another update pg 2 WWYD-- Retirement savings vs...

[aedidnoteatthesalad]

Using an AE I created a while ago since I prefer not to have my numbers out there on my regular account.  If you figure out who I am, please don't out me!

*poof* too many exact number details...

[ellipsis]

What's the interest rate on the mortgage?

[waverly]

If you take out of a non Roth you will get hit by super high taxes for early withdrawal. Do you have 50k in Roth?

Supposidly if you quit your job or get fired you have to pay that loan back too. I wouldn’t borrow from my retirement personally.

[scout8]

I would reduce my retirement contribution and put more money toward the property.

I would not borrow money from my retirement to pay off the property.

[sillygoosegirl]

It's not totally clear to me what the deal with the property is, but if it's advantageous to have it paid off in full, perhaps you should consider borrowing against your house instead of your retirement to do that. Or shoot, against the property itself if you are wanting to get out of the current situation of still owing money to the prior owner.

Lowering retirement savings for more cash flow seems sensible at the moment. You have a lot saved, but are looking at paying for 2 homes for a while in the short term.

[ellipses84]

I’m only a couple years younger than you and was told not to count on SS when I’m retirement age. I don’t know if the predictions have changed on that, but I usually exclude it when I look at my retirement calculations, as a worst case scenario.

If you could save a significant amount by paying off the land now, I’d take a construction loan to do it, but not out of your retirement account.

I don’t like the idea of paying for two homes at once. I’d either sell the old house and find a cheaper/low maintenance part-time living situation near work until you retire, or I’d get a roommate in your home near work to generate some income.

[aedidnoteatthesalad]

May 24, 2019 20:03:29 GMT -5 ellipsis said:

What's the interest rate on the mortgage?

Interest rate is around 4%.

[aedidnoteatthesalad]

May 24, 2019 20:58:46 GMT -5 waverly said:

If you take out of a non Roth you will get hit by super high taxes for early withdrawal. Do you have 50k in Roth?

Supposidly if you quit your job or get fired you have to pay that loan back too. I wouldn’t borrow from my retirement personally.

A loan wouldn't count as an early withdrawal, so normally no fee or taxes involved.

In almost 2 decades, I've only seen maybe 5 people fired (out of hundreds between different locations I've worked for this agency).  One was stealing, one was still on probation and got violent, one sexually harassed a boss's wife and they used "he lied on his resume" to fire him while he was on probation, and one was caught sleeping on the job multiple times while still on probation.  I've seen so much worse than all of that while I've been here, but once they were off probation, they just did some rug sweeping.  So, being fired is... unlikely...  Even if I were to become disabled and not be able to work anymore, I'm eligible for a disability retirement that is very generous.

If something extreme enough did happen to require me to pay back the loan, at that point I'd probably just keep the money, and pay the early withdrawal fee and taxes.

[aedidnoteatthesalad]

May 24, 2019 21:07:03 GMT -5 scout8 said:

I would reduce my retirement contribution and put more money toward the property.

I would not borrow money from my retirement to pay off the property.

I'm definitely leaning toward reduction of contribution, even though I hate the thought of increased taxes.  The loan on retirement is iffy, and certain factors may end up swaying me more one way or another (I go into more detail about property issues in another post that make me want to pay off this property ASAP, hence the more willingness to do a loan).  

[aedidnoteatthesalad]

May 24, 2019 23:05:46 GMT -5 sillygoosegirl said:

It's not totally clear to me what the deal with the property is, but if it's advantageous to have it paid off in full, perhaps you should consider borrowing against your house instead of your retirement to do that. Or shoot, against the property itself if you are wanting to get out of the current situation of still owing money to the prior owner.

Lowering retirement savings for more cash flow seems sensible at the moment. You have a lot saved, but are looking at paying for 2 homes for a while in the short term.

There are a few issues with the property and not having it paid off.  The guy I bought it from has already broken some agreements (and, of course, while I have documentation of every damn thing, I have misplaced the written agreement where the issues were discussed).  

[aedidnoteatthesalad]

May 25, 2019 10:54:23 GMT -5 ellipses84 said:

I’m only a couple years younger than you and was told not to count on SS when I’m retirement age. I don’t know if the predictions have changed on that, but I usually exclude it when I look at my retirement calculations, as a worst case scenario.

