Suze Orman opinions

[LEX]

I get all my money advice from this gal:

http://www.donotsleep.com/maria/photos.htm

 

[Martha]

Question: How many times was the money affiliated with the 401k loan taxed?

Answer: Twice.

Yeah, but the loan money you borrowed is floating around never taxed.

We borrowed from my 401k to pay for a down payment on our first rental property. Maybe it was something we shouldn't have done. But it worked out fine for us.

 

[Martha]

I get all my money advice from this gal:

http://www.donotsleep.com/maria/photos.htm

What's happening on Wall St.
What's happening at the Stock Exchange
I want to know
What's happening on Squawk Box
What's happening with my stocks
I want to know
I watch you on the TV every single day
Those eyes make everything okay
I watch her every day
I watch her every night
She's really outta sight

Maria Bartiromo
Maria Bartiromo
Maria Bartiromo


(Thanks to Joey Ramone)

 

[kjpliny]

Yeah, but the loan money you borrowed is floating around never taxed.

Nor is money you borrow from a bank for a normal loan. In fact, you can actually write off the interest from a normal loan if you take out a home equity loan, so it may even be better to go that route if you own a home. The purpose of a 401k account is to have pre-tax money grow tax-free until you withdraw it. By using it for a loan, in order to replace the money that was there, you have to pay taxes on the money you're replacing it with.

 

[Martha]

Nor is money you borrow from a bank for a normal loan. The purpose of a 401k account is to have pre-tax money grow tax-free until you withdraw it. By using it for a loan, in order to replace the money that was there, you have to pay taxes on the money you're replacing it with.

Duh. You're right. (Still don't regret the 401k loan we took as there was no other way to get the money and we have the advantage of hindsight saying it worked fine.)

 

[mathjak107]

I understand what you're saying and in fact it's correct when you compare a 401k loan to a normal loan. That doesn't mean you're not being taxed on the money twice, it just means you're not worse off than had you taken a normal loan.

But in absolute terms, you have to answer the following questions:

Question: When you repay a 401k loan (or any loan for that matter), is the money you're using to pay the loan after tax money?

Answer: Yes.

Question: When you take money out of a 401k plan at retirement, is the money withdrawn taxed?

Answer: Yes.

Question: How many times was the money affiliated with the 401k loan taxed?

Answer: Twice.

well think of it this way.. the money you took out of the 401k was never taxed. your income is taxed regardless anyway whether you take a 401k loan or not so you can think of it as merely replacing the untaxed money you took out. the same as if you took the 401k loaN decided you didnt need it and put it back... even though your income is taxed you wouldnt say the 401k money was being taxed 2x would you if you merely are putting it back ?

 

[Martha]

Double duh. I am feeling really stupid here. HELP!

If you had borrowed the money from the bank, even though the money you borrowed wasn't taxed, the money you use to pay back the loan is taxed and it is gone; it is now in the bank's hands. So you were taxed once.

If you borrow money from the 401k, that money has to get taxed sometime. So you pay it back with after tax dollars and it gets taxed. If you used pretax dollars to pay it back, it never would be taxed, only those pretax dollar would be taxed as they come out of the 401k. So, if I am right, no double tax.

 

[kjpliny]

well think of it this way.. the money you took out of the 401k was never taxed. your income is taxed regardless anyway whether you take a 401k loan or not so you can think of it as merely replacing the untaxed money you took out. the same as if you took the 401k loaN decided you didnt need it and put it back... even though your income is taxed you wouldnt say the 401k money was being taxed 2x would you if you merely are putting it back ?

Interesting perspective, but I guess this can also apply to any loan. You go to a bank and borrow some money, then decide you don't need it and pay it back with the money you borrowed. The money was never taxed...however, this is not realistic nor common. In fact, any loan is free money until you have to pay the piper one day and return the principal plus interest, plus any fees, etc.

So, if we can agree that any loan (401k, car, home equity) is tax-free money when we receive the money, it's just a question on how it is repaid. Pretty much all loans I know of are normally repaid with after-tax dollars over time. One exception might be a medical flex plan at work, which is basically a reverse loan to yourself...you make the payments (tax-free) first, and take mini loans from your account when you pay out for out of pocket reimbursements, which is a good deal.

