Author Topic: Best way to get cash  (Read 3510 times)

FiguringItOut

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Best way to get cash
« on: May 10, 2022, 07:47:17 AM »
I need a large amount of cash between this year and next.  Between $70K and $85K. 

The timing sucks considering what market is doing but that is out of my control.  On paper I am about $85K down in my accounts since end of 2021.

What is the best way to get cash that I need?
How and when? From what accounts?  All at once?  As needed every few months? 

Currently as off this week I have the following:
Cash = $35K
Rollover IRA/401K = $435K ($20K in BND, the rest in VTSAX and FSKAX)
Traditional IRA = $40K (VTSAX)
Roth IRA = $26K (cost $19K) (VTSAX)
Brokerage = $11K (cost $8K) (VTSAX)
Brokerage = $6K (cost $8K) (Stocks)
HSA = $50K ($2K in cash, the rest in VTSAX)

Monthly contributions to max all accounts over the year:
401K = $1,500/mo (no match)
HSA = $290/mo
IRA = $500/mo

All remaining paycheck is spend on regular expenses, there are no additional monthly savings.

HSA:
To withdraw from HSA I can support the following:
My expenses = $8K
My kids ??? = $7K
I have self HSA.  Initially HSA was for me and kids.  Then my medical plan was changed to just me about 4 years ago.  Can I even use it for kids expenses at this point?

No home, no car, no debt

Need for cash as following
$13K in July 2022
$26K in Sept 2022
$15K-18K between Nov 2022 and July 2023 (amount may increase)
$18K-22K second half of 2023 (amount may increase)

I do not itemize on my tax return.  None of transactions related to above will push me into itemizing either.  I file HOH with one depended.




« Last Edit: May 10, 2022, 08:15:58 AM by FiguringItOut »

knigry01

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Re: Best way to get cash
« Reply #1 on: May 10, 2022, 08:12:12 AM »
Do you own a home you could do a HELOC draw from?

FiguringItOut

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Re: Best way to get cash
« Reply #2 on: May 10, 2022, 08:13:10 AM »
Do you own a home you could do a HELOC draw from?

No home, no car, no debt

cool7hand

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Re: Best way to get cash
« Reply #3 on: May 10, 2022, 08:18:29 AM »
You say your portfolio is down. How far can you get to your number by harvesting losses and then rebalancing?

FiguringItOut

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Re: Best way to get cash
« Reply #4 on: May 10, 2022, 08:27:50 AM »
You say your portfolio is down. How far can you get to your number by harvesting losses and then rebalancing?

Doesn't harvesting loses only make sense for tax purposes?  I don't itemize, so I don't think it would really matter.
Also, I haven't contributed to my brokerage account in over a year and I am still up on VTSAX.  $2K loss on my stocks.
Do loses even matter in pre tax accounts?
Also, I am almost 100% in VTSAX, how would I rebalance and why?

MDM

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Re: Best way to get cash
« Reply #5 on: May 10, 2022, 08:46:43 AM »
I need a large amount of cash between this year and next.  Between $70K and $85K. 

Need for cash as following
$13K in July 2022
$26K in Sept 2022
$15K-18K between Nov 2022 and July 2023 (amount may increase)
$18K-22K second half of 2023 (amount may increase)

See p. 9 of https://www.irs.gov/pub/irs-pdf/p969.pdf for what "Qualified medical expenses" you can use to justify an HSA withdrawal.

Stopping 401k contributions gets you $1500/mo.  That's $27K * (1 - marginal_tax_rate) over the next 18 months: maybe $20K depending on your state taxes.
Cash = $35K
Brokerage = $11K
Brokerage = $6K
HSA = $8K
----------------------
Total = $80K

Appears doable using the above amounts, combined with some belt-tightening if needed.  How does it look to you?

charis

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Re: Best way to get cash
« Reply #6 on: May 10, 2022, 08:51:02 AM »
Can you cash flow the amount that you need through by stopping contributions? It's not ideal to stop contributing when the market is down, though.  And your accounts are still up, so it's not like you are selling at a loss.

FiguringItOut

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Re: Best way to get cash
« Reply #7 on: May 10, 2022, 08:54:12 AM »
I need a large amount of cash between this year and next.  Between $70K and $85K. 

Need for cash as following
$13K in July 2022
$26K in Sept 2022
$15K-18K between Nov 2022 and July 2023 (amount may increase)
$18K-22K second half of 2023 (amount may increase)

See p. 9 of https://www.irs.gov/pub/irs-pdf/p969.pdf for what "Qualified medical expenses" you can use to justify an HSA withdrawal.

