Should I put my tax refund into an IRA or pay my credit card off?

Question

I really want to keep adding money into my IRA so I can hurry up and retire, but my tax refund will also allow me to pay off my whole credit card, what should I do?

Answer 1

Well, i'm thinking that yes, it would be nice to have that extra money to put in the IRA, but then you still have a bill, which even though you didn't pay right away, you will stilll be paying eventually, so you kind of come out even. BUT, another way to look at it is you have plenty of time to contribute to the IRA, and the longer you wait to pay off the credit cardbill, the more interest accrues, and the more extra money they take from you. So the faster you pay off the credit card the more you come out on top, but the faster you contribute to the IRA, doesn't reeeally benefit you, because either way you look at it, whether you put money in there right now or not, they won't be taking any from you. right? and even if you did retire early, you would have to use some of that retirement money to pay that credit card, so now it's just ironic, right? ok, i think you should just hurry up and pay that credit card so that you will have no obligations, and so you can move on with retirement. what do you think?

Answer 2

My knee-jerk reaction is to say pay off your credit card. However, I don't know what interest rate you're earning on your IRA, or what interest you're paying on your credit card. If you have a 0%APR on your card, and you can pay it off before the rate rises without using your tax refund, you should put your refund in your IRA so you'll be earning money on it.

If you're paying interest on your card, your best bet is to pay off the card and then put the amount you were paying monthly on your credit card toward your IRA every month.

Answer 3

Pay off the credit card!!!!

THen take whatever your monthly payments (plus some!) for the card and put that into your IRA. The same amount of money goes into the IRA (eventually) but you're not paying for interest.

Answer 4

Perhaps you should split it. Realistically you'll always have some sort of credit card debt but it doesn't have to be high and this is the inspiration you need to help continue to pay of your credit card bills while contributing to your IRA at the same time. If you're committed to only doing one then pay off the CC's.

Answer 5

Does the interest you will earn on the IRA far exceed what you pay on the credit card? another words will you earn more or pay more. Also I have changed my deductions so I don't get much money back at the end of the year. I prefer to get my money as I earn it instead of letting the government borrow it free of interest. I know some people like getting that check at the end of the year but think about it.

Answer 6

Pay off the credit card...Reason being if your refund is more than $4000 you're not going to be able to contribute no more than that anyway. (See the "funding" segment on this link http://en.wikipedia.org/wiki/Individual_Retirement_Account ) Depending on what your balance is, I'd pay them all off, and whatever's left, I'd open up a long-term (at least 6-12 month) certificate of deposit(CD) at least that way you can have interest working for you for a change instead of having it work against you with the credit cards.

Answer 7

PAY OFF YOUR CREDIT CARD. THEN YOU CAN TAKE WHAT YOU WOULD BE PAYING IN CREDIT CARD PAYMENTS AND PUT THAT INTO YOUR IRA. MORE COST EFFECTIVE AS YOU WON'T BE PAYING THOSE HIGH CREDIT CARD INTEREST AMOUNTS EVERY MONTH.

Answer 8

Pay off that credit card! No use in paying interest.

Answer 9

Pay off the credit cards them alone are sucking you dry

Answer 10

Pay off the card and get out of debt and tear up the card. Get out of debt and stay out of debt. Check out Dave Ramsey sometime on the radio. Or look him up on the Internet. Just google Dave Ramsey.