Cashing out 401K to payoff mortgage

[Anonymous]

Only the poors rely on their 401K, pension, and IRAs.

[Anonymous]

Anonymous wrote:Only the poors rely on their 401K, pension, and IRAs.

We weren't all born into money. Some of us had to earn it.

[Anonymous]

I don't feel comfortable with saving money and expecting it to last in the future, I prefer an investment that will generate income. The only ting available as pp pointed out is rental income since pensions are gone.

[Anonymous]

Anonymous wrote:I don't feel comfortable with saving money and expecting it to last in the future, I prefer an investment that will generate income. The only ting available as pp pointed out is rental income since pensions are gone.

Now you're sock-puppeting, eh?

Ever hear of annuities?

[Anonymous]

"Personally I have always advocated Real estate because it is like gold, a physical investment whereas stocks are theoretical. I want to be able to touch my investments."


I just bought a small rental and borrowed against my 401k for the downpayment. With the impending "fiscal cliff" looming before us, the temptation to cash out the rest and pay down on that mortgage is great. Our goal is to downsize into the apartment we are building over our shop, and rent out our current home and the smaller home. One plan is to refinance and roll both mortgages into one. Our mortgage payment will be made by the rentals, the apartment will be paid off, and we will be able to build our cash savings again, while also investing in improvments to the rental properties. We would also start buying physical silver and gold. Our parents are aging and there is potential for inheritance income, which would enable us to further pay down our debt. We have no credit cards, and only one vehicle loan remaining.

My husband works for a federal agency, and I work for a consultant on a federally funded project. Not a good place to be if federal funding is slashed in 2013. We also live in a remote town in the northwest, far from urban centers. Hopefully, the government will avoid the crisis by "kicking the can down the road" and we can see our current plan through to fruition.

While so many advocate planning and investing in retirement, we are being realistic in the fact that we will both be working into our 60s and 70s and cannot really plan on retirement funds to support us. With the volatility of the market, seeing those funds evaporate at the whim of the market is frustrating. I want something tangible that I can see and touch. I am not reassured by participating in a retirement plan driven by our current economy. I want out.

[Anonymous]

Anonymous wrote:Can't you "borrow" from your 401K, pay off the 2nd trust, and then repay the loan from the 401K with the savings from refinincing your mortgage at a lower rate?

This is slightly more palatable than the original idea. What is your rate on the first and what is the UPB?

[Anonymous]

Anonymous wrote:

Anonymous wrote:well sort of a bad idea. IF you were able to buy a house and pay the MAXIMUM amount of points against the 401k withdraw you could deduct away most of the penalty. Try to minimize the loss by finding a way to deduct against it that tax year.

FYI we are doing this and plan to liquidate current 401k that has remained stagnant for the last 12 years. Our new plan is to continue to buy rental homes and use future income of paid off homes for retirement.[/quote

exteremely smart. This is the real way to build wealth. Only t he poors rely on their 401k, pensions, and IRAs.

Where in the US or the world do they use the world "poors"? It's a little entertaining, like Marie Antoinette being out of touch saying, "Let them eat cake."

[Anonymous]

Anonymous wrote:bad idea right? we are seriously considering cashing out one of the 401Ks and paying off a second trust on our house, we then plan on saving payment each month to grow our cash reserves and just have some more security in that we won't lose our house if we lost a job or had to take significant paycuts. we will also be able to refinance and take advantage of the low rate. Here's how I see it:

Pros: pay off high interest 2nd trust
Refi 1st and lower payments by almost 2K a month
ability to be more flexible in job market (ie. no needing to make 300k a year)

Cons - obvious - taxes, penalties, losing future returns on investments.

anybody done this even though its against all conventional wisdom?

If you were removing a mortgage in its entirety from your house, it might be worth it simply for the peace of mind of only having to pay real estate taxes and eradicate the mortgage. YMMV, and there are those who would rather be enthralled to debt because it is "tax deductible."

With that said, putting all your eggs in the basket of real estate is also problematic -- you become a landlord or pay management companies, both of which are taxing (heh). Property appreciation is no more guaranteed than stock market appreciation.

What are the numbers. There is of course the 10% penalty and the fact that any withdrawal will be taxed at a very high tax bracket. Would it take 2-3 years to make up the money (and removing a 2nd trust is always a good thing?) Or would it take 20 years to pay back?

[Anonymous]

this years lowered tax rates and higher allowed deductions allowed us to deduct more than the penalty and income. It was a win for us, this is your last chance before everything goes up next year .

[Anonymous]

Anonymous wrote:

Anonymous wrote:You are living beyond your means.

No one is forcing you to own a house that makes you a slave to a $300K/yr job but YOU.

My advice is to downsize to a home you can afford on one salary (or a lower salary) and gain your financial security/job flexibility that way. You can still live in a close-in neighborhood, just in less space.

Signed, someone who lives in a 1200 sq ft house that cost less ($500K) than the total value of our 401Ks, and with a mortgage payment that's less than half of one of our salaries. Very happy with our lifestyle and flexibility/savings.

its sad that we must live in these conditions as the middle class.

different poster. I'm not sad about this at all. This is common to our region. I don't understand all the house envy that goes on in these threads.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:401ks are a scam and rip off the only people making money on these are the investment fund companies http://money.cnn.com/2012/07/25/retirement/401k-fees.moneymag/index.htm

Well I made my first million through my 401(k). Have you made your first million yet? If so, how did you do it?

are you 50+ years old? The younger generation got screwed by you. You will be able to retire on the backs of your children who will not be able to achieve the golden parachute of government benefits, pensions, artificial stock / housing appreciation (housing before 2005, stocks before .com crash) etc... that are not available to us.

oh here it comes. The pity party has started. Wow, I wonder if the people who grew up during the Depression reviled their grandparents for having it easier than they did. Don't recall any Woody Guthrie tunes about the spoiled older generations.

[Anonymous]

Only the poors rely on their 401K, pension, and IRAs.

Poor people do not have access to a 401k. In fact many worker(not poor) not do have access to a 401k. Only 59% full-time workers have access to a retirement plan at work.

[Anonymous]

Since this thread is four months old, OP what did you do?

[Anonymous]

Some folks on this thread have been talking about investing in rental property and distrusting 401ks. Those posters have usually presented what seems to me to be well-thought-out plans. I think the difference with OP's situation is that she/he seems to have gotten in too deep due to lack of planning. In that case, withdrawing funds from a 401k seems foolhardy because it doesn't seem as if OP and family will make the necessary lifestyle adjustments to deal with the real problem.

I say this as someone who once bought too much house and had too much debt and was tempted to take money out of a 401k to deal with it. Fortunately I had the kind where you couldn't withdraw the money when you were changing jobs or I would have done it. The real problem was our lack of planning and our aspirations to a lifestyle we couldn't afford. Thank god we survived those days and learned from our mistakes.

[Anonymous]

Bump

Any update from anyone on this thread who were investing in real estate instead of 401ks or other taxable investments?