[ Day 77 of 2000 ]
I am well aware of what the stock markets are doing right now. Before I started the blog, and actively tracking it, I would have had no idea. I update that tracker on the right side every Monday. We just had a week where neither of us got paid, and our net worth still went up by about $5971.88 in a week. Isn’t that awesome?
It is very likely that you have seen similar increases in yours. Are you doing anything about it? Like, say, spend more?
I think I have to tell you about Jen. Jen is a friend – may be more of an acquintance. Or rather, somewhere in between.
I ran into Jen last week, and she told me that they were renovating their house. I have been there before – it is a lovely colonial, not too far from where I live. It is slightly old, and shows the age. And she wants it to look perfect. When she mentioned tearing up some walls, I asked for details. I was really interested – their floorplan is very similar to ours.
Turns out, they are removing some walls to turn it into an open concept home. They are moving some closets to make the layout better. They are also getting new flooring throughout and some ceiling lights. The contractor is going to start sometime next month. I am sure the house is going to look great. They want to renovate the house while they have years left to live there. And I agree with that sentiment. If you are anyway going to spend money on your house, do it while you are going to enjoy it and not just when you are looking to sell.
She told me that she was so glad that the stock market was doing so well. I was pleasantly surprised – we had never talked about money or stock market before. To be honest, I don’t normally see a lot of women talking about the stock market. And then she told me something that made me ask “WHAT?”
They looked at their 401(k) balances and saw that it had a nice big total. And since fixing up the house was important to them, they decided to do just that.
As such, it is fine. Jen and her husband both work well paid full time jobs. They have access to some money, and decided to spend it on something that is important to both of them. After all, money is just to get you stuff that you want.
Honestly, I wish I could do that. If there is one thing I want in my house, it is a direct door to the garage. We have a garage right next to the house, but no connecting door. That wall has electrical connections and baseboard heating on it. I haven’t even got an estimate for that. May be, I will. Some day.
The reason I was shocked was because Jen and her husband are no where close to being 59.5 years of age. That means that to withdraw from 401(k), they will pay a 10% penalty, and taxes on top of that. My guess is that they will pay 32 or 35 % taxes on that.
I brought it up, and they seem to have thought about it. Jen put it to me this way – The stock market has three places to go. Go up, go down or stay the same. If it goes up, the fact that they took out some of the money shouldn’t matter too much. They will make more, and they get to enjoy the new home. If it goes down, they made a good decision by taking it out at the right point. If it stays the same, they would feel great that they could enjoy their new home much longer.
I also don’t know how much they have saved up in 401(k) already. For all I know, they are 401(k) millionaires multiple times over. Or they could be withdrawing the whole thing. I sure hope that they are not taking it out of 401(k) while they have post-tax, penalty-free money invested elsewhere.
However, I don’t think I agree with them. I would rather have my money invested. Withdrawing an amount from 401(k) and getting to spend slightly more than half of it is not acceptable for me. If it was an emergency, I would probably do that. Fixing up my home is not important enough for me.
In one way, I am glad that we aren’t too close. I would have tried my best to dissuade them. As the case is, we are not close enough for me to keep talking about it. What is hard for me to grasp sometimes is that what is important to me is not as important to them. They probably won’t understand why trying to retire early is so important for me. Not that they know about it – All they see is us not spending much money 🙂
I am also glad that they have thought about it, and made their decisions (good or bad) based on that. Too many people make big decisions without thinking enough.
I probably wouldn’t have written about them if it weren’t for this article. Looks like Jen and her husband are not alone. There are others making similar decisions, and hopefully they have thought about it. I don’t know.
What do you think? What would you have done? And what do you think about the door to the garage – Should I get that?