Selling shares to buy a car? Yikes!

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retire57
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Selling shares to buy a car? Yikes!

Post by retire57 » Wed Feb 12, 2020 2:54 pm

DH is retired and I still work part-time. Our living expenses are covered by his pension/his SS/my income. I plan to take SS at 64 (my break-even age) and may continue to work.

I'm beginning to wonder if we will ever touch our $1.2 million nest egg. (50/50 taxable and tax-deferred.) Great problem to have.

We are buying a new car this year and initially planned to pay cash from our MM. However, there may be a shortfall of about 10K by the time the new model year we want is available.

Here's where I need help. As lifelong savers, it's almost impossible to imagine dipping into our retirement funds in exchange for a depreciating asset. But it seems silly to ignore our savings and put off the car purchase so I can save the extra 10K. After all, I'm not a teenager with a summer job - I'll be 62 soon! :wink:

So ... if we don't crack the egg now, when? After all, the market has been so good to us.

What do you think?

ochotona
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Re: Selling shares to buy a car? Yikes!

Post by ochotona » Wed Feb 12, 2020 2:56 pm

If you retire before your SocSec full retirement age (FRA), and continue to work, you will get hit with an insanely high marginal tax rate on your earned income! Watch out! What is your FRA?
Peter W., MBA, CRPC

mervinj7
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Re: Selling shares to buy a car? Yikes!

Post by mervinj7 » Wed Feb 12, 2020 3:05 pm

10/1200=0.83%

It's just noise in the short and long term. When you do sell, look at maximising tax efficiency.

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retire57
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Re: Selling shares to buy a car? Yikes!

Post by retire57 » Wed Feb 12, 2020 3:06 pm

66 and 8 months until FRA. I assure you my income will be well below that threshold.
Last edited by retire57 on Wed Feb 12, 2020 3:09 pm, edited 1 time in total.

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retire57
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Re: Selling shares to buy a car? Yikes!

Post by retire57 » Wed Feb 12, 2020 3:08 pm

mervinj7 wrote:
Wed Feb 12, 2020 3:05 pm
10/1200=0.83%

It's just noise in the short and long term. When you do sell, look at maximising tax efficiency.
Well, the most tax efficient way would be to use my Roth, right?

bloom2708
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Re: Selling shares to buy a car? Yikes!

Post by bloom2708 » Wed Feb 12, 2020 3:10 pm

All your savings are "deferred spending". You didn't spend it then so you can spend it now.

If you defer too long, someone else will be spending.

Selling shares to buy a new car seems like a good use of your savings.

Just keep taxes in mind. You might mix taxable shares with some Roth. Using specific lots from taxable you can pick lots with lower gains or losses.
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Re: Selling shares to buy a car? Yikes!

Post by MotoTrojan » Wed Feb 12, 2020 3:11 pm

retire57 wrote:
Wed Feb 12, 2020 3:08 pm
mervinj7 wrote:
Wed Feb 12, 2020 3:05 pm
10/1200=0.83%

It's just noise in the short and long term. When you do sell, look at maximising tax efficiency.
Well, the most tax efficient way would be to use my Roth, right?
Look at the overall tax efficiency. Sure you pay not tax now, but your $10K remaining in taxable will continue to incur a tax-drag on dividends and grow to a higher value which will incur additional capital gains upon withdrawal. Leaving that $10K in the Roth allows it to grow tax-free.

There is no one correct answer, it is a complicated model. One option would be to use dividends from your taxable account for as much of it as possible, since that is taxed no matter what.

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Re: Selling shares to buy a car? Yikes!

Post by ochotona » Wed Feb 12, 2020 6:12 pm

We are at historically low tax rates. They go back up on 12/31/2025. I am doing all I can to spend down my IRAs, up to the top of my current tax bracket, so as to reduce RMDs, because my IRA is too damn big. If I were the original poster, I'd sell shares and take the cash out of my IRA.
Peter W., MBA, CRPC

adamthesmythe
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Re: Selling shares to buy a car? Yikes!

Post by adamthesmythe » Wed Feb 12, 2020 6:18 pm

> it's almost impossible to imagine dipping into our retirement funds in exchange for a depreciating asset

Your lifetime remaining is also a depreciating asset.

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Re: Selling shares to buy a car? Yikes!

