Quote:
Originally Posted by Fireup2025
There is a $22K debt (daughter got married in England in April )that is currently at 0%, but the rate ends in October 2007.
Would it be wise to withdraw $22K from pension/401k accounts to just pay off the debt?
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With the numbers given, I'm not sure where else she has the money to do so. Is she proposing to pay off a little each month from her $1500 cash flow? That could take a long time.
If she's thinking of getting a home-equity loan (or more mortgage on the real estate) then the interest on those loans may be less than the Oct interest on the $22K debt. It'd be tax-deductible, too, but only a benefit in excess of the standard deduction. Most people don't pay enough mortgage interest to make that worth the effort.
Paying off the $22K debt out of the retirement funds would forego a bit of tax-free compounding, but she's old enough to withdraw the money without penalty and again she doesn't seem to have another source of funds to pay off the debt.
If she's trying to decide between using home equity or her retirement portfolio... well... that's the pay-off-the-mortgage-or-invest-the-money question, and we're not going to start that
reciprocated diatribe debate again.
Quote:
Originally Posted by Fireup2025
Would you put $10K (emergency fund) in a MM account? (Currently just sitting in a savings account)
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Absolutely, with full faith that a company like Fidelity or Vanguard would make the MM account whole if some misfortune or malfeasance actually drove the share value below $1.
Another option would be to buy a long-term CDs (like PenFed's three-year at 5%) in $1000 chunks. She could break one or two $1000 CDs as needed for emergencies without suffering too much pain, and even so she'd still probably be far ahead of the savings account.
An over-the-top long-term option would be to build a CD ladder out of the $10K, but that'd take some time & effort. However she could put the whole $10K in the money market and gradually withdraw it to buy a $1000 five-year CD every six months. Might be too much tracking & renewal effort for most investors.