credit card? I know the mantra of paying off the credit card first because of the interest rate. But i will be losing my 2006 year to invest in my IRA. What do you smart people say?
2007-02-05 07:48:05 · 7 answers · asked by joshjones007 1 in Business & Finance ➔ Personal Finance
You need to weigh the long term cost. Should you pay your credit card bill or invest it?
Depending on the APY on your credit card, if its very high (above 14%), then yes you should pay off your credit card. Then again, your investments in the Roth IRA can have a rate of return of 6-14% and it grows tax-deferred.
I don't know if paying off your credit card will do any good for you if there always seem to be a never ending balance on your credit card.
Why not to do this? Split the extra saved money. Apply 50% to credit card and the rest to the Roth IRA.
2007-02-05 15:36:15 · answer #1 · answered by Anonymous · 4⤊ 0⤋
A Roth IRA will not give you a tax break. You would need to open a traditional IRA for that.
Your question poses my question; how much debt & at what rate? I feel that's probably the best plan unless you don't have a lot & it's a low interest rate.
And do you think you won't get $ back? If you get $ back you can pay credit off with that. Or do a combination of the 2.
2007-02-05 07:57:25 · answer #2 · answered by ♣Hey jude♣ 5 · 1⤊ 0⤋
First, you need to close your account with the company who suggested you buy a Roth IRA/Life Insurance product...they are worthless scum for suggesting it, and you have been "had", I'm afraid! Life Insurance is NOT "an investment"! Would you buy a Car Insurance product that was also a "savings vehicle" that would never be worth less than you paid in if you don't have an accident? I'm guessing not, you'd probably realize you could buy "regular car insurance" FAR cheaper & invest the difference yourself to earn 7-12% a year return! Drop those bums! Defer 10% into your 401(k), and pay off as much more as you can bear each month of the loans, even though the interest is deductible... And read a book about basic finance!
2016-05-24 19:05:46 · answer #3 · answered by Anonymous · 0⤊ 0⤋
Pay off the credit card first. You don't want to be paying the interest on that any longer than you have to. You may lose your Roth IRA 2006 contribution, but you will have that much more money in the future to invest into other things. No good can come of carrying credit card debt longer than necessary.
2007-02-05 09:23:52 · answer #4 · answered by fretzdawg 2 · 0⤊ 0⤋
Isn't your Roth a taxed investment? If it won't help decrease your 2006 tax refund, your best bet is to pay off the credit card this year.
I know a traditional IRA is a tax deductible investment, but I don't think it aids you at all (tax wise) to contribute to a ROTH IRA.
2007-02-05 09:52:31 · answer #5 · answered by Jen J 4 · 0⤊ 0⤋
I think you should talk to your Tax Accountant. It really depends on your tax situation what my advice would be. It may even pay to start a Traditional IRA this year instead of adding to the existing Roth. Without the exact details I can't be certain which would be best for you.
2007-02-05 07:52:53 · answer #6 · answered by misskenzie12 2 · 0⤊ 0⤋
Much of it depends on your interest rate. Chances are it's horribly high-probably higher than your tax bracket. My advice would be to pay down your credit card debt. If you're paying 18% interest on the debt, with that interest also being assessed interest, I think paying down the debt is a no-brainer.
2007-02-05 07:57:15 · answer #7 · answered by SuzeY 5 · 0⤊ 0⤋
If your high earning years are behind you and the interest rate is high, pay off the credit card and tear it up.
If your high earning years are ahead of you, put it into the ROTH and tear up the credit card.
Debt can destroy you. Being out of debt can set you free.
2007-02-05 08:02:06 · answer #8 · answered by Stan M 3 · 0⤊ 0⤋