Chef Jim Posted October 7, 2008 Share Posted October 7, 2008 Uh, it wasn't my plan. And, who said $10k? Back in the 1990's my 401K allowed up to $45k loan or more for a primary residence...in WNY where real estate is cheap. And I wasn't endorsing it. I just didn't shoot it down. It's an interesting concept but I personally wouldn't consider it in my circumstances. Unlike you though I don't feel the need to decree that it's bad idea just because it doesn't work for me. First sentence was a response to your comment about taking money out of a 401k for a home and the second comment was to bills_fan not you. But you are correct you can take more than $10k from your 401k, $10k is from an IRA, my mistake. However if you do take that loan from your 401k and then you leave your job or are let go before you pay it back it becomes a distribution and the amount left is taxed and penalized 10%. But here's the kicker on taking money from your 401k. You pay it back with after tax dollars and then that money is taxed again when you withdraw at retirement. Being taxed once is bad enough but taxed twice is worse. I've always felt that 401k loans should not be allowed. And the reason I decreed it a bad idea wasn't because it doesn't work for me, it doesn't work for anyone. Once you've put your 401k money in your home, how do you get it out to generate income at retirement? You can't sell a bedroom to finance your vacation at retirement. Link to comment Share on other sites More sharing options...
Booster4324 Posted October 8, 2008 Share Posted October 8, 2008 First sentence was a response to your comment about taking money out of a 401k for a home and the second comment was to bills_fan not you. But you are correct you can take more than $10k from your 401k, $10k is from an IRA, my mistake. However if you do take that loan from your 401k and then you leave your job or are let go before you pay it back it becomes a distribution and the amount left is taxed and penalized 10%. But here's the kicker on taking money from your 401k. You pay it back with after tax dollars and then that money is taxed again when you withdraw at retirement. Being taxed once is bad enough but taxed twice is worse. I've always felt that 401k loans should not be allowed. And the reason I decreed it a bad idea wasn't because it doesn't work for me, it doesn't work for anyone. Once you've put your 401k money in your home, how do you get it out to generate income at retirement? You can't sell a bedroom to finance your vacation at retirement. Just out of curiosity, what are your clients percentages of profits YTD? 3 years? 5 Years? Why couldn't they adjust the taxation rates if people followed this plan, as surely taking money out of the government's hands is a good idea. FWIW I really don't know enough to say whether this is a good or bad idea. It does seem a bad idea as it gives people money to spend, when if perhaps they saved, they wouldn't need to touch their retirement. Link to comment Share on other sites More sharing options...
Chef Jim Posted October 8, 2008 Share Posted October 8, 2008 Just out of curiosity, what are your clients percentages of profits YTD? 3 years? 5 Years? Why couldn't they adjust the taxation rates if people followed this plan, as surely taking money out of the government's hands is a good idea. FWIW I really don't know enough to say whether this is a good or bad idea. It does seem a bad idea as it gives people money to spend, when if perhaps they saved, they wouldn't need to touch their retirement. My clients percentage of profits? Well it's 100%....let taxes of course. If you mean ROR it varies depending on the client. I have no idea what you're talking about with regard to the rest of your post. Link to comment Share on other sites More sharing options...
Chilly Posted October 8, 2008 Share Posted October 8, 2008 First sentence was a response to your comment about taking money out of a 401k for a home and the second comment was to bills_fan not you. But you are correct you can take more than $10k from your 401k, $10k is from an IRA, my mistake. However if you do take that loan from your 401k and then you leave your job or are let go before you pay it back it becomes a distribution and the amount left is taxed and penalized 10%. But here's the kicker on taking money from your 401k. You pay it back with after tax dollars and then that money is taxed again when you withdraw at retirement. Being taxed once is bad enough but taxed twice is worse. I've always felt that 401k loans should not be allowed. I'm a bit curious here, and if you don't mind expanding, let me ask a question: The only person I've ever really heard any info about 401ks and loaning money from it was my father, who seemed to indicate it was a pretty good deal. His thinking was that you pay yourself back the interest, rather than pay it to a bank. Is there a reason why that line of thinking is faulty? Link to comment Share on other sites More sharing options...
