Nevermind.

[Golgatha]

s0me0nesmind1 you can go fuck yourself.

 

[s0me0nesmind1]

No. You're an idiot. Why the hell would you pay off your loan in full unless you're $5k away from it or something? No. God no.

Did I mention... No? Taking a penalty? good lord you need some more research. If you're questioning doing something THIS stupid, then obviously you're not putting enough away towards retirement.

edit: Also, NO!

 

[Red Storm]

Complex Money Question

And you came to ATOT because...?

 

[Golgatha]

No. You're an idiot. Why the hell would you pay off your loan in full unless you're $5k away from it or something? No. God no.

Did I mention... No? Taking a penalty? good lord you need some more research. If you're questioning doing something THIS stupid, then obviously you're not putting enough away towards retirement.

edit: Also, NO!

Actually we're well above the median net worth for our income by age. We expect a 40% raise in household income based on the facts I already mentioned next year and all of that 40% will be taxed 3% more than the tax bracket we're in this year.

 

[Golgatha]

And you came to ATOT because...?

To get opinions. There are some very financially savy people here among the rif-raf.

 

[Golgatha]

No. You're an idiot. Why the hell would you pay off your loan in full unless you're $5k away from it or something? No. God no.

Did I mention... No? Taking a penalty? good lord you need some more research. If you're questioning doing something THIS stupid, then obviously you're not putting enough away towards retirement.

edit: Also, NO!

The other psychological aspect of this for my wife is she won't do anything more risky than say a CD with her inheritance. Given the current bank rates for CDs, I'd much rather get an equivalent and guaranteed return of 3.375%.

 

[s0me0nesmind1]

Actually we're well above the median net worth for our income by age. We expect a 40% raise in household income based on the facts I already mentioned next year and all of that 40% will be taxed 3% more than the tax bracket we're in this year.

Our household income is over 2x the median since each my fiance and myself make more than the median by... everyone. Want to go by age? Fine, we're 3x above the median, and I'm at the bottom of the age bracket.

I'm still going to call you a complete dumbass for even thinking of this. You want to be taxed less? Max out your 401k retard. There isn't anything more safe than a balanced portfolio.

Unless your wife inherited $500k+, there is no reason for you to be spending any cash to buy out your loan at an interest rate that low.

 

[s0me0nesmind1]

The other psychological aspect of this for my wife is she won't do anything more risky than say a CD with her inheritance. Given the current bank rates for CDs, I'd much rather get an equivalent and guaranteed return of 3.375%.

Ask your wife how big of a brick people in Europe were shitting when they put money into Cyprus Bank. Yeah, she's being one hell of a dumbass if that's her mentality.

 

[Apple Of Sodom]

You would pay a 10% penalty on your earnings PLUS get taxed on that money. Your $100K IRA is now worth $60K in cash because you couldn't wait...

There are income limit contributions for putting into an IRA.

•For married couples filing jointly: The phase-out has gone up $5,000. The new phase-out range for 2013 is $178,000 to $188,000, up from $173,000 to $183,000 in 2012.
•For singles: The phase-out has gone up $2,000. The new phase-out range for 2013 is $112,000 to $127,000, up from $110,000 to $125,000 in 2012.
•For a married individual filing a separate return who is covered by a retirement plan at work: The phase-out range remains $0 to $10,000

Why would you pay off your home loan? Keep that money, unless you have an ARM or a very high interest rate. Sure, pay $10K or $20K on principle, but invest that money and get a return on it. I use Fidelity and easily get a 15% return on their mutual funds without even trying.

 

[JoeyM]

1. Do not pay off your mortgage.
2. Convert IRA to Roth IRA and use inheritance to pay taxes due. Do not withdraw IRA and take penalty.
3. Max out Roth IRA and retirement savings every year.
4. Do not blow the inheritance. Save the money and earn interest. You have kids? How about a 529 plan? In some states you can deduct 529 deposit from your state taxes.
5. Learn a little bit about saving, investing and taxes. With a financial windfall and good income, you need to know the very basic stuff. Your comments in the initial thread show significant ignorance in these matters and will be making a big mistake if you don't do what people are recommending here. At least you had the sense to ask for help.

Joe M.

 

[JoeyM]

There are income limit contributions for putting into an IRA.

