suggestions on paying off debt, 401k related etc.

[bandb]

Annual income: $65,000
married, 2 kids
mortgage debt: $0
401k loan: $6900
bonus due of $3000-5000 in March
401K $145k (80% invested, 20% cash)
savings of $1300 for emergencies

Last summer I took a hardship withdrawl to purchase a car. This is allowed under our 401k rules. It ended up being for $20k - $14k for the car and $6k for taxes. I was 100% in cash for various reasons.

I have a $6900 401k loan, which represents what I "owe" on my house. I had a 6% mortgage, so I figured instead of paying the bank 6%, I'd loan me my money and pay myself back at 3%. And again I was all in cash anyway.

I really want to be debt free - all debt even the house, but I realize taking the withdrawl wasn't the best move, but there's not a lot I can do about it at this point. Unless...

1) I was thinking if I put my last two checks into the 401k (about $3500) I could cut my tax bill a bit. But, I'd have to borrow some money from my HELOC. So I'd have $10k ($6900 loan + HELOC to pay back).

2) I have a bonus due in March for $3000-5000 (likely on the lower end) I could put into my wifes IRA for a 2012 deduction.

3) just take the tax hit and be totally debt free in 2013. My plan was to use the bonus to pay off the 401k loan in March, so I'd have no debt at all.

Any advice or suggestions are appreciated.

[bjl584]

With 0 mortgage debt and $145K in a 401K I'm wondering why it was necessary for you to tske out a loan against your retirement in order to buy a car. Couldn't you have done a traditional loan through your bank or the car dealership? Your financial profile doesn't look like someone that has trashed credit and a ton of debt.

But,
You should pay off the 401K loan ASAP. Use all of the bonus and any other money that you can scrape together.

[Petunia 100]

I would not borrow money from a HELOC to pad your 401k contribution. It is much simpler to wait for the bonus and contribute that to your wife's IRA. The taxes work out exactly the same, you don't have to borrow and incur interest costs, and by then you will know exactly what you can afford to contribute.

You're going to be completely debt-free soon enough, anyway.

[jpg7n16]

Annual income: $65,000
married, 2 kids

How old are you?

Does she work too, or is $65k total household income? (I'm assuming $65k household)

401K $145k (80% invested, 20% cash)

80% invested how?

savings of $1300 for emergencies

That is way too low. A good emergency fund should be 3-6 months worth of expenses.

You're married with 2 kids? There's no way your expenses are $200-400/month.

1) I was thinking if I put my last two checks into the 401k (about $3500) I could cut my tax bill a bit. But, I'd have to borrow some money from my HELOC. So I'd have $10k ($6900 loan + HELOC to pay back).

2) I have a bonus due in March for $3000-5000 (likely on the lower end) I could put into my wifes IRA for a 2012 deduction.

You are likely in the 15% bracket. There is no real sense in trying to maximize your tax deductions. If you're doing an IRA, make it a ROTH IRA, and just pay the tax today. 15% tax is a pretty good deal historically speaking.

Though I'd fund your EF first.

3) just take the tax hit and be totally debt free in 2013. My plan was to use the bonus to pay off the 401k loan in March, so I'd have no debt at all.

Any advice or suggestions are appreciated.

I would instead use the bonus to build up your Emergency Fund until you have a good 3-6 months of expenses set aside.

After that, I would take your employer match (no more, no less) and use any funds to fund Roth IRAs for yourself and your spouse.

Maxing 2 Roths would be $10k or 15.38% of income. Plus whatever you do in the 401k. You probably don't need more than that.

[Bayspieler]

Annual income: $65,000
married, 2 kids
mortgage debt: $0
401k loan: $6900
bonus due of $3000-5000 in March
401K $145k (80% invested, 20% cash)
savings of $1300 for emergencies

Last summer I took a hardship withdrawl to purchase a car. This is allowed under our 401k rules. It ended up being for $20k - $14k for the car and $6k for taxes. I was 100% in cash for various reasons.

I have a $6900 401k loan, which represents what I "owe" on my house. I had a 6% mortgage, so I figured instead of paying the bank 6%, I'd loan me my money and pay myself back at 3%. And again I was all in cash anyway.

I really want to be debt free - all debt even the house, but I realize taking the withdrawl wasn't the best move, but there's not a lot I can do about it at this point. Unless...

1) I was thinking if I put my last two checks into the 401k (about $3500) I could cut my tax bill a bit. But, I'd have to borrow some money from my HELOC. So I'd have $10k ($6900 loan + HELOC to pay back).

2) I have a bonus due in March for $3000-5000 (likely on the lower end) I could put into my wifes IRA for a 2012 deduction.

3) just take the tax hit and be totally debt free in 2013. My plan was to use the bonus to pay off the 401k loan in March, so I'd have no debt at all.

Any advice or suggestions are appreciated.

I suggest you be patient and keep paying off the loan according to schedule. Maybe once you can pay it off in one fell swoop, go ahead and do so.

I'm in a similar situation right now, and I know that you really want to get that debt monkey off your back, but as long as you are secure in your job, that loan really isn't a big burden. Applying for a HELOC is going to take time, money, and stress, and your tax savings probably won't offset the savings you are getting from paying interest to yourself instead of the bank.

Remember, $7000 at 3% is only $210. That's the most it's going to cost you to service that debt for a year, and you're paying the interest to yourself. Don't sweat this. This is small stuff.

[kv968]

You have a 401k loan and a HELOC. Between the two the payments to the 401k loan are more beneficial because they reduce your taxable income while eliminating debt.

Payments to a 401k loan aren't tax-deductible and don't lower your taxable income.