Choices - 1) keep HELOC with iBonds? or 2) Pay HELOC for 0 Debt?

[cyber888]

What would you do ?

1st CHOICE
Ok, so I retire in a year, and I was planning to have 3 Years Expenses in Cash Reserve and keep a HELOC balance of $50K-$55K (HELOC interest rate could be between 4% - 5.5%, since my HELOC is -1.01% of prime) but also have part of my cash, around $50K - $55K in iBonds earning 7.13% - 9.61% (which is higher than my HELOC rate). So, iBonds will earn higher interest rate than my HELOC rate for the same amount of balance ($50K-$55K). The HELOC is my only Debt, but I'm earning higher interest in iBONDs.

2nd CHOICE
Or, would you rather pay off the HELOC amount of $50k-$55K (have Zero Debt in retirement) and have only around 2+ Years of Emergency Cash. Now, even if the HELOC account has zero balance ($0.00), it could still be used for emergencies to withdraw money, like home repairs. I mean I could get $$$ from it by just issuing a check. So, in addition to 2 years cash, there is an HELOC account. The only thing I fear here is if the bank suddenly suspends the HELOC without warning. Although the HELOC has zero balance, I'm not sure if banks can just suspend HELOCs if you have great credit and if you only borrow 10% or less of your home value. Right now, my house is worth $550K - $600K

If you were in my position, will you keep a HELOC balance (keep the iBonds), or pay off all debt ?

 

[madatrub]

What would you do ?

1st CHOICE
Ok, so I retire in a year, and I was planning to have 3 Years Expenses in Cash Reserve and keep a HELOC balance of $50K-$55K (HELOC interest rate could be between 4% - 5.5%, since my HELOC is -1.01% of prime) but also have part of my cash, around $50K - $55K in iBonds earning 7.13% - 9.61% (which is higher than my HELOC rate). So, iBonds will earn higher interest rate than my HELOC rate for the same amount of balance ($50K-$55K). The HELOC is my only Debt, but I'm earning higher interest in iBONDs.

2nd CHOICE
Or, would you rather pay off the HELOC amount of $50k-$55K (have Zero Debt in retirement) and have only around 2+ Years of Emergency Cash. Now, even if the HELOC account has zero balance ($0.00), it could still be used for emergencies to withdraw money, like home repairs. I mean I could get $$$ from it by just issuing a check. So, in addition to 2 years cash, there is an HELOC account. The only thing I fear here is if the bank suddenly suspends the HELOC without warning. Although the HELOC has zero balance, I'm not sure if banks can just suspend HELOCs if you have great credit and if you only borrow 10% or less of your home value. Right now, my house is worth $550K - $600K

If you were in my position, will you keep a HELOC balance (keep the iBonds), or pay off all debt ?

I abhor debt, so I look to eliminate it at all costs, even if its not what the "math" suggests. It helps me sleep better at night. YMMV.

 

[TheWizard]

I had a modest HELOC balance going into retirement and that was fine with me.
I paid it off after a few years and now have an additional thousand dollars per month that I invest into stock index funds.
I don't expect ever to need to borrow money again; I'll just liquidate investments and pay cash.

Also, I have no need for an emergency fund or lots of cash in retirement.
I just keep around $10k in checking to cover lumpy expenses.

I also try to maintain about 5% of my taxable account in my settlement fund (MM fund) but there are usually low-ball limit orders written against that for stock index funds...

 

[DuluthGA]

Keep ibonds as long as rate exceeds Heloc rate. Don’t let Heloc balance exceed I bond balance. Make sure to include eventual tax on ibond interest rate n your consideration

 

[Sunset]

I've had a HELOC, sitting unused for many years, probably around 7 years. I recently phoned the bank as I was thinking of borrowing from it. All was good and they were eager to have me borrow.
Later I decided not to do it.

So I think many HELOC's could sit at $0 for years, and be available to use later, there probably is not a rule to close out a HELOC if unused after 2 years. After all it would defeat part of the purpose of them.

 

[cyber888]

I've had a HELOC, sitting unused for many years, probably around 7 years. I recently phoned the bank as I was thinking of borrowing from it. All was good and they were eager to have me borrow.
Later I decided not to do it.

So I think many HELOC's could sit at $0 for years, and be available to use later, there probably is not a rule to close out a HELOC if unused after 2 years. After all it would defeat part of the purpose of them.

So, they still hold the title of your house, correct? I guess they do until you close the HELOC out.

 

[OldShooter]

Keep ibonds as long as after tax rate exceeds Heloc rate.

... So I think many HELOC's could sit at $0 for years, and be available to use later, there probably is not a rule to close out a HELOC if unused after 2 years. After all it would defeat part of the purpose of them.

I had one, $250K, unused for a decade or more. About a year ago I realized that I might need it during construction of a new house. I called the bank and was told there would be no problem using it, but when I asked about getting a better rate than the old one, they ended up cooking up a new HELOC from scratch. In a sense it was a very easy process, but the administrivia was a PITA.