Thinking about cashing in my IRA to buy a '67.

[Roger A.]

Thinking about cashing in my IRA and buying a 1967 I found. Not getting crap for my money in the IRA. I think I can convince the wife it's a better deal. Anyone else done it? Thanks!

[John M.]

Re: Thinking about cashing in my IRA to buy a '67.

Everyone will tell you not to, I did and I don't regret it, follow your heart!

Thinking about cashing in my IRA and buying a 1967 I found. Not getting crap for my money in the IRA. I think I can convince the wife it's a better deal. Anyone else done it? Thanks!

[Roger A.]

Re: Thinking about cashing in my IRA to buy a '67.

Forgot to say, I got my first vette a 57 in 1977. I've had several since then. Sold my last one a 66 coupe in 1992. Have been thinking about getting another one lately. At least I could enjoy the 67, the IRA is not much fun.

[Gene M.]

Re: Thinking about cashing in my IRA to buy a '67.

Roger,
Try asking Suzy Ormon, I think she will tell you NO. But do what ever you want.

[Duke W.]

Re: Thinking about cashing in my IRA to buy a '67.

If it's a traditional IRA, you will pay tax on the amount you withdraw as if it were earned income the year you withdraw it, and if you are less than 55, you pay an additional 10 percent early withdrawl penalty.

If you convert to a Roth IRA this year only, you can pay tax on one-half the amount converted in 2011 and pay tax on the remaining half in 2012 (and all subsequent withdrawls are tax free as long as you are over 55), but tax rates may be higher next year since Congress has shown no intention of extending the "Bush tax cuts", which means many taxpayers will be paying higher marginal rates next year and beyond.

There may be a way you can convert traditional IRA's financial assets into "collectible assets", but that's a slippery slope and not something I've seriously researched.

Before you make a move, regardless of what it is, I strongly suggest that you seek competent advise on the tax implications.

Duke

[Don H.]

Re: Thinking about cashing in my IRA to buy a '67.

One thing I know,
While the 67 Corvette MAY or MAY NOT be a good investment, if it is a good sound car, in desireable configuration, it will probably be a good investment, since you will not have to pay a moonshot price right now, like prices were a few years ago. AND, the car will bring you a ton more enjoyment than that money sitting there earning .002 percent (or whatever the rate is). Talk to the tax man, but if it looks like it will be a tossup, I say, go for the fun thing. You only go around one time. (note- I am not a tax accountant and not qualified to give tax advice)

[David J.]

Re: Thinking about cashing in my IRA to buy a '67.

Thinking about cashing in my IRA and buying a 1967 I found. Not getting crap for my money in the IRA. I think I can convince the wife it's a better deal. Anyone else done it? Thanks!

Duke is right about the tax situation you might look into a self directed IRA. I am doing that my self under different circumstances but here is the web site so you can check it out for your self.
www.entrustcalifornia.com/sandiego

I have talked to Brian an he is able to answer my questions. Good Luck.

[David H.]

Re: Thinking about cashing in my IRA to buy a '67.

Only YOU know your financial situation and NOBODY cares when or if you ever retire.

Make an estimate of how much money you want/need each month in retirement. Multiply that amount by 12 to get a yearly after-tax amount. Multiply that amount by 1.3 to give you a before-tax estimate.

After retirement you have three sources of income - Government programs (Social Security), Pensions from your previous employer(s), and Savings (401k, passbook, etc).

Subtract SS and pension income from your after-tax amount to determine how much (if any) money you'll need from savings.

Take the yearly amount of money needed from saving and DIVIDE by 0.03 to give yourself a ball park estimate of the INITIAL size of your savings (401k) you'll need when you begin retirement. (3% return).

Now take the estimate of how much savings you need to retire, how much savings you have, how long you'll need to work, the price of the 1967 you want and you can determine if cashing in the 401k makes sense.

As others have stated, cashing in a 401k prior to age 55 may incur penalty in addition to Federal and State income taxes.

Given that you are asking for advice, it would be wise to seek out a financial planner/tax specialist.

[Keith G.]

Re: Thinking about cashing in my IRA to buy a '67.

Been there, done that, having fun with 4 1967s, insurance kind of bites.

[Steven C.]

Re: Thinking about cashing in my IRA to buy a '67.

As others have indicated, a self-directed is worth looking into as it provides greater control/options.

