Who is good at financial math?

Lawrence00

Lawrence00

Senior Member
I have a small 401k approx 11K. It is in a value fund so it will probably grow 5-10% each year. But of course it could drop in value ... tomorrow. At the same time it is only about 75% of that because once I do withdraw it, the government will take about 25% (investing for the government)
I also have a vehicle loan for about 13K at about 3.3%, on the backside of the loan with about 24 payments left @585 each. Maybe $25 interest every month.
If I withdraw most of the 401k I could, with my small savings, pay off the vehicle loan immediately.

On the emotional side, it would be nice to not have that big bill each month. I do not have any other long term debt, I live in an apartment.

I am still working so I could put that monthly 585 into the Amex high yield savings paying 4.25 %.

I will need about 2,500 at the end of the year for the government tax.

What is roughly the net dollar difference between the two choices, leave the money in the 401K or erase my debt?
 

See if you can get some figures using this set of calculators. I've been using these calculators to estimate how my retirement savings will grow and how long my retirement portfolio would last using various payout scenarios I've been keeping track for 9 years and the calculations for growth and the ending balances have been pretty close to the actual yearly figures. Hugh Chou's Mortgage Loan and Financial Calculators

I don't carry debt so I've never used his debt calculators. He's got all types of calculators on his site. Check them out by categories in blue across the top. I always used the Simple Savings Calculator (Saving/Investing) and Retirement Payout Duration (Retirement), even though I don'r have to take withdrawals (except RMDs) from my portfolio.
 
OneEyedDiva said:
See if you can get some figures using this set of calculators. I've been using these calculators to estimate how my retirement savings will grow and how long my retirement portfolio would last using various payout scenarios I've been keeping track for 9 years and the calculations for growth and the ending balances have been pretty close to the actual yearly numbers. Hugh Chou's Mortgage Loan and Financial Calculators

I don't carry debt so I've never used his debt calculators. He's got all types of calculators on his site. Check them out by categories in blue across the top. I always used the Simple Savings Calculator (Saving/Investing) and Retirement Payout Duration (Retirement), even though I don'r have to take withdrawals (except RMDs) from my portfolio.
Click to expand...
Thanks
 

401K earns 7.5% long term (let's say) and savings earns 4.25%. Why would you want to trade a tax advantaged account that earns 7.5% for a taxable savings account that yields 4.25%? Yeah the 401k could go down but you're making the payments now so even if it does go down you're still able to make the car payment and rent now.

You've got a cheap loan, sit back and enjoy!
 
I agree with againstthegeain that the 3.3% loan is cheap money, so I vote you take the car loan to term. Typically I advocate for debt free living but in your case that isn't a reasonable risk. It sounds like the $11k is the bulk of your money, if so you need to hold on to it, we should always have a financial safety net, and for retired seniors it's absolutly critical.
 
Depending on the type of 401K you could be seeing up to near 18% growth so far this year.
Invest, do not spend your retirement thinking you can invest later. Well thas my thoughts.
Try to pay off your high percentage credit card with an advanced, miser strategy, over some
months ahead, well is the good plan. not change your investment funds values or investment
per month strategies... ... (y) The Dow jumped near 1000 this past week.

A car loan with 3 - 5% is a great hedge against inflation not a burden. Sure, I say that?! Toast to you Lawrance!
 
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Our tale.... Just bought a dirt bike for the grandson. Had the cash available in several places. 1.89% interest offer from the dealer. We are making more money, on our money, by using their money...
Using your numbers... Your interest paid is $600... $25x24
401 growth @ 7.5% over 24 months... $1712.
So your $1100 ahead, cars paid off and you still have your nestegg.
 
Inflation is currently at 3.1%, so your 3.3% loan is very low cost money, almost free of charge. You can't get another 3.3% auto loan these days. I would keep it.

Your investments are growing at 5 to 10% a year. Keep them. That's a nice return.

If you do pay off your 3.3% loan the bank that holds the paper should at the very least buy you a very nice lunch. Keep the 3.3% loan, then every time you make a payment think about how you outsmarted the bankers.
 

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