I know I know, taking money out of your retirement fund is BAD, but hear me out! I'm just thinking of ideas here and wanted some input...

I have a Simple IRA set up with my employer; he matches up to 3% and currently out of each paycheck I'm putting in 5% (so that makes essentially 8% of my income going into the IRA, right). I'm 25 years old. I'm at a point where I want to make a rather substantial purchase in the near future (a ring, FYI), and I've saved up about a third of what I'm aiming for, at least what I think I'm aiming for.

At the rate I'm going, even if I keep socking away as much as I possibly can, there's no way I can get 100% of the cash I want in the next 3-4 months which is the time frame I'm looking at for popping the question. I'm pretty sure that by the end of the year, maybe a little longer, I could have it, but circumstances say I don't think I can wait that long. Sooooo, I'm looking at what other options I have to come up with the money.

I have a good chunk in this IRA from the past couple of years. I did some reading, and it looks like if I were to take out money early, I'm hit with something like a 15% cut, on top of the income taxes I'd have to pay on it (thats something like, what, 25-30%?...stupid government) Anyway, even so, is going that route better than financing something like that? I'm looking into that option, too, but it bugs me that for something like a ring you shouldn't have to buy that on credit as much as you can help it.

Part of my thoughts are that I'm still pretty young, and between being only a year or so behind, plus I'm going to be moving and should be getting a better job where I'm actually paid what I'm worth, I'd be able to make up the lost time a lot better. Maybe I'm just nuts, too, who knows. Any thoughts or opinions?

On a side note, anyone know of some good ways to come up with ~4k in cash quick? :)

I'm not an expert or anything, but I've always been told it's bad to withdraw from your IRA, and it's always better to start young than to put it off. Personally, I'd say leave the IRA alone and work out a way to get the ring you want. If you don't think you can get it by the time you want to pop the question, get a smaller/cheaper one (or a promise ring), and just upgrade when you've saved enough - hopefully before the wedding.

Curious - is the ring you have in mind worth $4K or is that just a nice round number you're looking at?

Thanks for the reply. I'm still crunching numbers, etc. As for what I'm looking at, basically I've started poking around bluenile.com, and for the size and quality that I put in it seems to come to around $4k for the diamond....I'm actually looking to spend around 4-6k total I think. I haven't got to the point of checking out the local prices, yet, though, either. First I gotta figure out how to pay for it! :)

As someone who shopped for rings fairly recently, I would say it would be to your benefit to scope out local stores before going online. Not only do you have the benefit of actually seeing the quality of the rock firsthand, but the salespeople could give you valuable information - things you wouldn't otherwise consider. I assume you know about the 4C's already?

I say don't get stuck on numbers/figures, but instead concentrate on what means most to you (carat weight, clarity, cut, color). BTW, did you go to State? We used to go up to Lansing every so often when my sister-in-law went there.

Thanks for the advice! I'm doing a lot of research into it now....been ramping it up lately. Heh, fun stuff.

Yep, went to State, graduated a couple of years ago. Now it looks like I'll probably be heading down to the South Bend area in the somewhat near future. All kinds of things to prepare for!

Glad I could help. If you need more info (about rings, that is - not IRA), just post away! :)

You're heading down to ND?

You're heading down to ND?

That seems to be the plan. She graduates in May and has found a job down there (she's finishing up her vet degree). I'm looking for something down there, haven't had much luck so far though through monster and careerbuilder. I don't have a definite timeframe as I have a stable job here, but would really like to get things going. So yeah, theres a bit going on right now :).

Don't mean to go off topic, but how old do you have to be start an IRA?

I remember in 7th/8th grade my math teachers showed us from time to time how much more it would end up having saved up years from now if we started at that time.

I would think 16/18 to start an account....and if you're not old enough, I think parents can start an account in the child's name or something, and then the child gets sole ownership at 18.

