401K or an AVANTI R2????

[2r10jim]

I just found out today that my 401K that I put into a IRA is make .6% When I saw that the first thing that came to mind was cash it in and get a AVANTI R2!!! At least I would be getting something out of my money.

I know a lot a people would say no leave it in the bank, BUT they've never driven an Avanti before!!

Jim

[Dan White]

You will pay taxes and a significant penalty if you cash out the 401K!!!

[2r10jim]

It has to happen sometime. It was a 401K from my old company that went out of business 4 years ago. I put it into a IRA through State Farm. I did notice that you didn't say, no don't do it. LOL

[Flashback]

I would consider the amount, and then how it would affect my family. If both those things are good with you, then the AVANTI is the answer. You may never get a second chance.

[sweetolbob]

I just found out today that my 401K that I put into a IRA is make .6% When I saw that the first thing that came to mind was cash it in and get a AVANTI R2!!! At least I would be getting something out of my money.

I know a lot a people would say no leave it in the bank, BUT they've never driven an Avanti before!!

Jim

As a raging conservative, I can see no up side in paying upwards of 35% of what I withdraw to buy anything, until forced to next year when I'll be 70 1/2. Unless you are forced to pull it out, I'd just start saving for a down payment and borrow the money to buy one at 4% interest. I'd also put the IRA in CD's which are drawing 2.5% if you want security.

Yes I have driven an Avanti and they are great cars but anything you would spend on one probably won't do any better than where you are currently the way they have historically appreciated.

You could possibly just borrow the money from your IRA as a hardship loan but why take the money out. Just get a loan as I said previously and keep the IRA whole.

Bob

[RareBird]

When I bought my Hawk I told my wife (julie) there sits our 401

[JBOYLE]

They way things are going, it's a safe bet a well-equipped R2 wil appreciate (and accelerate) faster than the 401K.

One of these days, Avantis will get the respect they deserve....and people have been saying that for 30 years.

[Bob Andrews]

Now you have my attention. Money management and investing is a field of great interest and study to me.

If you are serious about this, the clear answer is DON'T DO IT. If you cash out any retirement plan of any kind, you will pay two penalties- one of ten percent and one at your tax rate. That means you will give 35-40% to the government! So if you pull out $20K your available amount to spend is something like $12 or $13K; and you'll have a tax bill of $7-8K! The math is simple, just apply it to your amount.

Now, the car. Suppose you overpay or buy one with massive hidden problems. It's a tricky thing to rationally determine real, current market value; then you add excitement and emotion and you are REALLY in danger. Next, it's nearly impossible to project what the real market value will be 5, 10, 20, or however many years out. Now add in storage, insurance, upkeep (WAY more than most realize to do it right; i.e. replacing expensive tires that look new because they're too many years old; blowing a piston because you tried to sneak by on regular gas; etc.), and you're lucky if you don't lose your shirt. Remember, the vast majority of the time cars sell for less than invested. We're seeing that with high-end Big 3 muscle; now imagine it with a brand that is much less popular hobby-wide...

I locate, inspect, and buy high-dollar collector cars, mostly for the very wealthy. Their concern is mostly accurate condition analysis and getting the deal done. The very wealthy got there other ways; they know chances are they will lose money on even a six-figure blue-chip car, but they don't care; they can afford to indulge their whims and losing 5 or 6 figures doesn't even move the needle in their world. If you are that wealthy, God Bless, and go for it! But if you really are counting on this as an investment to help your retirement, it's a huge gamble; and no financial advisor I know would tell you to gamble with your future like that.

Really, your problem is a bad IRA. Roll that money into some good Growth Stock Mutual Funds. The 30-year history shows an average of about 10% growth over that time. If you can leave the money alone for at least 5 years, that's the way to go. You don't say how old you are, but put that figure in a compounding interest calculator and play with the numbers: Dollar amount, interest rates, number of years. The compounding numbers will blow your mind! And likely, will outstrip even the most optimistic value growth projection of a Studebaker. Every B-J sale you can see some special car- anniversary Vette, Hurst Olds, etc, with 20 actual miles selling for barely the sticker- after 20-30 years of climate controlled storage and insurance cost.