If you could save a significant amount by paying off the land now, I’d take a construction loan to do it, but not out of your retirement account.

I don’t like the idea of paying for two homes at once. I’d either sell the old house and find a cheaper/low maintenance part-time living situation near work until you retire, or I’d get a roommate in your home near work to generate some income.

I've heard mixed stuff on SS.  All my calculations still come out with me just fine if I don't have it, it would just mean less money for fun stuff like travel.

I don't think I can get a construction loan with how the property is now (unless I plan to pay someone else to just clear everything for me quickly enough to also get a house built before the loan expires.)

[mainelyfoolish]

If you’re motivated by taxes, taking a loan from a tax deferred retirement account is a poor choice because you end up paying double income tax on the loaned money. You must repay the loan with after tax money, and then when you withdraw from the account in retirement you will pay income tax on that money again.

[aedidnoteatthesalad]

May 25, 2019 13:23:31 GMT -5 mainelyfoolish said:

If you’re motivated by taxes, taking a loan from a tax deferred retirement account is a poor choice because you end up paying double income tax on the loaned money. You must repay the loan with after tax money, and then when you withdraw from the account in retirement you will pay income tax on that money again.

Being double taxed is actually not true, at least, not on the balance of the loan (it is true for the interest you pay, but you're paying that interest back to yourself).

I've had it explained like this...  If you take a $10k loan from your tax deferred retirement, cash the check, and put it under your mattress, then pay it back a week later, did you pay any taxes on that $10k?  No.  You could put that $10k under your mattress for a year or more, and never pay any money tax on it.  The interest is the only part you are truly paying with taxed money.  

[mainelyfoolish]

May 25, 2019 13:31:08 GMT -5 aedidnoteatthesalad said:

May 25, 2019 13:23:31 GMT -5 mainelyfoolish said:

If you’re motivated by taxes, taking a loan from a tax deferred retirement account is a poor choice because you end up paying double income tax on the loaned money. You must repay the loan with after tax money, and then when you withdraw from the account in retirement you will pay income tax on that money again.

Being double taxed is actually not true, at least, not on the balance of the loan (it is true for the interest you pay, but you're paying that interest back to yourself).

I've had it explained like this...  If you take a $10k loan from your tax deferred retirement, cash the check, and put it under your mattress, then pay it back a week later, did you pay any taxes on that $10k?  No.  You could put that $10k under your mattress for a year or more, and never pay any money tax on it.  The interest is the only part you are truly paying with taxed money.  

Somebody told me that once and I just believed them and never thought it through. Thanks for setting me straight. 

[aedidnoteatthesalad]

May 25, 2019 13:53:29 GMT -5 mainelyfoolish said:

May 25, 2019 13:31:08 GMT -5 aedidnoteatthesalad said:

Being double taxed is actually not true, at least, not on the balance of the loan (it is true for the interest you pay, but you're paying that interest back to yourself).

I've had it explained like this...  If you take a $10k loan from your tax deferred retirement, cash the check, and put it under your mattress, then pay it back a week later, did you pay any taxes on that $10k?  No.  You could put that $10k under your mattress for a year or more, and never pay any money tax on it.  The interest is the only part you are truly paying with taxed money.  

Somebody told me that once and I just believed them and never thought it through. Thanks for setting me straight. 

Once I heard the "double taxed" statement, I had a hard time sorting it out in my head how it wasn't double taxed, until I read the mattress analogy.  It's an easy one to get confused on!

[sadlebred]

Who owns the property now--you, the "old" owner, or the "new" owner? You are paying the old owner right?

[aedidnoteatthesalad]

May 25, 2019 15:24:49 GMT -5 sadlebred said:

Who owns the property now--you, the "old" owner, or the "new" owner? You are paying the old owner right?

"Old owner" had two lots.  I bought the bigger of the two, with the agreement that, if he ever wanted to sell the second lot, he had to offer it to me first (it would have been a stretch for me to buy both lots at the same time, and he still had sentimental attachment to the land, so wasn't ready to give up both lots yet anyway).  "Old owner" carried the contract, so I pay him directly (but did the title and all that, so it's set up like you would a mortgage with a bank).

[sadlebred]

aedidnoteatthesalad In that case, I think it makes sense to pay the land off as quickly as possible. I hope the old owner cleans things out!

