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re: Anybody ever say "screw it" & cash out retirement while relatively young to pay off debt?
Posted on 2/27/19 at 9:20 am to GetCocky11
Posted on 2/27/19 at 9:20 am to GetCocky11
Terrible idea unless you want to work until you die.
1
Posted on 2/27/19 at 11:27 am to ctiger69
I cashed my 401k in to buy a business 4 yrs ago 40000 and it cost me ten thousand to do it but it was only 10 percent more than you will normally pay with withdrawals. For me my net worth has gone from 140,000 to over 900000 in alittle over 4 yrs so I'd do it again in a second.
Posted on 2/27/19 at 11:28 am to tankyank13
quote:yea that is retarded.
Dave Ramsey (I know people on this board don't like him
Wonder why
quote:
says to not contribute ANYTHING to retirement (not even enough to get a match) until all your debt is paid off.
Oh yeah
Posted on 2/27/19 at 9:47 pm to CarRamrod
quote:
yea that is retarded.
nah
Posted on 2/27/19 at 10:05 pm to Sigma
quote:yes it is. Even for his audience, that's not very good advice.
nah
that's a 100% instant return on your money. How many people out there are paying off debt with interest rates higher than that?
Understand his plan works for most of the population, and that sometimes the math needs to be taken out of the equation equation. But this just doesn't make sense,no matter how you slice it.
Posted on 2/28/19 at 12:01 pm to GetCocky11
I know a guy that cashed out his 401k, paid off his truck and then 2 years later traded that truck in and now has a $400mth note. This guy also financed a camper for 10yrs at 7% interest I believe. All I remember hearing is, “ but I only pay $150 a mth for the camper” lol
Posted on 2/28/19 at 1:19 pm to GetCocky11
I have known one guy that I guess it worked out for. An older guy I worked with got freaked out after the market crashed in 2001 or so and cashed out. He brought 3 or 4 houses to be rentals. Seemed like he got good deals on them and fixed them up himself and was doing well.
One of the places he purchased was a shitty camp down south of here and fixed it up. Ended up getting a guy who rented it who worked for BP after the spill and he made a shitton off of the deal.
I think it's always a bad idea to cash out of retirement plans. I also agree that it's retarded not to contribute and get the match on a 401-k.
One of the places he purchased was a shitty camp down south of here and fixed it up. Ended up getting a guy who rented it who worked for BP after the spill and he made a shitton off of the deal.
I think it's always a bad idea to cash out of retirement plans. I also agree that it's retarded not to contribute and get the match on a 401-k.
Posted on 2/28/19 at 1:46 pm to brian_wilson
How did the people who took loans out get fricked in the end other than "potential gains"?
Posted on 2/28/19 at 2:08 pm to AUGDawg
quote:Well for one, that's pretty significant.
How did the people who took loans out get fricked in the end other than "potential gains"?
Secondly, the penalty is nothing to scoff at (and its potential gains). Thirdly, all of that money is taxed at your marginal rate, and depending on how much money it is, some of that money off the top could be taxed at a higher rate if it its addition bumps you into the next rate.
Posted on 2/28/19 at 2:10 pm to castorinho
Literally none of that happens with a 401k loan
Posted on 2/28/19 at 2:15 pm to GetCocky11
I find this
to be an unwise investment strategy for anything.
quote:
"screw it"
to be an unwise investment strategy for anything.
Posted on 2/28/19 at 2:18 pm to GetCocky11
Look, if you ignore the fact that all these other posters are dump and/or have a "friend" who has done something stupid, from a pure MATH standpoint, it's about comparing rate of return. I suspect I'm the only one here who has any kind of fund/PE background, because all I'm hearing from the down voters is: I know a guy who cashed out and bought a truck and now is screwed...The assumptions I make when answering your question are: 1)you're not an idiot and don't currently run a personal budget deficit, 2) you passed algebra 1 and and can do rudimentary math problems. It's a simply TMV problem. Instead of paying money on your debt at a high interest rate, pay it off with your IRA money and start putting the money you were paying on your debt towards your retirement. You will have more when you retire in the long run this way because math says so. It's so simple. Don't listen to these idiots. .
Posted on 2/28/19 at 2:21 pm to Thib-a-doe Tiger
frick, I was still thinking OP.
Yeah I mentioned the loan being a much better option in the first post in this thread, though still not advisable.
Yeah I mentioned the loan being a much better option in the first post in this thread, though still not advisable.
Posted on 2/28/19 at 5:24 pm to castorinho
quote:
yes it is. Even for his audience, that's not very good advice.
that's a 100% instant return on your money. How many people out there are paying off debt with interest rates higher than that?
Understand his plan works for most of the population, and that sometimes the math needs to be taken out of the equation equation. But this just doesn't make sense,no matter how you slice it.
We all know it doesn't make mathematical sense in a vacuum. But if you know anything about Ramsey's method, you know it's all about the mindset. If you feel the pain of missing out on the 401k match, maybe it motivates you to get out of debt 6 months faster than you would've otherwise, which is 6 months of additional savings far beyond the missed match.
Posted on 2/28/19 at 5:37 pm to Sigma
I agree with that approach on pretty much everything. Except that. That's just too crazy. 100% instant return.
Posted on 2/28/19 at 6:14 pm to castorinho
quote:
I agree with that approach on pretty much everything. Except that. That's just too crazy. 100% instant return.
If you are doing all the other DR stuff, then I can understand turning this down for a very short period of time (2 years max, and really more like 12-18 months). The interest you will save in the 2-3 years after alone will be more than enough to make up the match and the deferral.
Posted on 3/1/19 at 7:50 am to LSUFanHouston
Punish myself further by making a stupid decision because I may have made stupid decision in the past. never turn down free money
Posted on 3/1/19 at 7:59 am to bigtruckin1775
quote:
You will have more when you retire in the long run this way because math says so.
If it was a math problem, he wouldn't be here. It never would have gotten to this point.
NEVER cash out retirement. NEVER. Bankruptcy is better, because that will, at least, force you to live within your means for 7 to 10 years. Those habits will take you into the future.
Cashing out just doubles down and reinforces deficit spending habits and the "new" and "bigger" retirement fund will just become the bailout fund the next time he hits a wall.
So, recall that "Math" + "Human beings" = "Something other than math"
This post was edited on 3/1/19 at 8:00 am
Posted on 3/1/19 at 11:16 am to tankyank13
quote:
never turn down free money
This is a huge misconception. It's not free.
In order to get the match, you have to put up money.
If it was free money, they would just credit your account with no action on your part.
You are getting, if it's a dollar for dollar plan, $2 for every $1 you invest. That's a hell of a great deal. But it's not in any way free.
And with many plans moving from a 100 percent match up to 3 percent to a 50 percent match up to 6 percent, it's even less of a "free" deal.
For most people, not taking the match is a really bad idea. For most people, cashing out early is a really bad idea. But there are no absolutes in finance. Every situation is different.
This board has some smart people on it, but sometimes there is a groupthink and "everyone needs to do it like me" mentality that is dangerous to personal finance.
Not everyone should buy a house.
Whole life isn't always a disaster.
Sometimes temp forgoing a match / cracking a retirement account makes sense.
Signed, a person who bought a house too young in 2006 because everyone told me I had to, and got my butt busted when the market went south at the exact time I had to move.
Posted on 3/1/19 at 11:17 am to Ace Midnight
quote:
Cashing out just doubles down and reinforces deficit spending habits and the "new" and "bigger" retirement fund will just become the bailout fund the next time he hits a wall.
If the behavior that caused the problem doesn't change, sure.
But if the behavior changes...
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