|
Are you planning to buy a house in the near future? If not, why do you care about your credit score? Take the settlement offer and save yourself $400.
|
#
?
Sep 17, 2013 16:35
|
|
|
|
| # ? May 24, 2024 23:47 |
|
|
Duckman2008 posted:Anyone know if I should do a tax withholdings now, or pay the taxes with my tax return? If you normally get refunds of several hundred dollars or more, you can just pay the taxes with your return. If you normally just break even or usually owe money, have the taxes withheld. martyrdumb posted:I'm coming into a minor windfall, so I thought it would be a good time to get this monkey off my back. How big is the windfall? If it's like $2000, take the settlement. If it's $100,000, pay it in full. Take the settlement unless the difference is tiny in relation to how much you are getting.
|
|
#
?
Sep 17, 2013 16:47
|
|
|
Wait, when is the debt from?
|
|
#
?
Sep 17, 2013 16:57
|
|
|
Duckman2008 posted:Ugh, things I won't mention to my grandfather when I next see him. They're making far more off your money than you are, but you can always counter with the fact that 8000 would provide you with about $800,000 in level term life insurance for the next ~16.5 years. Just pay with your tax return. Even if your work withholding doesn't cover it, it wouldn't trigger a penalty if you just paid it by next April. Best thing to do is keep back what you expect your liability to be in a saving account til you do your taxes next year.
|
|
#
?
Sep 17, 2013 19:50
|
|
|
I just got an offer from my previous employer to cash out my pension in a lump sum. The lump sum amount is around $7,500. I'm 35, so I'll get the 10% early withdrawal tax. They would withhold 20% from the lump sum for taxes. I could really use this money, as it would cut my debt in half even after putting some to the side for taxes. I figure after the 20% I'll get about $6,000 of which I would put 1400 aside for the penalty plus cushion, the rest would pay off a couple of credit cards, reducing my utilization to less than 40%. Doing this would save me about 300 bucks a month, as I'm paying 140 every two weeks to try and pay those two cards off by this time next year. I guess I basically have two questions. One, is this a good idea? I already contribute to my 401K with my current employer at a 100% match up to 6%, plus 7K isn't all that much for retirement. Also, once those cards are paid off, I can start putting more away in my 401K after the wedding. Two, if I do this, would putting the 1400 aside for taxes be enough? Thankfully, I wouldn't get the check until December and I always file my taxes by Feb. 15th so I wouldn't have to hold it too long. Thanks!
|
|
#
?
Sep 17, 2013 20:15
|
|
|
What happens to the pension fund if you don't pull it out? And no, $7500 isn't much for retirement... But then $75 000 is made of ten $7500 investments and ten times that is $750 000, you know? Every little bits help.
|
|
#
?
Sep 17, 2013 20:19
|
|
|
FrozenVent posted:What happens to the pension fund if you don't pull it out? It sits there until I retire, which won't be for at least another 30 years. No interest, no more contributions, it'll just sit there. That's why I want to take it, on top of the fact that I'd like to pay some debts off so I can save more and not pay any more interest. And yes, every little bit helps, but there are things that I can use that money for now that would be to my long term benefit. At least, that's the way I'm seeing IR, but I'm a moron so who knows? BobbyDrake fucked around with this message at 21:25 on Sep 17, 2013 |
|
#
?
Sep 17, 2013 21:19
|
|
|
BobbyDrake posted:It sits there until I retire, which won't be for at least another 30 years. No interest, no more contributions, it'll just sit there. That's why I want to take it, on top of the fact that I'd like to pay some debts off so I can save more and not pay any more interest. And yes, every little bit helps, but there are things that I can use that money for now that would be to my long term benefit. At least, that's the way I'm seeing IR, but I'm a moron so who knows? Roll it over into a traditional IRA. I know you can rationalize things the other way, it's not like you are going to buy big screen TV's with it, but the way you look after your long term is to live below your means, pay off your debts with money you earn, and let tax deferred money grow for 30 years. The interest isn't going to kill you unless you decide to take 30 years to pay off your cards. I don't like paying interest either, but it will be less than what $7500 is worth 30 years from now. I decided to calculate it based on a very conservative 6% rate of return and it was over $43,000. At 8% it is $76,000.
|
|
#
?