Post by ochotona » Wed Feb 12, 2020 6:20 pm

adamthesmythe wrote:
Wed Feb 12, 2020 6:18 pm
> it's almost impossible to imagine dipping into our retirement funds in exchange for a depreciating asset

Your lifetime remaining is also a depreciating asset.
Food depreciates faster than a car. We have to pay to haul used food away.
Peter W., MBA, CRPC

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retire57
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Re: Selling shares to buy a car? Yikes!

Post by retire57 » Wed Feb 12, 2020 6:21 pm

adamthesmythe wrote:
Wed Feb 12, 2020 6:18 pm
> it's almost impossible to imagine dipping into our retirement funds in exchange for a depreciating asset

Your lifetime remaining is also a depreciating asset.
May be the truest statement I've ever heard. :beer

chevca
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Re: Selling shares to buy a car? Yikes!

Post by chevca » Wed Feb 12, 2020 6:25 pm

retire57 wrote:
Wed Feb 12, 2020 2:54 pm
Here's where I need help. As lifelong savers, it's almost impossible to imagine dipping into our retirement funds in exchange for a depreciating asset.
Were you saving and investing to never use it and just look at a big number?

Look at it like the shares you bought way back when have worked and grown enough to buy the car for you now... probably. Either way though, you were wise to invest. Use it.

TallBoy29er
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Re: Selling shares to buy a car? Yikes!

Post by TallBoy29er » Wed Feb 12, 2020 9:16 pm

Not my favorite answer, b/c I think you pay more for the car, but you may get a LOW (eg < 1%) interest rate, and pay the car off with your discretionary income that you mentioned you would have to save for the car.

Otherwise, that $10k is a blip. Roth. Taxable. I'm sure there is a "best" answer. But I think you have two "good" answers in front of you.

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Re: Selling shares to buy a car? Yikes!

Post by 1789 » Wed Feb 12, 2020 11:27 pm

I don’t know where you pull that money but i would buy that car tomorrow if that is what you want. What are you waiting for? Life is shorter that we think.
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Re: Selling shares to buy a car? Yikes!

Post by ronno2018 » Wed Feb 12, 2020 11:31 pm

I agree, life is short, you have saved up a good sum. Buy a nice car and help the economy grow. :happy

I would prefer you buy a nice electric cargo bike or a hybrid or fully electric car, but I am about to buy a new Royal Enfield Himalayan adventure bike that runs on gasoline, so I would be a hypocrite to say don't buy an ICE car... :beer

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Re: Selling shares to buy a car? Yikes!

Post by ochotona » Thu Feb 13, 2020 7:25 am

Getting a car loan... my thoughts:

If we had a terrible market drawdown, and it felt like March 2009 all over again, then my idea would be to take out loans for cars, take out a HECM ("Reverse Mortgage") and then make sure I'm fully invested. That is, I would not sell equity shares at the bottom to buy anything. I'd do the opposite, apply leverage... but nothing dangerous I couldn't pay off pretty quickly and easily if I had to or wanted to.

During the next March 2009 event, the interest rates on loans are going EVEN LOWER. Near zero? They are in Europe.
Peter W., MBA, CRPC

chevca
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Re: Selling shares to buy a car? Yikes!

Post by chevca » Thu Feb 13, 2020 8:56 am

ochotona wrote:
Thu Feb 13, 2020 7:25 am
Getting a car loan... my thoughts:

If we had a terrible market drawdown, and it felt like March 2009 all over again, then my idea would be to take out loans for cars, take out a HECM ("Reverse Mortgage") and then make sure I'm fully invested. That is, I would not sell equity shares at the bottom to buy anything. I'd do the opposite, apply leverage... but nothing dangerous I couldn't pay off pretty quickly and easily if I had to or wanted to.

During the next March 2009 event, the interest rates on loans are going EVEN LOWER. Near zero? They are in Europe.
Okay. :confused

Since it's not 2009, what are your thoughts about car loans in 2020?

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Re: Selling shares to buy a car? Yikes!

Post by ochotona » Thu Feb 13, 2020 9:05 am

chevca wrote:
Thu Feb 13, 2020 8:56 am
Okay. :confused

Since it's not 2009, what are your thoughts about car loans in 2020?
Stocks are expensive now, so take some profits (sell the shares) out of your IRA, reduce your future RMDs, and buy the car.
Peter W., MBA, CRPC

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Re: Selling shares to buy a car? Yikes!