Chef Jim Posted October 8, 2008 Share Posted October 8, 2008 I'm a bit curious here, and if you don't mind expanding, let me ask a question: The only person I've ever really heard any info about 401ks and loaning money from it was my father, who seemed to indicate it was a pretty good deal. His thinking was that you pay yourself back the interest, rather than pay it to a bank. Is there a reason why that line of thinking is faulty? That is completely offset by the fact that you pay taxes (which will probably be higher than the interest you paid) twice on your loan payments. They never talk about the double taxation of the loan payments. And don't forget, you lose your job or get laid off before the payments are made that loan is now a distribution which is taxed and penalized. Link to comment Share on other sites More sharing options...
Chilly Posted October 8, 2008 Share Posted October 8, 2008 Ahh... I knew you had said the double taxation thing in the last post, but the key was that rate would be higher than the interest rate you'd get for the loan (that was the part that wasn't clear for me). Interesting, I'll have to look into it. Thanks. Link to comment Share on other sites More sharing options...
Chef Jim Posted October 8, 2008 Share Posted October 8, 2008 Ahh... I knew you had said the double taxation thing in the last post, but the key was that rate would be higher than the interest rate you'd get for the loan (that was the part that wasn't clear for me). Interesting, I'll have to look into it. Thanks. But....and there's always a but, you will be compounding off your interest you paid so how long that money is going to be growing has to figure into the equation. Link to comment Share on other sites More sharing options...
KD in CA Posted October 8, 2008 Share Posted October 8, 2008 Right now, if I sold my house (which has a 30 year fixed mortgage, with 21% down payment), I'd lose most of my down payment, and if I had to pay a broker to sell, would have to dig into my pocket at closing. So, you can forget selling and then buying another house. And this is not in California/Florida/Nevada, but NY, a more stable market. So don't sell your house. A generation ago most people lived in the same house for 30 years. And when the supply dries up, the inevitable increase in demand will start to push prices again. Link to comment Share on other sites More sharing options...
Chilly Posted October 8, 2008 Share Posted October 8, 2008 But....and there's always a but, you will be compounding off your interest you paid so how long that money is going to be growing has to figure into the equation. I suppose that's effected by the time you have left. It might be more beneficial to take out the loan earlier in your life, so you have a long time to build wealth on it, versus taking it out closer to retirement. Link to comment Share on other sites More sharing options...
Chef Jim Posted October 8, 2008 Share Posted October 8, 2008 I suppose that's effected by the time you have left. It might be more beneficial to take out the loan earlier in your life, so you have a long time to build wealth on it, versus taking it out closer to retirement. But most Americans change jobs quite often so they run the risk of leaving the job with the loan intact. Uncle Sam will want maybe 40% (taxes and penalties) unless you can pay the loan back within 60 days. Link to comment Share on other sites More sharing options...
Chilly Posted October 8, 2008 Share Posted October 8, 2008 But most Americans change jobs quite often so they run the risk of leaving the job with the loan intact. Uncle Sam will want maybe 40% (taxes and penalties) unless you can pay the loan back within 60 days. Jesus..... 40%?! No wonder you're a Republican. Speaking of which, why is turnover so high? Do not enough companies provide ample room for advancement, or is it more of a case of people being idiots? I guess I'm about to find out, starting in the private sector in a week and a half.... Link to comment Share on other sites More sharing options...
