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Discussion Starter #1
...like me.

Regarding purchasing my first Porsche, relevant to my retirement.

I am 52.5 now, and can retire at 55. Plan "A" has always been to work until 58.5, which is about 6 more years.

We have always lived within our means, so my hot young wife works when she feels like it, and doesn't work when she doesn't feel like it, and we get by just fine, either way.

I'm carrying almost no debt, and my credit scores are good.

Trying to decide whether to try to squeak out the purchase the car now (it would be tight), have it paid off by the time I retire, and then enjoy my full pension amount, or to wait until I retire, take part of my retirement in the form of a lump-sum payment, and use that to just pay cash for the car.

But I recently read something about getting hit with an additional 10% tax penalty for pulling money out before I reach 59.5.

FWIW, even if I pull ALL of my money out, I'll still continue to draw a pension check (a smaller one) based on my employers contributions, and my employer contributes way more than I do (nearly two to one).

Should I pull the money out, roll it over into something else, and use that to make the payments on a financed car, or is that overly Rube-Goldbergian? I don't know much about this kind of stuff.

I make decent money now (low 6 figures), but my income will go WAY down in retirement- I have a feeling that my tax burden will not be much...but I won't be able to afford to make Porsche payments.

And then of course I'll be eligible for Social Security upon reaching 62 years of age.

I just want one nice car after all that I've been through, before I pass, and I'd like it if it wasn't RIGHT before I pass. It would suck even more if I passed before actually being able to do it.
 

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So, are "Porsche payments" $1000 a month, or $500 a month? (I expect anything more than $1000 a month are Turbo payments? Just trying to map out the terrain here.)
You can buy almost any Cayman for $1000 a month if you have a good FICO score (over 810) and a reasonable cash down payment. You can't buy a GT3 for that money (trust me) but a Cayman/Boxster, yes.
As for you retirement situation, I would recommend avoiding any decision that incurs an early withdrawal penalty. At the moment, anyone with a good credit rating can borrow money at rates that are far lower than what you can earn with savings/investments. In another 3 years, maybe I'd be saying the opposite. But interest rates are about to take a hike--up. Not a rapid rise, or to sky high (whoa, 8%) levels, but they are going to go up. The economic situation (The Fed is looking to raise rates, but slowly) is reasonably predictable, but the political climate is heating up, and all bets are off. Trump is a loose canon, and I don't care whether you think he's the savior of America or the idiot with the biggest ego, he's a factor (and that means his fortune is tied intimately with the economic future of the country...
 

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Never take early payments from retirement accounts unless it s a drastic financial need. You get hit with a 10% penalty and taxes. Also, if you take a lump sum distribution for a Porsche, it will be a large sum which will likely push you into a higher tax bracket.

I would buy the Porsche and continue working.
 

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Never take an early withdrawal unless u are desperate and destitute. And think carefully about ur SS strategies. For many with other retirement accounts it is often best to defer and use other SS strategies like retirement acct withdrawals while deferring SS. I just started my age 70 benefit which is nearly double what it would have been at 62. When my wife started hers I took a spousal on hers while deferring mine and spent some pre-tax retirement money. This way we stunted the growth of our retirement accounts a bit and avoided tax bracket creep when required minimum distributions kicked in. If either u or ur douse have longevity, u need to think hard annuity deferral strategies. Enough said on that.

It's hard to guess what interest rates will be in a few years, which will determine ur lump sum benefit. If ur pension has a valuable COLA, u probably should not do any lump sum withdrawal. If you really want to buy now, I'd look for a low cost loan. Your 401k/403B might be helpful, but repayment terms can be very rigid. There are some new car loans out there that are cheaper than what Porsche offers.
 

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I make decent money now (low 6 figures), but my income will go WAY down in retirement- I have a feeling that my tax burden will not be much...but I won't be able to afford to make Porsche payments.

