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Cheat Sheet Q & A:
Topic: Use 401k or construction loan?
I am a 59.5 year young working man. My question to you is I purchased a lot in 2004 (that’s now worth less than half its original purchase price). I am considering taking out a withdrawal to build on this lot a spec house, to sell. My family has been in the construction business my whole life and in my career I have numerous contacts in the industry to build at quite a significant savings. Would you try going thru a construction loan instead of my 401-k ? The reason I ask is I am considering building cash and selling it as if I was the lender. I am very unsure about the climate going into next year with the 401-ks and feel I can rely on myself with more confidence.
Bottom Line: Ordinarily I wouldn’t advocate tapping into a 401k plan for almost any reason. Especially when one is distressed financially (even in bankruptcy a 401k account can’t be taken away from you). 401k plans are more important than at any time previously as we enter an era of uncertainty regarding the future of Social Security and Medicare. Additionally the stock market has represented the best investment vehicle to grow wealth (with an 8.4% historic annual rate of return). This situation is a bit different…
The key to this question for me is the age of this individual. 59.5 is the age at which one can withdraw money from a 401k without penalty. Current construction loan rates are in the range of 5.3 to 6.2% plus the fees for originating the loan. That already dramatically reduces the ROI of the project and injects additional pressure to complete the home and sell it as quickly as possible as any delays would results in higher expense and less ROI.
The final cog to the consideration is the risk involved. Risk assessment is key to investment returns. This individual is nervous about the current 401k investments and isn’t confident he wants to leave all of his money invested in the options in his account. He is looking to use investment dollars for an investment project in an area of expertise for him which also diversifies his investment portfolio. The risk / reward scenario for him also makes sense for his needs, wants and age.
So I’d recommend moving forward with the 401k withdrawal.
If you have a topic or question you’d like me to address email me: firstname.lastname@example.org
A La Carte TV? Take 20:
Bottom Line: So it seems like we’ve been debating the A La Carte TV option for about 20 years (it’s been at least ten). The biggest advocate for change in
McCain is proposing the following:
The principal behind the proposal is somewhat admirable. If it didn’t pass in years gone by what’s the likelihood it would today. We have more options for TV content then ever before. Additionally the advent of streaming TV options has introduced the principal of A La Carte content for those who truly seek it. If the sports blackout rule change was proposed as a stand alone proposal I think it’d stand a strong chance of passing.
Companies made in the
Bottom Line: A few months ago the lovely and talented one (Ashley) asked me why we only invest in American companies. There are a few reasons philosophically:
But there also are principled reasons:
And best of all companies made in
Of the 500 companies in the S&P 500, 150 not only are based in
Not bad for supporting companies that support all of us.
Scam to beware of with property assessments:
Bottom Line: I’ll be direct with this story that Bankrate first brought us last summer. Don’t pay any upfront money for services that claim to be able to reduce your property tax assessment.
This scam is back as some have experienced increase property assessments for the first time in several years. If you do want to challenge your property assessment start you’re able but there is no certainty that you will be successful and you never should pay money out of pocket to facilitate the process. If you do need help to make your case, perhaps you could seek a real-estate related legal professional but most likely you should make the appeal yourself. Don’t pay any company that comes to you claiming to be able to make this happen for you – the scammers are targeting those with recent increases.
AT&T channels its inner T-Mobile:
Bottom Line: If you had wondered if T-Mobile’s new contract-less service model was working, the answer most certainly would be yes. How do I know?
AT&T is launching a whole new brand that’s mimicking T-Mobile’s new model. The company is called Aio Wireless.
Aio Wireless is now available in three test markets and two are in
If you’re curious about AT&T’s new venture the link to the new company is below: