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Do you have any use for the money? There is the taxes hit, but they're going to get it one way or another.
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Sep 11, 2013 18:18
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Are you on target for your current 401k? Do you plan to buy a house soon? Do you have any debts?
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Sep 11, 2013 18:24
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Zeta Taskforce posted:So if I understand, the choice is between a real emergency fund or a temporary, Roth emergency fund that requires almost daily attention, forces you to pay really close attention to fund choices, which it's in a money market, it will earn the same exact rate as being outside, and if you ever do withdrawal your contibution, you have to pay super close attention to the tax laws about restoring the contribution (I think it's 60 days, but not 100% sure on that) because if you miss that, you miss the opportunity of having a full contribution that year, which seems to be the purpose of this in the first place. There's no daily attention, it's just embedding your emergency fund in a ROTH IRA money market to start out with. The first $x in the Roth go into the money market account, then any additional contributions are in whatever investments you like. If you don't have an emergency and get to a point where you can max out your Roth and fund your emergency fund, transfer the embedded emergency fund once your external one is fully funded, so you essentially put a 'save the date' on the previous year's contribution. This method will not save your contribution space if you have an emergency and need to pull the money out. But if you have an emergency that wipes out your emergency fund to the tune of $5k+, you likely wouldn't need that contribution space anyway if you always topped off the emergency fund first. When you have that kind of disposable income I question whether a Roth IRA is that good an idea in the first place.
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Sep 11, 2013 18:27
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Engineer Lenk posted:There's no daily attention, it's just embedding your emergency fund in a ROTH IRA money market to start out with. The first $x in the Roth go into the money market account, then any additional contributions are in whatever investments you like. If you don't have an emergency and get to a point where you can max out your Roth and fund your emergency fund, transfer the embedded emergency fund once your external one is fully funded, so you essentially put a 'save the date' on the previous year's contribution. We have a very different philosophy on these things. You encourage people to seek out zero percent credit card offers are usually trying to balance this particular rate vs that one and I seem to recall that you personally actively use 7 different credit cards and every time you make a purchase you figure out which will give you the most rewards based on the transaction type you are thinking about. I know you pay them all off every month. I’m closer, but not exactly the same as the Dave Ramsey approach and you are perhaps more…. is “strategic” the word I am looking for?
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Sep 11, 2013 18:48
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Zeta Taskforce posted:We have a very different philosophy on these things. You encourage people to seek out zero percent credit card offers are usually trying to balance this particular rate vs that one and I seem to recall that you personally actively use 7 different credit cards and every time you make a purchase you figure out which will give you the most rewards based on the transaction type you are thinking about. I know you pay them all off every month. I’m closer, but not exactly the same as the Dave Ramsey approach and you are perhaps more…. is “strategic” the word I am looking for? 'Anal' might have been what you were looking for, but in general it's a reflection of my own risk-benefit judgment. I'm OK with a bit of complexity (I use 3 rewards cards) and have a moderate tolerance for risk. I don't have much of an emotional connection with debt, so I tend to look for the solution with the highest expected value, factoring in the value of my time, and considering but not weighting very heavily worst-case scenarios.
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Sep 11, 2013 19:52
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If its an either/or situation there's really no downside to it. I don't think its something you want to do long term though. You don't really need to even find a money market fund since most brokerages throw your money into one of theirs anyway.
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Sep 11, 2013 19:53
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Harry posted:Do you have any use for the money? There is the taxes hit, but they're going to get it one way or another. Not really. I have $6,000 in savings, which is about 4 months of expenses. ntan1 posted:Are you on target for your current 401k? Do you plan to buy a house soon? Do you have any debts? Eh, hard to say? I currently contribute 6% of my check, to get the company match, works out to about a combined total of $190/mo, I currently have a balance of $5900, and I am 29 years old. I have no plans to buy a house, but I owe $10,000 on my student loans at approximatley 6%, and I owe $15,250 on my car at 3.99%
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Sep 11, 2013 20:10
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Roll that poo poo into a 401k because you have some serious catching up to do. Edit: did the math and just realized you make 30k/yr. You may want to consider paying off the debt but only if you're not going to spend recklessly or buy any more new cars. MrKatharsis fucked around with this message at 21:17 on Sep 11, 2013 |
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Sep 11, 2013 20:33
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Deviant posted:I have no plans to buy a house, but I owe $10,000 on my student loans at approximatley 6%, and I owe $15,250 on my car at 3.99% Pay off the student loans. Even if you roll your cash into a 401k, you're unlikely to make much money off of it because those student loans are at a high interest rate. You do also have some catching up to do on your 401k. At age 30, you should have at least 0.5x your current salary, as a base rule. Oh, and that car loan is very high for your salary and because you have student debt. Consider spending a lot less the next time you buy a car.
