Debt reduction using retirement funds.

[Guest James1 2]

Does it make more sense to a) reduce personal

debt by borrowing against Mutual Funds, b)sell them to reduce debt, c) hold on to the

Mutual Funds as long as possible, d) any other suggestions? (The interest rate on the debt exceeds earnings of the fund)

[Guest David A. Harmon]

Depending upon your plan, you may want to borrow against it - usually the interest rate is very favorable and less than rates on the other debt. If the plan does not allow borrowing, you may want to consider selling some fund assets to pay off the debt; however, there would be some tax consequences (either as ordinary income or capital gains depending upon the retirement account). I do think it is better to get out of a high amount of short term debt quickly. You can then replenish the funds with the amounts you were previously spending on the debt.

[Guest Debtmaster]

Does it make more sense to a) reduce personal

debt by borrowing against Mutual Funds, b)sell them to reduce debt, c) hold on to the

Mutual Funds as long as possible, d) any other suggestions? (The interest rate on the debt exceeds earnings of the fund)

I concur with the previous post as a benchmark and good financial protocol. My response would depend on your answers to the following questions: 1)What is/are the nature of the debt(s), e.g. secured or unsecured, personal or business? 2) Is the business and officers joint and several liable? 3)Are there any assets that may be attached indirectly because of potential cross-collateralization? Depending upon your answers, I may have some follow-up questions, before I could give you accurate, specific advice.

I have removed the attachment because my case study has been subsequently edited to include FAQ and may be viewed at the public domain website to be forwarded as a link to the webmaster for proper indexing.

Abraham Brad Cozzi, President of Advanced Benefits Consulting, Partner in Joint Venture: Two Bridge Debt Resolutions

Former Managing Editor of Compensation and Benefits Managers' Monthly, CBMM now an IOMA publication.