Car fund vs IRA

A

azanon

Thinks s/he gets paid by the post
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Right now, my car is getting old so i'm in the process of saving for it. However, i cant quite yet afford to max my Roths (in addition to my TSP(401k)).

Would i be better off saving money in a taxable mutual fund so that i can eventually buy the car I want with cash and not have to finance, or use that money to finish off my IRA's but be forced to finance my next car when it does give out?

I'm just afraid by the time she does give out, interest rates will be sky high again. My other concern is I dont want to just be so typical and have to borrow to buy a car.

Thoughts?
 
it depends what sort of car you're looking for. if you're going to buy a brand new car then you should be fine for financing. if it's a used car then you might have to pay a bit more in interest, but the long-term tax benefits of maxing out your roth should far outstrip the interest costs.
 
It'd probably be a new car. I prefer to buy new, but save by owning them a long time (mine now is 10 years old and i'm gonna keep her as long as possible).

Yes i could get a low interest rate now, but maybe not 3-4 years from now. So i have to decide do i sock away this extra cash i have into a taxable fund or just finish off my Roth and count on financing the car.
 
Why dontcha put the money in the roth, and if you cant get a low/no interest rate loan, you can withdraw the contribution amount (but not the gains) without tax. At least I think you can...check the roth rules on the irs web site. Then if you need it, you got it, if you dont, you dont.
 
Yeah, i think your right on that TH.  Withdrawing contributions is not considered a "qualified distribution" if done before 59 1/2 and/or prior to having a roth 5 years, but non-qualified distributions of Roths dont necesssarily incur penalities.  My understanding is that contributions can always be taken out of a Roth both penality and tax free at any time, regardless of age.

Ok yeah i'll probably do that then.
 
Jim - I think the 5 year period is minimum for a tax free qualified withdrawal. I believe you can ALWAYS withdraw principal tax free, as you already paid taxes on it. Its the gains that are taxable if they're non-qualified withdrawals.

So if you put 6k into a roth, and its worth 8k, you can take your 6k back out after a year or two if you wish. You just cant put it back, you'll continue to be limited by the annual contribution maximum.
 
It'd probably be a new car. I prefer to buy new, but save by owning them a long time (mine now is 10 years old and i'm gonna keep her as long as possible).
Click to expand...

Good idea.

My only suggestion: buy a car that will suit your needs in ten years. I have a little two-door coupe, and I'd keep it except it's too darn small. In retrospect, I wish I would have gotten a four door or a slightly larger car.
 
Boy I wish you could figure THAT out. ;)

Last time I bought a car, I was single, living in a mcmansion, making a million bucks a year. Now I'm married, expecting a baby, living in a smaller house, retired, and living off my investments.

:p
 
Last time I bought a car, I was single, living in a mcmansion, making a million bucks a year.  Now I'm married, expecting a baby, living in a smaller house, retired, and living off my investments.
Click to expand...

So, I guess that means you now need a minivan that looks like either a Cadillac or a Town Car? :D
 
Well we're going to suffer with my Expedition and her Rav4, both of which should continue to serve us well for another 5-7 years!

But my BMW convertible and my Infiniti Q45 and her Corvette have gone by the wayside...
 
Pay Yourself First.

The car fund should be a secondary priority.
 
No advice on the "fund" question, but a few
observations re. cars.

In my big spender days we drove Cadillacs. All
behind me now. I will never again incur debt to
drive a car, or any vehicle. Right now we have a Jeep
Cherokee with 202,000 miles and a Dodge Ram pick-up
with 140,000 miles. No plans to replace either anytime
soon. However, my sense of style prevents me from
driving a rust-bucket, or allowing my spouse to do so.
At one time I thought maybe my "biker"
career would end at the same time we needed a newer
vehicle. But, I am still riding (the bike) and so our
current arrangement will need to continue for a while.
The way I look at it is that I can afford the basic
minimal repairs until the wheels fall off, as long as
the vehicle still looks good.

John Galt
 
Well we're going to suffer with my Expedition and her Rav4, both of which should continue to serve us well for another 5-7 years!
Click to expand...
I dunno, maybe it's just my paranoia, but one of the first things I did when we had a kid was buy a new car. I kept the old Explorer as my kayak-toting beater, but the kid only travels in the new SUV with lower/wider/better suspension, rollover protection, anchored child-seat, traction control, etc.

But then I'm always looking for any excuse to buy a new toy :)
 
Tell ya what. I'll strap my kid into that expedition and we can play chicken.

Unless you're driving something with "peterbuilt" or "mack" emblazoned on it...
;)
 
Meet my new pickup truck (purchased especially for the occasion) :)

capt.dn10209162157.big_truck_dn102.jpg
 
Hi Wab. Still on the diet. Only a little cheating :)

With a truck like that no one would ever call you a
girlyman :)

Re. the Rumsfeld quote that appears on all of your posts, I'll bet whoever wrote that thought they had tapped into a speechwriter's dream phrase. Probably
worked a lot better on paper than when he actually delivered it.

John Galt
 
I saw that truck the other day. Have to pick one up the next time I need to haul 20 tons...

Reminded me of that hyundai commercial making fun of everybody driving tractors and dump trucks. Real life taking the fun out of commercials...
 
I think I heard that that monster gets 6-8 miles to the gallon. If and when I ever see someone driving one of those on the road I'll be sure a have a good laugh. Most likely I'll see one at the gas station. :)

That vehicle is not compatible with LBYM!
 
I don't think Wab needs to LBYM. Power to him!

Cheers,

Charlie
 
Hi Wab.  Still on the diet.  Only a little cheating  :)
Click to expand...
I'm at the end of month three and just went in for some more bloodwork to see how phase II of the experiment is going. I'll post an update when I hear the results.

Re. the Rumsfeld quote that appears on all of your posts,  I'll bet whoever wrote that thought they had tapped into a speechwriter's dream phrase.  Probably worked a lot better on paper than when he actually delivered it.
Click to expand...
I'm certain that Rumsfeld came up with that on his own. He's a genius. An evil genius, but still a genius :)
 
I don't think Wab needs to LBYM.
Click to expand...
I've cut my burn rate way back. There was a brief period when I might have bought a toy like that, but I'm showing tremendous restraint. And I'm sure it wouldn't fit in the garage anyway.
 
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