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No Ready Personal Savings and feel like in a RUT

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rsprec
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No Ready Personal Savings and feel like in a RUT  Reply with quote  

I think this is the right forum. I read through a lot of other about Loans from 401K and other things but it all seems based on personal situation so I'm adding another post:

Main Question(s) is:
Does it make since to Borrow from works 401K ?
Pay Off some CC Debt
How or Should I adjust my portfolio to get out of RUT ?
Could I be Saving TO MUCH and taking the Fun Out of Life ?
Saving 10% to 12% depending on how look at it doesn't seem
like a lot, but not sure what normal is.

Credit Card Debt is around $17K+ and growing
Various reasons but a lot from Medical Bills ( couple big happenings )
this past 1+ years or more to come .. Autos needed fixing ( we only
have used cars ) .. House repairs .. and I can go on and on including
gas prices. Oh and this CC debt is more than one card in various rates.

Biggest problem is we a living paycheck-to-paycheck paying down bills,
food, gas, utilities, etc .. it's tuff in Michigan ..

So I'll add we have NO Ready Cash situations, some forum post talk
about 401K is a savings, just harder to get at, thus reason for one
of my questions above.

We only go on short camping Vacations at times, but hate having my
kids miss out on things, but not much we can do.

Any talk or idea's would be appreciated
.. HERE is More Detail, Number are approximate and rounded

Ages: Me: 52 Wife: 46

2011 Adjusted Gross income: $72,000 ( myself about 65K )

Current Work 401k: $59,000: Monthly: $340.00 = 6% of pay
Employer matches upto: 4%
Current Work Pension: $49,000 est: $750.00 monthly

Personal Roth 401k ( myself ): Current $25,000
Putting in Monthly: $100

Personal Roth 401K ( wife ): Current $15,000
Putting in Monthly: $100

Loans Mortgage: Current about $120,000
Auto: $11,000

CREDIT CARDS: $18,000+ and growing

College Savings:
MESP: putting in $75.00 per month

Kids:
2nd Year College
HS Seniour ( plans on College )
HS Freshman ( plans on College )

THANKS AGAIN
Post Thu Sep 13, 2012 8:11 pm
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littleroc02us
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Welcome to the forum, I see that you have some issues regarding both debt and savings for retirement. My philosophy that has allowed my family to become successfully thus far is far less risky then other's advice you'll get on this forum, but still very rewarding. I'm a no debt except the mortgage kind of financial strategist. We carry no cc debt, we pay cash for cars and everything else. We plan to have our home paid off well before retirement.

Whatever you do don't take a loan on your 401k or withdrawl because they will double tax you probably in to the 40% range and you don't have time to build that account back up. Here is my advice.
I use a guage that I learned from a book called "The Millionaire next door" to compare to others what approximate networth you should have based on your salary and age. You take your gross income which is 72k and times that by your age (I'll use 49 because that is the average between you and your wife) and divide it by 10 =$352,800. That is what your networth should be if your on track to saving well for retirement. According to my calculations you would have a network of around 104k, based on if we call your house a wash since I don't know what its worth. That 352k becomes 918k after 10 more years at an 8% rate. That's why I feel the calculation I use gives you a judge of where the average person should be so that they can live a good retirement.

Now what I would suggest for you is to stop contributing to your 401k and Roth IRA's for a while until you get your debt fixed. You net about 4500k so is there anywhere else you can find money that you can cut down on. You should be able to cut down you debt in 2 years. That will free up a ton of money to play catch for the following 10 years which you would be 66 and would give you substanstially more investments. The biggest problem is that you don't have much time for compound interest to work in your favor, but IMO stay away from the 401k, pay off your debt and then double 24k a year for 10 years into investments and go like crazy.

Good luck!

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Thu Sep 13, 2012 9:28 pm
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rsprec
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Great Stuff, And all make sense

Let me add addtional info about my works 401K Loan option and see
if it sounds more reasonable:
( and no not just trying to get someone to say go for it )

Not sure what you mean by double tax rate so maybe I'm missing something

Loan Option:
NO TAXES
No FEES
4.25%
Payment Comes out of paycheck
Can only Borrow up-to half amount
Can select number of months payoff up to 60 months

So from calculations wouldn't I be paying more interest in CCards
I realize 401K building interest needs to be considered.