Post by Jack FFR1846 » Thu Feb 13, 2020 9:11 am

I would sell off from IRA/401k. Why? You state your tax rate is low and by reducing your IRA/401k balance, the eventual RMDs that come will be that much less. As mentioned, the current low rates are in place only temporarily to prop up the perception that the powers that be have made our tax burden less. These are going up, based on the bill that lowered them temporarily.
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Re: Selling shares to buy a car? Yikes!

Post by Wiggums » Thu Feb 13, 2020 9:14 am

Buy the car! I’d use IRA money.

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Re: Selling shares to buy a car? Yikes!

Post by Kenkat » Thu Feb 13, 2020 9:24 am

At the risk of incurring the wrath of Bogleheads world wide, I will suggest this might be a time to utilize a particular tool in the financial toolbox called debt. If you can get a low interest loan for a portion of the car, you can avoid a taxable withdraw from your IRAs, allowing that money to continue to grow tax-deferred for a little while longer. You might be able to get low interest rate financing on a new car purchase or tap a source such as a Heloc (mine for example is prime rate - 1.01% so pretty good).

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Re: Selling shares to buy a car? Yikes!

Post by jacksonm » Thu Feb 13, 2020 10:31 am

Bought a new car shortly after retiring by taking profit from VTI held for many years in a taxable account.

I was able to do this without paying any capital gains tax at the time because I had not yet started taking SS and RMD's were still a few years away. With my wife still working, those three sources of income have now put me over the income limit to avoid capital gains so I don't regret seizing the moment.

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Re: Selling shares to buy a car? Yikes!

Post by TN_Boy » Thu Feb 13, 2020 1:38 pm

retire57 wrote:
Wed Feb 12, 2020 2:54 pm
DH is retired and I still work part-time. Our living expenses are covered by his pension/his SS/my income. I plan to take SS at 64 (my break-even age) and may continue to work.

I'm beginning to wonder if we will ever touch our $1.2 million nest egg. (50/50 taxable and tax-deferred.) Great problem to have.

We are buying a new car this year and initially planned to pay cash from our MM. However, there may be a shortfall of about 10K by the time the new model year we want is available.

Here's where I need help. As lifelong savers, it's almost impossible to imagine dipping into our retirement funds in exchange for a depreciating asset. But it seems silly to ignore our savings and put off the car purchase so I can save the extra 10K. After all, I'm not a teenager with a summer job - I'll be 62 soon! :wink:

So ... if we don't crack the egg now, when? After all, the market has been so good to us.

What do you think?
When you retired, what was your planned budget and how did you expect to pay for things like new car purchases, major home repairs, etc. Surely you thought about that a little?

But regardless, just pull the money from your nest egg and buy the car.

The tax smart way to do this depends on a lot of things ... are you planning on Roth conversions, what is your tax bracket, etc.

Big Dog
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Re: Selling shares to buy a car? Yikes!

Post by Big Dog » Thu Feb 13, 2020 1:42 pm

check out Open Social Security. Use the Advanced tab.

https://opensocialsecurity.com

And I'd consider just taking out a car loan for a few years while you are working. You can always pay it off at any time.

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Re: Selling shares to buy a car? Yikes!

Post by 3504PIR » Thu Feb 13, 2020 1:59 pm

I would most likely take out a loan and try to time it to when a deal might be likely, like a low or zero interest rate. We often will use credit to buy a car to maintain flexibility in our cash flow, and then pay it off in 6-12 months. Ensure you can pay it off early without penalty.

Another option would be to turn off the reinvestment of dividends and/or capital gains and direct that money to your MM until you have the cash available. You’d likely have the money you need in 6 months depending on how often your investments pay distributions. 1% of $1.2m = $12,500 and most index funds pay out a little over 2% annually.

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Re: Selling shares to buy a car? Yikes!

Post by bhluckyusaguy » Thu Feb 13, 2020 2:05 pm

We usually buy new cars every 10 years. In 2019, we sold enough shares in taxable investments to purchase a new Lexus - first time buying a "luxury model".

