DC Recomendations

[Tim Wagner]

Ok, I am going to see about getting a 401k loan. I won't feel too bad about it as My payments including interest get paid back into my account. with that being said, I am thinking of borrowing $3000.00. and i already have a $1000.00 in cash.

I am pretty dead set on the PM2000. I would also like to build my own NYW Router station, and get a 8" Jointer. what kind would you suggest?

With all that said. And knowing my budget listed above, which jointer, and which DC system should I get? The DC system has a restriction though. It will be in my basment with a max cealing hieght of 7'. it will need to be piped to the saw, jointer, RT, and other futer tools.

I am also going to have to install another subpanel, which will have to handle the shop equipment, and about 4 other 20 amp circuits that are taking up spots in the main panle. i do have a 30 amp feed in the main now for the dryer, could i put a 50 amp in ther to run a sub panle, and then run the dryer off the sub panle?

Feel free to make whatever recomendations you can think of.

Thanks.

[Pete Brown]

There are restrictions on what you can use a one-time 401k loan on. I would not recommend using it on tools.

In addition, if your 401k is doing ok, the interest you pay yourself back (which comes out of your pocket, so you net nothing) will be less than what you could have made if you left the money in your 401k

I originally took out a 401k loan to help buy my house. While it was useful for that first time, there was a cost to it.

I'm not sure how old you are, but in order to retire at 67 or so just on your 401k, you need to max it out every year (and have employer matching) from your twenties onward.

I know you didn't ask for financial advice, but I thought I'd toss it in anyway :)

FWIW, I have similar feelings about using refinancing to pay off debt. Do you really want to pay for that car/jointer/ring/whatever for 30 years?

If you can pay back your 401k loan over the payback period, you can also save up for good tools. It just takes some diligence and patience

Pete

[Pete Brown]

You can find the rules on the web, search on "401k loan rules". Here's an excerpt:



The rules governing 401k plans allow plans to provide loans, but do not mandate that an employer make it a plan feature. Even so, loans are a feature of most 401k plans. Check with your Human Resources department if you’re not sure if your plan allows loans. If offered, your employer must adhere to some very strict and detailed guidelines on making and administering them.

Most of the time loans are only allowed for the following reasons: (1) to pay education expenses for yourself, spouse, or child; (2) to prevent eviction from your home; (3) to pay un-reimbursed medical expenses; or (4) to buy a first-time residence. You must pay the loan back over five years, although this can be extended for the first-time home purchase.

Usually you are allowed to borrow up to 50% of your vested account balance to a maximum of $50,000 (set by law). Because of the cost, many plans will also set a minimum amount and restrict the number of loans you can have outstanding at any one time.

If loans are available in your plan, they are pretty easy to get. No credit check is required. Contact your Human Resources department on how to apply. Loan payments will generally be deducted from your payroll checks and, if married, you may need your spouse to consent to the loan.

Funds obtains from a loan are not subject to income tax or the 10% early withdrawal penalty. If you should terminate your employment, often any unpaid loan will be distributed to you. This distribution will be subject to income tax and, if your are not at least 59½ years of age, the 10% withdrawal penalty. A loan can’t be roll into an IRA.

[Jim Becker]

The compounding loss is the major bummer with a 401K loan, even if the 401K loan can get funded. Big time loss of growth, even for a short time.
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Getting away from the financial, the PM2K is a great saw. One of the Grizz 8" jointers would be a nice choice...good tool and attractive cost. The ceiling hight is a challenge for a cyclone, although one of the JDS units might work. OR, you can possibly fit a cyclone if the blower is separate and not on top. Otherwise, you're going to have to go with one of the 2-3hp single stage canister units.

Get a licensed electrician to examine your power situation...you can't just be replacing breakers, etc. There is a lot more to doing it right.

[Pete Brown]

The ceiling hight is a challenge for a cyclone, although one of the JDS units might work. OR, you can possibly fit a cyclone if the blower is separate and not on top.