Based on what you posted, I'd recommend not buying a Porsche, certainly not a new one. Just the message that you wanted to read, right? The median income of a 2014 Porsche 911 owner is in excess of $400K. So not many buyers of new 911s struggle to find ways of paying for their car, but there are some that do and you are in that boat. Keep in mind that Porsches not only have a high purchase price, moderately equipped base 911s will have stickers in excess of $100K, but they are also very expensive to maintain. A simple oil change which may cost $40 for an Audi or BMW will cost you $300 or more, depending upon where you live, and a major maintenance will average about $1500.

So if you still want to buy a Porsche, even though by your admission it will be a struggle, I'd consider buying a late model CPO 911. If you go to the Porsche USA web site, you can do a search for CPO cars configured the way you like at a substantial discount from their original MSRP. Another option would be to buy a new 981 Boxster or Cayman. The base models will sticker in the $50Ks which you can easily afford, and they offer lots of driving enjoyment. There are many forum members who own the base 981 model, and I can't recall reading a single post where they had any complaints. On the contrary most are very enthusiastic about their cars, and have no regrets about their buying decision.

As others have pointed out you absolutely do not take a lump sum from your retirement plan to buy a car. Depending on a person's circumstance, financial advisers will sometimes recommend withdrawing money from 401K plans to purchase a home, but never to buy a rapidly depreciating asset like a car.
 

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I make decent money now (low 6 figures), but my income will go WAY down in retirement- I have a feeling that my tax burden will not be much...but I won't be able to afford to make Porsche payments.

Based on what you posted, I'd recommend not buying a Porsche, certainly not a new one. Just the message that you wanted to read, right? The median income of a 2014 Porsche 911 owner is in excess of $400K.
Listen to fast1. Your looking to do something with your heart rather than logically

1. If you take out money before 59.5, you not only pay tax on that but an additional 10% penalty. For example, if you were took out $100,000 and were in a 25% fed bracket then add your state tax? For example say 7%, then you owe 32 + 10 = 42%. You get $58,000, not $100,000. Of course rates rise in brackets so it will be less but you get the point- REALLY BAD IDEA.

2. If you make $100,000 and take out $100,000 your income is now $200,000 for the year. So your rate might not be 25% & 7% but 33% & 9 %. You got to look up the rates for your state and the fed rate for $200,000. Again - bad idea because now you get back even less, maybe $55,000.

3. Most people tell you never to take out Social Sec at 62. Bad idea. Its 75% of your 65 value. PCA1983 is absolutely right. You take it at 70 and maximize it for life.

4. If you wait until 59.5. then you know your pension will be much lower. So your tax rates will be lower. You got to do the math for your situation but that $55,000 you might get might increase to $70,000. Plus, since its likely invested, it should increase. Would you rather have $55,000 today or maybe $72,000 tomorrow? Then again, will the price of the car increase so much the extra 7 years makes no difference? Money today is always worth more than money tomorrow (unless there is deflation).

5. Taking money from your retirement fund is dangerous. I think most places tell you that you need $2M in funds to retire comfortably (not including pension). Google "how much do I need to retire" and do the math. If you got the $2M stashed away, you are golden.

6. People live longer all the time. Years ago the average age to die was like 72. Now its much higher. You need to realistically look at your health and do the math. You don't want to be 85 and eating dog food because you bought a Porsche at 55 that is now rotting in some junkyard?

For an amusing read, read Am I rich enough to buy a Porsche?

The thing is, it's all a gamble. How long will I live? How much cash flow do I have? And most importantly, will I regret this at 85 because people now live to 95?

Good luck.
 

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A little OT but if you're a lowly HS drop out doing 6 figures and looking at retiring at 55 you obviously have something going for you that I if not most of the rest of us missed.

This is a good place to come for help spending your money. Usually not so much for saving it. Whatever. Fast1 is dead on. Don't go into retirement savings be it IRA's, 401K's, pensions or whatever. The early withdrawal penalties and jump in tax brackets are a killer.

You didn't say what car you wanted. Drive them and figure that out. If it's a Boxster or Cayman and you don't go crazy with options new should be doable. And decent ones do come up on CPO. For a 911 catching them coming off lease and CPO works out better. Usually nicely optioned and maintained. Might not work as well if you want MT but even those are out there. Lets someone else take the depreciation hit. And factor in maintenance as part of the cost. Just like payments and insurance. If paying for the next scheduled inspection is a problem it changes a fun car to a burden.