Chef Jim Posted October 8, 2008 Share Posted October 8, 2008 Jesus..... 40%?! No wonder you're a Republican. Speaking of which, why is turnover so high? Do not enough companies provide ample room for advancement, or is it more of a case of people being idiots? I guess I'm about to find out, starting in the private sector in a week and a half.... It depends on the industry. When I worked in the kitchen I had probably 20 jobs in 20 years. It's the best way to learn the ropes and burnout is very high. I left the kitchen and worked for a company as a manager for contract food service for five years and have been at my current job for nearly eight and plan on retiring there. So 20 jobs is the first 20 years and 2 in the last 13. We do lots of recruiting and I'm amazed at how short people stay at their jobs, I thought is was just me. I think the reason turnover is so high is because there are a lot of dead end jobs and lots of managers have no idea how to motivate and keep people interested in what they do. Oh and BTW I'm not a Republican. Link to comment Share on other sites More sharing options...
Chilly Posted October 8, 2008 Share Posted October 8, 2008 We do lots of recruiting and I'm amazed at how short people stay at their jobs, I thought is was just me. I think the reason turnover is so high is because there are a lot of dead end jobs and lots of managers have no idea how to motivate and keep people interested in what they do. Interesting, I thoguht one of the reputations of the private sector versus the public sector (outside of the stereotypical middle management job) was the ability for advancement. At UT, there wasn't any, one of the reasons why I'm better off with the new job. Oh and BTW I'm not a Republican. I had a feeling you were going to say that. Link to comment Share on other sites More sharing options...
Chef Jim Posted October 8, 2008 Share Posted October 8, 2008 I had a feeling you were going to say that. I hate to disappoint. Link to comment Share on other sites More sharing options...
bills_fan Posted October 8, 2008 Author Share Posted October 8, 2008 So don't sell your house. A generation ago most people lived in the same house for 30 years. And when the supply dries up, the inevitable increase in demand will start to push prices again. I'm really not planning to at this point, just used it as an example. Although with the ever expanding family/possible Mom moving in, a little more room would not be a bad thing. Link to comment Share on other sites More sharing options...
GG Posted October 8, 2008 Share Posted October 8, 2008 Interesting, I thoguht one of the reputations of the private sector versus the public sector (outside of the stereotypical middle management job) was the ability for advancement. It is, but that usually involves moving to a new company. No matter where you work, chances are the person above you has Peter Principled out. Thus, since there more jobs in the private sector, you have more chances to advance beyond the Peter above you. Link to comment Share on other sites More sharing options...
Chef Jim Posted October 8, 2008 Share Posted October 8, 2008 I'm really not planning to at this point, just used it as an example. Although with the ever expanding family/possible Mom moving in, a little more room would not be a bad thing. I'm opening a region for my company up in San Francisco first quarter of 2009. I have to sell my house and I'd rather not but if I held on to it and rented it out I probably would be a bit negative. That move up north will reduce my income a bit so I'm not sure if I will be able to afford to go a bit negative. I'll probably sell, go to cash for a year or so and see where the market takes me. Link to comment Share on other sites More sharing options...
Chilly Posted October 8, 2008 Share Posted October 8, 2008 It is, but that usually involves moving to a new company. No matter where you work, chances are the person above you has Peter Principled out. Thus, since there more jobs in the private sector, you have more chances to advance beyond the Peter above you. Interesting. One of the benefits of Rackspace seems to be how much they spend on educating and moving their people up through the ranks. Is it only such a rosy picture because of their recent growth, and it'll stop soon? Link to comment Share on other sites More sharing options...
GG Posted October 8, 2008 Share Posted October 8, 2008 Interesting. One of the benefits of Rackspace seems to be how much they spend on educating and moving their people up through the ranks. Is it only such a rosy picture because of their recent growth, and it'll stop soon? Life's a bit different in a young company and as long as it survives, it will offer room for advancement. But like death and taxes, unless you own your own shop you will hit the Peter ceiling. Link to comment Share on other sites More sharing options...
Chilly Posted October 8, 2008 Share Posted October 8, 2008 Life's a bit different in a young company and as long as it survives, it will offer room for advancement. But like death and taxes and OU sucking, unless you own your own shop you will hit the Peter ceiling. Fixed. Appreciate the info. Link to comment Share on other sites More sharing options...
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