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Old 07-18-2019, 08:50 AM
 
71,934 posts, read 71,971,035 times
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Quote:
Originally Posted by Mightyqueen801 View Post
That's really a moot issue though when you really need the money. If you have other resources to begin with, you wouldn't be considering borrowing from a retirement account in the first place.

For me, the idea of having the opportunity to own and not pay rent anymore far outweighed something so minor.
many have the ability to borrow elsewhere ... but they get this free loan mentality in their head like the op....back in the early 1990’s I did it .. I could have borrowed anywhere I wanted but not knowing better I picked the 401k ...a year later the company failed and my loan became due.

The worst was a co-worker who took a 401k loan to buy a new car ...he could have gotten a low interest rate new car loan from the beginning ...instead he borrowed from the 401k ...

Now when our company failed the loan was due ...he could only get it refinanced as a used car with a very high rate
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Old 07-18-2019, 10:17 AM
 
Location: Loudon, TN
5,818 posts, read 4,862,439 times
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Yes ...there are often unintended, unforeseen consequences to this kind of loan. Before borrowing against your retirement, consider selling off under-utilized assets like extra vehicles, your engagement ring from your first husband, that welding set-up you have in the garage you've never used, etc...

Most things that are not emergencies can wait until you can save the money needed. Think long and hard about it, because like Mathjak's situation, his full balance came due suddenly through no fault of his own. I believe at that point taxes on the amount withdrawn would also be required.
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Old 07-18-2019, 12:01 PM
 
Location: Staten Island, NY
8,772 posts, read 7,135,606 times
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Quote:
Originally Posted by Mightyqueen801 View Post
I am in a public pension system, and yes, we could take a loan against our retirement. I did it multiple times over the years because the interest rate was lower than what I could get on the outside, plus it doesn't show up on your credit record.

As a matter of fact, (some of the financially perfect pansies better grab their smelling salts here) I took out a retirement loan for the 3% down payment on my condo. I wanted to buy a place of my own rather than rent, the tax credit was being offered for a window of time, and I wanted to take advantage of it. I had a good salary and could make the mortgage payments, but I had no savings because Life.

Someone else I know who works for a different public transportation agency just did the same thing to buy in a 55+ complex.

Now the catch is that if you leave work, via retirement or otherwise, and still have an outstanding balance, your pension is PERMANENTLY reduced. I took out the loan and bought my condo in 2010, but long before I retired in 2016, I had it paid off and so my final pension allowance was not affected.

I am not sure you would be able to borrow against a pension if you aren't working there anymore, though. The best place to ask is the pension system from which you are interested in borrowing.
Same here.

I've HAD to take pension loans a few times over the years. I did it in situations where the pension loan was my best option and the debt being paid was unavoidable. Don't use it to buy a car, vacation ,etc. Retirement fund loans should only be used for emergencies, or, like Mightyqueen did, to purchase a home. I'm pretty sure our pension loans are paid back pre-tax FYI.

I am considering a pension loan to purchase a second home now. I don't view my long-term financial health only through the glasses of dollars and cents. I'm trying to keep myself mentally in the game enough to tough out another 10 years at my job, thereby GREATLY increasing my pension benefit. A second home I can retreat to will increase my mental heath and relaxation, making those 10 years much easier to stomach. Furthermore, I'll finally have a tangible "I made it" asset to look towards as opposed to just numbers on paper.

I don't care how that sounds to financial gurus. I'm 40 years old and chose a career that affords me a pension that most can only dream of (or save $3 millions plus to attain). I don't have to be the perfect investor. I never intended to become a 1%'er.
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Old 07-18-2019, 03:19 PM
 
Location: Scottsdale, AZ
7,755 posts, read 4,771,338 times
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Quote:
Originally Posted by Mightyqueen801 View Post
As a matter of fact, (some of the financially perfect pansies better grab their smelling salts here) I took out a retirement loan for the 3% down payment on my condo. I wanted to buy a place of my own rather than rent, the tax credit was being offered for a window of time, and I wanted to take advantage of it. I had a good salary and could make the mortgage payments, but I had no savings because Life.

"Financially perfect pansies" LOL! I need a knee-slapping emoji here!
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Old 07-18-2019, 03:33 PM
 
Location: Phoenix, AZ
1,732 posts, read 766,387 times
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Quote:
Originally Posted by Mightyqueen801 View Post

As a matter of fact, (some of the financially perfect pansies better grab their smelling salts here) I took out a retirement loan for the 3% down payment on my condo. I wanted to buy a place of my own rather than rent, the tax credit was being offered for a window of time, and I wanted to take advantage of it. I had a good salary and could make the mortgage payments, but I had no savings because Life.


I am very much in favor of using retirement funds to buy a home. I did it myself 20 years ago. I had two homes. One I lived in that had very little left on the mortgage and a rental that also had a small balance on the mortgage. I borrowed as much as I could on both houses and took a distribution from my IRA to make up the difference. Bought my current house for cash, sold the other two homes, paid off the loans and still realized some cash from the sales. The tax (with penalty) that I paid on the distribution was about a third of the interest I would have paid on a 30 year loan and I have the added benefit of never again having to make a mortgage payment. There is nothing more euphoric than not having to make mortgage payments.
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Old 07-18-2019, 03:39 PM
 
71,934 posts, read 71,971,035 times
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Many find having accounts full of liquid investments that can provide easy cash for anything needed or wanted and keep that mortgage rather then have that money tied up and inaccessible if needed like in 2008 when many banks shut down equity loans .

