[update, my reply to your kind advice] The decision my employer made has just drastically affected m
barberlover
Posts: 2,228 ✭✭
My final date of termination is probably going to be the last friday in March, I have just found out from the folks handeling my employers 401 k account that if my 401 k loan is not paid in full within 90 days of being in default that the 20 percent tax and 10 percent penalty will be due for the next tax year.
I asked the bank in charge of this account if i could pay a percentage of the unpaid balance of the loan before the 90 days were up to lower the tax and penalty for next year and was told; "it's all or nothing"
The only way other than taking out another loan to pay the whole outstanding balance would be to sell off approx. one third of my remaining collection.
God, i don't know what to do?
My head is telling me sell at auction because coins with "the look" are bringing great prices right now. But my heart just doesn't want to let go.
Also, what if the coins i would sell went up in value after i sold them ? This is not going to be an easy decision, but i have to make up my mind fast.
Advise would be appreciated Les
I asked the bank in charge of this account if i could pay a percentage of the unpaid balance of the loan before the 90 days were up to lower the tax and penalty for next year and was told; "it's all or nothing"
The only way other than taking out another loan to pay the whole outstanding balance would be to sell off approx. one third of my remaining collection.
God, i don't know what to do?
My head is telling me sell at auction because coins with "the look" are bringing great prices right now. But my heart just doesn't want to let go.
Also, what if the coins i would sell went up in value after i sold them ? This is not going to be an easy decision, but i have to make up my mind fast.
Advise would be appreciated Les
The President claims he didn't lie about taxes for those earning less then $250,000 a year with public mandated health insurance yet his own justice department has said they will use the right of the government to tax when the states appeals go to court.
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Of course this is only my personal opinion but here goes. As much as I understand and have felt the emotional tie to the coins in my collection the bottomline is were talking coins versus your retirement and a huge penality to hold on to them. If you can sell the coins now for a profit and pay off the 401K load you not only make a profit on the coins but avoid some huge penalties (I don't know how much the load is but the hit you take percentage wise is huge). In one sense that interest gets added to the cost of the coins.
You can always enjoy the chase for coins again once your job situation is settled. If I were in the same situation I'd sell, payoff the load avoiding the interest and hope for the best in finding another job and if possible building my collection over time.
I would recommend visiting with a certified financial planner. Something about this requirement does not feel right. Consult with those "in the know" about financial matters as you would coin related issues. Good luck.
lablover
If the coins are that neat, you will get a nice price for them right now as the demand for pretty PQ Barbers or type in general is strong....esp. PCGS. Average coins are not that liquid at bid levels. But lovely pieces are under ferocious pressure from the right buyers. Just have to find them.
If you must sell them, sell them as a lot soliciting bids from the top firms. Otherwise they will cherrypick out your ultra PQ pieces are the ones you don't know the full value of. You will be left with the pieces that will be hardest to sell. All or nothing.
roadrunner
I also suggest trying to avoid borrowing against one's 401-K in the future.
As to coins it could be educational to chose the ones you can most easily part with and sell them. Yes it is a setback on your collection -- for now. You might buy different coins when you get back into a situation where you can buy again. You might buy fewer coins of higher grade, or more coins of a lower grade. Anyway look at it as a learning exerience.
New collectors, please educate yourself before spending money on coins; there are people who believe that using numismatic knowledge to rip the naïve is what this hobby is all about.
Maybe you could make a list, and we could tell which coins are "keepers" and which ones should go on the block. Examples of "on the block" are common dates and items like generic $20 gold pieces (although the market for those probably is not very good right now).
Sorry to hear about your situation.
You may want to look at all the numbers closely and meticulously (i.e. what you project earning this year versus last, given that it may be a little less due to your unemployment, is the tax penalty that substantial ??). However, I am of the opinion that unless you have single pop numbered coins or completely high-end coins, sell them now as I feel that the market is (and has been) deflating and purchase them (or even better ones) at a later point in time.
I love Ike dollars and all other dollar series !!!
I also love Major Circulation Strike Type Sets, clad Washingtons ('65 to '98) and key date coins !!!!!
If ignorance is bliss, shouldn't we have more happy people ??
That is a real bummer.
I think you will only be paying ordinary income tax on the outstanding balance and then a 10% penalty for early withdrawl on that same outstanding balance. I had the same thing happen last year. In my case I just paid the taxes and rolled over the balance of the 401k into an IRA.
Larry
Dabigkahuna
In my case, i took a $12,000 loan from a trusted local coin dealer on a 1907 PCGS MS64 High Relief flat edge St. Gaudens $20. I'm giving him 10% rate of interest......but it allowed me to purchase a gorgeous rainbow toned 1937-D 3-Leg Buffalo MS64 in NGC and a 1795 AU58 NGC Flowing Hair half dime that looks MS63-64 but was market graded to AU58 due to the typical weak eagle breast.(no feathers).
Without the loan these would not have been possible. This dealer has done this for me in the past with other coins, and you may have such a dealer friend locally. If not i can PM you his name and #, as he might be willing to work with you. TOTALLY trustworthy, BTW......i've known him 20+ years and he's one of the few who will treat you right.
Also....if you end up selling a coin/coins.....sell those easiest to replace such as non key-date gold. Monster toned silver in better or key dates are much harder or impossible to replace later.
Joe T
Once again resides with Legend, the original purchaser "raw" at live Eliasberg auction. Laura and i "love" the same lady!
This saddens me more than you know but my wife and my faith are more important then my coins. It woud have been better if had had crappy looking coins that were easy tp part with though. Les
One thing to remember is that the 20% tax is just the withholding your actual tax depends on your marginal rate which may very well be higher than 20% due to all of the 401(k) distrubution counting as ordinary income. The 10% tax penalty is in addition to your marginal rate. If you live in a state with income tax you will also lose pay state (and local) takes on all of the outstanding loan, plus some states also levy penalties (my home stae of California levies an additional 2.5%). Overall you could easily lose half your distribution to taxes.
My opinion is that no matter how it hurts pay back that loan if at all possible. Sorry to hear your tough luck.
-JamminJ
<< <i>I would recommend visiting with a certified financial planner. Consult with those "in the know" about financial matters as you would coin related issues. >>
Good advice!!!!
The rules on whether a 401k loan must be paid in full on termination of employment, or can be paid back over time, are in the 401k plan itself, and vary from employer to employer. The comment about the 20% being withholding, and not necessarily the actual amount due is right on. If the loan converts to a distribution, your taxable income is the full amount you receive, including any cash paid out in addition to the loan balance and the amount withheld. You are taxed at your marginal rate on all of that, and could also be penalized further in some cases for failing to pay a sufficient amount through withholding and estimated tax payments.
My sympathy for your job situation, and good luck with both finding replacement employment and dealing with the Infernal Robbery Service!
Next, try to collect something different first, for a year or two, then return to your favorite and see if it still pulls you in the same way or not.
I have a few opportunities to consider liquidating some of my collection for some urgent matter, and I found it quite pleasing that for something I have so enjoyed studying and collecting, merely as a hobby, I could simply unload a few or my "toys" and be able to resolve the situation. Yes, I was somewhat disappointed, but the positive feelings prevailed. Couple that with having to be and successfully being a predominantly independent person and personality most of my life and the decision was relatively easy for me.