Finally liquidated my 401k and SEP IRA

[scaredyclassic]

housing prices cannot dip more than another 20%, the dow cannot possibly go below 4,000, gold cannot possibly go about $1,200 per ounce, america cannot possibly not be the most powerful country int he world, the dollar cannot possibly not be the world’s reserve currency, and on average, retirement accounts are a no-brainer way to amass a large nest egg over time.

Or not.

[danielwis]

I did it. Here’s what I did. In 1999, I was WAAAY upside down on a condo that I bought in West Oahu in 1993. I paid 180,000 in 1993. By the late 90’s, the same units were selling in foreclosures for around 70,000. For those of you that do not know this, the 90’s were devastating to real-estate in Hawaii, following the Japanese investment bust/bubble.

Many of my friends and co-workers were doing short sales or going into foreclosure.

I took a different approach. I just “knew” the market had to be at the bottom. I was right. I cashed in an IRA. I had to pay taxes, but it wasn’t as bad as I thought, as my property purchases and fix up investments cancelled a lot of my tax obligations in that year.

I used the money to buy to more condos, for a total of 3 real-estate investments on Oahu. I bought another condo in West Oahu in the same complex that I owned in, for 72,000. It was a mess, but I knew an underemployed handyman that did the whole fix up for a very reasonable price. I also purchased a one bedroom apartment at the base of Diamond Head, just out side of Waikiki, for 171,000.

I did extremely well on both investments. No regrets. I hope you have similar results.

I’m following the San Diego market and the Honolulu market. Both are still to rich for my blood, though this might be the bottom. I don’t know (who does??). I’m staying put, unless things take another leg down. If I were thinking of making a purchase for my primary residence, I would likely jump in now, but that’s not the case.

[danielwis]

I did it. Here’s what I did. In 1999, I was WAAAY upside down on a condo that I bought in West Oahu in 1993. I paid 180,000 in 1993. By the late 90’s, the same units were selling in foreclosures for around 70,000. For those of you that do not know this, the 90’s were devastating to real-estate in Hawaii, following the Japanese investment bust/bubble.

Many of my friends and co-workers were doing short sales or going into foreclosure.

I took a different approach. I just “knew” the market had to be at the bottom. I was right. I cashed in an IRA. I had to pay taxes, but it wasn’t as bad as I thought, as my property purchases and fix up investments cancelled a lot of my tax obligations in that year.

I used the money to buy to more condos, for a total of 3 real-estate investments on Oahu. I bought another condo in West Oahu in the same complex that I owned in, for 72,000. It was a mess, but I knew an underemployed handyman that did the whole fix up for a very reasonable price. I also purchased a one bedroom apartment at the base of Diamond Head, just out side of Waikiki, for 171,000.

I did extremely well on both investments. No regrets. I hope you have similar results.

I’m following the San Diego market and the Honolulu market. Both are still to rich for my blood, though this might be the bottom. I don’t know (who does??). I’m staying put, unless things take another leg down. If I were thinking of making a purchase for my primary residence, I would likely jump in now, but that’s not the case.

[danielwis]

I did it. Here’s what I did. In 1999, I was WAAAY upside down on a condo that I bought in West Oahu in 1993. I paid 180,000 in 1993. By the late 90’s, the same units were selling in foreclosures for around 70,000. For those of you that do not know this, the 90’s were devastating to real-estate in Hawaii, following the Japanese investment bust/bubble.

Many of my friends and co-workers were doing short sales or going into foreclosure.

I took a different approach. I just “knew” the market had to be at the bottom. I was right. I cashed in an IRA. I had to pay taxes, but it wasn’t as bad as I thought, as my property purchases and fix up investments cancelled a lot of my tax obligations in that year.

I used the money to buy to more condos, for a total of 3 real-estate investments on Oahu. I bought another condo in West Oahu in the same complex that I owned in, for 72,000. It was a mess, but I knew an underemployed handyman that did the whole fix up for a very reasonable price. I also purchased a one bedroom apartment at the base of Diamond Head, just out side of Waikiki, for 171,000.

I did extremely well on both investments. No regrets. I hope you have similar results.