I can certainly understand realizing a dream while you can enjoy it. Never know what tomorrow will bring. So start looking. The hunt is part of the fun. Buying or ordering new is fun too but since I'm not a deviated stitching, leather vent slat kind of guy it's not quite the same as hunting the perfect car down.
 

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A new Porsche is not good financial sense, but I did it. Suggest you figure the costs of each path, including the tax penalties, then go with your heart. A used one is a more reversible decision because you lose lots less when you sell. But you cannot get exactly what you want used. But new costs a lot in depreciation. Good luck! It's your money, your life. One more idea: rent one for a day before deciding. I rented one from Hertz.
 

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No depreciating asset ever makes good sense, but if you have the discretionary funds set aside to pay for items like this. Then go for it

Driverxxx7
 

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Discussion Starter #11 (Edited)
Looks like plenty of good advice here.

I realize that this is heart decision and not a head decision, but I don't want to damage myself needlessly.

Pen Fed has good rates right now. We don't know where they are going, but there is a lot more room for them to go up, than to go down.

Looks like pulling money out of my retirement should be a last resort, if at all.

I'm looking at a modestly-optioned 981, possibly for European Delivery (we did one on my wife's new BMW and it was a hoot). Aiming for about $60,000.

I do get a 2.5% COLA every year, as well as free medical for life.

My wife and I live cheaply.

As far as Social Security goes, if I take it at 70 and live to 76, I get 6 years of payments. If I take it at 62 and live to 76, I get 14 years of payments. Even if the checks are twice as big at 70, I'd be losing money.
 

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Discussion Starter #13
Free medical is fantastic. You save big money if you got that.

Are you sure your COLA is absolutely guaranteed 2.5% every year forever? If its tied to the CPI, well this year its zero. For example No Social Security COLA Predicted for 2016 – AARP No COLA this year for social security.
Yup.

Have no idea what Social Security will do in that area, but my 2.5% COLA is in ink on paper.
 
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Given the impending Zombie apocalypse I would buy the car now, today even, and enjoy it as long as you can until you get bitten and don't care anymore... just a different perspective ;-)
LOL! Do zombies even like Porsches?
 

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image.jpg


I'd think they like slow and low (Nissan Leaf, any Fiat, new Flat Four 981s!) you know zombified joints must hurt getting in and out, and a fast car, well the head might snap off!

Here's a zombie-proof 911, no need for retirement to get it!
 

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Buy what you can afford now (981, 981.2). Drive the car and enjoy. Tapping an IRA early often gives 40-50% away for uncle Barry to squander. Better keep it to yourself for later.
 

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Buy a nice 2009 era Cayman S. Priced under $40k, with a nice loan you can do it now and enjoy it. The real cost of a car is depreciation and maintenance plus carrying (finance) cost, and I would suggest a slightly older but well maintained used Porsche is best in this regard and better than a new car for your financial position. And it is an amazing car. I have a 2007 Cayman S, and feel no need to spend more for that fun car. I retired at 48 and own other cars as well, but would never, ever suggest you take money from your retirement fund for the fun car purchase, for all the reasons cited above. I never even considered buying a Porsche until it was a very small percentage of my annual income. The fun of a car pales in comparison to the fun of having a well funded retirement account that will live as long as you need it. That's freedom, baby!
 

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As far as Social Security goes, if I take it at 70 and live to 76, I get 6 years of payments. If I take it at 62 and live to 76, I get 14 years of payments. Even if the checks are twice as big at 70, I'd be losing money.

The advice that chow4us gave you regarding postponing taking social security until 70 is the standard recommendation made by every financial planner I have either talked to in person or heard on the radio, but your point is also valid. There are a couple of friends of mine who died in their mid 60s, so postponing social security wouldn't have been good for them, but if you live an average life span which I believe is around 84 for a male, then taking it at 70 is the way to go. Your social security payment will increase by 8% for every year after you reach the full retirement age at 66 until you are 70.
 
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