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Sep 11, 2013 20:36
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$31k student loan debt and $3500 credit card debt and contributing $100/month into a Roth IRA for 1 year so far (I can't tap into our company 401k yet). I'm up for a 2k bonus if I can finish a website by the 23rd. If I achieve this what would you guys do with the money? I'm on track to pay off the credit debt in ~7 months. I make 35k a year. I was thinking of keeping it for emergencies/using it as a starter newer used car fund or maybe throwing it into my Roth? My current car isn't the safest to drive, but mechanically sound and I only have 1k on hand for emergencies. Be nice to have 3k for another car just in case.
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Sep 12, 2013 20:19
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Can we change the thread title to: "Newbie Personal Finance: What are your interest rates?"
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Sep 12, 2013 20:30
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cheese eats mouse posted:$31k student loan debt and $3500 credit card debt and contributing $100/month into a Roth IRA for 1 year so far (I can't tap into our company 401k yet). I'm up for a 2k bonus if I can finish a website by the 23rd. If I achieve this what would you guys do with the money? I'm on track to pay off the credit debt in ~7 months. I make 35k a year. I would dump everything into the credit card. Then I would work on the student loan. It will be a longish process. I wouldn't close the credit card until your emergency fund is a bit beefier. I am not advocating going back into credit card debt, but I can't advocate cutting everything up in a premature burst of excitement either. I would try to keep the car going as long as possible and not save on the side for it until the student loans are gone. Hopefully you can strech a few more years out of it. If it ever gets dangerous you can put the student loans on hold and save agressively for a replacement, and if you get stuck there are worse things than getting a $5,000 car loan to get yourself boring but reliable used car. SlightlyMadman posted:Can we change the thread title to: I'm not a mod anymore so not up to me, but lets not. We already have enough people playing games with interest rate arbitrage, and my head is still spinning from thinking of your "rebalancing emergency fund (in quotes) within a Roth scheme" Zeta Taskforce fucked around with this message at 20:42 on Sep 12, 2013 |
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Sep 12, 2013 20:37
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I was reading the last few pages and I notice paying off student loans is a common recommendation. I was surprised to see this because I thought the interest was deductible and the money can be better put to work someplace else. For instance I have about 15k in loans at an interest rate of 4.38%. Once I get everything else taken care of, should I work on paying down the loans? At ~85 bucks a month it doesn't have a huge impact on my monthly budget.
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Sep 13, 2013 10:23
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Going by what you said, yeah I'd be trying to knock your loans out. If $85 isn't really impacting your budget you can probably get a little more aggressive and kill $15K without having it beat you up in a reasonable amount of time. I was pretty aggressive once my wife and I got down to our last $10K or so of student loans, though. Where else would you use the money? I personally would just want to be rid of the damned thing.
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Sep 13, 2013 11:34
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Troubadour posted:I was reading the last few pages and I notice paying off student loans is a common recommendation. I was surprised to see this because I thought the interest was deductible and the money can be better put to work someplace else. Depends, once again, on your interest rates. If your only other debt is a car loan at 1.2%, pay off the student debt. If you have $2000 on an Amex at 28%... Obviously BFC would tell you to pay that off first. There's also the fact that student loans aren't dischargeable in bankruptcy. While BFC as a community is never too keen to advise bankruptcy, it's still a valid contingency option.
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Sep 13, 2013 11:58
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Troubadour posted:I was reading the last few pages and I notice paying off student loans is a common recommendation. I was surprised to see this because I thought the interest was deductible and the money can be better put to work someplace else. Most people with student loans aren't getting much, if anything, from the interest deduction, because you need to have a *lot* of interest to make it useful, or a mortgage, or other high deduction tax items in order to not just take the standard deduction instead.
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Sep 13, 2013 12:45
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baquerd posted:Most people with student loans aren't getting much, if anything, from the interest deduction, because you need to have a *lot* of interest to make it useful, or a mortgage, or other high deduction tax items in order to not just take the standard deduction instead. Actually the student loan interest deduction can be taken above-the-line to reduce your taxable income directly. You don't need to itemize and can still take the standard deduction.
