Tilted Financial Question....

Okay, here's the dealio...
I have a ~$17,500 403B with an ex-employer.
I have car that was originally financed for about $26k, it's down to $21.5k for the next 3 years 11 months. At 3.45%
I could roll my 403b into an IRA and invest or pull it out and pay penalties and pay off the car in March when some other monies come in. Which won't leave us with a lot of cushion in savings, but will free up around $500/month... which will then go into savings and the Oh Fuck Fund.
We're trying to figure out how to calculate which will be more financially smart.
Hi, I'm an unemployed graduate student, racking up more student loans, and we need to be more liquid, if it's financially savvy.
Anyone know how to calculate the penalties, tax impact, etc?
We think I'm still going to fall into the 25% federal tax bracket, even though I only worked 10 months this year, if we pull out the 403b money, given the 10% penalty and the 20% federal tax withholding that is automatically applied to the taxes anyway. Florida has no state tax.

Oh, did I mention I have to figure all of this shit out by Tuesday?

 

Leave the retirement money where it is.
I'll leave it to someone else to show the math.
Scolding grandmother hat on: And you shouldn't have such an expensive car.

 

My car was chosen because it will last around 250-300k miles and gets 40mpg on average. With my other job, I was driving 30K miles per year. I'm still putting a lot on it with school. It costs me 9 cents a mile in fuel to drive it and needs oil changes every 10,000 miles. And I plan to drive it until it falls apart. So, in the long run, it actually works out. The original loan included some rollover from my other car, which WAS falling apart and still had 3 years left on the loan.
But I understand the lecture, no worries, Grandma.

 

Many mutual funds in the US market are taking it in the neck this year... past few, actually. I'd LOVE to see 4%... 3.45 even.

 

While I understand the suggestions about the car itself, selling it is not a viable option as the highest I could get for it is significantly less than what I owe. The car actually did make a great deal of sense as the goal is and always has been to get it paid off by graduation so I don't have a car payment and a student loan payment at the same time. So i need one that will last as long as possible. Hence the question about what to do with the 403b. I appreciate the feedback, and some of the Franklin Templeton funds that I discussed with a financial advisor yesterday (this question came up long after I met with him and I have an appt on Monday again) are actually showing progress.

 

Good luck noodle, keep your retirement savings intact. I know some people who didn't. You just don't get a chance to get it back. No sense placing yourself in a situation where you quite literally will have to work until the day you die (worst case scenario) but I know of a few people like that. Much worse situation than yours.

And as a general rule of thumb, never ever borrow more than something is worth. Whatever it is. Expecially automobiles that depreciate so quickly.

 

Where is the 403b invested now? Was it a 72 or 60 month car loan? The last thing you want to do is cash the savings out. You may want to talk to a fee based advisor instead of the product salesperson, you are talking to now. Look over your investment option at your current 403b account.
Regarding the car loan, whether 60 or 72 months, you have been paying mostly interest up to now. You should see the balance start to drop quicker.
Be careful of anyone showing long term rates of return. A client of mine had a "Financial Advisor" show her a 40 yr return in the S &P 500 and used the 10.49% return to project her retirement earnings in 13 years. Her $250,000 magically became $1,250,000 and she could retire happily everafter. In real life if you look at the S & P on 12/01/1998 and 12/01/2011 and it has risen from 1176 to 1229 : 53 points in 13 yrs. Sure it may go way up again but one shouldn't rely on that....

 

Thanks for the reply Lindy, you seem to think like an accountant. Hi, I'm noodle's sugar daddy. The dilemma is that looking at the amortized interest payment over the next year to two years, the interest that would be paid negates at least 70% of the penalty/tax loss if noodle cashes out. That's also about the right amount of time before I would pay it off for her, based on my cash-flow. However, if the 403b was cashed out I could pay it off in early 2012. That's the crux.

 

The strictly correct financial answer is still:
Don't touch the retirement money.
Sell the expensive car, get out from under the loan and buy something much cheaper. There are plenty of vehicles that you could buy for much less money that would still meet your needs.
You can replace the crappy car with something newer in a few years.
You can't replace the retirement funds.

 

My 403d yielded .89% last quarter. I need to move the money, but I'm not sure what level of risk I want to move it to.

 

I'm currently waiting for the check to be deposited from one company to another.
I've rolled over the 403b money into a traditional IRA (a Roth wasn't an option because of my employer's plan).
My credit union contracts with a financial advisor and it'll cost me $35/year to access him as much or as little as I need to. He's got a great plan, understands that I want to be in charge of my money and we're looking at a large diversified fund, 10% each in stocks (two major with strong growth plans), natural resources, utilities, and overseas markets. I researched what he suggested we do and I like his style. Sugar Daddy and I will just plan to get more aggressive with the car payments.

 

Sounds like you bought an annuity and the $35 is the annual fee.....