From a tax standpoint, the purchase was free since we stayed within the 0% LTCG and 12% federal tax bracket. Only 85% of DW's Soc Sec was taxable. Like you, we have pension and SS income. We did have to pay 3.07% state tax on the LTCG and were still able to do a Roth Conversion.

Since you say only $10K is needed, not all of this is taxable - either federal or state.

I finally realized the portfolio has continued to grow since retirement and we're not getting any younger - so go for it.

The 0% LTCG reminds me of the Jackie Gleason saying - "How Sweet It Is". The market gains paid for our new ride...…. :sharebeer

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Re: Selling shares to buy a car? Yikes!

Post by 123 » Thu Feb 13, 2020 2:12 pm

bloom2708 wrote:
Wed Feb 12, 2020 3:10 pm
All your savings are "deferred spending". You didn't spend it then so you can spend it now.

If you defer too long, someone else will be spending....
+1 And if someone else spends it they won't exercise the same thought and concern that you will. After all it'll just be "free money" to them.
Buy the car now.
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Re: Selling shares to buy a car? Yikes!

Post by surfstar » Thu Feb 13, 2020 2:15 pm

You can't take it with you.

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Re: Selling shares to buy a car? Yikes!

Post by wolf359 » Thu Feb 13, 2020 2:46 pm

surfstar wrote:
Thu Feb 13, 2020 2:15 pm
You can't take it with you.
Well, technically the car will take YOU with IT! :happy

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Re: Selling shares to buy a car? Yikes!

Post by 2 bits » Thu Feb 13, 2020 5:06 pm

"Here's where I need help. As lifelong savers, it's almost impossible to imagine dipping into our retirement funds in exchange for a depreciating asset. But it seems silly to ignore our savings and put off the car purchase so I can save the extra 10K. After all, I'm not a teenager with a summer job - I'll be 62 soon! "

Been there, done that. This past year it was time to replace one of our cars. We are retired and we have pension income but we saved for these days and this kind of thing.
I like our newer car.

We took money from our taxable account by selling shares. That being said we also made a tIRA withdrawal this past year, along with a fair amount of tax gain harvesting of LTCG. I like to see the accounts growing but living expenses and cars and roofs are what its for. Spend it and enjoy it , just don't go crazy.

This is probably not a good time to mention that I wished I had seen the thread about uncomfortable seats in some Accords but I digress.

Enjoy your new car.
I sometimes think that I am living the life of which my immigrant ancestors dreamed.

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Re: Selling shares to buy a car? Yikes!

Post by RootSki » Thu Feb 13, 2020 5:09 pm

I sold $50K of mega-corp stock last year to buy a new Volvo XC60. No regrets at all. I’m way overweight in mega stocks and I LOVE my XC60 T8. I hate carrying debt around. 8-)

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Re: Selling shares to buy a car? Yikes!

Post by RobZ » Thu Feb 13, 2020 7:04 pm

Why not buy a 1 to 2 year old used car and not even spend the $10k? I'm sure you've already considered this, because its not the question you asked. But as someone who bought a new car every 2 to 3 years throughout my 20s and 30s, I can't help but to shudder at the thought now. Obviously you can afford it and everything else.
But with the trend to to electric and autonomous, that depreciating asset may depreciate faster than ever - in your lifetime cars may become analogous to personal computers, where they become obsolete and essentially worthless every couple years because the new ones are so much better.

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Re: Selling shares to buy a car? Yikes!

Post by Nate79 » Thu Feb 13, 2020 8:06 pm

There is no need for debt. You have far and above the money needed to buy the car. Buy it with money from your IRA and move on.

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retire57
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Re: Selling shares to buy a car? Yikes!

Post by retire57 » Thu Feb 13, 2020 8:18 pm

RobZ wrote:
Thu Feb 13, 2020 7:04 pm
Why not buy a 1 to 2 year old used car and not even spend the $10k? I'm sure you've already considered this, because its not the question you asked. But as someone who bought a new car every 2 to 3 years throughout my 20s and 30s, I can't help but to shudder at the thought now. Obviously you can afford it and everything else.
But with the trend to to electric and autonomous, that depreciating asset may depreciate faster than ever - in your lifetime cars may become analogous to personal computers, where they become obsolete and essentially worthless every couple years because the new ones are so much better.
Thanks for your thoughtful response. I've considered used and probably would, but it's a plug-in/hybrid that's only been made since 2017. Thus hard to find. :( The upside is the $7500 tax incentive.
Last edited by retire57 on Thu Feb 13, 2020 8:30 pm, edited 1 time in total.