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Sep 13, 2013 14:06
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Troubadour posted:I was reading the last few pages and I notice paying off student loans is a common recommendation. I was surprised to see this because I thought the interest was deductible and the money can be better put to work someplace else. At 4.38, it's a close decision. I would probably up retirement contribution rather than pay it off early. However, if you're just thinking about spending the money instead I would put it towards the loan, because you're essentially borrowing that pocket money at 4.38%-tax break from your future self since the debt is non-dischargeable. Many of the other posters have 6+% student loans, which is high enough to make knocking it out a priority even with the interest deduction.
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Sep 13, 2013 14:29
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Yea mine are 6-6.8% so they're a bigger priority for me. Almost $400 in monthly payments is nothing to laugh at. I could be maxing my Roth IRA instead! I'm thinking of after getting the credit card gone of adding to my monthly contribution, but I should be eligible for the company 401k then.
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Sep 13, 2013 14:43
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I have $140,000 in student loans. Lol
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Sep 13, 2013 16:20
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What do you pay per month and how many years at that rate  10 years @ ~$700/mo or so, for me. So many dollars...
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Sep 13, 2013 16:46
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I have 110,000 in student loans and pay $750 per month. My girlfriend has around 200,000 and will be paying $1400 a month. Together, we do make around $120,000 so we're not struggling but it does suck that for at least the next decade we'll be paying off our loans.
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Sep 13, 2013 17:49
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I got a $600 technical college degree, best investment I ever made.  (Well ok it came out to 20k after you factor in living expenses, thanks mom and dad!)
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Sep 13, 2013 17:54
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Troubadour posted:I was reading the last few pages and I notice paying off student loans is a common recommendation. I was surprised to see this because I thought the interest was deductible and the money can be better put to work someplace else. Keep in mind that deducting interest is treated as a reduction in income, not a credit. Meaning for every $100 of interest you deduct you are only saving $15-$35 depending on your tax bracket. So you need an investment to beat 3.25% to beat paying off your loan if your in the 25% bracket. That is certainly possible, but paying off your loan both guarantees that return and gets you out of debt in general.
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Sep 13, 2013 17:57
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$1600 a month in student loans, and my take-home pay is $3300 a month. Thank god for IBR!
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Sep 13, 2013 18:44
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One weird tip for lowering your taxes with education expenses, marry someone who's still in school. My wife's tuition is higher than her income and it's no longer a refundable credit for her, so she wasn't saving much. Now that we're married, that $8000 deduction from my income puts a nice fat check in my hand at the end of the year.
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Sep 13, 2013 21:08
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SmuglyDismissed posted:Actually the student loan interest deduction can be taken above-the-line to reduce your taxable income directly. You don't need to itemize and can still take the standard deduction.
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Sep 14, 2013 00:31
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Um I'm kinda surprised I'm asking this question but is there a good way to check my credit score these days? I know I can get a free credit report but I've never been able to check my score for free.
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Sep 14, 2013 18:32
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Orange_Lazarus posted:Um I'm kinda surprised I'm asking this question but is there a good way to check my credit score these days? I know I can get a free credit report but I've never been able to check my score for free. https://www.creditkarma.com is a legit site that can make a guess of it, but there are dozens of different types of credit scores depending on what the check is for and the exact formulas aren't public knowledge. It is at most only going to be accurate within +-50 points.
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Sep 14, 2013 19:23
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CreditKarma works for your TransUnion score, and CreditSesame works for Experian. They're both guesses to your actual FICO score and I would agree with prior posters +/- 50 points statement. CK said my wife's score was a 698, but Discover told her it was a 720 when she got her new IT card.
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Sep 16, 2013 18:39
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Question on capitol gains taxes: I'm going to be cashing out my $8,400 life insurance policy (currently in mutual funds). I make $50-60K a year, my wife makes $22K. What will my taxes on the policy be? Just trying to figure out how it would impact my tax return for next year if I withdraw it now. I'm guessing waiting until January to withdraw would only hurt me long term.
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Sep 17, 2013 03:18
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Duckman2008 posted:Question on capitol gains taxes: I'm going to be cashing out my $8,400 life insurance policy (currently in mutual funds). I make $50-60K a year, my wife makes $22K. What will my taxes on the policy be? Just trying to figure out how it would impact my tax return for next year if I withdraw it now. I'm guessing waiting until January to withdraw would only hurt me long term. You only will owe taxes if the cash out exceeds the amount you paid in. Whole life/universal life is such a terrible return you will likely have no tax liability. (Also assuming it isn't a modified endowment contract, which changes the rules somewhat.)
