Thinking about cashing in my IRA to buy a '67.

[Paul L.]

Re: Thinking about cashing in my IRA to buy a '67.

Sometimes your dreams do not come true. Yes, it was my dream. But be careful. I drove this 1967 from 2003-2008. I spent many $$$s on it with paint and interior. I never enjoyed driving it. Pretty car but cramped, uncomfortable, and very hot. Just a misery to drive. It went back to the USA in mid-2008. The money from the sale is now in international commodities, ~10% interest.

Bet my pension on it? Not a chance. It's just a car. I don't miss it although it was the much prized 1967. No regrets on the sale just prior to the 2008 economic bust. I saw it coming.

[Clem Z.]

Re: Thinking about cashing in my IRA to buy a '67.

My thought - these are toys, not investments. I don't finance toys. If I can't pay cash, I don't really need it. My investments are sound as is my retirement. I wouldn't gamble either on a toy.

remember that a 70 454 SS chevelle sold for $ 2 million+ and last year it sold for $270,000.

[Jim D.]

Re: Thinking about cashing in my IRA to buy a '67.

remember that a 70 454 SS chevelle sold for $ 2 million+ and last year it sold for $270,000.

Funny you should use that as an example. I sold my 70 LS6 Chevelle for $2500 with only 20,000 miles on it. That was 1978.

[Phil D.]

Re: Thinking about cashing in my IRA to buy a '67.

Roger
Another couple of things to consider is the yearly cost to insure and the DMV fees.

Plus maintenance and don't forget storage cost. In 2002, I had an extra garage constructed in my back yard. I borrowed about half the cost and will be paying interest on it monthly for another seven years, plus the property tax, the additional structures rider on my homeowners insurance, the electric bill (they made me install a second meter at the commercial rate), building maintenance, etc. People always talk about how much their cars appreciate, but if they added up the total cost of ownership, they'd realize they aren't really good investments. But these old cars sure are a lot of fun

[Jim C.]

Re: Thinking about cashing in my IRA to buy a '67.

I don't know. Is that really a good idea??

Jim C.

[Duke W.]

Re: Thinking about cashing in my IRA to buy a '67.

Duke you are NOT wrong. You can take starting at 55 if you make the same annual withdrawls for a minimum of 5 years.

I can't find anything in 2009 IRS Publication 17 that states you can draw on an IRA without penalty before 59 1/2 except for some contingency conditions like unreimbursed medical/dental expenses in excess of 7.5% of AGI.

I know I crunched the numbers before I turned 59 1/2, which was a few years ago. My decision at that time was not to draw on my IRA until I have to make minimum distributions at age 70 1/2, and I am now looking at a Roth conversion given the current "deal" for 2010 conversions, but the numbers don't look good - too much tax. I'm better off taking the minimum distributions at 70 1/2 because I have effective tactics for minimizing taxes on modest incremental increases in income.

IRAs are complicated - one reason being that the rules have changed over the years. In fact, the whole tax code is a full employment act for tax accountants and tax lawyers.

I remember when they discontinued the IRA tax deduction, I just stopped contributing because I had the foresight to avoid a potential tax accounting problem in future decades, and not long after I was able to participate in a 401K program that I converted to an IRA when I left that employer (my last) and combined it with my first IRA. So, at least for me, it's simple. Any distributions are taxable, but for many who contributed to IRAs with both taxable and non-taxable contributions, you have a tax accounting nightmare on your hands.

Publication 17 is a 300 page booket that you can order at www.irs.gov for mail delivery that discusses all aspects of individual income taxes, and there are additional publications that get into more detail in specific areas. Publication 590 is a specific booklet on IRAs, and you can download it as a pdf, even on dialup with no problem.

Before anyone starts messing with their IRA you should download and study the current Pub. 590, which includes those who are currently contributing and those who are thinking about distributions.

Duke

[Ronald L.]

Re: Thinking about cashing in my IRA to buy a '67.

Duke count yourself lucky.

most people that get in the market lose a pile. Most people I know that have company 401k and IRA are way upside down in both when teh company plan gives little options and the other lots of control.