•For married couples filing jointly: The phase-out has gone up $5,000. The new phase-out range for 2013 is $178,000 to $188,000, up from $173,000 to $183,000 in 2012.
•For singles: The phase-out has gone up $2,000. The new phase-out range for 2013 is $112,000 to $127,000, up from $110,000 to $125,000 in 2012.
•For a married individual filing a separate return who is covered by a retirement plan at work: The phase-out range remains $0 to $10,000

There's a way around this. You can contribute to a non deducted IRA (income you have paid taxes on) and then convert it to a Roth IRA. Since you have already paid taxes, there is no cost for the conversion to Roth. Even though your income might not allow direct contribution to Roth IRA, you now have one by doing this extra step.

Joe M.

 

[Schfifty Five]

Background - My wife is going to come into a considerable amount of inheritance money very soon, but the amount is about $30k shy of us being able to pay our house mortgage off. I also got a raise this year and my wife started working again (9 years raising our kids until they both are in public school), so I expect my total taxable income to be much higher next year as compared to this one. Basically most of our extra income will be taxed 3% higher. I was planning to convert my regular IRA to a Roth IRA this year (either partially or fully if it makes sense from a tax perspective) as well due to changes in my tax situation.

I fully understand that distributions from a regular IRA get a 10% penalty, and for peace of mind, I'm willing to make that sacrifice. For the rest of my money, it will be taxed as regular income. I was thinking of rolling my regular IRA to a Roth and I assume this rollover amount would be taxed as if it were income as well correct? So, if I take the early distribution, the difference in rolling over to a Roth vs cashing out would only be the 10% penalty correct?

The reasons I'm thinking of doing this is because I'll definitely be in a higher tax bracket next year for all our additional income, so I'll pay 3% more in taxes if I convert to the Roth IRA next year. Also, if I cash out a partial portion, we would be able to fully pay off our house that's sitting on a 3.375% loan. The way I figure it, I'll save 3% on taxes if I move the money now, and I'll save 3.375% on the loan interest going forward, so with the 10% penalty it's really more like a 3.625% penalty due to the taxes and loan interest savings going into next year. Of course I won't get the interest deduction, so that number will be a bit higher, but we're counting pennies at this point since I only pay about $5k in interest each year due to a decently high loan/equity ratio on my house. I also realize I won't realize any gains on this money that could stay invested, but I'm also willing to take that risk as well due to having several other tax-free accounts that make up the majority of our retirement savings (work 401k and wife's Roth IRA she's had since 18 years old).

Any advice is welcome. However even at a full 10% penalty, psychologically it's worth it to me to be done with paying a mortgage, as this would make my family completely debt free. i.e. I have no other loans except for my mortgage or balances on any revolving credit lines.

So you're 30k short of paying off your mortgage. If you take out $30k you will lose 10% right off the bat and pay taxes. That's $3k plus any taxes on that $30k. Why would you want to throw away that much cash just so you can have your house paid when you can pay off your house within another couple years at most.

 

[Gunslinger08]

Personally, I wouldn't withdraw the money or convert to a Roth. A 45-50% haircut (approximate penalty + taxes) now makes a big difference down the line. I don't know your specifics, but run it through a calculator here: http://money.msn.com/retirement/roth-ira-conversion-calculator.aspx

Just withdrawing your money to pay your mortgage may feel good for a bit, but how long would it take you to pay off that $30k? 2 years? That savings of interest (minus tax deduction) probably doesn't come close to making up for the loss of compound growth in your IRA.

I've got no problem with you paying down your mortgage with the inheritance. You could probably get a higher return than the ~3% interest rate after tax deduction, but it's clearly more risky than paying off debt and I understand the desire to be debt free. I just don't like paying penalties (ex. 10%) on money you already have invested to pay something off "just to feel good".

 

[monkeydelmagico]

There's a way around this. You can contribute to a non deducted IRA (income you have paid taxes on) and then convert it to a Roth IRA. Since you have already paid taxes, there is no cost for the conversion to Roth. Even though your income might not allow direct contribution to Roth IRA, you now have one by doing this extra step.

Joe M.

This. No reason to take the hit upon conversion.

Just because the wife is risk averse does not mean your portfolio must also be so. Consider your own account in which you can at least start up a blue chip or index investment plan that will reap some dividends. Going to beat the living hell out of CD rates.

DO NOT cash out any IRA balances as the penalties are silly high IMHO.

Start an education 529 fund for kiddies

Sounds silly but it's tough when you have more money than you know what to do with. The addage a fool and his money are soon parted starts to have many digit consequences. Find a TRUSTED consultant who will steer you right.

