Financial advice?

[HSNARC]

So recently i got a new job with a PD after working 4 years at another PD. For those 4 years i paid into a retirement fund (IMRF) as well as social security. Now that i am no longer an employee there IMRF has to give me a refund of the money i paid in (approx 6500.00) If i take it as a cash payout i have to pay taxes on it, but if i roll it over i don't. I don't think i can roll it over into my new pension either.

What i want to know is if i can use this money to mostly wipe out my Federal student loan (approx 8000.00) without paying the tax?

I know that this money rolled over would make a great start to an additional savings program/deffered comp ect, but i don't think it makes sense to have debt at a higher rate of interest (14%) while saving money earning a lower rate.

I want to get my debt knocked out asap so i can save as much money as possible for a house.

 

[rrflyer]

Re: Financial advice?

I'm about 99% sure you can not do that. Theres no real way to "roll" it into paying off your loan.

I think your probably gonna end up rolling it into an IRA and then keep paying down the loan.

 

[HSNARC]

Re: Financial advice?

well i know i can cash it out and use that to do whatever i want (rifles are tempting) but if i do that ill have to pay something like 25% tax on it. I was just hoping since one government entity has my money they could give it to another one that wants my money without much fuss, but alas it is the government.

 

[Inogame]

Re: Financial advice?

I understand wanting to blow the debt out asap. Its a good natural reaction to have, but you have to consider the tax deferment into the equation. I don't know what your tax % ends up being but lets say for argument it's 20%, that 6500 becomes 5,200 pretty quickly.
I'm not sure but there might also be a early withdrawal penalty as well, which is 10% off the top so take off another 650. (early withdrawal is for 401ks and IRA's, I'm not sure if the IRS treats pension deferments differently a rep from your pension plan should be able to tell you.)
So you are in essence losing up to 30% (depending on your personal tax rate) right off the top.

Now is it better to lose the 30% and still pay off the loans? Possibly, depending on how long you are planning to take to pay it off without the payout.

Figure out the penalties and use your last tax return as a template to figure out how much the tax man will take, good news is IL will not tax you, only the fed.
Then butt it up to a realistic average return if invested in an IRA. Minus the interest you'll be paying on your loan if you continue to pay it off as if you didn't get the payout.

Personally, I'd roll it over, and work to kill the loan by squeezing harder on my wallet. Retirement money becomes powerful the longer it can compound interest. I also understand that everyone has different $ situations and it goes quickly into the realm of none of my business.

As with Law, please consider consulting a professional to give more personalized advice. The internet is great for suggestions, but I could be pants-less in my mom's basement for all you know.

 

[Guest]

Re: Financial advice?

Open an account and buy all the SWHC stock you can.
SWHC

 

[Maggot]

Re: Financial advice?

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Inogame</div><div class="ubbcode-body">I understand wanting to blow the debt out asap. Its a good natural reaction to have, but you have to consider the tax deferment into the equation. I don't know what your tax % ends up being but lets say for argument it's 20%, that 6500 becomes 5,200 pretty quickly.
I'm not sure but there might also be a early withdrawal penalty as well, which is 10% off the top so take off another 650. (early withdrawal is for 401ks and IRA's, I'm not sure if the IRS treats pension deferments differently a rep from your pension plan should be able to tell you.)
So you are in essence losing up to 30% (depending on your personal tax rate) right off the top.

Now is it better to lose the 30% and still pay off the loans? Possibly, depending on how long you are planning to take to pay it off without the payout.

Figure out the penalties and use your last tax return as a template to figure out how much the tax man will take, good news is IL will not tax you, only the fed.
Then butt it up to a realistic average return if invested in an IRA. Minus the interest you'll be paying on your loan if you continue to pay it off as if you didn't get the payout.

<span style="font-size: 14pt"> <span style="color: #FF0000">Personally, I'd roll it over, and work to kill the loan by squeezing harder on my wallet. Retirement money becomes powerful the longer it can compound interest. </span> </span> I also understand that everyone has different $ situations and it goes quickly into the realm of none of my business.

As with Law, please consider consulting a professional to giver more personalized advise. The internet is great for suggestions, but I could be pants-less in my mom's basement for all you know.

</div></div>Wish I had learned that fact at 20. It is always wise to have some Cash On Hand, for emergencies, even if you would have to pay the penalty.

 

[worvin]

Re: Financial advice?

You wouldn't be taking it from one government entity and giving it to another. You don't owe the government for your student loan. You owe some lender. The government only guarantees your student loan. At least that is the way it was back when I was a recent graduate. (This was right when dinosaur rides went from 10 cents to a quarter.)