Today it is even harder to get to that money tied up as equity loans require the same requirements as a mortgage.no job can mean no loan .

So I can’t imagine that feeling very euphoric compared to holding the equivalent in your own money.

So not having that mortgage can be a double edge sword
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Old 07-18-2019, 04:01 PM
 
Location: Phoenix, AZ
1,732 posts, read 766,387 times
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Quote:
Originally Posted by mathjak107 View Post



So I canít imagine that feeling very euphoric compared to holding the equivalent in your own money.

So not having that mortgage can be a double edge sword
Yes, I have read a lot of pundits on this site who advocate investing your cash and borrowing money to buy your house.


The fallacy there is that the average person isn't going to make that delusional 5% to 12% on their investments. They'll be lucky to make 2% if they put it in a CD for long term and a half percent in a regular savings account.
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Old 07-18-2019, 04:12 PM
 
814 posts, read 171,938 times
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Quote:
Originally Posted by mathjak107 View Post
Many find having accounts full of liquid investments that can provide easy cash for anything needed or wanted and keep that mortgage rather then have that money tied up and inaccessible if needed like in 2008 when many banks shut down equity loans .

Today it is even harder to get to that money tied up as equity loans require the same requirements as a mortgage.no job can mean no loan .

So I canít imagine that feeling very euphoric compared to holding the equivalent in your own money.

So not having that mortgage can be a double edge sword
I used home ownership over the years to build equity. When I sold a home all proceeds went into the next home so the mortgage was small. My last home and my present home were both bought cash outright ...proceeds from the previous sale and any extra money I received was invested.

I would rather have a smaller monthly budget.
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Old 07-18-2019, 04:20 PM
 
71,934 posts, read 71,971,035 times
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Quote:
Originally Posted by adjusterjack View Post
Yes, I have read a lot of pundits on this site who advocate investing your cash and borrowing money to buy your house.


The fallacy there is that the average person isn't going to make that delusional 5% to 12% on their investments. They'll be lucky to make 2% if they put it in a CD for long term and a half percent in a regular savings account.
investing is not for everyone , i agree , many people are just poor investors because they lack discipline .

however that does not make it any easier to access that money in the house if needed ...

the house is a funnel with a one way valve and without costly loans there is no way to get at it once it goes in .

with the new requirements today for helocs there is a good chance if you need to get at that money you may not be able to . you need to meet all the requirements a new mortgage has both income , job and credit wise .

so i do attach a caveat to the words " There is nothing more euphoric than not having to make mortgage payments."

that assumes you have enough money to meet all your future needs without needing to get any back out in an emergency.

but in any case having lots of liquidity and being able to pay off that mortgage at any point if need be can be just as euphoric for someone with a mortgage ....

The problem is the comparison is always made where you take someone who has extra money or all cash to pay off or not have a mortgage vs someone with a mortgage and not much money .

there is not anything mutually exclusive to that same money being anymore euphoric sitting in the house then in liquid accounts by someone who has the resources . they both provide a level of comfort if you have the money ..

in fact we rent ...we no longer have any money in a house ....i can tell you we have a euphoric feeling because we have all that money once tied up in a house and other real estate at our finger tips ... we can pay a lifetime of expenses and not worry about stressing over any bill .... so this euphoria you speak of can come in quite a few ways

Last edited by mathjak107; 07-18-2019 at 05:11 PM..
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Old 07-18-2019, 04:51 PM
 
Location: Coastal New Jersey
56,279 posts, read 54,731,851 times
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Quote:
Originally Posted by Airborneguy View Post
Same here.

I've HAD to take pension loans a few times over the years. I did it in situations where the pension loan was my best option and the debt being paid was unavoidable. Don't use it to buy a car, vacation ,etc. Retirement fund loans should only be used for emergencies, or, like Mightyqueen did, to purchase a home. I'm pretty sure our pension loans are paid back pre-tax FYI.

I am considering a pension loan to purchase a second home now. I don't view my long-term financial health only through the glasses of dollars and cents. I'm trying to keep myself mentally in the game enough to tough out another 10 years at my job, thereby GREATLY increasing my pension benefit. A second home I can retreat to will increase my mental heath and relaxation, making those 10 years much easier to stomach. Furthermore, I'll finally have a tangible "I made it" asset to look towards as opposed to just numbers on paper.

I don't care how that sounds to financial gurus. I'm 40 years old and chose a career that affords me a pension that most can only dream of (or save $3 millions plus to attain). I don't have to be the perfect investor. I never intended to become a 1%'er.
I hear you. I put in 37 years, and when I started as a secretary at 20, I took the job because they paid secretaries more than most other places, plus they also gave more vacation to start. I wasn't even thinking about the health insurance or the retirement system. Of course, as time went on and I moved up and stayed there, I learned how valuable they were.

Was going to leave by 55 with 35 years in, and at 54 my boss called me in and asked if I would stay for a major project, and that it meant a promotion with an 11% increase. Boosted my pension, and I retired at 57 instead.

I'm not rich, either, but the pension more than provides for what I need.

I just came back from a retirees' luncheon for people who live in NJ who all used to work where we worked in NY or NJ (not sure if you've figured out who MY employer was, but there's a clue in there ) and there were a lot of retirees in attendance who did the same job as you and are doing OK now in retirement.
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