Heard our FAs talking today about taking the covid disbursement plan. I’m gathering some talking points on pros/cons. im not thinking it’s a good idea to dive into a retirement plan to get out of debt, etc.

Thoughts?

 

Thoughts? Yeah.....it’s a terrible idea unless you’re really in need of it.

 

Since you brought it up, I believe there is a Sept 22nd deadline for anyone taking a Covid related loan. But I could be making it up

 

I think that would be a last resort thing to take a disbursement. The penalty is waived, but you still have to pay tax on it as earned income.

Even a loan program seems like a looser. Your money is doing better (now) in the 401K then loan rates at the bank.

 

Anyone else think we are due for a major market correction?

 

Didn’t we just have it? I believe the market dropped quite a bit in the March-April. Fortunately though, money and greed don’t catch viruses and the market has almost returned to pre-Covid levels.

 

One can take a Covid Distribution up to the end of the year, I believe December 22, 2020. You can defer the taxes up to three years before actually having to pay taxes. You can return the monies without tax liability up to the three year mark when taxes are due. I’m not suggesting using the monies to pay debt but it makes for one hell of piece of mind knowing that one has liquidity in these uncertain times and that it can be replaced without penalty. The only issue would be the lose of capital gains during the time in which the monies are set aside.

Without replacing the monies one could be potentially down 500k on average. This is over the life of ones career in the 401k just assuming a modest return (20 plus years remaining). But, depending on one’s own 401k that could be somewhat minimal based on individual saving practices and when someone started. The limit is 100k withdrawal.

This isn’t necessarily a bad deal depending on one’s own financial situation. At least it’s an option that can give piece of mind in this turbulent time. Another way of looking at it, is there no guarantee that will even make it to retirement and why not take advantage of something that we have worked our entire life’s for. I know it’s a taboo subject of never touching one’s retirement. Just a thought.

 

Loan needs to be initiated by Sept 22. See Q8

https://www.irs.gov/newsroom/coronav...ns-and-answers

 

Right, and at this point, do you think the market is a smoking deal, at the right levels, or is it way too high? Personally, I think it's way too high and due for a contraction that's in line with the economic reality.

 

I don’t usually react to noise and turbulence in the markets, but this morning I finally had my Sell Mortimer Sell moment. I’m out and sitting in cash at least through the election and possibly all the way to the inauguration at this point. Just too many outside forces acting on the market and I just can’t justify letting it ride this time. Even if we get a quick SnapBack, I’m alright with just sitting on the sidelines for a little while and see where this all goes.