I probably do less but easy numbers on $20,000
Total Number of Loan Payments 120
Payment Frequency Two Per Month
Payment Amount $185.15 ( 370.30 per month )
First Payment Date* 09/28/2012
Final Payment Date* 09/13/2017
Total Payments (Interest + Principal) $22,217.77

Thanks again
Post Thu Sep 13, 2012 9:59 pm
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oldguy
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Location: arizona
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Two years ago the answer was to cash out that $20,000 VUL and use the proceeds to pay off the $17,000 credit card loans. And also have the two used cars repaired.
But now the loans are $18,000 - Very Happy something must have gone wrong ??

You're investing about $9600/yr into the 3 funds, and you have about $99,000 in the accounts. If you use 11%/yr stock index funds, that would be about $625,000 at age 65. A nice amount, but it could be tough to live on for 30 more years - of course SS & the pension probably gie you over half of what you need - but you probably shouldn't lower the $9600.

What's the situatioon with the mortgage, is there equity in the house? Could you refi and get a better rate - and a lower payment? If so, that could go toward the cc loans.

As for the $900/yr to MESP - I would quit that. It won't be much help for college, you'll need student loans anyway. So that $900 could go to the cc loans.
Post Thu Sep 13, 2012 11:07 pm
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rsprec
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How about this ? any comments

Mortgage I can refinance
Currently 6.1% new interest rate looks like 4.9%
( Cost is about $250.00 to refinance )

Mortgage also:
Currently paying extra $100 monthly .. Should I stop that for awhile ?

MESP Stop the $75.00 a month

Work 401K
Option ( only if others not working )
Lower the 6% to 4% ( still keep employer max match )

Thanks again
Post Fri Sep 14, 2012 1:28 am
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oldguy
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quote:
Mortgage also:
Currently paying extra $100 monthly .. Should I stop that for awhile ?


If you refi from 6.1% to 4.9%, your payment will be reduced by about $90/m. And if you can get 4.0% it will be reduced by $150/m, that is about what the rate is today. And yes, stop the $100 overpayments, your investments are probably returning way more that 4% so you don't want to derail your investing to prepay 4% or 6% longterm loans, keep the loan for the full term. That $240/m is $2880/yr that you can apply to your high interest consumer loans.
Post Fri Sep 14, 2012 2:54 am
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littleroc02us
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quote:
Originally posted by rsprec
Great Stuff, And all make sense

Let me add addtional info about my works 401K Loan option and see
if it sounds more reasonable:
( and no not just trying to get someone to say go for it )

Not sure what you mean by double tax rate so maybe I'm missing something

Loan Option:
NO TAXES
No FEES
4.25%
Payment Comes out of paycheck
Can only Borrow up-to half amount
Can select number of months payoff up to 60 months

So from calculations wouldn't I be paying more interest in CCards
I realize 401K building interest needs to be considered.


Thanks again


Sorry, I see what your talking about now, no I wouldn't take out a loan on your 401K. Not to be blunt, but why do you think it's wise to borrow more money? Borrowing money up to this point hasn't been a blessing. It doesn't solve anything except maybe some interest savings. I would buckle down, stop contributing to your 401k and Roth's, pay down the debt and then invest like crazy.

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Fri Sep 14, 2012 2:40 pm
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rsprec
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Joined: 27 Feb 2010

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Perfect Guys Very Happy
Just posting one last THANK YOU .. Great Forum

Think I finally see the big picture
Depending on future happenings I may not be rich at retirement
but can at least so a brighter future what ever age that is.

** NO MORE LOANS ( especially off 401k )
NO Not Wise .. Just was tempting
** I may lower 401K some ( not sure about completely ) maybe the Roths
Still thinking on that and will go through numbers to payoff CCards
** Refinance Will Do along with cutting extra for awhile at least

Thanks again .. very appreciated.
Post Fri Sep 14, 2012 3:42 pm
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