Another possiblity:

Assuming that the 7' is either to a suspended ceiling or to the bottom of the joists, you likely have another 6-10" where you can stuff the motor. That all depends on insulation and other factors, but *could* help you out in a pinch. You could box in the area where the motor will be, and toss a small desk fan up there or something to get air moving around the motor so it doesn't get overly hot.

Pete

[Tim Wagner]

ok, what if I just barrow 1200 for 1 year, get the saw, continue saving and then repay the remaning balance after six months? Electrical not a big thing, well it is for most, but we have already rewired most the rooms, just didn't figure on needing a larger panle.

[Tim Wagner]

BTW 401 k isn't my only savings, I just enrolled in stock options and profit sharing.

[Jim Becker]

'How about a HELOC? (Home Equity Line of Credit) Assuming you itemize deductions, you gain a possible tax benefit rather than losing future compounding. Or a low-interest credit card. No tax benefit, but useful if you manage it carefully with a payment plan that pays it off over a set period of time. My first major tool purchases back when I got the idea to buy good tools were funded with an AMEX Optima account which at the time was low interest and also paid points. I never carried a balance more than about 5-6 months and usually less as compensation {commissions} came my way quarterly at that point. Your bank may also offer a personal line of credit. All of these are generally a better choice if you must borrow than borrowing on retirement accounts...again, because it's not the interest you have to pay, it's the interest you lose over time due to how compounding works.

[Pete Brown]

I don't think you'll be able to borrow for this. In addition, if you can, you still want to save that one-time option for something serious (medical, etc.) instead of spending it on tools. I know, I know, tools are serious :)

I would not borrow any money from the 401k or any other retirement plan.


BTW 401 k isn't my only savings, I just enrolled in stock options and profit sharing.

I contribute the federal max to my 401k each year ($15,500 this year, IIRC) and have 50% employer matching up to a limit. Even with that, it will not be enough to retire on. I'm not sure what your age is or how much you put away, but it takes more to retire than most of us think.

Your best bet is to put money in your 401k and forget it is there. Consider it not your money until you retire. Of course, you still want to manage it to maximize your profits.

Options are options, unless you exercise them, and you'll need money to do that :)

This is pretty OT for tools, so we could always continue this on the OT forum if you would like. If so, just start a new thread there and post a link to it as the final post in this thread.

Pete

[Tim Wagner]

Well you have pretty much convinced me that it isn't a good idea, So I'll wait on it.

personal loans are allowed.

once you take a loan you have to wait 12 months for another

I can only have one loan at a time.

I am not married and don't own a house. live at home

my credit cards are double the interest of a 401k loan.

I am 40

And I do welcome all your advice, even financial. you guys are like my mom, anytime I say the word loan, she Freaks Out. But I suppose it's for my own good, as I have never been one to make the smartest decisions in life. :(

[Robert Waddell]

Tim,
Capital One and many other cards offer several months to a year of 0% interest just for applying for a new card. I bought my Unisaw that way just because I could. I bought most of my machines from selling my woodwork at the regional farmers market. Maybe you could do the same and pay as you go. At least weight your options other than the 401K.
Rob

[Jeff Watson]

Tim,
Believe me, I say this from experience. At first you might want to concentrate on what you want to make then on what tools you need/want. That is a mistake that I have made. It is easy to get on these forums and read about all the tools that are on the market and how great it would be to have them, but realistically, what good is a $2000 saw if you can't afford the wood to use it? I know, "but I am only going to buy one saw in my lifetime and when you break the cost out for 30 years, the expense is not that much" I have used that reasoning too many times to justify purchasing tools.

As far as credit cards go, here is my advise. You might try shopping your debt around to other credit card companies. This is a highly competive industry and you can almost always find a better deal if you transfer a balance to a new company. Most companies usually have a low introductory rate for the first 6 months or some even have low rates that are fixed as long as you keep your account in good standing.

Just a couple of ideas. Good luck. I can totally relate to your position.

Jeff W.