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Best Places to Get Personal Financial Advice?

Hexmage-PAHexmage-PA Registered User regular
Long story short, the plant I work at is shutting down this year and my dad is trying to convince me of a certain course of action regarding my 401k. I don't really trust his advice, though, so I'd like to run what he's saying I should do by someone who is actually an accountant or something, but I have no idea if I'd be able to afford a CPA.

Any advice on where to turn?

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  • DelzhandDelzhand Hard to miss. Registered User regular
    Have you tried asking on the personal finance subreddit? I've got a financial advisor who's frequently pushed me toward Permanent Life Insurance, and when I asked online, they told me a lot of value gets lost to fees and it's a high commission product for the advisor.

    So I guess generally, just be aware that just because someone is a professional doesn't mean they've got your interests in mind.

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  • Marty81Marty81 Registered User regular
    You can get decent advice in the financial literacy thread in D&D: https://forums.penny-arcade.com/discussion/207205/cha-ching-its-the-financial-literacy-thread

    Depending on how complicated your situation is or how unsure you are about things, you might consider seeing a fee-only financial planner. They are fiduciaries, meaning they are required to act in your best interest, and since they are not allowed to accept compensation from product sales they will have fewer conflicts of interest than other investment advisers.

    HeirdavidsdurionsMugsleyQuidElvenshae
  • MugsleyMugsley Registered User regular
    Keep in mind that depending the advisor and the situation, the fee could still be "significant" (in quotes because everyone's situation is different). It's a very large ballpark but something on the order of $1000 to $2000 probably isn't unreasonable. If you just want advice about this event and not to develop a full financial plan, the fees should be a bit more reasonable.

    Start here:
    https://www.napfa.org/find-an-advisor

    Depending on how far you want to go to vet an advisor, you can also check here for any recent infractions:
    https://brokercheck.finra.org/

  • CelestialBadgerCelestialBadger Registered User regular
    If you are getting bad vibes about something, just don't do it.

    I find the subreddit r/personalfinance is good for crowdsourced advice, but of course people there are not professionals.

    But professional advice is generally aimed at people with a *lot* of money to invest, like several houses and millions in the bank etc. There's not much of a market for "Good, cheap basic financial advice" out there. Most financial advisors at that level are trying to sell specific products for a specific company, and don't have your individual interests at heart.

  • ThundyrkatzThundyrkatz Registered User regular
    IANAL, this is general information.

    Its worth noting that you don't have to do anything. The 401k will exist after your job ends, you just wont be able to add more money to it anymore. Then when you get another job, if they offer a 401k, you can roll the old one into a new one. Baring that, you can roll the 401k into an IRA. Or you can cash it out and go buy a new TV.

    If you roll it over into a new IRA or into your new jobs 401k, and process the roll over as a direct transfer, then it will be fairly painless and you wont have to pay taxes or penalties. Call the company that will run your new IRA/401k and they will walk you through the process.

    If you cash it out or if you have them send you a check and then you deposit that check into a new IRA (if you handle the cash in anyway) you will incur a 10% early withdrawal penalty and you will be taxed at your marginal tax rate as income. The distributing 401k will issue a 1099.

    If you deposit the cash into a new IRA within 60 days, (it will have to be the exact same amount you withdrew from the 401k, meaning you will have to front the taxes and penalty) then you will get a form 5498 from the new IRA provider and you can reclaim the taxes and penalties on your tax return.

    That should cover 99% of situations. So, unless your eyeballing some kind of hardship withdrawal or you have an outstanding loan against your 401k.

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  • CelestialBadgerCelestialBadger Registered User regular
    Do not cash out the 401k for a new TV, even if it is small it can be rolled into your next 401k and over your life you will build up a decent nest egg, even if it seems like nothing now.

  • MugsleyMugsley Registered User regular
    But professional advice is generally aimed at people with a *lot* of money to invest, like several houses and millions in the bank etc. There's not much of a market for "Good, cheap basic financial advice" out there. Most financial advisors at that level are trying to sell specific products for a specific company, and don't have your individual interests at heart.

    I understand your point but this is a misnomer. Not only can financial advisors help people with any amount of money to invest, they are arguably more valuable when a person has lower net worth because they can help guide financial decisions early on.

    Regarding your last sentence; that is the exact reason why fee-only advisors are a thing. You pay them for their time so they don't have to sell anything to get paid; and they are obligated to act as a fiduciary.

  • CelestialBadgerCelestialBadger Registered User regular
    Mugsley wrote: »
    But professional advice is generally aimed at people with a *lot* of money to invest, like several houses and millions in the bank etc. There's not much of a market for "Good, cheap basic financial advice" out there. Most financial advisors at that level are trying to sell specific products for a specific company, and don't have your individual interests at heart.

    I understand your point but this is a misnomer. Not only can financial advisors help people with any amount of money to invest, they are arguably more valuable when a person has lower net worth because they can help guide financial decisions early on.

    Regarding your last sentence; that is the exact reason why fee-only advisors are a thing. You pay them for their time so they don't have to sell anything to get paid; and they are obligated to act as a fiduciary.

    I tried to locate one, but the fees were so high that it was pointless.

    "Fiduciary" is a key-word, by the way OP. It means that they are working for you, not for a company they are selling things for. You need to ask anyone you are thinking of hiring as an advisor if they are a "fiduciary."

  • Hexmage-PAHexmage-PA Registered User regular
    The gist of what my dad is suggesting (as I understand it) is to withdraw half of my 401k once I get my pink slip, use that to pay off some of my school loans, and then once I'm no longer working at the plant I won't have to worry about paying it back.

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  • CelestialBadgerCelestialBadger Registered User regular
    Hexmage-PA wrote: »
    The gist of what my dad is suggesting (as I understand it) is to withdraw half of my 401k once I get my pink slip, use that to pay off some of my school loans, and then once I'm no longer working at the plant I won't have to worry about paying it back.