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retire57
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Re: Selling shares to buy a car? Yikes!

Post by retire57 » Thu Feb 13, 2020 8:22 pm

ronno2018 wrote:
Wed Feb 12, 2020 11:31 pm
I agree, life is short, you have saved up a good sum. Buy a nice car and help the economy grow. :happy

I would prefer you buy a nice electric cargo bike or a hybrid or fully electric car, but I am about to buy a new Royal Enfield Himalayan adventure bike that runs on gasoline, so I would be a hypocrite to say don't buy an ICE car... :beer
It's a PHEV and I intend to haul my bike around with it. :D

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retire57
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Re: Selling shares to buy a car? Yikes!

Post by retire57 » Thu Feb 13, 2020 8:29 pm

ochotona wrote:
Thu Feb 13, 2020 9:05 am
chevca wrote:
Thu Feb 13, 2020 8:56 am
Okay. :confused

Since it's not 2009, what are your thoughts about car loans in 2020?
Stocks are expensive now, so take some profits (sell the shares) out of your IRA, reduce your future RMDs, and buy the car.
I get your point. But if pulling from my Roth, I would be selling from a bond fund. And I don't worry about future RMDs as that will all become QCDs. For rebalancing, I would be selling VTIAX from a taxable account. What do you think about that strategy?

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retire57
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Re: Selling shares to buy a car? Yikes!

Post by retire57 » Thu Feb 13, 2020 8:47 pm

TN_Boy wrote:
Thu Feb 13, 2020 1:38 pm
retire57 wrote:
Wed Feb 12, 2020 2:54 pm
DH is retired and I still work part-time. Our living expenses are covered by his pension/his SS/my income. I plan to take SS at 64 (my break-even age) and may continue to work.

I'm beginning to wonder if we will ever touch our $1.2 million nest egg. (50/50 taxable and tax-deferred.) Great problem to have.

We are buying a new car this year and initially planned to pay cash from our MM. However, there may be a shortfall of about 10K by the time the new model year we want is available.

Here's where I need help. As lifelong savers, it's almost impossible to imagine dipping into our retirement funds in exchange for a depreciating asset. But it seems silly to ignore our savings and put off the car purchase so I can save the extra 10K. After all, I'm not a teenager with a summer job - I'll be 62 soon! :wink:

So ... if we don't crack the egg now, when? After all, the market has been so good to us.

What do you think?
When you retired, what was your planned budget and how did you expect to pay for things like new car purchases, major home repairs, etc. Surely you thought about that a little?

But regardless, just pull the money from your nest egg and buy the car.

The tax smart way to do this depends on a lot of things ... are you planning on Roth conversions, what is your tax bracket, etc.
Good point. We thought about it a lot and concluded that, since we have sufficient income to meet our current needs, we could delay instituting a withdrawal strategy. Maybe it's needed now. Your comment makes me realize what an emotional bond we have developed with our life savings. Perhaps a counter-productive one.

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Re: Selling shares to buy a car? Yikes!

Post by Wanderingwheelz » Thu Feb 13, 2020 9:23 pm

retire57 wrote:
Thu Feb 13, 2020 8:29 pm
ochotona wrote:
Thu Feb 13, 2020 9:05 am
chevca wrote:
Thu Feb 13, 2020 8:56 am
Okay. :confused

Since it's not 2009, what are your thoughts about car loans in 2020?
Stocks are expensive now, so take some profits (sell the shares) out of your IRA, reduce your future RMDs, and buy the car.
I get your point. But if pulling from my Roth, I would be selling from a bond fund. And I don't worry about future RMDs as that will all become QCDs. For rebalancing, I would be selling VTIAX from a taxable account. What do you think about that strategy?
Off topic, but many would say that it’s best to have a Roth be invested for growth- stocks, not bonds. That’s because whatever is withdrawn down the line isn’t taxed. Aim high.

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Re: Selling shares to buy a car? Yikes!

Post by GoFish » Thu Feb 13, 2020 9:34 pm

Similar situation for us 2 years ago (had been retired 3 yrs at that point). We borrowed about 70% of the new car cost from the dealership.

First time since my 20’s I had a car payment! Weird feeling.

Why did we finance it? Bottom line is I don’t like seeing the bottom line of our total investable assets decrease. It’s a psychological thing, reinforced by the delta between the growth rate of our nest egg vs the 3% interest on the car loan.

Having debt when you can wipe it out at on a whim at any point feels entirely different than I recall it did when stretching paychecks to month’s end. Deciding to have debt is one thing, needing to have debt is another.

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Re: Selling shares to buy a car? Yikes!

Post by Kenkat » Thu Feb 13, 2020 9:57 pm

Unless you are pulling from a Roth IRA, you are potentially paying taxes of 20-25% on that withdrawal, more depending on whether you have state income taxes to worry about. Just something to consider.

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Re: Selling shares to buy a car? Yikes!

Post by grabiner » Thu Feb 13, 2020 10:03 pm

ochotona wrote:
Wed Feb 12, 2020 2:56 pm
If you retire before your SocSec full retirement age (FRA), and continue to work, you will get hit with an insanely high marginal tax rate on your earned income! Watch out! What is your FRA?
This is not a major loss. If you claim SS at 64, and lose a year's worth of benefits to the income limit, your SS will be refigured as if you had claimed it as 65. If you claim before FRA and lose all your benefits to the income limit, you will get the same SS starting at FRA as if you had waited until that age.
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Re: Selling shares to buy a car? Yikes!

Post by grabiner » Thu Feb 13, 2020 10:10 pm

View the decision as purely financial: is the cost of selling stock to buy a car greater or less than the cost of taking out a loan.

I have bought three cars, and the math worked out differently each time.

In 2001, I would have had a large capital gain, taxed at 20% federal and 5.5% state, if I sold stock to buy a car. Instead, I took out a loan from my credit union, and paid it off aggressively so that there was very little interest paid. (This was a used car, which is why I kept it only six years.)

In 2007, I had recently purchased some stock and the market hadn't moved, so I sold enough stock to pay cash for the car with only a $32 capital gain.

In 2017, I sold stock for a small capital gain to buy a car, because the gain was offset by carryover losses.
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retire57
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Re: Selling shares to buy a car? Yikes!

Post by retire57 » Thu Feb 13, 2020 11:28 pm

Kenkat wrote:
Thu Feb 13, 2020 9:57 pm
Unless you are pulling from a Roth IRA, you are potentially paying taxes of 20-25% on that withdrawal, more depending on whether you have state income taxes to worry about. Just something to consider.
The choice would be between my Roth or taxable. Wouldn't the taxable withdrawal simply incur a LT capital gains tax? Not sure where you are getting 20 - 25%.

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retire57
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Re: Selling shares to buy a car? Yikes!

Post by retire57 » Thu Feb 13, 2020 11:30 pm

Wanderingwheelz wrote:
Thu Feb 13, 2020 9:23 pm
retire57 wrote:
Thu Feb 13, 2020 8:29 pm
ochotona wrote:
Thu Feb 13, 2020 9:05 am
chevca wrote:
Thu Feb 13, 2020 8:56 am
Okay. :confused

Since it's not 2009, what are your thoughts about car loans in 2020?
Stocks are expensive now, so take some profits (sell the shares) out of your IRA, reduce your future RMDs, and buy the car.
I get your point. But if pulling from my Roth, I would be selling from a bond fund. And I don't worry about future RMDs as that will all become QCDs. For rebalancing, I would be selling VTIAX from a taxable account. What do you think about that strategy?
Off topic, but many would say that it’s best to have a Roth be invested for growth- stocks, not bonds. That’s because whatever is withdrawn down the line isn’t taxed. Aim high.
Thanks. The Roth contains bonds due to AA.

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Kenkat
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Re: Selling shares to buy a car? Yikes!

Post by Kenkat » Fri Feb 14, 2020 8:49 am

retire57 wrote:
Thu Feb 13, 2020 11:28 pm
Kenkat wrote:
Thu Feb 13, 2020 9:57 pm
Unless you are pulling from a Roth IRA, you are potentially paying taxes of 20-25% on that withdrawal, more depending on whether you have state income taxes to worry about. Just something to consider.
The choice would be between my Roth or taxable. Wouldn't the taxable withdrawal simply incur a LT capital gains tax? Not sure where you are getting 20 - 25%.
Roth would be tax free.