Issue is the big houses - pay-themselves-first. The Fid CEO billions, and on & on it goes. I got sick of putting money each year all to see it go away. So O put it in the hand of a private place in St Louis - that guy turned out to be just as bad and I believe selling at a loss on mine to a buddy of his - real slippery and hard to prove, was also on some of the boards, only those that dropped to zero. Looked to me like they were skimming.

All to much for a small guy to prove.

You certainly are playing a more conservative game but they can get you too.

The car is more fun and the risk is less.

I agree on the home equity loan to reduce finance costs and make them tax deductible.

[Martin T.]

Re: Thinking about cashing in my IRA to buy a '67.

Unless the car is exceptionally rare and sought after, I would not do it. There are much better places to invest your money (which by the way, should be intended as part of a retirement nest egg) than an old muscle car. In buying a Corvette as a hedge against deflation and assuming you will see continued appreciation you must consider the following: Will the desire for a C-2 or any other Corvette remain the same, increase over time, or decrease with a reduced number of baby boomers wanting such a car?
IMO, as we get older, the importance of owning a Corvette (or any other car we wish we could have owned in our youth) will fade. In addition, we as a society, seem to be moving into a socialistic society where entitlement seems to be placed ahead of achievement from hard work (and the rewards we may wish to bestow upon ourselves). If a VAT comes about, a continued series of socialistic policies is implemented, and everything increases in price to cover the entitlements for the lazy as..es then owning an expensive car will not be a priority.

[David H.]

Re: Thinking about cashing in my IRA to buy a '67.

That's correct. My statement of "55" was wrong.

Duke

In an earlier post I also mentioned 55 - the correct age is 59 1/2. However you can withdraw funds WITHOUT the 10% penalty if you use the IRS 72t - substantially equal payments.

[Duke W.]

Re: Thinking about cashing in my IRA to buy a '67.

Duke count yourself lucky.

most people that get in the market lose a pile. Most people I know that have company 401k and IRA are way upside down in both when teh company plan gives little options and the other lots of control.

Issue is the big houses - pay-themselves-first. The Fid CEO billions, and on & on it goes. I got sick of putting money each year all to see it go away. So O put it in the hand of a private place in St Louis - that guy turned out to be just as bad and I believe selling at a loss on mine to a buddy of his - real slippery and hard to prove, was also on some of the boards, only those that dropped to zero. Looked to me like they were skimming.

All to much for a small guy to prove.

You certainly are playing a more conservative game but they can get you too.

The car is more fun and the risk is less.

I agree on the home equity loan to reduce finance costs and make them tax deductible.

I think it's more than luck. I spent a lot of time/money getting an education, doing my own research, and I am a true DIYer whether restoring my Corvette or managing my portfolio, so in addition to all the education, I have a lot of experience

My investment track record was a mixed until the nineties when I backed off on stocks and started playing the bond market, and I've never looked back.

The bond market is more predictable because most of the players are pros. The stock market is heavily marketed by retail brokers, "investment advisors", TV "personalities", etc. and is subject to recurring fits of irrational exuberance and bubbles.

Probably the best lesson I've learned is that few investments that involve risk (which is just about any equity) have a potential return/risk ratio that is competitive with very low risk fixed income investments if you know how to play interest rate cycles, which are suprisingly predicatable.

For example, August 2000 saw a sort of "harmonic convergence" where both stock prices and interest rates peaked in the shadow of an obvious equity price bubble. It was a perfect opportunity to get out of stocks and get into long duration CDs or bonds. Another opportunity occurred in August 2006 in the shadow of an obvious housing price bubble, and I have no doubt that similar opportunities lie somewhere in the future, but won't even hazard a guess when.

I picked both and acted accordingly. There was probably some luck involved, but it was mostly education, research, and a lifetime of experience.

When one is young, equities, especially index funds offer the best long term returns, but as folks get into their fifties, they should look for opportunities to get into bonds, which are less risky, especially when yields are at what might be cyclical peaks. Most people stay in stocks too long and ride bubbles into the ground.

Another sage piece of investment advise when dealing with risky investments (again, this would include ANY equity): The trick is when to SELL, not when to buy. Most people stay in stocks thinking they will never go down, and the more they get ahead, the greater their expectations. It's like a guy who goes to Vegas and keeps doubling down. He may make a million, and then lose it all on the next play.

BTW, I don't listen to any business news channels - just gather relevent data, mostly from the internet, and do my own analysis. I don't want my thinking contaminated by some boob tube moron like...

