Conference 7.286::digital

>Has anyone ever borrowed against their SAVE account?  How do you go about doing
>this?  How is it different from a regular loan?

	Use the touch-tone system - DTN 223-2236, with account # and PIN in 
	hand. You will be mailed loan papers. Sign them and have them notarized.
	Mail them back in. Your account will be debited the first of the next 
	month if the papers are received by the 15th, the month after that
	otherwise. The check is mailed four weeks later. They start deducting
	from your paycheck four weeks after that.

	The differences are this:
		1) you are repaying yourself - even the interest goes back in
		   your SAVE account.
		2) because of 1), the interest is not deductible.

eric

    This may be more appropriate in BMT::investing. Actualy there is
    quite a plethora on SAVE over there.
    
    To add INVESTING press KP7 (keypad 7) or select if you have a VT2xx
    or VT3xx.
    
    Chris...

    RE: .1
    
    Wow Eric, 4 weeks to get the check?  That's great!  When I took my SAVE
    loan out (back in '86) Investor Services was claiming ... "8-12 weeks
    to process your loan application and issue a check."  And they weren't
    kidding!  I applied in mid Feb. (before the 15th) and didn't get my
    check until early May!  It was darn near 12 weeks.
    
    For .0, my advice is to apply ASAP.  I hope you're not in a hurry for
    the money, unless the time to get the check really has been reduced to
    4 weeks as .1 stated.  Everything went fine for me using the touch-tone
    phone method.  You even get to choose the term of the loan (up to a
    maximum of 208 weeks [4 yrs.] as I remember).
    
    					...Roger...

>    Wow Eric, 4 weeks to get the check?  That's great!  When I took my SAVE
>    loan out (back in '86) Investor Services was claiming ... "8-12 weeks
>    to process your loan application and issue a check."  And they weren't
>    kidding!  I applied in mid Feb. (before the 15th) and didn't get my
>    check until early May!  It was darn near 12 weeks.
    
	read .1 again closely...it is:

	2-6 weeks from submission to liquidation
 	4 weeks from liquidation to check
	---
	6-10 weeks to check

FWIW, my check came almost 4 weeks to the day after my account was liquidated.

    Re: submission to check....I submitted my documents before August
    15th and got the check around September 30th.
    
    Re: Paying off the loan. I called and asked about making some early
    payments.  They said you  either have to pay the balance in full,
    or let the automatic deductions continue until the loan is paid
    off. No provision for prepayments other than the entire balance.
    
    Cheers,
    
    Gil
    

        If you need money quickly, but would prefer to hold onto your
        stock and borrow from S.A.V.E., you could approach the DCU or
        another bank and see about getting a loan using your stock as
        security, then use the S.A.V.E. loan to pay off the other loan
        as soon as you get the S.A.V.E. check.
        
        While it's always possible that DEC stock will drop to an even
        lower price, I personally don't think it's likely.  It may not
        jump back up to the high hundreds real soon, but it's more likely
        to go back up than lots further down, so selling it if you have
        another alternative might be a bad idea. 
        
        Tom

    RE: .4, Yup, I got it now.  I guess I didn't read it that closely.  But
    it seems that .5 got their check VERY quickly.  Maybe IS is getting
    quicker (although it seems unlikely since the "liquidation" process is
    a pretty involved one and that money isn't just sitting in a vault). 
    In any case, the typical waiting period is longer than for a car loan
    etc...
    
    The stock loan is a great idea.  I did that last year to buy a car.
    The A.P.R. (10.25% in Dec. '87) was the best rate going.  New car loans
    were better than 12% and since the stock had just hit the skids along
    with the rest of the market I wasn't worried about having (or needing)
    to sell them any time soon.  And since the stock price isn't much
    higher now than it was back in late '87 it makes sense to think about
    the stock loan as a way to get the money fast (read "faster").
    
    					...Roger...