Withdrawal from taxable would incur capital gains which could be 20% unless you are in a lower tax bracket. They would probably be 15% for most people.

Withdrawal from a traditional IRA would incur taxes at your marginal tax rate which could be 22 or 24 percent depending on income.

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retire57
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Re: Selling shares to buy a car? Yikes!

Post by retire57 » Fri Feb 14, 2020 2:17 pm

Kenkat wrote:
Fri Feb 14, 2020 8:49 am
retire57 wrote:
Thu Feb 13, 2020 11:28 pm
Kenkat wrote:
Thu Feb 13, 2020 9:57 pm
Unless you are pulling from a Roth IRA, you are potentially paying taxes of 20-25% on that withdrawal, more depending on whether you have state income taxes to worry about. Just something to consider.
The choice would be between my Roth or taxable. Wouldn't the taxable withdrawal simply incur a LT capital gains tax? Not sure where you are getting 20 - 25%.
Roth would be tax free.

Withdrawal from taxable would incur capital gains which could be 20% unless you are in a lower tax bracket. They would probably be 15% for most people.

Withdrawal from a traditional IRA would incur taxes at your marginal tax rate which could be 22 or 24 percent depending on income.
That's what I thought. Thanks!

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grabiner
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Re: Selling shares to buy a car? Yikes!

Post by grabiner » Fri Feb 14, 2020 7:12 pm

Kenkat wrote:
Fri Feb 14, 2020 8:49 am
retire57 wrote:
Thu Feb 13, 2020 11:28 pm
Kenkat wrote:
Thu Feb 13, 2020 9:57 pm
Unless you are pulling from a Roth IRA, you are potentially paying taxes of 20-25% on that withdrawal, more depending on whether you have state income taxes to worry about. Just something to consider.
The choice would be between my Roth or taxable. Wouldn't the taxable withdrawal simply incur a LT capital gains tax? Not sure where you are getting 20 - 25%.
Roth would be tax free.

Withdrawal from taxable would incur capital gains which could be 20% unless you are in a lower tax bracket. They would probably be 15% for most people.

Withdrawal from a traditional IRA would incur taxes at your marginal tax rate which could be 22 or 24 percent depending on income.
But withdrawal from taxable is probably better, even with the capital gain. This is a capital gain you are going to pay tax on at some time, and you keep more money growing tax-deferred.

Similarly, if you withdraw from traditional or Roth IRAs, you will have to pay tax on the traditional IRA whenever you withdraw, so you should withdraw from the traditional IRA now if the tax rate now will be lower than the tax rate you would pay later. If your accounts double in value and you are in a 22% tax bracket, withdrawing $10,000 from a traditional IRA to raise $7800 and keeping $7800 in a Roth IRA will give you $15,600 in the Roth when you withdraw that money from retirement expenses. Withdrawing $7800 from a Roth IRA will give you $20,000 in the traditional IRA, which will also become $15,600 after tax if you are still at a 22% marginal tax rate.
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iamblessed
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Re: Selling shares to buy a car? Yikes!

Post by iamblessed » Fri Feb 14, 2020 7:25 pm

retire57 wrote:
Wed Feb 12, 2020 2:54 pm
DH is retired and I still work part-time. Our living expenses are covered by his pension/his SS/my income. I plan to take SS at 64 (my break-even age) and may continue to work.

I'm beginning to wonder if we will ever touch our $1.2 million nest egg. (50/50 taxable and tax-deferred.) Great problem to have.

We are buying a new car this year and initially planned to pay cash from our MM. However, there may be a shortfall of about 10K by the time the new model year we want is available.

Here's where I need help. As lifelong savers, it's almost impossible to imagine dipping into our retirement funds in exchange for a depreciating asset. But it seems silly to ignore our savings and put off the car purchase so I can save the extra 10K. After all, I'm not a teenager with a summer job - I'll be 62 soon! :wink:

So ... if we don't crack the egg now, when? After all, the market has been so good to us.

What do you think?
The way I look at it is how many new cars do you have left in you. I am younger than you but might only have two new car left in me. Just try to keep it 10-15 years.

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