I’m following the San Diego market and the Honolulu market. Both are still to rich for my blood, though this might be the bottom. I don’t know (who does??). I’m staying put, unless things take another leg down. If I were thinking of making a purchase for my primary residence, I would likely jump in now, but that’s not the case.

[danielwis]

I did it. Here’s what I did. In 1999, I was WAAAY upside down on a condo that I bought in West Oahu in 1993. I paid 180,000 in 1993. By the late 90’s, the same units were selling in foreclosures for around 70,000. For those of you that do not know this, the 90’s were devastating to real-estate in Hawaii, following the Japanese investment bust/bubble.

Many of my friends and co-workers were doing short sales or going into foreclosure.

I took a different approach. I just “knew” the market had to be at the bottom. I was right. I cashed in an IRA. I had to pay taxes, but it wasn’t as bad as I thought, as my property purchases and fix up investments cancelled a lot of my tax obligations in that year.

I used the money to buy to more condos, for a total of 3 real-estate investments on Oahu. I bought another condo in West Oahu in the same complex that I owned in, for 72,000. It was a mess, but I knew an underemployed handyman that did the whole fix up for a very reasonable price. I also purchased a one bedroom apartment at the base of Diamond Head, just out side of Waikiki, for 171,000.

I did extremely well on both investments. No regrets. I hope you have similar results.

I’m following the San Diego market and the Honolulu market. Both are still to rich for my blood, though this might be the bottom. I don’t know (who does??). I’m staying put, unless things take another leg down. If I were thinking of making a purchase for my primary residence, I would likely jump in now, but that’s not the case.

[danielwis]

I did it. Here’s what I did. In 1999, I was WAAAY upside down on a condo that I bought in West Oahu in 1993. I paid 180,000 in 1993. By the late 90’s, the same units were selling in foreclosures for around 70,000. For those of you that do not know this, the 90’s were devastating to real-estate in Hawaii, following the Japanese investment bust/bubble.

Many of my friends and co-workers were doing short sales or going into foreclosure.

I took a different approach. I just “knew” the market had to be at the bottom. I was right. I cashed in an IRA. I had to pay taxes, but it wasn’t as bad as I thought, as my property purchases and fix up investments cancelled a lot of my tax obligations in that year.

I used the money to buy to more condos, for a total of 3 real-estate investments on Oahu. I bought another condo in West Oahu in the same complex that I owned in, for 72,000. It was a mess, but I knew an underemployed handyman that did the whole fix up for a very reasonable price. I also purchased a one bedroom apartment at the base of Diamond Head, just out side of Waikiki, for 171,000.

I did extremely well on both investments. No regrets. I hope you have similar results.

I’m following the San Diego market and the Honolulu market. Both are still to rich for my blood, though this might be the bottom. I don’t know (who does??). I’m staying put, unless things take another leg down. If I were thinking of making a purchase for my primary residence, I would likely jump in now, but that’s not the case.

[(former)FormerSanDiegan]

[quote=scaredycat]i certainly think it’s a better bet to borrow half of it to put ina house than to put half int he market.[/quote]

I’m with scaredy on this one.

Most 401k plans allow you to borrow 50% of your 401k balance up to a loan amount of 50K.

If you have 100K in a 401k, take a loan for 50k, and leaves the rest in a short-term cash position in the IRA, you end up paying about 3 or 4% for the loaned money (about 2k per year or less).

If you withdraw the money, you pay your federal and state marginal tax rates (could easily be 40% combined), plus a 10% penalty. So the expense is about 50K. Also, large withdraws increase income and induce phase outs of many tax credits, deductions, and may put you into AMT, thus increasing your tax bill more than just the tax on the withdrawal itself.

Your hot new investment needs to double just to get back to break-even.

[(former)FormerSanDiegan]

[quote=scaredycat]i certainly think it’s a better bet to borrow half of it to put ina house than to put half int he market.[/quote]

I’m with scaredy on this one.

Most 401k plans allow you to borrow 50% of your 401k balance up to a loan amount of 50K.

If you have 100K in a 401k, take a loan for 50k, and leaves the rest in a short-term cash position in the IRA, you end up paying about 3 or 4% for the loaned money (about 2k per year or less).

If you withdraw the money, you pay your federal and state marginal tax rates (could easily be 40% combined), plus a 10% penalty. So the expense is about 50K. Also, large withdraws increase income and induce phase outs of many tax credits, deductions, and may put you into AMT, thus increasing your tax bill more than just the tax on the withdrawal itself.

