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Retirement Accounts, Credit Scores, & Home Equity Loans – MAM Podcast 193
Time Stamps:
1:42 – “Should I withdraw from my retirement accounts?”
6:25 – “How will buying or leasing a car affect my ability to get a mortgage?”
11:40 – “Should we use our 401K funds to pay off a home equity loan?”
16:33 – “Should I use my traditional IRA to pay for my son’s college tuition?”
18:56 – “Has the recommended stock/bond mix changed throughout the years?”
22:35 – “Do I need to have a retirement plan?”
Show Notes:
VIDEO – Managing Cash Flows
Mullooly Asset Podcast 193 – Transcript
Tim Mullooly: Welcome back to the podcast. This is episode number 193. This is Tim Mullooly, and here with me is …
Tom Mullooly: Tom Mullooly. Hello.
Tim Mullooly: Welcome back. We are going to continue answering your questions. People have been sending in some pretty great questions that they have about their finances and financial planning and investing, and we try our best every week to answer them for you. That’s what we’re going to keep doing today.
Tom Mullooly: Please understand that when we do answer these questions, most of them are pretty sketchy. They’re detail-light in terms of what we get. These are questions that come into a website and they get sent to us, so we have very little information. Understand that our response is not baked into an in-depth financial plan or analysis that we’ve done for these clients, nor should anything that we mention on a podcast be considered investment or financial planning advice.
Tim Mullooly: Right.
Tom Mullooly: With that, why don’t we kick it off and start with our first question this week, Tim.
Tim Mullooly: Sure. First up, the question says, “Should I withdraw from my retirement accounts?”
Tom Mullooly: Okay, so let me give you a little bit of background information that we’ve got on this. The person writes in, “We’re finding ourselves afraid to go into debt after our baby, but we need to pay for daycare costs and tuition to renew a specific license.” The total that they estimate would be about $10,000. “It’ll be a few months before I start working and making money again, and we have nothing to spare and are barely able to stay afloat paying for kids and braces and sports, the mortgage, health insurance and all the usual bills. Does it make sense to withdraw from our retirement accounts?”
Tim Mullooly: There’s one things that we often times talk about with questions like this and it’s the importance of having a safety net or some sort of emergency fund. The fact that the bills that they’re estimating is only around $10,000 and they say they have nothing to spare, this isn’t exactly answering directly their question, but it kind of goes back to probably where the problem started, the fact that they don’t have any fallback savings or anything to be able to cover a $10,000 bill.
Tom Mullooly: It’s a tough spot. This is someone that I think a financial planner could have helped a year ago, or a year-and-a-half ago. It’s a tough spot, but you do need to have that safety net. We really discourage people from taking money out of retirement accounts, only because it’s probably the most expensive withdrawal or the most expensive source for money that you can find. When you take money out of a retirement account, assuming that you can, when you do take money out, it becomes taxable just like ordinary income to you, federal and state. So you’re going to get a 1099R for this distribution that you make.
On top of all of that, at the end of your tax return you have to take on...
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By Mullooly Asset Management
5
88 ratings
Time Stamps:
1:42 – “Should I withdraw from my retirement accounts?”
6:25 – “How will buying or leasing a car affect my ability to get a mortgage?”
11:40 – “Should we use our 401K funds to pay off a home equity loan?”
16:33 – “Should I use my traditional IRA to pay for my son’s college tuition?”
18:56 – “Has the recommended stock/bond mix changed throughout the years?”
22:35 – “Do I need to have a retirement plan?”
Show Notes:
VIDEO – Managing Cash Flows
Mullooly Asset Podcast 193 – Transcript
Tim Mullooly: Welcome back to the podcast. This is episode number 193. This is Tim Mullooly, and here with me is …
Tom Mullooly: Tom Mullooly. Hello.
Tim Mullooly: Welcome back. We are going to continue answering your questions. People have been sending in some pretty great questions that they have about their finances and financial planning and investing, and we try our best every week to answer them for you. That’s what we’re going to keep doing today.
Tom Mullooly: Please understand that when we do answer these questions, most of them are pretty sketchy. They’re detail-light in terms of what we get. These are questions that come into a website and they get sent to us, so we have very little information. Understand that our response is not baked into an in-depth financial plan or analysis that we’ve done for these clients, nor should anything that we mention on a podcast be considered investment or financial planning advice.
Tim Mullooly: Right.
Tom Mullooly: With that, why don’t we kick it off and start with our first question this week, Tim.
Tim Mullooly: Sure. First up, the question says, “Should I withdraw from my retirement accounts?”
Tom Mullooly: Okay, so let me give you a little bit of background information that we’ve got on this. The person writes in, “We’re finding ourselves afraid to go into debt after our baby, but we need to pay for daycare costs and tuition to renew a specific license.” The total that they estimate would be about $10,000. “It’ll be a few months before I start working and making money again, and we have nothing to spare and are barely able to stay afloat paying for kids and braces and sports, the mortgage, health insurance and all the usual bills. Does it make sense to withdraw from our retirement accounts?”
Tim Mullooly: There’s one things that we often times talk about with questions like this and it’s the importance of having a safety net or some sort of emergency fund. The fact that the bills that they’re estimating is only around $10,000 and they say they have nothing to spare, this isn’t exactly answering directly their question, but it kind of goes back to probably where the problem started, the fact that they don’t have any fallback savings or anything to be able to cover a $10,000 bill.
Tom Mullooly: It’s a tough spot. This is someone that I think a financial planner could have helped a year ago, or a year-and-a-half ago. It’s a tough spot, but you do need to have that safety net. We really discourage people from taking money out of retirement accounts, only because it’s probably the most expensive withdrawal or the most expensive source for money that you can find. When you take money out of a retirement account, assuming that you can, when you do take money out, it becomes taxable just like ordinary income to you, federal and state. So you’re going to get a 1099R for this distribution that you make.
On top of all of that, at the end of your tax return you have to take on...