Sep 17, 2013 22:08
|
|
|
So I'm coming into a small inheritance, most of which is in pre-tax pension and retirement accounts, plus just some money in a checking account. I'm planning on taking any of the checking account and other stuff that's not pre-tax and using it to pay down some HELOC debt I've racked up for funeral expenses and the like, but I'm working out what my options are with the pre-tax money. The obvious thing would be to roll it into an IRA, but to be honest I don't really need it. I'm doing pretty well with my own retirement accounts and it would really be a drop in the bucket in the long run. My brother and I are splitting it, and since he doesn't have any retirement savings yet, I've convinced him to put his into a Vanguard IRA (that hopefully he'll start contributing to regularly). With mine, I'd like to actually use it to open up a 529 fund for my niece (the aforementioned brother's daughter). It doesn't seem like there's any way around me paying income tax on the money, but I figured I'd ask here in case anybody knew of some tricks. It's not enough to change my tax bracket or anything like that, so it's not a huge deal, but if there's any way to reduce the amount of taxes I pay on it I'd like to hear it.
|
|
#
?
Sep 17, 2013 22:28
|
|
|
I don't think you pay income tax on inheritances: https://turbotax.intuit.com/tax-tools/tax-tips/General-Tax-Tips/Video--Is-Inheritance-Money-Counted-as-Income-by-the-IRS-/INF19544.htmlquote:Hello, I’m Tammy from TurboTax with important news for taxpayers who receive an inheritance. You may be pleasantly surprised to know that inheriting money from a friend or family member will not cost you a single dollar in federal income tax. Instead, the U.S. tax system may impose a tax on the decedent’s estate—which is the source of your inheritance money—if its value exceeds a certain amount.
|
|
#
?
Sep 17, 2013 22:49
|
|
|
Cicero posted:I don't think you pay income tax on inheritances: https://turbotax.intuit.com/tax-tools/tax-tips/General-Tax-Tips/Video--Is-Inheritance-Money-Counted-as-Income-by-the-IRS-/INF19544.html My understanding is that I don't have to pay any money on inheritance that she already paid income tax on, but anything from pre-tax sources, like pension and 410k, will be taxed as income.
|
|
#
?
Sep 17, 2013 22:55
|
|
|
BobbyDrake posted:It sits there until I retire, which won't be for at least another 30 years. No interest, no more contributions, it'll just sit there. That's why I want to take it, on top of the fact that I'd like to pay some debts off so I can save more and not pay any more interest. And yes, every little bit helps, but there are things that I can use that money for now that would be to my long term benefit. At least, that's the way I'm seeing IR, but I'm a moron so who knows? If your cc rate is less than ~16%, rollover into a trad IRA.
|
|
#
?
Sep 17, 2013 23:04
|
|
|
SlightlyMadman posted:My understanding is that I don't have to pay any money on inheritance that she already paid income tax on, but anything from pre-tax sources, like pension and 410k, will be taxed as income.
|
|
#
?
Sep 17, 2013 23:44
|
|
|
Zeta Taskforce posted:How big is the windfall? If it's like $2000, take the settlement. If it's $100,000, pay it in full. Take the settlement unless the difference is tiny in relation to how much you are getting. Around $1800. Harry posted:Wait, when is the debt from? FrozenVent posted:Are you planning to buy a house in the near future? Also, it's like a fun minigame in life. Why not play to win, if I can? There's no reason not to try to do better. I just need to figure out if the reflection on my credit is worth a few hundred extra bucks.
|
|
#
?