[atarianna]

In most circumstances, I am against TSP loans, but in your case I don’t think it’s necessarily a bad choice. Your rate would be at the rate of G fund, and it’s interest paid to yourself. You had a healthy retirement account and with your other pensions etc, I think you’ve set yourself up nicely.

I would likely do the TSP loan if you need the money sooner or reduce your contributions if you could spread it out over time. I do think you should reduce your retirement contributions a bit since you have set yourself up so nicely.

We are on a pretty similar path as you and have had very similar questions and floated similar ideas.

[aedidnoteatthesalad]

May 25, 2019 20:09:56 GMT -5 spearmintleaf said:

Can you take out the 50k and then continue your $725/mo contribution? It would take you a little over 5.5 years if you paid it back at that rate.

My thought was that you really don’t need to be contributing to retirement anymore, and I would have advised you to pull back on those contributions to have more money for what you want to do now. However, I understand what you’re saying about wanting to just get your land before things get dicier. I think you’re good to withdraw the money if that’s what makes sense for you.

The loan would need to be paid back in 5 years (unless I wanted to do more work to make it tied to building a home, then I could stretch it out over 15 years).  In order to pay the loan, save to build, etc, I'd likely lower my contribution to match + some extra.

I have really gone back and forth with further contributions!  I feel like I don't need to contribute more at this point (beyond the match), but it's such an ingrained habit.  It does help with taxes though if I have a big overtime year (which, this year is looking not to be one of those).

[aedidnoteatthesalad]

May 25, 2019 20:32:40 GMT -5 sadlebred said:

aedidnoteatthesalad In that case, I think it makes sense to pay the land off as quickly as possible. I hope the old owner cleans things out!

Thanks, I really hope so too!  It's going to be a ton of work for me if he doesn't.

[aedidnoteatthesalad]

May 25, 2019 21:26:59 GMT -5 atarianna said:

In most circumstances, I am against TSP loans, but in your case I don’t think it’s necessarily a bad choice. Your rate would be at the rate of G fund, and it’s interest paid to yourself. You had a healthy retirement account and with your other pensions etc, I think you’ve set yourself up nicely.

I would likely do the TSP loan if you need the money sooner or reduce your contributions if you could spread it out over time. I do think you should reduce your retirement contributions a bit since you have set yourself up so nicely.

We are on a pretty similar path as you and have had very similar questions and floated similar ideas.

I admit, it's kind of a nice "problem" to have.  It's a good path when you can do it!

I have talked other people out of TSP loans, or at least advised against it, several times in the past (most recently a few months ago when someone asked if it would be a good idea to do the loan to pay off credit cards.  I asked if there was any chance he and his wife would run up the cards again.  Apparently his wife is a spender, so I gave him a hard no, with the statement "if you do the loan and pay off the cards, and you can't get the wife on-board with saving, then in a year or two, you'll have the same credit card debt load AND no money in your TSP.")

So, doing the loan myself feels "wrong" and like I'm "making an exception" for myself.  So, I am glad to think I'm not the only one who thinks it would be a 100% bad idea with my specific situation.

[awkwardpenguin]

May 25, 2019 10:54:23 GMT -5 ellipses84 said:

I’m only a couple years younger than you and was told not to count on SS when I’m retirement age. I don’t know if the predictions have changed on that, but I usually exclude it when I look at my retirement calculations, as a worst case scenario.

Social security will almost certainly be around when we are retirement age, and if it's not we'll have bigger problems.  You can model the benefits as less than under current law (I use 60% of current benefits) but not counting them at all is incredibly conservative, especially if you plan to retire at a traditional retirement age.

[ohgillian]

You're at Vanguard. I hope you've looked into their personal advisor service. I love our advisor there and this is the kind of stuff she helps me figure out.

[aedidnoteatthesalad]

May 29, 2019 7:51:15 GMT -5 ohgillian said:

You're at Vanguard. I hope you've looked into their personal advisor service. I love our advisor there and this is the kind of stuff she helps me figure out.

I don't have $50k in the Vanguard account, so it looks like I'm ineligible.

However, somewhere in the back of my mind there was a financial something-or-other tied/in addition to our EAP, so if I can find that info, I might able to look into that.

