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CajunRevolution 
LSU Fan
Member since Apr 2009
28794 posts
| Short Term Investment (Posted on 5/8/12 at 2:41 pm)
Unfortunately, I'll be cashing out my 401K in a couple months as I leave my job to head back to school. Since I've decided to do this 10 months ago, I've been managing the heck out of it and doing well considering the crappy funds they've made available to us through ING. I'm looking at a 10% return since the start of the year. I'm pulling all my money in three months to pay off debt.
I recently changed my funds from an ING based service fund to Technology based fund that's seen considerable more growth 15% YTD at half the price of the shares I own now. The risk is considerably high but the funds had a decent return even in its worst months.
So basically I'm looking to maximize return over the short period. Are technology mid/large cap stock based funds the right strategy at the moment? They've been doing consistently better it seems over the past 6 months.
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foshizzle
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quote:
I'm looking to maximize return over the short period. Are technology mid/large cap stock based funds the right strategy at the moment?
Over a six month horizon? Your guess is as good as anyone else's.
Why do you have to cash out your 401?
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CajunRevolution
LSU Fan
Member since Apr 2009
28794 posts
| re: Short Term Investment (Posted on 5/8/12 at 2:51 pm to foshizzle)
Only way I can get out from underneath my debt to go back to school. I'm 26 and I'll more than make up the amount I have in there by going back to school.
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ByDaBook
LSU Fan
Laffayette
Member since Dec 2009
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That's a big bet on yourself and I'm guessing student loans aren't an option. People say stocks do well in election years...but I just read to much gloom and doom.
Pick your # and just walk away. If you're $5K away from your #, when you cash out just go put $5K on ODD, or BLACK. Good luck.
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ByDaBook
LSU Fan
Laffayette
Member since Dec 2009
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quote:
Only way I can get out from underneath my debt to go back to school. I'm 26 and I'll more than make up the amount I have in there by going back to school.
With that said, just do it. Not like you have over $200K in there or anything. Plenty of earning years left if you plan on working til 70. I'd like to retire at 45.
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CajunRevolution
LSU Fan
Member since Apr 2009
28794 posts
| re: Short Term Investment (Posted on 5/8/12 at 2:56 pm to ByDaBook)
Dude, my 30K ain't making me rich.  my projected retirement income is like $66 bucks a month trust me, I'll work 30 years after school and retire at 60.
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foshizzle
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Member since Mar 2008
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If your debt involves credit cards, can you just request a rate reduction instead? Or instead of cashing out, get a loan from your 401(k) for the lower rate?
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CajunRevolution
LSU Fan
Member since Apr 2009
28794 posts
| re: Short Term Investment (Posted on 5/8/12 at 3:02 pm to foshizzle)
I've got $15K in credit card debt I want to get out from under.
That way I'll just have school loan (200/mo), car note ($399) and living expenses. Nothing else.
The money I get paid now isn't allowing me to get out from under anything.
This post was edited on 5/8 at 3:03 pm
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ByDaBook
LSU Fan
Laffayette
Member since Dec 2009
88 posts
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You did your homework I'm sure, so you realize the 10% penalty and tax on gains. $15K in credit card debt is NOTHING (sounds bad, but it's true). With $30K (not bad for your age), you should be able to take a loan against it and kill the debt service on the credit card.
Have you tried modeling a loan from your 401K? I took a $26K loan out of mine last year to put on a house. You got to pay it back, but interest is low.
Best decision would be to take the loan, payoff the credit card (and cut it up), then get a job while in school (maybe a student worker for the state or something). Or you could just sell the car and buy a beater...then just work part time.
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tigeralum06
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Member since Oct 2007
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The way I am reading this is you are about to go back to school. This will defer your other student loan payments. Take out as many new student loans as you need to pay the credit card debt first and car note second. Then, withdraw from your 401k to cover the cost of tuition which would prevent you from paying the 10% penalty. Don't take the money from the 401k until 2013 when you will not have other income which should lower the income tax hit, and you would also have tuition credits to offset the income tax.