Any more thoughts on the merits of cleaning out the retirement account for the time being, and starting over in a bit? :)

Well I can't give you advice on weather to take it out or not. But I can tell you the tax effects of taking it out. You will have to pay 10% penalty plus regular income tax. If you have alot in it think about how much that will cost you in taxes versus putting on credit. If you add that to your income you may go up into a higher tax bracket. Especially if you are filing Single. Remember there is an exception to the 10% penalty if you are buying your first home.

Now to the subject of a ring. Is that standard pricing for a ring? If so I never knew it was that much. :) Myself I really wouldn't want my partner to spend that much on a ring for me.

I would think 16/18 to start an account....and if you're not old enough, I think parents can start an account in the child's name or something, and then the child gets sole ownership at 18.

Thanks! I'm going to research a bit to see if it's in my advantage to start stashing away now :P

ed -
How long have you had your IRA anyways?

geekgirl -
That's a very practical thought - I'm sure your partner would appreciate it. :) Question: Are IRA deductions tax-deferred?

Aga -
I'd start stashing away right now if I were you (if you can). You seem to have a good head on your shoulders, and it doesn't hurt to have something saved up even though you won't see it for a very looooong time. :)

ed -
How long have you had your IRA anyways?


I think its been two years now...so relatively not that long. Hmmmmm, maybe I do need to just step back and think things over a bit more...heh, maybe adjust my goals and not go too overboard :). Thanks everyone anyway for all the advice!

Bluenile.com is awesome. I compared the diamond I got there to the ones at local jewelry stores, it would have cost me about $2500 more if I had bought it locally. And be SURE to use the GottaDeal referral link when you buy it. I didn't realize they had one, I felt really bad when I realized I could have earned Ross and Brad a lot of money (to support this awesome site they provide for us :)) by cilcking on that stupid link.

I guess my question is, why are you spending so much on the ring if it's going to make you take such a big hit financially? You can get a great quality, nice sized diamond for ~$3000 at BlueNile. A gold setting will run you about $200, platinum is obviously more. What specs are you looking for? My fiancee gave me a maximum size for her diamond because she has tiny hands, so I spent a little more on getting a higher quality stone. F color, VS1 clarity, Ideal cut. It's a beautiful stone, I can't imagine how much better a diamond can look.

She'll still love you even if you don't spend the two month's salary that De Beers says you should. :)

Thanks! I'm going to research a bit to see if it's in my advantage to start stashing away now :P

If you KNOW you'll never need the money it would be, but if you want to use the money in the future put it in something else. Think of it this way - I probably made more money in the year after I finished college than in my entire life up to that point, and I didn't even have a good job. You're better off focusing on school than killing yourself working to get money in an IRA a few years earlier, IMO. When you get out of school though, definitely make sure you contribute as much as possible. If you make the max contribution every year after you finish school, you'll probably be way ahead of the average person.

geekgirl -
Question: Are IRA deductions tax-deferred?


Well when you contribute to an IRA you are able to take those contributions as a deduction on your tax return (depending on the IRA). Retirement plans by employers are tax deferred also as they are not included in your W-2 income.

Its only when you withdraw that you have to pay taxes on it.

Not quite the same situation you're in, but I cashed out my 401k when I was 23 to finish school. I'd been working at the same job, contributing 5% or so to my 401k (don't remember if that included the employer's matching or not) and had about $3K in it. Well, I was pregnant with my 2nd child and 1 semester away from getting my BA, so I decided to quit work altogether, go to school full-time (18 units, I think, ouch) and graduate before the baby was born. But to do that I had to come up with money to live off of. Financial aid gave me some. My tax refund gave me some. I decided I still had my entire life ahead of me to earn money and put it in a 401k, and that I'd have a much better income (and thus more money in the 401k) if I had a college degree--so it was worthwhile for me to go ahead and cash it out. I did, I graduated...and wouldn't you know it, I haven't worked since. Wound up getting married and moving 2,000 miles away to an area that has NO jobs whatsoever in my field. So I've been a stay-at-home mom. But I don't regret that decision at all. I will always have my degree and at some point I will go back to work, and I'll have a much better chance of getting a good job with that degree.

