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roth ira and home improvements


Guest nae

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Guest nae

can I withdraw money from my roth ira for home improvements. I had the account since 2001 and I am not 59 1/2. I want to use only $4,000 of the $14,000 I have in the account, is this possible?

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Contributions can be withdrawn at any time without penalty.

But... money is on sale right now. You can get home equity and home improvement loans at low single digit rates. You might also have an offer in the mail for a credit card that will be interest free for six months. I would explore other options then drawing down on a Roth.

Your Roth is a great tax shelter. Try to maximize your long term benefit by keeping funds in for the long haul.

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Caveat emptor! Many of those credit cards with low interest rates have other charges, so be careful.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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  • 2 weeks later...
Guest mikez3049

I have a similar situation. I have had my Roth IRA for about 4 years and have 7 grand in it. This would pay off my credit card debt that I have outstanding. The question I have for you is this.

Since I can withdraw funds at any time from the Roth, am I better off paying off my credit card debt and moving forward, or chipping away at my credit card debt with low interest balance transfers. I lean towards just dumping the CC debt, but I do not know if this is a smart choice.

Any advice would be much appreciated.

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No one can answer your Q without knowing more.

Questions:

What is the total credit card debt?

What is the interest rate currently on that debt?

If you got more cautious on spending in the coming year, what would be your free cash that could be put to debt retirement?

Why did you incur credit card debt? Be honest - cause this may very well be a recurring problem rather than a one shot fix.

Where is your Roth money, and how is it invested?

What is your age and marital status?

Do you own your own home? And if yes, what is your current home equity and base mortage interest rate?

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Guest mikez3049

-Total CC debt would be about 6 grand.

-On about 3500 of the debt the APR is 14 percent. The rest is sitting at about 1.99 percent. It is one of those situations where if you default at all then the whole boat goes to 18+ percent.

- Third question is hard to answer, but if we got strict we could probably free up quite a bit of money for retirement.

- This CC debt has been there since college and my honeymoon 5 years ago. I have not been able to shake the cards. I have not been using the cards for about a year now. I have managed to chop some of the balance, but it is very slow. This is why I was considering a quick fix for this and using the Roth contributions. So, no this is not a habit with CCs.

- My Roth money is in an aggresive growth track the whole way.

- 29 years old and married about 3 years.

- Own one side of a twin home. Home equity is about 40-50 thousand once I get reappraised after finishing my basement. I assume that you want to steer me down this road, but I am tapped out here because of finishing the basement with that line of credit loan. Mortgage interest rate is 5.5.

Whew...a lot of typing.

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Yes, I was wondering if you could tap into a home equity loan to retire the CC debt.

CC debt is a "fool's trap" - you get stuck and it gets harder to get out. Talk to your local banker about a home equity loan to see if you can get a very low rate. It was not clear from your comments if the equity would be sizeable after the project is done.

Also look into moving you balance to a new credit card with a low initial rate. Some will tease you with zero percent for 6 months - which helps you pay off the principal.

But, the single most important thing you absolutely must do is start living way below your income and use that extra cash to erase the credit card debt. If you are only able to nibble away at the debt, then you need to rethink what you are spending. Alternatively, you may have the chance to work longer or take a second job. Maybe you should skip the next vacation or make getting out of debt your Christmas present.

The best way to deal with credit card missed payments is to tie it into your checking account.

You have a wife - she needs to be part of the solution.

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