    I think you know that’s a bad idea. Your 401k is *yours* not the plant’s, so you are just robbing yourself.

    Elvenshaefirewaterword
  • Hexmage-PAHexmage-PA Registered User regular
    Hexmage-PA wrote: »
    The gist of what my dad is suggesting (as I understand it) is to withdraw half of my 401k once I get my pink slip, use that to pay off some of my school loans, and then once I'm no longer working at the plant I won't have to worry about paying it back.

    I think you know that’s a bad idea. Your 401k is *yours* not the plant’s, so you are just robbing yourself.

    Well I'd be using the money to pay off school loans so I won't have to worry about them anymore, and I would be avoiding interest.

    I've got about $50,000 in my 401k, so I'd be taking out about $25,000.

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  • CelestialBadgerCelestialBadger Registered User regular
    That’s a nice little nest egg. Forget it exists and it will grow. Your older self will thank you.

    Elvenshaeschuss
  • ElvenshaeElvenshae Registered User regular
    ... and you will pay a huge tax penalty on withdrawing that money.

    Do not do so.

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  • see317see317 Registered User regular
    Elvenshae wrote: »
    ... and you will pay a huge tax penalty on withdrawing that money.

    Do not do so.

    Yeah, after the taxes and the penalty for early withdrawal, you're going to be pulling it nearly all of it to pay off that 25k.

    Ringo wrote: »
    Well except what see317 said. That guy's always wrong.
  • PaladinPaladin Registered User regular
    Just do the math yourself. Will the projected APY of the 401K outgrow the APR of the loans once you take the tax penalty into account? If yes, leave it in. If no, take it out. You can run it through your bank's financial advisor if you're unsure of your calculations. You can also run your 401K allocation by your bank's financial advisor to get their opinion on how you should generally be dividing it based on your risk preference. Most large branch banks offer this service for free. What's your bank?

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  • PowerpuppiesPowerpuppies Registered User regular
    edited May 2019
    Withdrawing from your 401k to pay off debt is a sufficiently bad idea in the general case that you shouldn't do it unless you're a financial expert. If the crisis is not important enough to do the research to become a financial expert, it's not important enough to withdraw from your 401k.

    Furthermore, not working at the plant has no impact on whether it's a good idea, so you've no more reason to consider this now than you did last year or when you put the money in. If it were true that you should withdraw now, that would mean it was always true that you were wrong to be contributing.

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  • DivideByZeroDivideByZero Social Justice Blackguard Registered User regular
    Do you have an emergency fund set up? Because this is exactly the type of situation to draw on it. Your 401k is not an emergency fund and you shouldn't be withdrawing from it unless you have literally no other options.

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  • CelestialBadgerCelestialBadger Registered User regular
    Furthermore, not working at the plant has no impact on whether it's a good idea, so you've no more reason to consider this now than you did last year or when you put the money in.

    Yeah. Hexmage-PA's dad seems to be under the impression that the plant owns the 401k so if you take a loan on it and don't pay it back, you are ahead, like if you get a loan from a friend the week before you know you are moving out of town.

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  • CauldCauld Registered User regular
    You'd be avoiding the student loan interest, but you'd also be forgoing any interest/gains in your 401k. Also, student loan interest is deductible, so even though it sucks to pay interest it's effectively a lower interest rate than it says. And like others have said you'll pay a penalty (I think 10%) and you'll pay income tax on any amount you withdraw from a 401k.

    Elvenshae
  • ThundyrkatzThundyrkatz Registered User regular
    I agree with CelestialBadger. It sounds like Hexmage-PA's dad is under the impression that you can pull a fast one on the 401k provider. But that's not how it works. You will only have access to redeem the vested portion, and that is yours now and forever.

    If you take out $25k, you will be charged a 10% penalty (for redeeming before your 59.5 years old) and additionally, most likely have another 10% withheld for taxes. So you will receive a check for $20k. The $25k you took out will be deemed income and will be added to your income for 2019 at your marginal rate and may result in you owing more then the 10% that was withheld when you file your taxes. Your 401k provider will send you and the government a 1099 this year.

    This is generally seen as a bad idea because you will miss out on the compounding effect of that $25k in the stock market till you retire which is most likely going to end up being more then the interest you will have paid on your loans.

    So, unless your only option is to default on the loans, paying them back the normal way is probably better then taking money out of your 401k.

    KamiroCelestialBadgerCauldElvenshae
  • GdiguyGdiguy San Diego, CARegistered User regular
    I mean, there's a situation where this makes sense - but it requires the interest on the debt to be substantial (like, I can see it financially making sense if you were trying to get out of a bunch of 25+% interest credit card debt or something). That's speaking purely from a financial side; obviously there's the psychological concern there of doing that, losing your long-term savings, and then going back into high interest debt again instead of saving the 'extra' money you're getting from not paying down that debt; but if it was a sudden medical issue that created a giant amount of high-interest debt that you need to get out of, then sitting down to work out the math wouldn't be a bad idea

    But as said above, the 10% early withdrawal penalty makes it highly unlikely that you'd come out ahead with paying off standard student loan debt

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  • MegaMan001MegaMan001 CRNA Rochester, MNRegistered User regular
    I'd love to see the OP put up the numbers of loan interest and the amounts involve, but I'm just going to add myself to the chorus that there is no financial reason to take the penalty on withdrawing your retirement funds early.

    Also, in terms of general financial advice, I've gotten good success following Suze Orman who is very vocal about the stuff that fucks the average person (life insurance, annuities, etc.) and has a solid road map to some financial security (emergency fund followed by x, y z), without being as demanding as Dave Ramsay.

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