Duke

[Mark J.]

Re: Thinking about cashing in my IRA to buy a '67.

Instead of withdrawing from your IRA, just write a check off your checking account. Oh, you don't have that kind of money lying around? Then maybe using IRA funds isn't a great idea. I definitely would not pay a 10% penalty to get at the money. If you are old enough to avoid the 10% penalty you might consider taking half this year and half next year and financing the balance with a loan. The withdrawal from IRA will be taxed as ordinary income this year and taking out $125,000 or $150k (how much are we talking here?) added to your current income - depending on what that is - will be taxed at a fairly high rate. Of course that rate may go up a lot in 2011 and beyond so you may in fact avoid taxes by doing it now. I have solved my income tax problem by not having any income. I don't necessarily recommend this technique to others.

Also, if you have other income and the IRA withdrawal pushes your total income beyond that magic threshold ($250k for families) your investment income (not the IRA withdrawal) will be subject to that additional 3.8% healthcare tax.

[Ridge K.]

Re: Thinking about cashing in my IRA to buy a '67.

In an earlier post I also mentioned 55 - the correct age is 59 1/2. However you can withdraw funds WITHOUT the 10% penalty if you use the IRS 72t - substantially equal payments.

Here's what I was told (I am NOT an expert on these matters).

That age 55 stipulation (IRS 72t) requires you to take withdrawls (equal payments) based on a left expectancy table.
In other words, the government tells you how much you can take until age 59 and 1/2.
Not NEAR enough to buy a C2 Corvette.

I was able to avoid this penalty due to a little secret our federal government has. Congress has exempted government workers (themsleves) from this penalty.
I worked for a municipal fire department. Clearly, not the federal government, but none the less, a local city government. Firefighters and Police Officers are thus exempted from the penalty.
I cashed mine out in full, and paid no penalty.
Not important to many reading this thread, but just a little tibbet.

As far as paying taxes.............who doesn't pay taxes......?
Maybe some home or small internet auction site sellers, but most everyone else pays taxes. Take a lump sum and the tax bracket may be higher......so what?
the decisions should be in my opinion, (a) can you afford this AND handle a retirment? (b) is this what you want to do?

It worked out well for me.
Good luck!

[David H.]

Re: Thinking about cashing in my IRA to buy a '67.

Here's what I was told (I am NOT an expert on these matters).

That age 55 stipulation (IRS 72t) requires you to take withdrawls (equal payments) based on a left expectancy table. ...

No particular age restriction on 72t - my wife retired at 51 and used the provision. You do have to take out "substantially equal" amounts for a specified time / age.

72t is written so as to keep you from "cashing in" your IRA - for most of us, "substantially equal" is not going to support the purchase of a nice 1967.

[Duke W.]

Re: Thinking about cashing in my IRA to buy a '67.

In an earlier post I also mentioned 55 - the correct age is 59 1/2. However you can withdraw funds WITHOUT the 10% penalty if you use the IRS 72t - substantially equal payments.

I didn't get any hits on "72t" under forms and publications on the IRS site, but a quick review of Pub. 590 yielded that there is a possible waiver of the 10 percent penalty for pre-59 1/2 distributions if you convert a traditional IRA into an annuity, and there are some some very specific provisions including amortization of the annuity over your entire life or your life and your beneficiary, which means the annual payments will be relatively small compared to the starting principle.

And though there was no specific statement in this regard, often such elections are irrevocable without some sort of penalty.

Pub. 590 also lists some other IRS references, so one should thoroughly research all the Ts and Cs before executing an annuity conversion.

Beyond this, IMO (and with some possible exceptions) commercial annuities are one of the WORST investments that an individual can make.

Duke

[David H.]

Re: Thinking about cashing in my IRA to buy a '67.

.... but a quick review of Pub. 590 yielded that there is a possible waiver of the 10 percent penalty for pre-59 1/2 distributions if you convert a traditional IRA into an annuity....

Beyond this, IMO (and with some possible exceptions) commercial annuities are one of the WORST investments that an individual can make.

Duke

72t does NOT require conversion to an annuity. We manage (buy/sell) within my wife's retirement account - she retired at 51.

And you are correct, commercial annuities are one of the worst investments an individual can make.