 

[mathjak107]

yes the key is your income is taxed regardless of whether you take the loan or not. its irrelevant. you are merely replacing back the pretax money you took out . your tax bill dosnt change at all .. whatever it is before the loan it is after the loan.

 

[mathjak107]

no matter how you take A loan its not a taxable event. from a bank or a 401kl

 

[mathjak107]

i think what throws everyone off is the fact that your income is taxed regardless 1x if its not in a deductable shelter like an ira or 401k.

the borrowing of money from your 401k has nothing to do with the taxing of your income that 1x that happens regardless.

all your doing is replacing the pretax dollars you borrowed . that money is still taxed once when you withdraw it.

so you end up with your regular annual income taxed 1x just like it always is. . some of that money repays the 401k which so far has never been taxed and borrowed out. and at the end the 401k is only taxed 1x when withdrawn. can someone explain this to susie now

 

[Martha]

What threw me off is the fact that the money has to eventually get taxed once way or another.

 

[mathjak107]

What threw me off is the fact that the money has to eventually get taxed once way or another.

thats the part susie is missing from her point when she says you are taxed on the loan 2x

 

[Nords]

I wouldn't say she's hideous, nor carnivorous.

Awright, guys, I told you not to make me do this.

All hands put down your beverages and swallow whatever you don't want to spew on your monitor.

Then scroll down.

 

[mathjak107]

wheres the staple in her navel?

 

[rs0460a]

she has done a good job of filling a niche

Just remember - it's "entertainment"

- Ron

 

[mathjak107]

i really want to see her naked! :

 

[mickeyd]

I like watching her on PBS

I don't think that she has been on PBS for a few years now that she took her roadshow over to CNBC. I think Jonathan Pond replaced her dog and pony show with his dog and pony show. PBS seems to be the place where financial "experts" get a chance to cut their teeth on TVdom and use it as a jump-off place for bigger and better entertainment/book selling educational opportunities.

 

[Rich_by_the_Bay]

Awright, guys, I told you not to make me do this.

All hands put down your beverages and swallow whatever you don't want to spew on your monitor.

Then scroll down.

Geez, Nords. It's Christmas, fer cryin' out loud .

 

[Nords]

Geez, Nords. It's Christmas, fer cryin' out loud .

Thank goodness it comes but once a year... or did you want me to go back to Google Images for more?

I get all my money advice from this gal:
http://www.donotsleep.com/maria/photos.htm

Just out of curiosity, I wonder how long it took "DoNotSleep" to link & load all those photos. He has a real video-capture problem that borders on a stalking obsession...

 

[DRiP Guy]

[snip]

I don't think that she has been on PBS for a few years now

Shows you just how "plugged in I am" (i.e. Virtual Hermit)

 

[Nords]

I don't think that she has been on PBS for a few years now that she took her roadshow over to CNBC.

You're technically correct, but PBS has been pounding the rerun keyboard pretty hard. She's been on Hawaii's PBS channel at least twice in 2006 alone.

 

[haha]

Frankly, I don't see the problem. She looks the same or better than lots of women I was happy to be seen with.

And, if you include her hairdo, she is wearing more $$ than many of you are driving.

The intensity is probably largely her media shtick.

Ha

 

[LeatherneckPA]

.....sound, basic financial advice for the mostly finance-clueless younger generation....they need to hear it from someone, and since mommykins and daddykins apparently have capitulated.....

Hmmm, I have a 24 year old D and a nearly useless 22 year old SIL, it's not that I have capitulated. It's the simple fact that ANYTHING I say is automatically wrong, possibly right if corroborated by independent associates, and it's just totally amazing I've lived so long without getting hit by a bus or starving to death because I'm too stupid to care for myself much less them.

Maybe Suze does have a purpose after all.

 

[mickeyd]

she is wearing more $$ than many of you are driving.

OTH, if Suze is paying for the weekend in the islands, I'll stay with her for the entire time and be as accommodating as I can possibly be.