Sep 18, 2013 14:22
|
|
|
martyrdumb posted:Around $1800. Take the settlement quote:It won't go away until 2016, I just checked my credit report last night. In the long term, would it be better to let it fall off? If I make a settlement I think it'll be listed for another 7-10 years into the future. But I'm not sure how that works. No, it's not better to just wait for it to fall off. The debt isn't forgiven in 2016, you still owe the money, they can still collect from you, they can still sell the debt to another collector, they can still sue you. These things have a way of bitting you when you least expect it. Take the settlement quote:Because employers also pull credit. So do financial institutions and landlords. I had difficulty opening my current checking account and I barely qualified for a lease back when my credit was in the mid-500s. I work at a bank and my credit score could have prevented me from getting the job if I hadn't pulled it up in the meantime. I won't consider my credit "good enough" to stop building it until I'm at least in the low-700s. The reason why you had trouble with landlords and financial institutions is because you borrowed money from people and you didn't pay it back. You still haven't. Tell me why a prospective employer will view a settled debt worse than an unpaid debt, or view it much different from a bad debt that you paid off 5 years after the fact. Take the settlement. Or play the minigame.
|
|
#
?
Sep 18, 2013 15:26
|
|
|
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.) I have a variable universal life policy with Ameriprise that I'm likely going to be cashing out in the near future. The cash value is roughly $10K, with a surrender value of roughly $6500. The premiums I have paid to date are slightly in excess of the current cash value. Does this mean that I will just be able to take the surrender value as essentially a one-time tax-free income amount? For more background, I am 28 and have been paying into this policy, which provides a guaranteed $500000 of coverage and has monthly premium of $200, since mid-2009. Their website also says that my policy's tax status is "Non-Qualified", any idea what that means? revengeanceful fucked around with this message at 21:23 on Sep 18, 2013 |
|
#
?
Sep 18, 2013 21:17
|
|
|
revengeanceful posted:I have a variable universal life policy with Ameriprise that I'm likely going to be cashing out in the near future. The cash value is roughly $10K, with a surrender value of roughly $6500. The premiums I have paid to date are slightly in excess of the current cash value. Does this mean that I will just be able to take the surrender value as essentially a one-time tax-free income amount? For more background, I am 28 and have been paying into this policy, which provides a guaranteed $500000 of coverage and has monthly premium of $200, since mid-2009. Their website also says that my policy's tax status is "Non-Qualified", any idea what that means? You're correct about taking the surrender value, it won't create a taxable event for you. Non-Qualified just means that you used after-tax money to pay the premiums, which is one of the reasons that the death benefit wouldn't be taxable if it were to pay out. Keep in mind that it's not tax-free income, its treated as a return of your premiums which is why it isn't taxable. Kind of like withdrawing money from your savings account that you already paid tax on in years past. You should purchase some insurances post-tax all the time, such as short-term disability. That way when the benefit comes in, it won't be subject to income tax. When it comes to life insurance, most often you'll see qualified plans offered as part of an employee compensation, in values up to $50,000 (the limit that the companies can deduct and not cause tax liability for you as additional compensation.) Just for comparison, if you had been investing that for the past four years @ 10% annualized that $200/month would be about $12,000, or just under double what you're getting out of it right now.
|
|
#
?
Sep 18, 2013 21:41
|
|
|
martyrdumb posted:Because employers also pull credit. So do financial institutions and landlords. I had difficulty opening my current checking account and I barely qualified for a lease back when my credit was in the mid-500s. I work at a bank and my credit score could have prevented me from getting the job if I hadn't pulled it up in the meantime. I won't consider my credit "good enough" to stop building it until I'm at least in the low-700s. If you're concerned about your credit score, what I've gathered from the debt collection thread is that tradeline will drag you down as long as it stays on your report no matter what you do with it. The general advice is to negotiate a "pay for delete" to get it removed entirely, for more information go check that thread.
|
|
#
?
Sep 19, 2013 12:51
|
|
|
Kilty Monroe posted:If you're concerned about your credit score, what I've gathered from the debt collection thread is that tradeline will drag you down as long as it stays on your report no matter what you do with it. The general advice is to negotiate a "pay for delete" to get it removed entirely, for more information go check that thread. Thanks, I came across the concept of deletion yesterday and I will research it more thoroughly.
|
|
#
?