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Sep 17, 2013 03:25
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zharmad posted:You only will owe taxes if the cash out exceeds the amount you paid in. Whole life/universal life is such a terrible return you will likely have no tax liability. (Also assuming it isn't a modified endowment contract, which changes the rules somewhat.) Yeah, I am at $8400, and I am pretty sure they put down $7,000 in 1993 (no joke). Even with the disclaimer that no money was paid into it since then, it basically turned into a free life insurance policy for me between the ages of 5-27 (aka not worth it).
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Sep 17, 2013 03:30
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Duckman2008 posted:Yeah, I am at $8400, and I am pretty sure they put down $7,000 in 1993 (no joke). Even with the disclaimer that no money was paid into it since then, it basically turned into a free life insurance policy for me between the ages of 5-27 (aka not worth it). If it was funded all at once, it probably does qualify as a modified endowment contract which would be taxed on a last in first out basis, plus an additional 10% penalty for being under 59 1/2. You should check with a cfp or accountant to calculate the details, but if there are no premiums being paid it may not hurt to let the thing sit there, assuming you don't have an immediate need for the money.
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Sep 17, 2013 03:39
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zharmad posted:If it was funded all at once, it probably does qualify as a modified endowment contract which would be taxed on a last in first out basis, plus an additional 10% penalty for being under 59 1/2. You should check with a cfp or accountant to calculate the details, but if there are no premiums being paid it may not hurt to let the thing sit there, assuming you don't have an immediate need for the money.
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Sep 17, 2013 05:20
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swenblack posted:He's made 20% in 20 years. At this point, he's better off getting his money out of this "investment" as soon as humanly possible. It'd be worth any sort of penalty if he could roll it into a Roth IRA in either his or his wife's name. If he's maxing both out currently, even putting it in a savings account with today's lovely rates would yield a better return. This is kind of where I am at with it.
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Sep 17, 2013 06:05
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Where is that rear end in a top hat in the insurance thread pitching whole life. Perfect case right here. 20% in 20 years. S&P 500 did 300% in that same period. Would you rather have $8,400 or $21,000?
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Sep 17, 2013 06:10
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swenblack posted:He's made 20% in 20 years. At this point, he's better off getting his money out of this "investment" as soon as humanly possible. It'd be worth any sort of penalty if he could roll it into a Roth IRA in either his or his wife's name. If he's maxing both out currently, even putting it in a savings account with today's lovely rates would yield a better return. I agree its a poo poo return, and lets do some quick math: Long term cap gains would be 15% plus whatever short term capital gains for the policy dividends within the last year. Add in the 10% for being under 59 1/2 and we can call it about 25% on the gain. You said the gain thus far was $1400, so you're looking at an approximate tax liability of $350, so about 4.2%. Essentially, when you move it out of the policy and into a better investment, you'll only be giving up the first 4-6 months worth of gains depending on the market. The only reason I suggested hanging on to it is that it's paid for and the death benefit would be non-taxable when it paid out, if you were really concerned about the tax implications. edit: ^^^^^^^ Also, if it had been invested in a S&P index fund over the last 20 years, lump sum with no additional money added, it would have compounded to about $47,000 at this point. zharmad fucked around with this message at 09:41 on Sep 17, 2013 |
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Sep 17, 2013 09:38
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zharmad posted:
Ugh, things I won't mention to my grandfather when I next see him. I see your point, but I'm cashing it out at this point to go towards some of my student loans. Edit: Prudential gets reallllly huffy when you call and say you want to cash out the policy. They gave me a 10 min speech of how i should just borrow against my policy, and to remember that i am "cancelling $125,000 in life insurance just to get $8,000." Anyone know if I should do a tax withholdings now, or pay the taxes with my tax return? Duckman2008 fucked around with this message at 15:07 on Sep 17, 2013 |
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Sep 17, 2013 13:22
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What's the difference between making an offer to settle an outstanding debt vs paying the debt off in full? Will it reflect a lot more poorly on my credit if I get them to settle for a smaller amount? How much more poorly, and for how long? My current FICO estimate on Credit Karma is 631, which is the best it's ever been since filing for BK almost 5 years ago. But I've been at a plateau for awhile, and I think it's because of this. If I paid it off today, I think that the delinquency would be on my record for 7 more years regardless. But I'm wondering if it's worth the extra few hundred dollars to say "paid in full" vs "settlement" (or whatever it says). The debt is approximately $900 but I think I could get them to take $500. I'm coming into a minor windfall, so I thought it would be a good time to get this monkey off my back.
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Sep 17, 2013 16:30
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