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USE 401k to pay for new RV outright, or finance and use it to make monthly payments?

6,400 1,007 August 21, 2023 at 05:27 AM in Finance (4)
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Trying to find out which makes more sense. I am over 59.5 so can access this 401k penalty-free. I have a smallish 401k that I always planned to use to buy a new RV. I am retiring next year so income between myself and my husband will be significantly lower for 2024. I can pay off the entire camper balance (around $30k) by withdrawing the 401k money but I know that money will then be treated like income. Or I can finance the cost and make monthly payments over 5 years or so, but then have to pay the finance charges. Just trying to figure out which makes more sense.
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karrun
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killroy was here
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dayv
08-21-2023 at 10:34 AM.
08-21-2023 at 10:34 AM.
i don't think there is a general rule. it's going to be highly dependent on 1/2 dozen numbers.

you have to consider how the RMD impacts your taxes and how much of a premium you might pay for the stuff getting bumped to the next bracket. if it was non 401k/RMD you'd really just consider rate of return on that money vs the finance rate.

The optimal answer might also be a combination of non 401k savings + 401k RMD. Could even finance it so that you split that extra RMD over 2 years or 3 years.
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Let Sleeping Dogs Lie
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komondor
08-21-2023 at 04:32 PM.
08-21-2023 at 04:32 PM.
You can run the numbers pretty easily but I am willing to bet any savings you have it taking out less money each year will be offset by the interest paid. BUT taking out the loan and paying it off over a year could be a factor in improving your credit rating. I have found that paying off as car loan early always gives me a boost to my credit score.

The RV dealer could also get some $$ for sending a loan to a certain place or using the companies financing so you could use it for some leverage.

You should also see if you could put 5-10K on a credit card and pick up some nice rewards for opening a new credit card.
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Mydiscover
08-25-2023 at 02:00 AM.
08-25-2023 at 02:00 AM.
Quote from karrun :
Trying to find out which makes more sense. I am over 59.5 so can access this 401k penalty-free. I have a smallish 401k that I always planned to use to buy a new RV. I am retiring next year so income between myself and my husband will be significantly lower for 2024. I can pay off the entire camper balance (around $30k) by withdrawing the 401k money but I know that money will then be treated like income. Or I can finance the cost and make monthly payments over 5 years or so, but then have to pay the finance charges. Just trying to figure out which makes more sense.
If it's only $30k, Why not just pay it off with savings? Smart money is to let the 401k grow tax free until you are required to take rmd. That's how millionaires are made.
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karrun
08-25-2023 at 08:25 AM.
08-25-2023 at 08:25 AM.
Lol, that's assuming I have 30k in savings. Actually I do, but want to keep this available as liquid assets after I retire just in case my husband loses his job.
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YanksIn2009
08-25-2023 at 10:22 AM.
08-25-2023 at 10:22 AM.
As already noted, it depends on a number of variables. Add to that that you can currently get about 5.5% return state and local tax free (if applicable to where you live) on 4-6 month T-Bills which are absolutely risk free and you might be able to get that return in your 401k plan as well depending on your plan. So it also depends on the interest rate of a potential loan, how much extra taxes you would pay if you took the money from the 401k, etc. Add in you could spread any potential 401k money over 2 tax years. Best to check with your accountant and have him run some scenarios.

My 2 cents.
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Mydiscover
08-27-2023 at 03:14 AM.
08-27-2023 at 03:14 AM.
Quote from karrun :
Lol, that's assuming I have 30k in savings. Actually I do, but want to keep this available as liquid assets after I retire just in case my husband loses his job.
Sorry to burst your bubble. If you are worried about your husband losing his job over a small amount like $30k, then you simply can't afford it. Simple as that. Don't live beyond your means.
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karrun
08-27-2023 at 04:05 AM.
08-27-2023 at 04:05 AM.
Quote from Mydiscover :
Sorry to burst your bubble. If you are worried about your husband losing his job over a small amount like $30k, then you simply can't afford it. Simple as that. Don't live beyond your means.

You just don't get it. Its always advisable to have liquid assets available in case you lose your job. It doesn't mean its going to happen, its just good sense.
I know what I can and can't afford. I don't live beyond my means. I came here for some advice as to what course makes more sense financially. Others managed to post without being judgemental.
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Last edited by karrun August 27, 2023 at 04:09 AM.

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Joined Feb 2006
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karrun
08-27-2023 at 04:09 AM.
08-27-2023 at 04:09 AM.
Quote from YanksIn2009 :
As already noted, it depends on a number of variables. Add to that that you can currently get about 5.5% return state and local tax free (if applicable to where you live) on 4-6 month T-Bills which are absolutely risk free and you might be able to get that return in your 401k plan as well depending on your plan. So it also depends on the interest rate of a potential loan, how much extra taxes you would pay if you took the money from the 401k, etc. Add in you could spread any potential 401k money over 2 tax years. Best to check with your accountant and have him run some scenarios.

My 2 cents.

Thank you
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karrun
08-27-2023 at 04:13 AM.
08-27-2023 at 04:13 AM.
Quote from komondor :
You can run the numbers pretty easily but I am willing to bet any savings you have it taking out less money each year will be offset by the interest paid. BUT taking out the loan and paying it off over a year could be a factor in improving your credit rating. I have found that paying off as car loan early always gives me a boost to my credit score.

The RV dealer could also get some $$ for sending a loan to a certain place or using the companies financing so you could use it for some leverage.

You should also see if you could put 5-10K on a credit card and pick up some nice rewards for opening a new credit card.

That's some good advice. I was able to put the deposit on a credit card, but it was only $500. The rest is cashier's check.


My credit is already near perfect (close to 850). so don't really need to build that up.
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Mydiscover
08-28-2023 at 02:03 AM.
08-28-2023 at 02:03 AM.
Quote from karrun :
You just don't get it. Its always advisable to have liquid assets available in case you lose your job. It doesn't mean its going to happen, its just good sense.
I know what I can and can't afford. I don't live beyond my means. I came here for some advice as to what course makes more sense financially. Others managed to post without being judgemental.
Just telling it like it is. Buying something that is only $30k and you're worried about your husband losing his job means you can't afford it. Also at you and you're husbands age you should have easily a 7 figure net worth if you was financially savvy. If you did, you wouldn't be asking about this silly $30k dilemma. Ask Suze Orman what she thinks.
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Last edited by Mydiscover August 28, 2023 at 02:09 AM.
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Let Sleeping Dogs Lie
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komondor
08-28-2023 at 07:40 PM.
08-28-2023 at 07:40 PM.
Look at it this way if you husband loses his job that could be a good time to do a withdrawal from your 401k as your income for the year will be less.
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