[aedidnoteatthesalad]

Not much of an update, but I've left a message on the guy's phone. I mentioned needing to discuss paying off the property, as well as needing to talk to him about disposal of stuff there. I hate that he didn't hold up his side of the agreement, so am hoping that he will recognize that and work with me (knock off some of what I owe). I'm a little shaky, but the hard part (for me... making contact and bringing it up) is done.

I also got the phone number for an old coworker. He has a lot of equipment and is about an hour from my property. I'm going to call him after I hear back from old owner, and see if I can make a deal with him to help me clean stuff up. I'm hoping he's "bored" enough to want to take it on!

[aedidnoteatthesalad]

Still no update... I've left many messages, verified I have the correct phone number (through new, smaller lot neighbor). I've received two "unavailable" phone calls that were made while I was sleeping (I was working nights, so requested that calls be made late afternoon, received these at 10 am with no message left).

Every week he does not call me back is costing me about a couple hundred in interest.

I have no idea what my recourse is when he will not answer his phone or make a decent effort to call me back. At this point, I'm ready to throw up my hands. I'll give him through the weekend to call back, and then I might call the neighbor back Monday, and see if he is interested in my lot. If he is, I'd probably sell it to him for what I paid for it (he'd have to do some of the work to deal with the details since the guy actually calls him back).

If I do that (sell the property), I think I'll just pay off my current house, save the money I've been spending on my mortgage + property payment, and just buy a different lot (maybe with a house already there!) in the future. If I go this route, I'd be 100% debt free and would not need the TSP loan. So, even though I wouldn't have the land anymore, it wouldn't be a complete waste in the end.

I hate it when people play games. I'm just done with all of it.

[aedidnoteatthesalad]

Latest update...

Guy I am making payments to (owner carried contract) refuses to answer my calls. I've started getting calls from an "unavailable" phone number, up to three times a day (this guy blocks his number, so could be him). When I answer, no one will respond, but will stay on the line until I hang up (I've said "hello" for about 3 minutes before I finally hung up).

So, he is knowingly forcing me to pay him interest money by refusing to speak to me.

Today, I got the name of his lawyer. I made a phone call to that lawyer, but he was out of the office, so I left a message. I told him I was given his number as guy's attorney and that I was trying to resolve this without having to resort to getting my own attorney. Hoping he calls back tomorrow.

I've spoken to the smaller lot neighbor and brought up maybe selling the lot to him. He's going to think about it and get back to me in a couple days. He is also planning to speak with the guy in the meantime (he's already talked to him once during this mess, and that conversation requires more talking, so...)

Anyway, I'm stuck. I can't pay it off if I can't get a payoff letter/amount. I can't do that if this guy refuses to speak to me and plays games (which he is obviously doing).

Maybe the lawyer approach will work.

I'm about to just quit making the property payments, but I have to stay above board on all of this.

It's becoming a nightmare.

[ellipses84]

That’s awful! Hopefully you hear back from the lawyer soon.

[aedidnoteatthesalad]

Before I go back and delete some details, I just wanted to make an update.

I ended up having to hire an attorney.

I've spent the last 2-3 weeks moving all my money to one account to pay off the property.

I did take the TSP (retirement) loan. Old owner has been jerking me around and just playing too many games not to. It's well funded, so I am ok with the loan.

I sent a wire transfer to pay off the full balance (plus a few days of interest and his wire transfer fee) this morning. It felt so good, but I walked out of my Credit Union light headed!

I have emailed my attorney and left a message. Should be talking to him this afternoon or tomorrow.

If old owner tries to play games with the deed, we might have to go to court, but if it comes to that, we can ask for damages (like my attorney fees).

My attorney will also be sending a letter that all "stuff" remaining on the property after August 31 (unless we bump the date back a week or two) will be considered abandoned. Anything he wants removed before then must be done so by a licensed and bonded contractor (the last thing I need is him or one of his buddies stumbling all over his crap on my property, getting hurt, and trying to sue me. The licensed/bonded requirement would cover worker's comp, etc, if someone were injured).

I still may have some battle ahead of me, but I have much less stress now that I have an attorney to do the fighting for me. He's very familiar with the old owner and old owner's stall tactics, so he is good with strict deadlines being set, and he's not afraid to go after him as needed.

Thanks again for all the input. It got way more complicated than it should have, but once I know I'm in a game, I do my best to end it.