 

[skimple]

Leave the existing IRA alone. No point given the government more money. You should be thinking about withdrawing that based on your tax rate when you retire not on your tax rate today.

With a mortgage rate today of less than 4%, I think it would be foolish to use any inheritance to pay off the mortgage. Inheritance money is non-taxable income, unless it exceeds the "death-tax" limits. Find a way to squirrel away more of your paychecks, if you're concerned about avoiding income taxes.

 

[Golgatha]

1. Do not pay off your mortgage.
2. Convert IRA to Roth IRA and use inheritance to pay taxes due. Do not withdraw IRA and take penalty.
3. Max out Roth IRA and retirement savings every year.
4. Do not blow the inheritance. Save the money and earn interest. You have kids? How about a 529 plan? In some states you can deduct 529 deposit from your state taxes.
5. Learn a little bit about saving, investing and taxes. With a financial windfall and good income, you need to know the very basic stuff. Your comments in the initial thread show significant ignorance in these matters and will be making a big mistake if you don't do what people are recommending here. At least you had the sense to ask for help.

Joe M.

1) Security is intangible, but does have some value to my wife and I.
2) Purely financially speaking this is definitely the best thing to do.
3) Already do. Wife and I max our IRAs and I put 14% into my company 401k annually. I chose a regular IRA so I could deduct the contributions to offset interest income we were getting from an owner financed loan. The source of this extra income is the money my wife is set to inherit, as the company with the loan is refinancing and paying back all the remaining principle.
4) Have kids, have 529 plan already. Debating putting more in there but if the house is paid off before they enter college, I figure I could help them out more. I also don't like the idea of giving them a lump sum or having money inaccessible until they enter college/etc. Honestly I'd rather invest it directly than put it in a 529. I'll be glad to pay for their college once they have a degree in hand though. My oldest son is 10, so he will start post high school education in about 8 years.
5) I know exactly what I'm getting myself into if I do the early withdrawal. See comments 1 and 2.

 

[s0me0nesmind1]

1) Security is intangible, but does have some value to my wife and I.
2) Purely financially speaking this is definitely the best thing to do.
3) Already do. Wife and I max our IRAs and I put 14% into my company 401k annually. I chose a regular IRA so I could deduct the contributions to offset interest income we were getting from an owner financed loan. The source of this extra income is the money my wife is set to inherit, as the company with the loan is refinancing and paying back all the remaining principle.
4) Have kids, have 529 plan already. Debating putting more in there but if the house is paid off before they enter college, I figure I could help them out more. I also don't like the idea of giving them a lump sum or having money inaccessible until they enter college/etc. Honestly I'd rather invest it directly than put it in a 529. I'll be glad to pay for their college once they have a degree in hand though.
5) I know exactly what I'm getting myself into if I do the early withdrawal. See comments 1 and 2.

1) Security, if anything, is having cash readily available you dumb fuck. Not having your mortgage paid off. When the hospital wants you to pay your $20k bill, are you going to hand them the deed to your house?
2) Then why are you asking for advice? Dumbass.
3) Until you're maxing out your 401k (between you and your wife that's $35k) shut your trap. You're not putting jack shit into retirement, and you were probably late to the game to begin with.

 

[Golgatha]

Leave the existing IRA alone. No point given the government more money. You should be thinking about withdrawing that based on your tax rate when you retire not on your tax rate today.

Good point, I could start withdrawing at 59.5 years old or whenever I retire and my only reportable income will be what I withdraw. I could draw and close this account before touching either of our other tax-fee (401k and wife's Roth) retirement accounts. I suppose I could also start putting money in a Roth myself instead of a traditional IRA next year since we won't have a large amount of interest income like in previous years.

 

[Golgatha]

1) Security, if anything, is having cash readily available you dumb fuck. Not having your mortgage paid off. When the hospital wants you to pay your $20k bill, are you going to hand them the deed to your house?
2) Then why are you asking for advice? Dumbass.
3) Until you're maxing out your 401k (between you and your wife that's $35k) shut your trap. You're not putting jack shit into retirement, and you were probably late to the game to begin with.

You have a way with people don't you? I asked for advice not insults you pompous fucker.

 

[Schfifty Five]

s0me0nesmind1 you can go fuck yourself.

LOL.

 

[lupi]

Great album.

 

[dighn]

This thread

 

[Schfifty Five]

This thread

delivers!