    RE: .8
    
    I'm not sure if you understood all that was said in these replies.  The
    stock loan is VERY short term, like as soon as you get the SAVE check
    you pay off the stock loan and then repay the SAVE loan at a rate YOU
    specify (which you would probably take whatever the maximum is).  Take
    the stock loan for 12 months.  By the time DCU gets the paperwork done
    for payroll deductions and they actually start taking money from your
    check you'll probably have the SAVE loan check.  DCU won't like it, but
    heck, it's YOUR money!
    
    Let me give you an example of how much the SAVE loan costs:  when I
    took out my SAVE loan back in '86, I borrowed $2200 for 208 weeks...that
    came out to $12.84 per week.  Not a real big hit on the payroll
    deductions.  Now I hear what you're saying about not being able to
    handle another payment "at all" but you gotta pay it back somehow (it's
    a loan!), so why not pay the interest back to yourself in the process!
    
    					...Roger...

re:    < Note 686.9 by ROGER::GAUDET "Ski Nautique" >
   
   > Now I hear what you're saying about not being able to
   > handle another payment "at all" but you gotta pay it back somehow (it's
   > a loan!), so why not pay the interest back to yourself in the process!
    
    Although SAVE loans have certain advantages, "paying yourself interest"
    is not one of them. In fact, as this interest is not tax deductible,
    "paying yourself interest" may be a disadvantage. See the discussion
    in SUBWAY::INVESTING
                 

    
    I thought their were restrictions on SAVE Loans like you could only
    borrow for the purpose of education, medical that is not otherwise
    covered by your health insurance and for the purpose of buying your
    primary residense (the one you will live in, not rent to others).
    Is this no longer true? Also what is the interest rate for a SAVE
    loan? and what is the max. you can take out (is it 75% of what you
    have invested or more)?
    
    			- Ramani Mangu
    

    re .11 The conditions you talk of are approximately conditions for
    liquidation of the account.  In such a case, there will be tax.
    I looked into liquidation for a property settlement and found it
    not so good.  The loan rules are better and you can borrow at
    whim.
    
    Chuck

        If you don't have the current S.A.V.E. rules, and you are a
        S.A.V.E. participant, then you should get the information from
        the S.A.V.E. office (I don't have the number readily available
        here at home, but you should be able to find it in the Digital
        Telephone Directory), or get the information from your PSA.
        
        Tom

    .12 is correct, your restrictions are for liquidation of the fund(s).
    You may take a loan for any reason you like.  Dial DTN 223-2236
    (outside 508-493-2236) and use your badge number and SAVE PIN to access
    your account.  I just called the number and the current interest rate
    is 10%.  Interest is compounded weekly.  You may borrow up to 90% of
    your balance.  For my 1986 loan, the maximum term was 4 years (208
    weeks).  I'm sure Investors Services can give you exact information.
    
    					...Roger...

    re: 686.10
    
    I've used the SAVE loan program a couple of times and have found
    if *very* useful.  I disagree that about questions on the interest
    and if you look at the interest as bad, you really should change
    your prospective.  The interest is a subtle way you can make 
    additional deposits into SAVE plan over and above the 8% salary
    limit.  Abiet your not getting a tax deduction, but with the 1989
    tax year, only 30% of your personal interest is deductable anyway.
    Since they are currently charging 10%, that is the rough equivalent
    to a 13.5% loan elsewhere.  And that 10% belongs to YOUR retirement
    program, not your favorite financial institution.
    
    A current downside risks you have to contend with are how others
    will view your behavior.  Since I've been going through a messy
    divorce (unfortuanly, I married an %&*@ attorney), they've been targeting
    the SAVE/loan program $.  We've successfully defended it, but it's
    cost me close to a $1000 in attorney's fee's.
    
