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Profitable Conversationalist
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 Posted: Wed May 06, 2009 7:31 pm
So, I know very little about my 401K, other than I hope the economy turning around is going to do something really sweet to the numbers that currently aren't going up by much. I put in about 10% of my income and have for 5 years. It has grown quite nicely, despite the economy. It is, basically, money I forget about.
Today at work I was stressing again about money (this has been a 2 year stressfest since my ex-roommate shows no signs of ever paying back the $6K she owes me and lawyers are so expensive) and I have to pay taxes on forgiven credit card debt and cashed in savings bonds...which made my budget ridiculously tight. So my coworker, who is most extremely awesome and has helped me out in the past when I couldn't afford to buy food that wasn't Ramen noodles, told me how I could take a loan out of my 401K and explained that I'd be paying myself back, and not some faceless corporate entity that would rob me blind. True, there are fees and interest involved, but I did the math and it is much more cost effective to get the loan from my 401K and pay off my remaining credit card debt because the interest rate is about 3 full points lower than the percentage of interest I'm currently locked in at. It only will take me 2 years to basically pay myself back and the total interest and fees I'd pay to Fidelity will save me well over $500 that I'd be paying to Discover if I kept paying them at the rate I am now.
Even better, as soon as I pay off Discover with the loan money, that account is done and I start saving about $200 a month (even while paying back the loan). And when I finish paying my taxes in the fall, that number will go up to $500. By my next birthday, I should have $5000 in my bank account, have paid off half the loan, and can start looking at buying a house by early 2011!
Yeah, so for the whole work day (I had no patients all afternoon, it was great!) I calculated my savings and the plans for my money. If I put off buying a house for a little longer, in the next 5 years I will have well over $30K in my savings! Obviously that figure is based on 5 years of my current salary, as raises are fluctuating at my office and I may choose to work else where in the future, and life throws curve balls at you from time to time. So I just did simple number crunching. But my future is looking very bright and now I am not nearly as worried about money because my coworker helped me solve my problem.
Discuss:
~401K knowledge
~financial tips (ie: avoid living with a roommate who refuses to work...for any reason, credit cards will only serve to make things worse)
~cool coworkers
~realizing things are never really as hopeless as you feared
~planning for your future
~suddenly having a really great day
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Posted: Wed May 06, 2009 8:44 pm
 So let me get this straight.
You are going to loan yourself money from a savings investment that you personally made to pay off a loan that you have because you are paying too much money on it.
BUT you are going to pay someone ELSE for them allowing you to use YOUR money.
Because.....?
-------------------------------------------- Art By: Trish the Stalker
"What you don't seem to understand is that I'm not locked in here with you. You're locked in here with me." - Rorschach
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Profitable Conversationalist
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Posted: Thu May 07, 2009 6:20 pm
It's cheaper that paying taxes by withdrawing the money out of the account permanently...and I may as well use some of the money while the economy is bad and the account is only going up by me putting in so much each week. It's my money, why not use it to my advantage...and it's only a small fraction of what I have saved.
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Posted: Fri May 08, 2009 11:15 am
I am an old ATG member =]I'm confused now, GTR asks why you are "borrowing" your own money, and then paying back someone else for your own money.... when its yours and nor theirs... and you respond with it being cheaper?
Wouldn't using your own money technically be.... free?Click here to PM Me regarding ATG.
Captain Shram has answered your thread
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Posted: Fri May 08, 2009 11:38 am
No Shram borrowing your own money IS free because you can't be charged for using something you own unless you freely allow someone to charge you.
-------------------------------------------- Art By: Trish the Stalker
"What you don't seem to understand is that I'm not locked in here with you. You're locked in here with me." - Rorschach
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Posted: Fri May 08, 2009 11:43 am
Shram -- from what I am understanding, a 401k (whatever that is) is similar to an RRSP in Canada. You can contribute a certain amount of money to your RRSP each year to avoid paying income tax on it -- that money basically is excluded from your taxable income if you put it in an RRSP. Once you retire, the RRSP is paid out to you like a pension, supplementing the paltry amount you get from CPP.
Although the money in an RRSP is yours, you can't take it out early without paying income tax and possibly capital gains tax on it (if it actually made any money -- it is an investment account after all). Depending on which institution holds your RRSP, there may also be a large fee for taking your money out early, too.
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Posted: Fri May 08, 2009 5:09 pm
Kals I've tried to explain this to you before. Money you get from WORK is not taxable income.
-------------------------------------------- Art By: Trish the Stalker
"What you don't seem to understand is that I'm not locked in here with you. You're locked in here with me." - Rorschach
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Posted: Fri May 08, 2009 9:33 pm
Apparently the government here disagrees with you, GTR. They tax it... because it is income and they feel they should get a bit of our money. Income here is taxable and one generally has to work for income. Therefore your work income, in this country, is taxable. For those of you who don't understand an American 401K, it is, as Kals said, a retirement fund that is generally invested in a combination of stock and bonds. We have to do something to supplement our retirement, because Social Security is not looking like it will be offering much when my generation reaches retirement. A 401K is managed by a third party (Fidelity takes care of mine). It is my money in that I earned it, but I give it to them to manage for me so that the bit that I put in will grow over time. Basically I am entrusting Fidelity to invest my money so that it earns more over a long period of time than it would just sitting in my regular bank account. While the loan is coming from my account, I am requesting it well before retirement (obviously) so Fidelity can require certain fees. I'm not permanently withdrawing my money early, so the federal government cannot tax me. God The Rapist So let me get this straight. You are going to loan yourself money from a savings investment that you personally made to pay off a loan that you have because you are paying too much money on it. BUT you are going to pay someone ELSE for them allowing you to use YOUR money. Because.....? They managed my money so my leech of an ex-roommate wasn't able to completely ruin me financially, and that money was able to multiply under their watch. Hell, they're much cheaper to deal with than living with her ever was. They provided me with a great service by managing my retirement fund, and they invest my money with a better understanding of the volatile stock market than I could manage. They've earned me a good deal of money and security. I'd gladly pay for that kind of financial defense. I freakin' love Fidelity. Shram, that is why I said they were cheaper. They provide me with a better service and lower fees than any credit card loan. GTR said the money is all my own as if it were merely in my personal savings account, but that doesn't take into account that I'm paying for a contracted service that only collects when money comes out of the account while in the mean time they work to earn me potentially greater financial security through investing. I know nothing about stocks and trading, I would not be able to amass a decent amount of money if I were to try my hand at day trading, nor could I get such great results letting the money slowly grow in my bank's savings account program. I pay for a service that has already begun to show me greater returns over an almost 5 year time frame, and I expect to be investing through them for another 25-30 years.