Regarding Suze Orman, one look at her background revels that she has a BA in Social Work and no formal finance, tax, accounting or economic education or training. She is a journalist/author with a fixed amount of one-size-fits-all generic advise. Give her credit though, she turned nothing into a successful business with pure marketing.

[Clem Z.]

Re: Thinking about cashing in my IRA to buy a '67.

remember some day if you need money you can cash in the IRA BUT you have to find a buyer for your car for the full amount with cash and that could be a problem. that is why i buy new corvettes instead of a custom hot rod for the same $$$. if i have to sell people can always borrow the money to buy your new corvette but not a custom 35 ford

[Duke W.]

Re: Thinking about cashing in my IRA to buy a '67.

Being as how I am working on this year's taxes and doing financial planning for the next two years (which ALWAYS involves taxes), I did a quick check of 2009 IRS Pub. 17, and investing IRA funds in collectibles or buying property for personal use if off the table. I sure wouldn't do it because if the IRS calls your bluff, it could get REAL messy and expensive.

Many banks gladly finance collectible cars, and vintage Corvettes are good collateral because they don't depreciate like a rock falling off a cliff as new cars do.

So why not consider financing the '67. If you can do it from current cash flow, that would be great, but if you come up a little short, you can draw down the IRA to help make the payments as long as you are over 55, and the tax consequenses won't be too severe.

I think anyone under 55 who draws from an IRA to buy a toy is foolish and potentially jeopardizing their long term financial security.

Money market funds (that I have known and loved for over 30 years) are dead as are CDs. So are Treasury securities that I bought for yield and traded when opportunities arose up to 2006 when I put everything in long term CDs (which are effectively risk free) with an average yield of about 5.6 percent. The highest yield/risk ratio investments today are short to intermediate investment grade corporate bonds, and the best way to invest in these is through no-load mutual funds offered by all the big financial houses.

For example Vanguard offers short, intermediate, and long term investment grade bond funds that currently yield about 2.5, 4.5, and 6.0 percent, respectively, but the higher the yield, the longer the duration, and the more volatile the price.

The market is beginning to choke on the HUGE Treasury issues, which is going to drive prices down (and yields up) as the year progresses, and this will impact corporate bonds, too, so my advice is to not go longer than intermediate duration (around 5 years) unless you have a healthy appetite for risk.

I don't have Suze Orman's fame, but I do have a MBA in finance from UCLA, have been doing my own taxes for nearly 50 years, been a private investor for nearly 40 years, and haven't lost one red cent on any investment or trade for at least 15 years because I'm an ace at playing interest rate cycles.

In addition to being an engine system engineer, I'm also a "financial engineer".

Duke

[Timothy B.]

Re: Thinking about cashing in my IRA to buy a '67.

So tell me Duke, what's driving the stock market?? Is it because there is no where else to put money for a good return.. I don't understand with all our problems why the market keeps going up..

[Roger A.]

Re: Thinking about cashing in my IRA to buy a '67.

Quick question Duke. Is the "withdrawl" age 55 or 59 1/2? Your idea of the loan combination draw down looks good to me since I will be 59 in June. Thanks for your help!

[Chuck S.]

Re: Thinking about cashing in my IRA to buy a '67.

Quick question Duke. Is the "withdrawl" age 55 or 59 1/2? Your idea of the loan combination draw down looks good to me since I will be 59 in June. Thanks for your help!

Maybe Duke is considering the 72t equal payments exception for you, but the age for end of "early withdrawal" penalty is 59 1/2. See here:

http://moneyover55.about.com/od/taxtips/a/iraearlywithdrawal.htm

Editorial Starts Here:

Before making any future large "investments" that makes too much of my retirement funds illiquid , I would consider future possible changes in government retirement programs including social security and Medicare. This year, Medicare will take in less than it's paying out. Medicare is already going to be cut 500 billion to pay for "Obamacare" if it survives the "Supreme" test, and reimbursements ARE going to be cut MORE...soon we'll be standing in line to get an aspirin if we can't pay for it out of pocket. If we get a long term illness that ends up being terminal, it will be financially devasting.

I keep hearing politicians talking about the absolute need to address the skyrocketing debt, and mentioning social security, medicare and current entitlements as the only areas that can be cut. I have already gone through the thought process of HOW MUCH they can cut social security and I still be able to make my current commitments. It would take a healthy cut, but bettter prepare yourself accordingly...Big Brother is about to shuffle, cut, and re-deal the deck again. When asked about taxation as "income redistribution", the response is it's "just the fair thing to do".