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foshizzle
LSU Fan
Member since Mar 2008
25080 posts
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quote:
I've got $15K in credit card debt I want to get out from under.
Understood, but the penalties for early withdrawal aren't any better than typical credit card rates. Seriously, I would look into 1) asking cards for a rate reduction, they will often do that if you're current, and/or 2) a 401 loan.
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TheHiddenFlask 
Clemson Fan
The Welsh red light district
Member since Jul 2008
16382 posts
| re: Short Term Investment (Posted on 5/8/12 at 3:58 pm to tigeralum06)
quote:
The way I am reading this is you are about to go back to school. This will defer your other student loan payments. Take out as many new student loans as you need to pay the credit card debt first and car note second. Then, withdraw from your 401k to cover the cost of tuition which would prevent you from paying the 10% penalty. Don't take the money from the 401k until 2013 when you will not have other income which should lower the income tax hit, and you would also have tuition credits to offset the income tax.
This dood sounds like he knows what he's talking about.
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foshizzle
LSU Fan
Member since Mar 2008
25080 posts
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| re: Short Term Investment (Posted on 5/8/12 at 4:28 pm to tigeralum06)
quote:
The way I am reading this is you are about to go back to school. This will defer your other student loan payments. Take out as many new student loans as you need to pay the credit card debt first and car note second. Then, withdraw from your 401k to cover the cost of tuition which would prevent you from paying the 10% penalty. Don't take the money from the 401k until 2013 when you will not have other income which should lower the income tax hit, and you would also have tuition credits to offset the income tax.
Yes, I like this solution also.
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tigeralum06
LSU Fan
Member since Oct 2007
1278 posts
| re: Short Term Investment (Posted on 5/8/12 at 5:14 pm to TheHiddenFlask)
Im really good at being in debt.
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NC_Tigah
LSU Fan
Member since Sep 2003
40088 posts
| re: Short Term Investment (Posted on 5/8/12 at 6:24 pm to ByDaBook)
quote:
People say stocks do well in election years...
Didn't work out so well in '08, best as I can remember 
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Stanky Legg
Member since Sep 2010
4052 posts
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If your time frame is truly "a couple of months," you shouldn't be investing in anything.
Money markets, short-term CDs, etc. You can't risk losing money as you have no time to recover.
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tirebiter
LSU Fan
ATL
Member since Oct 2006
4458 posts
| re: Short Term Investment (Posted on 5/8/12 at 6:53 pm to tigeralum06)
quote:
Then, withdraw from your 401k to cover the cost of tuition which would prevent you from paying the 10% penalty.
I am fairly certain he could not borrow from his 401k post separation from his employer, and if he borrowed prior to quitting the loan would come due in 60-90 days. If the 401k was rolled to a TIRA before these machinations it would be a different story for qualified expenses. It's the little things that will trip you up.
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tigeralum06
LSU Fan
Member since Oct 2007
1278 posts
| re: Short Term Investment (Posted on 5/8/12 at 7:54 pm to tirebiter)
I suggested he withdraw from the account not borrow from it.
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ByDaBook
LSU Fan
Laffayette
Member since Dec 2009
88 posts
| re: Short Term Investment (Posted on 5/9/12 at 9:19 am to NC_Tigah)
quote:
Didn't work out so well in '08, best as I can remember
I stand corrected...another example of not believing everything you hear and importance of doing your homework. Found a Forbes study on the myth that stocks always rise in election year...just a myth...
"Conclusion: The market was up in 68% of years overall, and 67% in election years. So, whether it was an election year or not had no effect on the market’s performance."
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kfizzle85
LSU Fan
Houston
Member since Dec 2005
19801 posts
| re: Short Term Investment (Posted on 5/9/12 at 9:27 am to NC_Tigah)
People will ascribe anything to an election year to help convince them their political stance is "correct."
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