    Early payoff's can also be fairly tricky.  You have to contact
    investor services.  They are very touchy about giving you payoff
    figures over the phone.  And, the check you send them has to be
    the exact amount of the loan for the week in which you are 
    paying off the note.  With mail delays between the east and west
    coast, it was a process which took me three weeks to complete.
    The first time, I got my check back in the mail.  It is really
    helpful that recently they've added function 5 to the touch 
    tone system that gives you a very current loan balance.  This
    coupled with the amortization schedule should make the process
    much simpler.  Still, I would like to see a payoff function
    for loans included in the touchtone service.

re:    < Note 686.15 by GUIDUK::B_WOOD "Where Oh where has my DEC-20 gone?" >
   >                      -< Experience - Good and Bad >-
   >
   > re: 686.10
   > 
   > I've used the SAVE loan program a couple of times and have found
   > if *very* useful.  I disagree that about questions on the interest
   > and if you look at the interest as bad, you really should change
   > your prospective.  The interest is a subtle way you can make 
   > additional deposits into SAVE plan over and above the 8% salary
   > limit.  Abiet your not getting a tax deduction, but with the 1989
   > tax year, only 30% of your personal interest is deductable anyway.
   > Since they are currently charging 10%, that is the rough equivalent
   > to a 13.5% loan elsewhere.  And that 10% belongs to YOUR retirement
   > program, not your favorite financial institution.
    
    SAVE loan interest is not a subtle way to make additional deposits.
    
    Had the funds not been borrowed, the "additional deposits" would
    roughly have equaled the earned interest on the higher SAVE balance
    (assuming Fund A). The problem is: In both cases, those interest
    payments are taxed upon withdrawal. In other words, SAVE loan interest
    is taxed twice: First, when the interest is paid (with non-deductible
    dollars); second, during retirement, when all 401(k) dollars are viewed
    as having never been taxed. (Form 8606 cannot be used to establish a
    basis in 401(k) plans.) 
    
    Even so, SAVE loans can be cheaper than unsecured loans. However, SAVE
    loans are usually more expensive than home equity loans, and are always
    more expensive than "borrowing" from passbook savings. (Self-paid
    interest isn't viewed as taxable income. Yet.) 

                   -< SAVE Loan good/bad ? >-
    
    I apologize if this question has been asked before. If it hass been,
    please direct me to the note.
    
    Currently the SAVE fund A offers ~8.7%. I inquired for a SAVE loan
    and the rate is 12%, which is high compared to interest rates outside.
    However, I am told the loan repayment goes back to my own account.
    So, in effect, I am withdrawing funds that yield 8.7% and paying
    myself 12%. I say this cannot be true since everyone would do it.
    Am I mistaken for something here? Does anyone know how the loan
    borrowing and repayment part works?
    
    Thanks in advance.

    
    	What you described is correct.  12% on your loan (to yourself),
    	and 8.x% on plan A.  This is not the gravy train you describe,
    	however.  First of all, the 12% comes out of your pocket in the
    	form of payments, where the 8.x% comes from the plan.
    
    	If this 12% interest was tax deductible, then THAT might be
    	a bigger deal...
    
    	There has been alot of discussion on this in the INVESTING
    	notesfile.
    
    	Joe Oppelt

    
    
    Also, since the principal you borrow was already tax deferred once,
    it will be taxed along with the interest when the payments are made.
    

The interest I pay to myself on the 401k is "after tax" money (i.e. I have
already paid taxes on it).

Do I have to pay taxes on this money again when I take it out in 20 years?

On one hand, I don't like paying taxes on the same money twice, but on the
other hand, I don't like the thought of keeping reconds of these potentially
"special" funds either.  Does anybody know the IRS rulings on this?

    	re .20

    	Consider this:

    	If you had not borrowed your SAVE money, but borrowed from
    	elsewhere, you would have had to pay taxes on your the money
    	you used for interest payments to that other institution, and
    	effectively you can no longer deduct that interest.  (Yes, today
    	you can deduct a fraction of it, but that is getting phased
    	out.)  Your SAVE balance that is now NOT borrowed, would grow
    	with the PLAN, and you would have to pay taxes on that growth
    	when you withdraw it at retirement.  So what is the difference...

    	By this, if you can get a loan elsewhere for a better rate than
    	SAVE offers for a loan, use that other institution.

    	Joe Oppelt