WWYD -- Advice on DVC purchase - Boardwalk

[CowboyCO]

We're considering borrowing against our 401K to purchase a DVC at Boardwalk. Questions:

1. Boardwalk owners. Do you love it? We love the location, but have never stayed there. We toured a 1 BR last trip and weren't in love with the rooms as we were with AK, but we really think the location is a bigger deal than the room.

2. Borrowing against 401K. It would take us 2 years to pay off the loan. There is no danger of losing the job and having to pay it back immediately because DW is a teacher and is stable with seniority. Plus, even if she changed jobs within the state, the 401K goes with her (state-run 401K). Our thought is that with the way the market has been and likely will be for the next 2 years, that we aren't likely to lose any interest because the stock market is in a bear mode and likely will remain so under this administration (no politics, just reality). Plus, if we borrow the money from the 401K, at least we will protect that much of the 401K if the market drops. (which is possible if we double-dip in the recession. We feel like it is a short-term win-win, with not much downside.

But... WWYD?

 

[gkrykewy]

I would not pull money from your 401k for a luxury purchase. If you're concerned about the stock market, move your 401k holdings to bonds, don't cash them out.

Also, this sounds like a political decision for you rather than a financial one. Any link between partisan/administrative fortunes and market performance will be tangential at best - it's a global market, responding to a global economy. If you're on the younger side, I would just leave your retirement $$ in stocks and don't even think about them.

Find another way to pay for DVC if you want in.

 

[Deb & Bill]

BWV have no dedicated two bedroom villas. If you ever want to book at dedicated two bedroom villa, you'd have to book elsewhere. At BWV, they are all lockoffs (meaning a one bedroom connected to a studio - two separate entrances with a door between).

 

[CowboyCO]

BWV have no dedicated two bedroom villas. If you ever want to book at dedicated two bedroom villa, you'd have to book elsewhere. At BWV, they are all lockoffs (meaning a one bedroom connected to a studio - two separate entrances with a door between).

We'd probably never use a 2BR, just studios and the occassional 1 BR

 

[cvjw]

I don't think I would pull money out of my 401K for a DVC purchase. But, I do agree with everything else you said - we feel the same way. That's why we pulled money out of our investment account to buy into DVC. We figured if we spent some of our money, it would be less that the current government could take from us.

 

[CowboyCO]

I don't think I would pull money out of my 401K for a DVC purchase. But, I do agree with everything else you said - we feel the same way. That's why we pulled money out of our investment account to buy into DVC. We figured if we spent some of our money, it would be less that the current government could take from us.

At least with the loan, we're in a way becoming our own bank and we pay ourselves interest. Withe hits we've taken in the last 2 years in the 401K, it is almost calming to know that for that portion we borrow, that it will get 4.5% back into the account. I probably need to run a spread sheet on it to figure it all out. We definately don't want a bank loan to buy it. I've spent too many years paying off banks. Almost done with cars (2 years left on both) and then we'll be debt free other than our mortgage.

We could save up for a couple of years and buy one, but by then, I'm guessing DVC prices will have begun to go back up, probably more than the 4.5% I will pay myself to get it now.

We have a trip planned for 2011 to WDW and I figured $2,000 of the price could come out of that budget.

 

[Disneypubgal]

We're considering borrowing against our 401K to purchase a DVC at Boardwalk. Questions:

1. Boardwalk owners. Do you love it? We love the location, but have never stayed there. We toured a 1 BR last trip and weren't in love with the rooms as we were with AK, but we really think the location is a bigger deal than the room.

2. Borrowing against 401K. It would take us 2 years to pay off the loan. There is no danger of losing the job and having to pay it back immediately because DW is a teacher and is stable with seniority. Plus, even if she changed jobs within the state, the 401K goes with her (state-run 401K). Our thought is that with the way the market has been and likely will be for the next 2 years, that we aren't likely to lose any interest because the stock market is in a bear mode and likely will remain so under this administration (no politics, just reality). Plus, if we borrow the money from the 401K, at least we will protect that much of the 401K if the market drops. (which is possible if we double-dip in the recession. We feel like it is a short-term win-win, with not much downside.

But... WWYD?

Only you can decide whether or not borrowing from you 401k is a sound way to purchase your DVC... We are very happy BWV owners and have been since the late 90's... only regret is that we didn't do it sooner!

 

[Coach81]

I would not touch it personally..

 

[gkrykewy]

We could save up for a couple of years and buy one, but by then, I'm guessing DVC prices will have begun to go back up, probably more than the 4.5% I will pay myself to get it now.

The only way DVC prices will go back up over the next two years is if the economy picks up, which would mean that the stock market has also moved up. These things generally move in parallel.

 

[Sandisw]

At least with the loan, we're in a way becoming our own bank and we pay ourselves interest. Withe hits we've taken in the last 2 years in the 401K, it is almost calming to know that for that portion we borrow, that it will get 4.5% back into the account. I probably need to run a spread sheet on it to figure it all out. We definately don't want a bank loan to buy it. I've spent too many years paying off banks. Almost done with cars (2 years left on both) and then we'll be debt free other than our mortgage.