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Profitable Conversationalist
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Posted: Sat May 09, 2009 2:13 am
I am an old ATG member =]Money from work comes Post taxed... so technically GTR is correct as they can't tax your work money after you've recieved it.Click here to PM Me regarding ATG.
Captain Shram has answered your thread
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Posted: Sat May 09, 2009 7:39 am
But they refund the equivalent amount of tax on those funds when you file your yearly income tax papers so that it is as if they did not tax those funds in the first place. Kind of like the tax deductions you get for charitable donations, medical expenses, tuition amounts, and transit passes. It reduces the amount of tax you have to pay by... giving back some of the taxes you already paid. Then when you take the money out, they take back the taxes they refunded, sort of in a round about way.
Also, not all money form work comes post taxed. Some employers neglect to make deductions, and some people don't have enough deductions from their pay to cover the taxes they owe, so it only is partially pretaxed.
And GTR: Money you get from work is just about the only taxable income most people have. I do not comprehend what you are saying, it sounds to me like you are saying that 2 + 2 == orange.
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Posted: Sat May 09, 2009 7:52 am
That's because every time I try to explain it to you, you take a hissy fit and ignore me.
It can be summed up in seven words.
YOU DO NOT NEED TO PAY TAXES.
Ever, for any reason, on anything. I challenge you to prove to me otherwise. You can not do so using any STATUE or ACT because they DO NOT APPLY TO FLESH AND BLOOD MAN they only apply to LEGAL fictional entities.
-------------------------------------------- Art By: Trish the Stalker
"What you don't seem to understand is that I'm not locked in here with you. You're locked in here with me." - Rorschach
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Posted: Sat May 09, 2009 2:05 pm
I don't need to pay taxes because I am a starving college student with an extremely low income, so I get all my income tax returned to me, or at least automatically applied to my student loans.
I do, however, need to pay income tax because I don't want the CRA breathing down my neck any more than they already are. Neither would I like to pay a fine equal to up to the amount of tax I sought to evade and possibly go to jail for tax evasion. Similarly, I would hate to neglect to file my tax return for several years, decide to do so later, discover that I actually owed money instead of getting it back, and have to pay the ridiculous interest amounts that are applied.
And you never did try to explain anything, you just started trying to speak legalese to justify your anarchist position. You are evidently one of those people who attempts to avoid paying taxes by claiming to not be a person, and still expects all the benefits of society without fulfilling your responsibility to contribute to its upkeep. It is leeches like that who are largely responsible for the higher than necessary taxes that law abiding citizens have to pay because other people refuse to pull their weight. You don't want to pay taxes, you should not get access to things like public education, public health care, subsidized ANYTHING, family allowance or child tax benefits, or any public services.
One of the conditions of living within a society is willingness to abide by its rules and laws. You can't have your cake and eat it too, life does not work like that.
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Posted: Sat May 09, 2009 3:47 pm
Firstly I am not anarchist. I hate your Holier than thou bullshit attitude towards me. If you knew anything about shutting the ******** up and letting someone else talk you would understand what I am trying to tell you but because you won't I'm not going to try and help you ever again.
I guess the fact that Canada is supposed to offer you free education has nothing to do with you. I hope you enjoy paying back those student "Loans" that I could have taught you how to off set. And no it would not be LEACHING off the government as you put it because the money you would use would be YOUR money held in trust by the government.
I also never once said that I do not file or pay taxes just that you do not NEED to and if you are struggling, like you always claim you are, instead of ******** suffering like you seem to be, you can use the system to your advantage.
I am sick and tired of all you ******** sheeple not listening to me and frankly I'm finished. If GOD himself came down from the heavens and offered you EDEN you would probably pass it up just because the GOVERNMENT told you God doesn't exist.
I hate to break it to you though Kals. I REJECT government benefits willfully so no I do not want anything back from YOUR society even if I still continue to pay back into it just so that my FAMILY can live without being HARASSED by people who have nothing to do with me and everything to do with people who wish to be voluntary SLAVES like yourself.
I never wanted to be part of YOUR society and in fact am trying to get myself out of it.
-------------------------------------------- Art By: Trish the Stalker
"What you don't seem to understand is that I'm not locked in here with you. You're locked in here with me." - Rorschach
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Posted: Sat May 09, 2009 7:55 pm
Chill out people. Geez.
Now I understand why they say you're not supposed to talk about money socially. rolleyes
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Profitable Conversationalist
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Posted: Sat May 09, 2009 7:58 pm
I'm ok with talking about money. I have problems with people making claims that I have an obligation to something with no proof.
-------------------------------------------- Art By: Trish the Stalker
"What you don't seem to understand is that I'm not locked in here with you. You're locked in here with me." - Rorschach
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