Your hot new investment needs to double just to get back to break-even.

[(former)FormerSanDiegan]

[quote=scaredycat]i certainly think it’s a better bet to borrow half of it to put ina house than to put half int he market.[/quote]

I’m with scaredy on this one.

Most 401k plans allow you to borrow 50% of your 401k balance up to a loan amount of 50K.

If you have 100K in a 401k, take a loan for 50k, and leaves the rest in a short-term cash position in the IRA, you end up paying about 3 or 4% for the loaned money (about 2k per year or less).

If you withdraw the money, you pay your federal and state marginal tax rates (could easily be 40% combined), plus a 10% penalty. So the expense is about 50K. Also, large withdraws increase income and induce phase outs of many tax credits, deductions, and may put you into AMT, thus increasing your tax bill more than just the tax on the withdrawal itself.

Your hot new investment needs to double just to get back to break-even.

[(former)FormerSanDiegan]

[quote=scaredycat]i certainly think it’s a better bet to borrow half of it to put ina house than to put half int he market.[/quote]

I’m with scaredy on this one.

Most 401k plans allow you to borrow 50% of your 401k balance up to a loan amount of 50K.

If you have 100K in a 401k, take a loan for 50k, and leaves the rest in a short-term cash position in the IRA, you end up paying about 3 or 4% for the loaned money (about 2k per year or less).

If you withdraw the money, you pay your federal and state marginal tax rates (could easily be 40% combined), plus a 10% penalty. So the expense is about 50K. Also, large withdraws increase income and induce phase outs of many tax credits, deductions, and may put you into AMT, thus increasing your tax bill more than just the tax on the withdrawal itself.

Your hot new investment needs to double just to get back to break-even.

[(former)FormerSanDiegan]

[quote=scaredycat]i certainly think it’s a better bet to borrow half of it to put ina house than to put half int he market.[/quote]

I’m with scaredy on this one.

Most 401k plans allow you to borrow 50% of your 401k balance up to a loan amount of 50K.

If you have 100K in a 401k, take a loan for 50k, and leaves the rest in a short-term cash position in the IRA, you end up paying about 3 or 4% for the loaned money (about 2k per year or less).

If you withdraw the money, you pay your federal and state marginal tax rates (could easily be 40% combined), plus a 10% penalty. So the expense is about 50K. Also, large withdraws increase income and induce phase outs of many tax credits, deductions, and may put you into AMT, thus increasing your tax bill more than just the tax on the withdrawal itself.

Your hot new investment needs to double just to get back to break-even.

[socrattt]

[quote=danielwis]

I’m following the San Diego market and the Honolulu market. Both are still to rich for my blood, though this might be the bottom. I don’t know (who does??). I’m staying put, unless things take another leg down. If I were thinking of making a purchase for my primary residence, I would likely jump in now, but that’s not the case.[/quote]

Thanks to all of you for you input. I could definitely borrow half, which was an option, but something I decided against. Part of the money was in a SEP IRA and I was told I could not borrow against.

Sdduuude, I pulled the money out of the retirement umbrella and will be responsible for the taxes. I can stretch the entire amount for a bit of time if there are any short term investments and then pay the taxes.

Daniel, I don’t think we had the type of inventory issues in the 90’s we currently have so I wouldn’t hesitate to say the market has a long way to go. That said, inflation may play a role in this as well. I wish I could slightly predict where things are going, but unfortunately I can’t.

Mercedes to answer your question, I am a real estate investor and work in the alternative energy realm in CA and NV. I am working with some larger European solar companies looking for potential solar plays, so chances are this is where my money will go.

I am not a 9 to 5er, I am entrepreneur and sort bust my tail trying to make things happen. I would define myself as a conservative, all in kind of guy (if that makes sense). I make investment assessments with my own risk factors, if I like what I see I am all in. Sort of like poker :).

I guess if I pulled the cash out with no definitive purpose that could easily be considered a bad move, but I do have some direction and believe I can do well with the cash in this current market.

