Financial Advice- Care Act- Land Purchase

[Mr. Whiskers]

There are some pretty smart people on here so I’d like your opinions. Researching the Care Act, I can pull up to 100k with no penalty and only pay taxes. I have a 401K from a previous employer that still has not recovered to its original total from 5 years ago. I have an opportunity to purchase some land from a buddy of mine at about 1/2 market value (75k total worth 140-150k). My thought is to cash out, purchase land, build the shell and foundation of a barndo with cash, sell my house, finish the build out and replenish my funds in some type of investment account. Solid plan or is there a better way of going about it? I am self employed and have not contributed to the 401k since leaving my employer.

Thanks in advance

[Hogmauler]

I would pray about it first. Ask God for guidance in making this decision. Exam your own business. Is it recession proof? Is it a business that the majority of folks will need and can pay for? You know the questions you should ask yourself. If God gives you piece about it, and you’ve been able to answer your own questions in a satisfactory way as well move forward.
Personally I came from a family with a mindset of scarcity. My wife came from a family of investors. When we got married I left the scarcity mindset behind. You have to be disciplined enough to invest regularly when your self employed unless you have it set up to where it comes out automatically from your profit. Once you buy that land it becomes your alligator and you will be feeding it. If he’s giving you the property at 50% off you’ll probably be paying for your own survey and title policy. I wouldn’t purchase any property without that. Just my two cents.

[Shane]

1. Sounds like you really need to reallocate your 401k investments if they're doing that poorly - especially if you decide not to cash out.

2. Not enough info on the rest of your financial goals, assets and sources of retirement income for me to have an opinion if cashing out to buy land would be your best move or not.

[Acameron52]

Any time you can buy land for less than market value id say you’re doing good. If things change you could always sell and make your money back.

[STGS]

As others have said, there are several other details that would be important factors in making this decision; however, I generally advise against cashing out a 401K unless to avoid foreclosure or bankruptcy.

[jaspermac]

I’m not sure your income situation but taxes will get $25,000 plus of the $100,000.

[huntnfish]

I’m not sure your income situation but taxes will get $25,000 plus of the $100,000.

Yup, more like $30,000. Ask me how I know.

[JeffJ]

1. Sounds like you really need to reallocate your 401k investments if they're doing that poorly - especially if you decide not to cash out.

2. Not enough info on the rest of your financial goals, assets and sources of retirement income for me to have an opinion if cashing out to buy land would be your best move or not.

#1 for the win. Even a decent allocation should be close to an all time high water mark these days.

[bowhntrmatt]

I say go for it, but if you decide to pass and your buddy will make someone else the deal, please pass along the details.

[TigerBob]

I would roll that 401k into an IRA and have the IRA buy the land. You might even be allowed to buy the land out straight out of the 401k. I'd talk to a CPA, but I would not cash out and pay the taxes if you don't have to.

[brokeno]

Just go borrow the money. Buy land not a better investment out there

[wingnut]

I agree with brokeno, I’d just borrow the money from the bank. Shouldn’t have any issues with what kind of deal you are getting. Then build the barndo shell out of cash. Sell your house....pay the note off ASAP. Then finish your Barndo. The amount of interest isn’t going to be bad on $75,000 just for a short period.

[Kevin]

I talked to my CPA and he said that if you can’t prove that you had financial hardship and that your withdrawal was to support that, the government is going to come after you - and already has started doing it.

Just what he told me. Anyone else hear similar?

[buckerup]

Just go borrow the money. Buy land not a better investment out there

This!

[Codie]

borrow the money instead of doing anything with a 401k - 3% interest is plenty low cost of funds