Sep 19, 2013 14:16
|
|
|
martyrdumb posted:Thanks, I came across the concept of deletion yesterday and I will research it more thoroughly. I don't know how common "pay for delete" really is. My guess is it is like the cow tipping of the financial world. Everyone thinks its possible, everyone claims to know someone who has done it, but I don't see a lot of evidence that there are tons of these happening. But if you care that much about your credit score, why couldn't you have managed to scrape together a few hundred dollars together years ago to pay it, or better yet, pay the minimum payment on the stupid thing back when you got it. The only reason you suddenly care about this old collection account is this little windfall. Try to get the pay for delete if you want, but my advice: Stop treating your finances like a game, stop taking the easy way out, live below your means, use debt sparingly, establish an emergency fund so future hardships don't turn into a crisis.
|
|
#
?
Sep 19, 2013 14:47
|
|
|
My understanding is that a real pay for delete can only really happen with a disreputable company or if the debt isn't really yours but you want to pay it anyway to avoid the hassle. You need to get everything in writing up front and be willing to take them to court to enforce the agreement.
|
|
#
?
Sep 19, 2013 15:47
|
|
|
Zeta Taskforce posted:I don't know how common "pay for delete" really is. My guess is it is like the cow tipping of the financial world. Everyone thinks its possible, everyone claims to know someone who has done it, but I don't see a lot of evidence that there are tons of these happening. But if you care that much about your credit score, why couldn't you have managed to scrape together a few hundred dollars together years ago to pay it, or better yet, pay the minimum payment on the stupid thing back when you got it. The only reason you suddenly care about this old collection account is this little windfall. I think pay for delete is far less common than people would like to believe. The fair credit reporting act requires the creditors report complete and accurate information. While granted they sometime report inaccurate info, them not reporting the debt after they've reported it is kind of questionable, at least the way I read the FCRA. So it could be they're weighing the chance of a fine from the FTC/civil court action vs. how much they're going to collect.
|
|
#
?
Sep 19, 2013 19:48
|
|
|
My local banks all have signup bonuses of $100 or $200 for opening checking accounts with a minimum balance of $1000 (and a direct deposit within 90 days of signup). Am I foolish for not opening a bunch of accounts, pocketing the bonus money, then closing them in a year?
|
|
#
?
Sep 19, 2013 20:45
|
|
|
EugeneJ posted:My local banks all have signup bonuses of $100 or $200 for opening checking accounts with a minimum balance of $1000 (and a direct deposit within 90 days of signup). Just make sure you stay for the length of the term they require if you want to keep that $$. Otherwise, I know a few people who do this on a regular basis. Its more work than just straight getting interest from the bank, but its basically the same thing - interest paid up-front.
|
|
#
?
Sep 19, 2013 21:00
|
|
|
1) The Chex system is more stringent and if you open a bunch of accounts you could flag yourself and get them all closed. 2) Keep in mind these count as interest, which will get taxed. 3) Almost all of them will require a minimum balance and/or DD. You can game your way through the DD, but requires some work. Otherwise, no real problem with the plan.
|
|
#
?
Sep 19, 2013 21:03
|
|
|
Where do you save money that you plan on spending? From what I gather in the retirement thread, every year I should put $5,500 in my IRA and $17,500 in my 401(k). I can do that. But if I'm planning on saving up $100,000 to buy a house over the next five years, where do I put that while I'm saving it? Just in a savings account, or in some different type of investment account?
|
|
#
?
Sep 20, 2013 09:59
|
|
|
Kilo India posted:Where do you save money that you plan on spending? You must make a shitload amount of money. A savings account (or money market account) is your only real option. But I don't think anyone would fault you for buying a house sooner than 5 years and put less than $100,000 down on it.
|
|
#
?