Stopping 401k contributions gets you $1500/mo.  That's $27K * (1 - marginal_tax_rate) over the next 18 months: maybe $20K depending on your state taxes.
Cash = $35K
Brokerage = $11K
Brokerage = $6K
HSA = $8K
----------------------
Total = $80K

Appears doable using the above amounts, combined with some belt-tightening if needed.  How does it look to you?

This is where I am not sure.  Cash out HSA instead of Roth contributions?  Is that better?  Should I stop IRA contributions for the rest of the year?  I contribute to tradition IRA because I do not qualify for Roth anymore.
Also, I don't know about the timing?  Cash most of it now?  Wait and see what market is doing? 



FiguringItOut

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Re: Best way to get cash
« Reply #8 on: May 10, 2022, 09:02:27 AM »
Can you cash flow the amount that you need through by stopping contributions? It's not ideal to stop contributing when the market is down, though.  And your accounts are still up, so it's not like you are selling at a loss.

Don't think just stopping contributions will not be enough based on when I will be needing cash.  I can definitely cover July.  But Sep will be a stretch.  Will most likely need to sell something by then.  Definitely will be selling to cover most of December.
My main issue and which accounts to sell and when?  Now or wait and sell as needed?

MDM

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Re: Best way to get cash
« Reply #9 on: May 10, 2022, 09:16:25 AM »
This is where I am not sure.  Cash out HSA instead of Roth contributions?  Is that better?
Yes, because once the contributions are in the Roth and HSA accounts, the Roth is "more valuable" because contributions can be withdrawn tax free for any reason.  If you are not maxing out your retirement accounts, you should usually pay current expenses from the HSA is the advice in the Bogleheads HSA wiki.

Quote
Should I stop IRA contributions for the rest of the year?
Depends on whether you think you'll need the IRA money.  Consider working the Investment Order backwards: stop doing things toward the bottom, but retain doing things toward the top if feasible.

Quote
I contribute to tradition IRA because I do not qualify for Roth anymore.
That implies your AGI is >$139K.  If so, one might guess that belt-tightening is also possible, but that's just a guess.

Quote
Also, I don't know about the timing?  Cash most of it now?  Wait and see what market is doing?
Depends on the clarity of your crystal ball regarding the market.  It is a tradeoff between "don't panic and sell when the market drops" vs. "minimize investment risk on money that will be needed in the short term."  Thus one can make defensible arguments either way, and hindsight will tell what was correct.

charis

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Re: Best way to get cash
« Reply #10 on: May 10, 2022, 09:18:42 AM »
Can you cash flow the amount that you need through by stopping contributions? It's not ideal to stop contributing when the market is down, though.  And your accounts are still up, so it's not like you are selling at a loss.

Don't think just stopping contributions will not be enough based on when I will be needing cash.  I can definitely cover July.  But Sep will be a stretch.  Will most likely need to sell something by then.  Definitely will be selling to cover most of December.
My main issue and which accounts to sell and when?  Now or wait and sell as needed?

I personally would sell as needed given the current correction that we are in. September is a stretch but you could probably do it or not sell too much. See how things shake out leading up to Dec.

MDM

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Re: Best way to get cash
« Reply #11 on: May 10, 2022, 09:24:13 AM »
Consider working the Investment Order backwards: stop doing things toward the bottom, but retain doing things toward the top if feasible.
One qualifier to that: an emergency fund is there to be used in case of emergency.  Appears your situation qualifies (particularly if the cash need goes away after 2023), so drawing down the e-fund would be appropriate.

FiguringItOut

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Re: Best way to get cash
« Reply #12 on: May 10, 2022, 09:27:56 AM »
This is where I am not sure.  Cash out HSA instead of Roth contributions?  Is that better?
Yes, because once the contributions are in the Roth and HSA accounts, the Roth is "more valuable" because contributions can be withdrawn tax free for any reason.  If you are not maxing out your retirement accounts, you should usually pay current expenses from the HSA is the advice in the Bogleheads HSA wiki.

Quote
Should I stop IRA contributions for the rest of the year?
Depends on whether you think you'll need the IRA money.  Consider working the Investment Order backwards: stop doing things toward the bottom, but retain doing things toward the top if feasible.

Thank you.  I'll take a look at the order.  Until these expenses came up I was maxing out 401K/IRA/HSA every year.

