A $10,000 Luxury Item

Christy wants to spend $10,000 on plastic surgery. She has $190,000 in an inherited IRA and wants to know if it would be selfish to withdraw some for a one-time-only thing. What does Dave say?

QUESTION: Christy in North Carolina wants to blow some money and wants Dave’s permission to do it. Christy wants to spend $10,000 on plastic surgery. She has $190,000 in an inherited IRA and wants to know if it would be selfish to withdraw some for a one-time-only thing. What does Dave say?

ANSWER: If you pull the money out of the IRA, you’re going to take a 40% hit after taxes and penalties. In other words, you’re going to have to pull out $15,000 to get $10,000 out. It’s going to cost you $15,000. That’s pretty expensive for a luxury purchase.

You wouldn’t do this without your husband’s agreement. I would either have to save up to do it because I wouldn’t take money out of the IRA because I won’t give the government $.40 on the dollar, or we could hit the car fund by renaming the car fund and put the money back while we would have been saving for the luxury item. It’s the same cash flow. You’d have to be very diligent to put that back. That’s what Sharon and I would do were we to do that.

You’ve got to think through the math like we just did, and then your husband has to be okay with the fact that we’re stealing some of the car money to do this. That’s the beauty of this. You and your husband gave the money a name, and now you can choose to give it another name. You’re not hurting for a car. You’re not putting your family in jeopardy. We’re not giving the government a bunch of money. Or you could just wait and save up the $10,000.

I would get a second opinion, which is also known as getting bids. Don’t just take one person’s $10,000. It might be that you could have someone as reputable or more reputable for $7,000. When you’re paying cash to medical people, I expect a discount.