I know this is a party-pooper answer. Maybe you're just kidding, and already know all this. If you just want an Avanti and are looking for ways to justify it, this, sadly, falls far short of doing that...

I'm rooting for you to get a cool car. Just do it in a way that makes sense

[edpjr]

You're gonna have to pay taxes when you use the money in a 401K anyway you look at it. The 10% penalty doesn't apply since you're older than 59 1/2. So what if you earned a whopping 2.5% per year at your age? Go for it - now! And, from experience, let me tell you to buy the nicest, low-mileage, original numbers-matching Studebaker R2 Avanti you can find. It's a buyer's market right now because the economy is pure crap. Find a beauty with a pedigree, and buy it. DO NOT buy one that is high mileage or needs paint, interior, structural or mechanical work. It will cost you more to fix it up than buying the nicest original one you can find. Enjoy my friend. None of us are getting any younger.

[kirkdob]

Do a present / future value calculation on any popular classic car, for example a 65 Corvette convertible. Original price was 4106.00. Lets say it's now pristine and for sale at NADA high retail $82,900.00. Not counting ANY cost of ownership such as insurance, maintenance, storage or restoration your annual return is 6.6%.

However, the rate of return of the S&P 500 with dividends reinvested for the same 47 year period is 10.8%, and you didn't have to insure or restore it.

I love old cars, but don't use investment math as the reason to buy one. There ain't CFP after my name for nuthin!

[edpjr]

The Corvette always maintained it's value and you had a heckuva show piece. What was the value of the S&P investment post 9/11 or in March 2009? Stocks are cool if you can hold the money for long periods of time waiting on the market to recover or max out. And most people, including me, aren't thrilled looking at stock certificates. And yes, I have $$$ in a 401k earning a whopping 3% in safe value funds because I think the market is headed for a collapse.

Do a present / future value calculation on any popular classic car, for example a 65 Corvette convertible. Original price was 4106.00. Lets say it's now pristine and for sale at NADA high retail $82,900.00. Not counting ANY cost of ownership such as insurance, maintenance, storage or restoration your annual return is 6.6%.

However, the rate of return of the S&P 500 with dividends reinvested for the same 47 year period is 10.8%, and you didn't have to insure or restore it.

I love old cars, but don't use investment math as the reason to buy one. There ain't CFP after my name for nuthin!

[Bob Bryant]

You have received a lot of good advice here. I would suggest keeping the two issues separate. Interest paid is like rent on money. Credit unions have always been a good source of car funds for us, as they are quite competitive. I have a relative who is very conservative and always puts his savings in CD's. I am glad we didn't. Some research can allow you to choose some good alternatives. It is possible that the market could dump, but any security I enjoy now is because some calculated risks were taken and still are. The biggest threat to my wife and me is the possibility of needing long-term care. A $5,000 and up tab a month could demolish our planning over a period of time. Some people become uninsurable at some point in their lives. I suggest to people that they look at their net assets. If I buy a $100,000 home with borrowed money and it is really worth that price my net assets are the same. Most of my friends and relatives do not relate to that opinion.

My 4 Runner has 163,000 miles on it and I am looking!

[Avantidon]

Great words of wisdom here from many different people. As from one who spent almost 40 years in financial management and planning. All who have stated no to withdraw the money are correct. It is not a smart move on any terms unless you are totally deserate and then still it is not a good idea. Keep the money where it is in the IRA.

As for a good investment an Avanti R-2 is a good one.

[jnormanh]

Old cars go up in value, sometimes rapidly. They also go down. I've watched pristine Jag XKEs go from $8k to $100K and back down to $50K. 435HP Corvettes have gone from $25K to $150K+ and back down.

If you may need that 410k money in the future, leave it alone. while we don't know how much your 401k may appreciate, it all likelihood it will.

If you can find another way to buy that Avanti, without jeopardizing your future, go for it, but NEVER think it's a sure-fire investment. Maybe you get lucky, and maybe you don't.

[SN-60]

To: 2r10jim,-------But if You can't be talked out of this, make it the nicest Studebaker Avanti R2 Four Speed that You can find. An original as possible car. Then cross your fingers!