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#1 DuncanDad

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Posted 13 October 2019 - 04:47 PM

We have a money market account earning near 10% apr.

 

We have a chunk of change we would like to also earn near 10% apr but, we would like to use at least the principle to pay down on the lake house build. We are looking at 18 months max for the house build. We will be adding 2-3k/month to this but, we would like to avoid any tax penalty.

 

We are not sure of the timeline to see our current house but, we are looking at somewhere in the 24-36 month range. This alone will pay for about 60-80% of the new house cost.

 

Can we add to the money market account and leave the interest in place but "safe haven" some funds for the new home build?


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#2 djinkc

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Posted 13 October 2019 - 05:01 PM

10% - we would all like to hear about that


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#3 Vagus

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Posted 13 October 2019 - 05:05 PM

10% - we would all like to hear about that

I too am interested in this.  I have a money market account that sits at 0.01%  Maybe lower.


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#4 BFB

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Posted 13 October 2019 - 05:17 PM

He said near 10%. But he doesn't realize .01 is not 10%
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#5 DuncanDad

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Posted 13 October 2019 - 05:32 PM

Sitting at ~ +60k it's up by 7600 so far this year.

 

But, as usual, the question goes unanswered...

 

But, if you want my secret formula, invest recklessly while the market is hot and back off in October. Gear up in February.


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#6 maddog

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Posted 13 October 2019 - 06:06 PM

If this is truly a money market account (and I agree that if it is, you've employed some type of wizardry to get 10%), then the interest is taxable income. The money you put in can be taken out any time, of course.

 

If I could get a guaranteed 10% right now, I'd invest every cent I have in it.

 

Are you sure this investment isn't in stocks? I'd not put any money I needed to use in the next 5 years in stocks.


Edited by maddog, 13 October 2019 - 06:08 PM.

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#7 dondewey

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Posted 13 October 2019 - 11:37 PM

It's not money market.
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#8 Vagus

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Posted 14 October 2019 - 03:03 AM

Sounds like a mutual fund, perhaps this particular account is called "money market?"  


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#9 Trub L

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Posted 14 October 2019 - 04:51 AM

10% - we would all like to hear about that


Seriously.
Maybe he means "money in the market." Definitely put your house money in there! Lol
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#10 weeperABR

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Posted 14 October 2019 - 04:52 AM

What’s a “money market” ? Can I buy money and fine silks there?

Edited by weeperabr, 14 October 2019 - 04:52 AM.

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#11 AGrandDesign

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Posted 14 October 2019 - 05:20 AM

Does this money market have a name?
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#12 DuncanDad

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Posted 14 October 2019 - 05:22 AM

Seriously.
Maybe he means "money in the market." Definitely put your house money in there! Lol

 

 

We aren't, dumbass. No one said we were.

 

This is an investment fund we have held since the W/G left International Papers. This was her defined retirement fund that I.P. cashed out. We invested the funds with American Century Investments and the quarterly statement shows a current yield of 9.4% so far this year, (almost 10%).

 

No then, we have a stash of funds sitting in our savings account bringing in almost nothing, interest-wise. We would like to add to the ACI fund as a savings vehicle where, when we get ready to build the lake house, we pull the principle, (not the interest) to fund the construction. Leaving the interest so as not to incur a larger tax bill.

 

Can we do that since we have already been taxed on the principle?


Edited by DuncanDad, 14 October 2019 - 05:22 AM.

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#13 DuncanDad

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Posted 14 October 2019 - 05:24 AM

Does this money market have a name?

 

I'd have to dig up the paperwork. No telling where she put it.

I know I put it in a high growth fund with ACI several years ago. It's been growing pretty steady and took a nice jump so far this year.

 

Found it. Not much info on the page. Invested through American Century Investments. One Choice Portfolio: Moderate. Ticker AOMIX

Year to date: +14.12%

12 Month average +3.27%

Average since inception +7.11%

 

Anyway. Back to the original question...


Edited by DuncanDad, 14 October 2019 - 05:32 AM.

