Advice Needed

**Giro** · 12-29-2011, 10:32 AM

I really need a little bit of anonymous advice. This is going to be long..I'm sorry.

So, I have a background in Accounting and Finance. I currently work in Engineering. I'm losing my job on Jan. 6. I have a few prospects and I should be working again by March 15...(which is when my severance runs out).

Anyway, I got married in August. My husband is a retired officer in the AF. He retired in August as well. He is working now for the DoD as a civilian. I sold my house and moved in with him after the wedding. He has a mortgage on his house. We are in our 30's.

We put in an offer on a short sale property way back in August. We low-balled and truly did not expect to get it. But, the bank agreed just this week. It's a KILLER deal. Our offer was a cash offer of $105K. It appraised 2 days ago fro $280K.

Now, I am trying to figure out where to pull monies to pay for the new house. We will be leasing out his house until the market recovers a bit.

My husband has over $100k in a basic savings account (MMA). I have less than that in a savings and I have some investments. I don't want to pull money out of my investments because they are doing okay and I expect them to do very well in the future. I have no problem draining my savings to pay for the house. I have around $45k.

THE PROBLEM. My husband does not want to drain his savings to pay for the house. He wants to borrow from his TSP (401k). He sees this account as just extra money and he said he would just pay it back in 36 months. He wants to borrow $40K. I think borrowing from a TSP is insane and should be a last resort. He thinks he has his military retirement and doesn't need it anyway. He says that draining his savings account is a bad idea because he has spent the last 10 years saving that money and views it as a safety net. He likes to feel like he can go out and buy anything at any time.

ugh.

What do you guys think?

**Nishu** · 12-29-2011, 11:03 AM

I would leave it up to the math. With a military retirement and that much in savings, I wouldn't see a problem with borrowing from the tsp.

Have you calculated the cost of the different options?

**Giro** · 12-29-2011, 11:15 AM

Well, there aren't really a lot of costs. It's basically loss in future earnings and tax savings and with this market, it's nearly impossible to calculate.

I am just trying to come to grips with him borrowing from his TSP. Why in the world can't he just pay back his savings instead of his TSP? This is more emotional than it is logical and that is the part that bothers me.

**Nishu** · 12-29-2011, 11:55 AM

ETA, I was thinking there was interest, but I suppose the interest would be paid back to yourself into the tsp anyway.

Well, he's in his 30's and has substantial savings, a tsp and a military pension. He seems to have a pretty good grip on things.

I think you need to let this one go, jmo.

**Spirit Deer** · 12-29-2011, 12:14 PM

It sounds to me like you're both putting in a share of the costs, and drawing from your own separate accounts to do so. You're newly married so it seems like there's still some 'yours' and 'mine' involved, which is fine.

You've both saved substantial money prior to your marriage. You're in sound financial shape. Both of you reached that achievement on your own, thus proving you both know how to make good financial decisions. It doesn't sound like your husband drawing from one source or another is going to put your financial stability in jeopardy. And from your history, you've both proven you know what you're doing.

I'd let this one go. So what if it ends up costing a bit more? It's not worth a big disagreement. Consider it a paltry bit of interest paid on the home loan you aren't going to have because the two of you, independently, saved your money instead of spending it, and be happy. Your husband is obviously not someone who spends money foolishly or squanders his assets. And it sounds like even if your husband loses a little interest in order to stay in his comfort zone, there will still be plenty of equity in the house.

Congrats on the new house, btw. Most of us would love to have the biggest problem when considering a home purchase be wondering which pile of cash to draw from so our home would be paid in full the day we take ownership.

**Telephus44** · 12-29-2011, 01:02 PM

I think that yes, you're probably right in that it's better to take from savings than from the TSP, but it isn't a hill I would die on. I would be more concerned that someone in their 30's feels the need to sit on $100,000 in cash. Have you discussed why he wants to have that much just in savings?

**Giro** · 12-29-2011, 01:14 PM

Originally Posted by Telephus44

I think that yes, you're probably right in that it's better to take from savings than from the TSP, but it isn't a hill I would die on. I would be more concerned that someone in their 30's feels the need to sit on $100,000 in cash. Have you discussed why he wants to have that much just in savings?

I know why he has that much in savings...he's been in the military for 20 years. When he was first enlisted he worked a month and brought home a couple of hundred bucks. He had to work 2 jobs just to pay his bills. He knows poverty and he doesn't ever want to be poor.

We both sort of stopped increasing our standard of living years ago and just live on half of what we earn. Every raise, we saved. Idk. It's just kinda what we both do.

**Giro** · 12-29-2011, 01:17 PM

And thanks everyone. You are all right. I get caught up on exactly dollars and sense and I lose sight of the bigger picture. This is not a hill I want to die on.

I will compromise.

**shoiji** · 12-29-2011, 01:29 PM

Not sure how taxes work with a TSP. But I would figure this out to see if it would be better to use savings than the tsp.

But it does sounds good if you can rent out the house you are currently living in.

**lparker** · 12-29-2011, 02:38 PM

I'm pretty sure there isn't a tax issue with borrowing from the TSP. I did that years ago with no problem. You take a good hit with a withdrawal. I did that just before the markets tanked. The TSP is market based so you take your chances either way. Since he is still employed, I don't see any problem getting a loan on the TSP...it's his money and he'll get the interest back. $45 and $45 doesn't add up to $105 though. The other $15 has to come from somewhere.

If I could do it...I'd flip the new house...try for $200k or so.

**Giro** · 12-29-2011, 03:03 PM

Originally Posted by lparker

If I could do it...I'd flip the new house...try for $200k or so.

That certainly is the plan. I have some construction buddies who are going to make the basement pristine. stone hearth fireplace, the new hardwood floors for basements that have some sort of rubbing backing, theater room and a really nice gym with a sauna in the bathroom. It's already finished so my budget is around $25k for that.

I'm hoping for $250K in 2 years on a $130K investment.

**Giro** · 12-29-2011, 03:07 PM

Oh also, when I said tax savings I meant that when he start paying the loan back ... more than $1K a month, he will not want to contribute the full 15% on top of that to his TSP. He will contribute the 6% limit to get the full match and that is it. So, that other 9% income that is usually tax deferred, we will have to pay taxes on.

**Telephus44** · 12-29-2011, 03:14 PM

So what are his long term money goals/plan? It seems like he doesn't want to save for retirement, that he just wants to save for the sake of saving. I can understand overcoming poverty and wanting a lot of money in the bank just in case, but what's the plan besides just shoving money into a savings account?

**hmcart** · 12-29-2011, 03:19 PM

I cant really add on what everyone has said but congrats on the new house!

**Giro** · 12-29-2011, 03:30 PM

Originally Posted by Telephus44

So what are his long term money goals/plan? It seems like he doesn't want to save for retirement, that he just wants to save for the sake of saving. I can understand overcoming poverty and wanting a lot of money in the bank just in case, but what's the plan besides just shoving money into a savings account?

We both contribute the maximum amount to our 401K's, so he really does want to save for retirement. But he doesn't view that account as sacred and has no qualms with getting a loan from it. He currently contributes 15% to his 401K as do I. It's the maximum that our plans allow us to contribute. I am just adverse to taking money out of my 401. I don't touch it and wouldn't consider borrowing except in dire straits. BUT, I also don't have a million dollar military retirement. So, I can sort of understand why he doesn't feel the same about his account.

I'm not sure about future financial goals. I guess just to be debt free. I want my money to work for me, so I invest a little more in riskier investments than he does. He just dumps his into a savings account...cringe.

Is that what you mean? He should be investing in personal investments with better returns, outside of his 401K?