Sep 20, 2013 14:38
|
|
|
Zeta Taskforce posted:You must make a shitload amount of money. A savings account (or money market account) is your only real option. But I don't think anyone would fault you for buying a house sooner than 5 years and put less than $100,000 down on it. Unless he's looking to buy a 2BR bungalow in a decent part of the San Francisco bay area which will likely cost $750k and having $100k down won't even be 20%. http://www.redfin.com/CA/San-Francisco/6238-Fulton-St-94121/home/1595820 kansas fucked around with this message at 15:19 on Sep 20, 2013 |
|
#
?
Sep 20, 2013 15:16
|
|
|
kansas posted:Unless he's looking to buy a 2BR bungalow in a decent part of the San Francisco bay area which will likely cost $750k and having $100k down won't even be 20%. Even then, you are allowed to buy a house with less than 20% down, and it's a very common practice to get a 2nd mortgage or HELOC in conjunction with an 80% first to avoid PMI. More downpayment is better, but it takes many of us a very long time to scrape together 20%.
|
|
#
?
Sep 20, 2013 15:44
|
|
|
Kilo India posted:Where do you save money that you plan on spending? You could put the money in various CDs if you can find a decent rate. Problem is most CDs aren't any better than the high yield savings account rates you see at the more competitive banks (usually online banks).
|
|
#
?
Sep 20, 2013 15:56
|
|
|
Zeta Taskforce posted:Even then, you are allowed to buy a house with less than 20% down, and it's a very common practice to get a 2nd mortgage or HELOC in conjunction with an 80% first to avoid PMI. More downpayment is better, but it takes many of us a very long time to scrape together 20%. Of course it's allowed but that doesn't mean it's a good idea. I'm definitely not saying that there aren't situations where buying with less than 20% down makes sense, but purchasing a house is already a huge risk even with the standard 20%. If you don't have that, buying a house should be a rare and very deeply thought-out decision, not a matter of course. Plus even ignoring the risk profile and liquidity issues, there are usually ways of having a place to live without purchasing, often for less true cost than owning a house (not comparing to just the mortgage payments which is not even close to true cost). Again I'm not saying if you ever buy with less than 20% down you've definitely made a bad decision. But counseling someone to do so when they don't need to just because they could is pretty bad advice.
|
|
#
?
Sep 20, 2013 16:16
|
|
|
While we're touching on houses, people in this thread usually respond to credit questions with 'Are you planning to buy a house soon? No? Then don't worry about your score". Well, we're not planning on buying a house right now, but it's something we are talking about and trying to work out our horizon for (in terms of working out how much we can save, how quickly, what areas we would consider and what programs might be available to us there). So with that in mind, when should you start worrying about your score? A year out? Six months? When the bank rejects you?
|
|
#
?
Sep 20, 2013 16:25
|
|
|
Ashcans posted:While we're touching on houses, people in this thread usually respond to credit questions with 'Are you planning to buy a house soon? No? Then don't worry about your score". The way I look at it, it depends on how you define “worry”, and that is kind of the default response when people talk about weird things to manipulate the score. How many people ask if it’s wrong to pay a loan off early because they will miss out on potential reporting, or if they should open something because they don’t have enough tradelines, if they should pay off that collection account because it might drop off eventually on its own, if they should close something that they will never use again, or they want a new cell phone plan, but OMG they are going to pull my credit! More often than not, it’s people who have been careless with their money and finances are the ones to do all this stuff as a shortcut to financial responsibility. But you should take advantage of getting a free credit report though https://www.annualcreditreport.com you need to check it for obvious errors, you need to always make sure you pay all your bills every month, that you are never late, you should always borrow responsibly, try to keep your balances on cards low, so in that respect you should always be concerned with your credit.
|
|
#
?
Sep 20, 2013 16:43
|
|
|
I probably mis-stepped by using 'score' in my post. I don't actually care about my score aside from how it practically effects my life and finances. What I mean is that I am vaguely aware that credit events can cause issues when you are leading up to something like a mortgage application - opening or closing other lines of credit, big charges or payoffs, basically anything that jiggles the numbers that I guess banks use. I'd like to have some idea of what the window is for that sort of thing is, so that I don't cause myself problems by switching reward cards or something relatively trivial. I'm not actually worried about my score; according to Credit Karma it's in the high 700s, which is mostly due to careful spending and clean living (largely thanks to this thread, in fact!) We don't have any consumer debt and are paid up on all our student/medical/etc. accounts.
|
|
#
?
Sep 20, 2013 17:23
|
|
|
Ashcans posted:I probably mis-stepped by using 'score' in my post. I don't actually care about my score aside from how it practically effects my life and finances. What I mean is that I am vaguely aware that credit events can cause issues when you are leading up to something like a mortgage application - opening or closing other lines of credit, big charges or payoffs, basically anything that jiggles the numbers that I guess banks use. I'd like to have some idea of what the window is for that sort of thing is, so that I don't cause myself problems by switching reward cards or something relatively trivial. One thing that does screw people up all the time is if they decide to finance a car before they take out a mortgage. And it's not because it messes up the credit. The extra payment of several hundred dollars a month is often enough to completely throw off the debt to income ratio. It's probably good to avoid big ticket purchases before buying a house.
|
|
#
?
Sep 20, 2013 17:28
|
|
|
Kilo India posted:Where do you save money that you plan on spending? 5 years is a long enough time frame to leverage P2P loans like Lending Club. Even playing it plenty safe, you're looking at 4-5% returns.
|
|
#
?
Sep 20, 2013 20:42
|
|
|
baquerd posted:5 years is a long enough time frame to leverage P2P loans like Lending Club. Even playing it plenty safe, you're looking at 4-5% returns. This is horrible advice. You are forgeting risk. People have lost their shirts through P2P lending. When you are throwing $1500 or $2000 a month at something, when you hit $100,000 most of the money you put in will be your savings, hardly anything will be the interest. That is almost as true at 4% as it is at 1%. If all goes perfect, you might hit your $100,000 mark a month or 2 faster through P2P. This is your upside. In all cases, the interest you earn is taxable, and that reduces further this apparent spread.
|
|
#
?
Sep 20, 2013 20:54
|
|
|
Zeta Taskforce posted:This is horrible advice. You are forgeting risk. People have lost their shirts through P2P lending. When you are throwing $1500 or $2000 a month at something, when you hit $100,000 most of the money you put in will be your savings, hardly anything will be the interest. That is almost as true at 4% as it is at 1%. If all goes perfect, you might hit your $100,000 mark a month or 2 faster through P2P. This is your upside. In all cases, the interest you earn is taxable, and that reduces further this apparent spread. On the other hand, no one has lost money in Lending Club with proper diversification, you will get generally the same percentage of interest regardless of amount put in, and if you take the time to learn about it 10% returns aren't remotely out of the question. It's not fire and forget, but it's doable. Yes, it's taxable. Over 5 years you're looking at $4-10k extra money after taxes, which is 3-6 months ahead of schedule to save $100k.
|
|
#
?
Sep 20, 2013 21:03
|
|
|
baquerd posted:On the other hand, no one has lost money in Lending Club with proper diversification, you will get generally the same percentage of interest regardless of amount put in, and if you take the time to learn about it 10% returns aren't remotely out of the question. It's not fire and forget, but it's doable. Do you have any sources to back up this data? I googled around a bit, and found a couple articles claiming lending club doesn't count defaults in the numbers they give for average returns, so I'm having trouble finding any real information.
|
|
#
?
Sep 20, 2013 21:06
|
|
|
|
| # ? May 24, 2024 23:47 |
|
|
SlightlyMadman posted:Do you have any sources to back up this data? I googled around a bit, and found a couple articles claiming lending club doesn't count defaults in the numbers they give for average returns, so I'm having trouble finding any real information. You can drop by here and play with historical return numbers: http://www.nickelsteamroller.com/lendingclub_return I've heard but cannot source that no one with over 800 notes has lost money. Lending club states that 99% of people with just 100 notes makes money: https://www.lendingclub.com/public/diversification.action I have personally made over 12% returns year after year since 2009 using Lending Club. That was all fire and forget high interest loans, I'm now trying to improve on that.
|
|
#
?
Sep 20, 2013 21:41
|
|