Quote
I contribute to tradition IRA because I do not qualify for Roth anymore.
That implies your AGI is >$139K.  If so, one might guess that belt-tightening is also possible, but that's just a guess.

My AGI is $70K.  I just checked.  in 2021 I contributed to Roth and Traditional about 50/50.  Belt tightening is not going to happen.
 NYC rent and general costs plus kid in college.  I am stretched as it is.


Quote
Also, I don't know about the timing?  Cash most of it now?  Wait and see what market is doing?
Depends on the clarity of your crystal ball regarding the market.  It is a tradeoff between "don't panic and sell when the market drops" vs. "minimize investment risk on money that will be needed in the short term."  Thus one can make defensible arguments either way, and hindsight will tell what was correct.

FiguringItOut

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Re: Best way to get cash
« Reply #13 on: May 10, 2022, 09:29:14 AM »
Consider working the Investment Order backwards: stop doing things toward the bottom, but retain doing things toward the top if feasible.
One qualifier to that: an emergency fund is there to be used in case of emergency.  Appears your situation qualifies (particularly if the cash need goes away after 2023), so drawing down the e-fund would be appropriate.

Yep, expenses are temporary.  And $35K cash that I have is my e-fund that I plan to use.

MDM

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Re: Best way to get cash
« Reply #14 on: May 10, 2022, 09:56:56 AM »
That implies your AGI is >$139K.  If so, one might guess that belt-tightening is also possible, but that's just a guess.
Quote
My AGI is $70K.  I just checked.  in 2021 I contributed to Roth and Traditional about 50/50.  Belt tightening is not going to happen.
 NYC rent and general costs plus kid in college.  I am stretched as it is.

In that case you are eligible to make Roth contributions, but may not be able to deduct traditional contributions, especially if you stop 401k contributions (because then your AGI will increase by the amount of the stopped 401k).

Morning Glory

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Re: Best way to get cash
« Reply #15 on: May 10, 2022, 12:09:44 PM »
Can you put the expenses on a credit card? If you can find one with 0% for 18 months it will give you a longer time to raise the cash by reducing contributions.  Just make sure it's all paid off by the end of the 0% period.  Even if you have the cash it's probably worth trying to get a few cc bonuses out of this, which will reduce your total amount of cash needed.

If this is for college tuition then make sure your kid has maxed out the subsidized Stafford loans first. Those don't accumulate interest until 6 months after graduation. 

FiguringItOut

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Re: Best way to get cash
« Reply #16 on: May 10, 2022, 12:23:47 PM »
Can you put the expenses on a credit card? If you can find one with 0% for 18 months it will give you a longer time to raise the cash by reducing contributions.  Just make sure it's all paid off by the end of the 0% period.  Even if you have the cash it's probably worth trying to get a few cc bonuses out of this, which will reduce your total amount of cash needed.

If this is for college tuition then make sure your kid has maxed out the subsidized Stafford loans first. Those don't accumulate interest until 6 months after graduation.

It's not for tuition and my kid is not taking loans.  There is scholarship and we are cash-flowing the rest.  I'll try to get credit card bonuses but I haven't been able to be approved for new credit cards for a year now.  I did quite a few of them last few years so I am getting denials now.  I think I need to take a break of on those at least until next year.

Some of these expenses cannot be put on the credit card (they charge fees for credit card use).  Some I can put on credit card card without fees, technically.  The issue is getting new cards.

talltexan

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Re: Best way to get cash
« Reply #17 on: May 10, 2022, 12:43:04 PM »
Depending on the custodian of the brokerage accounts, there may be an option to take out a margin loan against the investments in them. I found a product like this to be helpful when I was in the "double mortgage payment" phase of moving.

MDM

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Re: Best way to get cash
« Reply #18 on: May 10, 2022, 01:51:47 PM »
...my kid is not taking loans.  There is scholarship and we are cash-flowing the rest.
Each family decides what is best for them.  Having said that, consider two common aphorisms applied to this topic:
1) Similar to "put on your own oxygen mask before assisting others," do consider funding your own retirement before funding children's college costs.
2) One can borrow for college but not for retirement.

The choice is yours - good luck whatever you do!

FiguringItOut

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Re: Best way to get cash
« Reply #19 on: May 10, 2022, 02:01:11 PM »
...my kid is not taking loans.  There is scholarship and we are cash-flowing the rest.
Each family decides what is best for them.  Having said that, consider two common aphorisms applied to this topic:
1) Similar to "put on your own oxygen mask before assisting others," do consider funding your own retirement before funding children's college costs.
2) One can borrow for college but not for retirement.