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#14 Stains_not_here_man

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Posted 14 October 2019 - 05:26 AM

Sounds like a mutual fund


Nailed it.

It's not money market.


Also nailed it.
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#15 maddog

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Posted 14 October 2019 - 05:33 AM

I wouldn't put a down payment in that mutual fund. What if the market drops 50% in the interval before you build?

Never put in stocks what you'll need in 5 years. Some conservative folks would argue that number should be 10.
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#16 Deerslyr

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Posted 14 October 2019 - 06:38 AM

We aren't, dumbass. No one said we were.

 

This is an investment fund we have held since the W/G left International Papers. This was her defined retirement fund that I.P. cashed out. We invested the funds with American Century Investments and the quarterly statement shows a current yield of 9.4% so far this year, (almost 10%).

 

No then, we have a stash of funds sitting in our savings account bringing in almost nothing, interest-wise. We would like to add to the ACI fund as a savings vehicle where, when we get ready to build the lake house, we pull the principle, (not the interest) to fund the construction. Leaving the interest so as not to incur a larger tax bill.

 

Can we do that since we have already been taxed on the principle?

 

Check with a Tax Adviser, but if this was an account set up from a pension buyout, then it was probably funded with pre-tax dollars to begin with.  First, there are pretty strict rules about co-mingling funds, but here you are talking about adding ordinary funds that have presumably already been subject to income taxes to an account that gets taxed on the back end.  Second, let's say you were able to add the funds to the account, if the account was initially funded with pre-tax dollars, you would be taxed on your withdrawal plus may be exposed to the 10% penalty (depending on your age).  

I'd talk to my Tax Adviser.


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#17 Mexas Joe

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Posted 14 October 2019 - 06:54 AM

LoL. Classic DD. Posts for advice. Errybody tells him that he is incorrect, proceeds to lash out.

 

^_^


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#18 Sidney Porter

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Posted 14 October 2019 - 06:58 AM

When you transferred the retirement account did you transfer it to another retirement vehicle or did you cash it out and pay a tax penalty.

If the former you probably can't add the additional money and withdraw in a short period without a penalty.

But it is just a mutual fund there are 1000s of them you can invest in. But they are not usually short term vehicles
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#19 Augie1991

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Posted 14 October 2019 - 07:05 AM

Assuming your question does not get answered....

Google "buying a house to avoid capital gains" and "selling investments to buy a house" it might be helpful.

Whenever I have sold an investment (Fidelity) it has always been first in first out. I would start by asking American Century if the account can be manipulated in the manner you described. If you don't mind sharing, post what you find out. I'd love to know the answer to your question too!
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#20 SnowMan

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Posted 14 October 2019 - 07:29 AM

Sounds like this is already a "retirement" fund of some flavor. You acquired it with money from her pension buyout.  As others have stated, you need a professional involved here, and it's very likely you can't add or remove money without fecking something up.  You could DIY, but the potential tax consequences are enough that I'd involve a professional. 

 

If you really want to buy more of that particular fund, you can likely buy it at any of the retail brokers.  Vanguard, schwab, etc.  I'd guess.  I"m not familiar with AOMIX.

 

If it were me, I'd just open a second account at the broker of your choice, and buy some of that fund and call it a day.  

 

I think it's important to realize, there is a downside risk to that fund, as there is with pretty much all of the various mutual funds out there.  Looking at it's all time chart, it looks like it has dropped about 50% once, and 20-30% a few times.  Yes, is has also done well over time, but depending on your time horizon for the funds in there, your money is at risk.  Can you tolerate a 50% drop and still build your house?  The only thing certain is that you can't time the market.  No sense in juggling knives... 

 

https://www.mornings...nas/aomix/quote

 

For a house savings, I'd look at some of the high yield savings CD's our there.  I like Ally, but there are lots of others.  Your local bank may even have an offering.  Sometimes, they will match what the big online places are doing, just to keep your $ in house.  But you have to ask.

 

https://www.ally.com/bank/cd-rates/

 

 

There are also true, money market accounts.  They will be around 1.00% though.  https://www.ally.com...market-account/


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