We could save up for a couple of years and buy one, but by then, I'm guessing DVC prices will have begun to go back up, probably more than the 4.5% I will pay myself to get it now.

We have a trip planned for 2011 to WDW and I figured $2,000 of the price could come out of that budget.

I understand what you mean. We have taken out loans in the past against our retirement (we are in NYS so it is a defined benefit plan) to consolidate things in the past with the expectation that it gets paid off quickly (which it did). The rationale was the same. We were borrowing our own money and paying ourselves back the interest.

The only piece that is important, IMO, is that you feel comfortable that you will be able to comfortably afford the payments, whether it is through your 401K or elsewhere and that you will be disciplined enough to pay it back on the time table you set.

I only say this because I know of others who have done this and then struggled with the payments to get the money back in to the retirement account.

As long as you have figured all of this in to the plan, then I say do what you are comfortable doing.

As far as resort choice, go with the one that you feel you would be happy staying it if you could not stay elsewhere. I think getting rooms at AKV will be possible at times when getting rooms at BWV are difficult.

We own at BLT because we knew we would love it there. I too love the look of the AKV rooms too--the kitchen is very similar to what we have at home-but that did not outweigh the benefits of being in walking distance to MK.

Good luck!

 

[gkrykewy]

Remember also that you're "borrowing" from a pre-tax pot of money (your 401k holdings), but paying it back out-of-pocket using post-tax cash.

So whatever your tax bracket is, that's a hit you're taking on the money right off the top.

 

[mybabesuz]

I would really consider staying there before you purchase.
We are AKV Lovers and really wanted to Love Boardwalk too.
We were considering a second contract there.
We have several friends who Love Boardwalk.

We tried it in April and found we really didn't like it at all.
We missed AKV.
We found we liked being more secluded and having the down time from the parks.
And the long hallways made me dizzy.
It wasn't the actual walk. It was the crazy patterns.

It seems to be getting harder to book at other resorts,
making it more important that you buy where you want to stay.

I don't think it is a bad idea to take a short loan on your 401k.
It's not cashing it out. You loan yourself money any pay yourself back.

 

[Inkmahm]

I personally would not borrow from my 401(k) for anything short of an emergency. Buying DVC would not qualify.

 

[CowboyCO]

Remember also that you're "borrowing" from a pre-tax pot of money (your 401k holdings), but paying it back out-of-pocket using post-tax cash.

So whatever your tax bracket is, that's a hit you're taking on the money right off the top.

How do you figure that? If I pay cash, it's post tax dollars. If I borrow it and pay it back, that's post tax dollars. If I borrow money from a bank, I pay it back with post tax dollars. Am I missing something, or how is this relevant? Whether it is paid back with post-tax dollars or not?

I admit to NOT being a financial guru. I do understand the difference between pre-tax and post-tax dollars (which is why I have set up a Roth IRA).

I moved my 401K to a bond fund at the beginning of the year and so far, it is up about 4.3%, about the same return if I borrow it and pay it back.

 

[CowboyCO]

I also forgot to mention. We're 20+ years from retirement.

 

[johnsbelt]

I would not pull money from your 401k for a luxury purchase. If you're concerned about the stock market, move your 401k holdings to bonds, don't cash them out.

In this interest rate environment, stay away from bonds. With interest rates so low, as they are raised the value of the bonds will go down. If you want stability, go to cash (money market) or a ultra short term bond fund, if you have this option (which very few 401k plans offer a fund like this though).

John

 

[CowboyCO]

In this interest rate environment, stay away from bonds. With interest rates so low, as they are raised the value of the bonds will go down. If you want stability, go to cash (money market) or a ultra short term bond fund, if you have this option (which very few 401k plans offer a fund like this though).

John

Unfortunately with our 401K, there aren't any options like that that. It eother stocks, bonds, or bond and derivitives...

 

[DebbieB]

I've owned BWV for 11 years and couldn't be happier! I also took a short term loan from my 401K. At the interest rates DVC charges, I thought it was a good option.

 

[jekjones1558]

I would never presume to advise anyone on the internet regarding a financial decision. You are in a much better position to judge that for yourself than any stranger online.
We bought DVC at BWV in the late 90's and have added many more points since then. We absolutely love the BWV location. I also like the rooms even better since last year's rehab. Oct. thru Dec. it is really important to have home resort advantage for BWV stays and BW view or standard view rooms are more easily booked year round if you have the 11 month booking window working for you. In the best of all worlds you should stay there to try it out before buying, but we didn't, so I don't think that is a deal breaker. Good luck from another teacher who is now retired and loving our BWV points even more!

 

[Sammie]

I personally would not do it, but many people do finance. Our vacations have always been considered a luxury item, not a necessity. We do not finance luxury items, we pay cash.

As to the BW, great resort, but I would recommend staying there before purchase. Things are better experienced than making a decision strickly on looks.