The choice is yours - good luck whatever you do!

I agree.  However, it was a thought through decision.  After all said and done, I pay about $7K a year for college.  It's not a huge amount in a grand scheme of things and I don't think it will materially affect my current situation.  There are two years left.  One of the reasons we decided on no undergrad loans is because we do not qualify for subsidized loans.  And kid is looking at $350K+ dental school loans after this. 

talltexan

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Re: Best way to get cash
« Reply #20 on: May 11, 2022, 05:56:45 AM »
$350,000 seems like a lot to pay for dental school.

We routinely socialize with a family who are two co-parenting dentists, and...the income is large. Really large.

svosavvy

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Re: Best way to get cash
« Reply #21 on: May 11, 2022, 06:34:01 AM »
My vote is get a low rate margin loan if you can.  Your stuff is conservative and there is a lot of it relative to the need so I doubt margin increases would hit you.

If not available then:

Cash   35k
contr.   27.5k  (2290/mo x 12 mo hsa/ira/401 contr divert these for a year)
brok's  17k       (I am assuming these are free and clear post tax regular money purchases)Do this last. You can realize 3k/yr loss on taxes or offset as much gain as you want while still taking standard deduction
----------------
            79.5k

Tap Roth contributions for the rest. Can take them penalty free. Honestly, when I have been in a pinch in the past, the right thing/choice shows up just in time.  I would not liquidate stuff right now, I would do it when it is called for.  Honestly, you never know when something might drop out of the sky and bless you.  Not sure why sep payment is a "stretch" jul+sep=36 you already have 35?  Best of luck.

MDM

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Re: Best way to get cash
« Reply #22 on: May 11, 2022, 07:54:36 AM »
contr.   27.5k  (2290/mo x 12 mo hsa/ira/401 contr divert these for a year)
$27.5K * (1 - marginal tax rate) = ?

talltexan

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Re: Best way to get cash
« Reply #23 on: May 11, 2022, 12:09:20 PM »
Can you contribute to 401K--earning the match--than borrow against it? Seems like borrowing $0.80 against a $1 contribution (which would earn a second $1 match)

oneday

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Re: Best way to get cash
« Reply #24 on: May 11, 2022, 10:38:57 PM »
Can you contribute to 401K--earning the match--than borrow against it? Seems like borrowing $0.80 against a $1 contribution (which would earn a second $1 match)

You can only borrow up to 50% of your account balance.
Loan repayments are not matched.

Fru-Gal

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Re: Best way to get cash
« Reply #25 on: May 11, 2022, 10:51:05 PM »
I was just thinking about this today, would a personal loan be an option to avoid selling stock in a down market? I just got an advert for one with 5-6% interest.

svosavvy

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Re: Best way to get cash
« Reply #26 on: May 12, 2022, 05:27:27 AM »
contr.   27.5k  (2290/mo x 12 mo hsa/ira/401 contr divert these for a year)
$27.5K * (1 - marginal tax rate) = ?
True.  I did oversimplify that a bit didn't I?

Dicey

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Re: Best way to get cash
« Reply #27 on: May 12, 2022, 05:28:30 AM »
Before I raided my piggy bank, I'd look long and hard at why I needed the money. You haven't stated what you need it for, which is curious, since you're posting under a pseudonym here.

If it's something that is a bona fide need instead of a want, explore if there are other ways to get the money. Rich people start businesses with Other People's Money, not their own, for example. SBA loans are another. And though you've refuted it, you could still borrow for your child's college and consider it temporary. Student loans are still a comparatively cheap source of $$, especially if you pay them off relatively quickly.

Best of luck to you, whatever you decide.


Shuchong

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Re: Best way to get cash
« Reply #28 on: May 25, 2022, 09:19:57 AM »
I was just thinking about this today, would a personal loan be an option to avoid selling stock in a down market? I just got an advert for one with 5-6% interest.

Good point.  There is a thread over on Bogleheads about First Republic offering a personal line of credit at decent rates (2.95%), though you have to set up direct deposit, maintain a wad of cash with them, etc.  Seems like that may be worth a look in this situation, though I can't vouch for it myself. 

Editing to add the link to the Bogleheads thread https://www.bogleheads.org/forum/viewtopic.php?t=342046&start=50.  Note that the title of the thread states a 2.25% interest rate, but it's gone up to 2.95% since the thread started.
« Last Edit: May 25, 2022, 02:13:11 PM by Shuchong »

 

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