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With my tax refund,should I buy a Roth IRA, or pay down a home equity line of credit? |
I currently have no credit card debt, and the HELOC is at approx 9.5% I would pay down HELOC ;) Pay down the HELOC. That's a guaranteed rate of return of 9.5%. You'll be hard pressed to get that anywhere else. I would pay down the HELOC, but you still can open a Roth IRA and get started saving for retirement which is important. I highly recommend Scottrade (I just moved my Roth to them) because they have no closing, opening or custodial fees. You don't need money up front to open an account and they have branches all over if you want to go in and talk to a person. They do not charge you a fee to buy mutual funds or bonds which is really nice bonus. With as little as $500 bucks, you can get started in some mutual funds and get your money working for you. Oberweis Mid-cap Fund (OBMDX) off the top of my head. I know they will have a minimum $500 to invest in their fund with an IRA and they are a good mutual fund. I think it is really important to get out of debt, but I don't know how much you owe on your HELOC and I would hate to see you putting off saving for retirement until you pay it off, which could be several years or one year - I'm not sure your situation. You sound like you are in pretty good financial shape. Just don't neglect your future. You may be interested in this new program. It works well with a 30, 20, or 15 year mortgage. I am currently using a HELOC (home equity line of credit) with a new software program that helps build equity fast, and will payoff my home and other loans in less than half the time without refinancing, and without extra payments. It is saving me thousands in interest, and pays off home in less than half the years. Those who take an honest look at all the facts and figures from a reputable source will find that this system truly creates a significant advantage for homeowners. E-mail me if interested. www.payoffyourmortgagefast.net Whatever you do, don't take the advice of anyone who plugs a product or service. One thing to factor in: Assuming you would otherwise be itemizing expenses on your return anyway, reduce your effective 9.5% savings of paying off the HELOC by your tax benefit of paying the interest [your highest tax rate times the total interest you would have paid]. If you invest in an index fund matching the S&P 500 and hold it in your Roth until you retire, it will average close to 10% a year. (http://www.usatoday.com/money/perfi/colu... Of course, these earnings will be tax free. In this case, I'd have to say that the Roth is slightly better. But it is close, and if you're close to retirement, the 10% return certainly is no guarantee. Hope this helps http://www.usatoday.com/money/perfi/colu... |
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