I think that since you are young, you'll have plenty of time to put lots of money into an IRA in the future. Just remember you'll get only about half of what is actually in that IRA, not the full amount. If that amount--what you'll wind up with after taxes--is what you need, then go for it.

In my opinion you don't need a ring that expensive. Mine cost about half that and I still had a cow when I found out how much it was. So if you do get it--don't leave receipts anywhere she could possibly find them. I can think of so many things we could have done with that money...I'm sure I could have found a cheaper one I liked just as much, if not more...but whatever, it's over and done with and if it made him happy to spend WAY more than he could afford on me, then good for him. Just remember--she'll love you regardless of how much the ring costs.

But yeah, go ahead and cash it out...this is a once-in-a-lifetime kind of event and it will affect your future in a big way, and you've got plenty of years ahead of you to put the money back in. Just don't go around doing this all the time. ;)

I'm gonna disagree with the consensus.

I think it's a *bad* idea to cash out your IRA.

Say you've got your IRA invested in something earning an average of 8% per year (exceptionally conservative, considering the stock market has average 10%+ over the last 70 years)... You've got 40 years till retirement (scary prospect, but a different discussion entirely)... I think you said that you had $4000 in your IRA... so $4000, invested for 40 years, at 8% per year = $97,093.54...

That's an expensive ring... Remember, you can *never* put that $4000 back... (yeah, you can contribute more, but since you're limited (by law) to how much you can contribute each year, you'll never be able to get back to the point you're at right now)...

Now, if you *do* take the money out of your IRA, you'll pay you regular income tax (I'm assuming you're in the 15% tax bracket, and that the $4000 doesn't push you into another bracket), plus the 10% penalty... That's 25%... You'd be better off putting it on a credit card and paying it off before you pay $1000 in interest (you'd be effectively *pre-paying* that much interest by taking the money out of your IRA to pay for it)...

Just my 2 cents...

<edit to add>
If you were able to match the 10% the stock market does, that $4000 jumps to $214802.65 in 40 years... aahhh the miracle of compound interest...
</edit>

Thanks everyone for all your input. I've talked some things over this weekend with some people, too, and I've come to the realization that I was shooting for the moon when I didn't necessarily need to. I'm in a lot better situation than I thought, so I don't think it will even come to what I'm asking about. Woohoo! Its gonna be a fun time in the next few months!!

edmicman - Dave Ramsey would tell you to ONLY take money out of a retirement account such as this if you were trying to avoid bankruptcy.

It's probably too late but I knew a guy who ran a pawn shop and he told me never buy rings at retail shops.

You can probably get a nice one at an estate sale or something like that or even a reputable pawn shop. You certainly want to know what you're buying or take someone with you who does.

i just look at this thread, and skim through it.

IMO, don't get anything out of your IRA, unless it's emergency. In your situation, it's not emergency.

I bought my engagement ring at bluenile.com after go to local store and see the differents in the 4C. in my casee it's 5C.
for those who don't know what is the 5C:
1. Carat
2. Cut
3. Clarity
4. Colot
5. Cash

even though you can't see the rock physically at bluenile, it does have the cheapest if you find the same 4cs in thte store. beside, you won't have to paid sales tax on it.
even better, they may have coupon.

what you really need is to get which Cs.. for me I got VVS2 clcarity, F color (still white) and perfect cut. For the carat, just buy the onee that appropriate to your future fiance finger size. too small and to big is ugly imo. but then again, look around in the local store regarding these 4 Cs, and pick the one suitable for you. don't be too jumpy to buy based on the price range.

they used to have ebates as well. Bought mine in may 2003. got married in nov 2003.

hopefully this meessage is not too late..