[socrattt]

[quote=danielwis]

I’m following the San Diego market and the Honolulu market. Both are still to rich for my blood, though this might be the bottom. I don’t know (who does??). I’m staying put, unless things take another leg down. If I were thinking of making a purchase for my primary residence, I would likely jump in now, but that’s not the case.[/quote]

Thanks to all of you for you input. I could definitely borrow half, which was an option, but something I decided against. Part of the money was in a SEP IRA and I was told I could not borrow against.

Sdduuude, I pulled the money out of the retirement umbrella and will be responsible for the taxes. I can stretch the entire amount for a bit of time if there are any short term investments and then pay the taxes.

Daniel, I don’t think we had the type of inventory issues in the 90’s we currently have so I wouldn’t hesitate to say the market has a long way to go. That said, inflation may play a role in this as well. I wish I could slightly predict where things are going, but unfortunately I can’t.

Mercedes to answer your question, I am a real estate investor and work in the alternative energy realm in CA and NV. I am working with some larger European solar companies looking for potential solar plays, so chances are this is where my money will go.

I am not a 9 to 5er, I am entrepreneur and sort bust my tail trying to make things happen. I would define myself as a conservative, all in kind of guy (if that makes sense). I make investment assessments with my own risk factors, if I like what I see I am all in. Sort of like poker :).

I guess if I pulled the cash out with no definitive purpose that could easily be considered a bad move, but I do have some direction and believe I can do well with the cash in this current market.

[socrattt]

[quote=danielwis]

I’m following the San Diego market and the Honolulu market. Both are still to rich for my blood, though this might be the bottom. I don’t know (who does??). I’m staying put, unless things take another leg down. If I were thinking of making a purchase for my primary residence, I would likely jump in now, but that’s not the case.[/quote]

Thanks to all of you for you input. I could definitely borrow half, which was an option, but something I decided against. Part of the money was in a SEP IRA and I was told I could not borrow against.

Sdduuude, I pulled the money out of the retirement umbrella and will be responsible for the taxes. I can stretch the entire amount for a bit of time if there are any short term investments and then pay the taxes.

Daniel, I don’t think we had the type of inventory issues in the 90’s we currently have so I wouldn’t hesitate to say the market has a long way to go. That said, inflation may play a role in this as well. I wish I could slightly predict where things are going, but unfortunately I can’t.

Mercedes to answer your question, I am a real estate investor and work in the alternative energy realm in CA and NV. I am working with some larger European solar companies looking for potential solar plays, so chances are this is where my money will go.

I am not a 9 to 5er, I am entrepreneur and sort bust my tail trying to make things happen. I would define myself as a conservative, all in kind of guy (if that makes sense). I make investment assessments with my own risk factors, if I like what I see I am all in. Sort of like poker :).

I guess if I pulled the cash out with no definitive purpose that could easily be considered a bad move, but I do have some direction and believe I can do well with the cash in this current market.

[socrattt]

[quote=danielwis]

I’m following the San Diego market and the Honolulu market. Both are still to rich for my blood, though this might be the bottom. I don’t know (who does??). I’m staying put, unless things take another leg down. If I were thinking of making a purchase for my primary residence, I would likely jump in now, but that’s not the case.[/quote]

Thanks to all of you for you input. I could definitely borrow half, which was an option, but something I decided against. Part of the money was in a SEP IRA and I was told I could not borrow against.

Sdduuude, I pulled the money out of the retirement umbrella and will be responsible for the taxes. I can stretch the entire amount for a bit of time if there are any short term investments and then pay the taxes.

Daniel, I don’t think we had the type of inventory issues in the 90’s we currently have so I wouldn’t hesitate to say the market has a long way to go. That said, inflation may play a role in this as well. I wish I could slightly predict where things are going, but unfortunately I can’t.

Mercedes to answer your question, I am a real estate investor and work in the alternative energy realm in CA and NV. I am working with some larger European solar companies looking for potential solar plays, so chances are this is where my money will go.

I am not a 9 to 5er, I am entrepreneur and sort bust my tail trying to make things happen. I would define myself as a conservative, all in kind of guy (if that makes sense). I make investment assessments with my own risk factors, if I like what I see I am all in. Sort of like poker :).

I guess if I pulled the cash out with no definitive purpose that could easily be considered a bad move, but I do have some direction and believe I can do well with the cash in this current market.

[Author]

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