Quote:
Originally Posted by jimhoward
The 50K in the IRA would probably appreciate over the coming three years, so that estimated appreciation has to be credited (after accounting for future taxes) against the interest expense on the HELOC.
On the other hand the taxes on the IRA will at some point need to be paid regardless of whether or not they withdraw the money now. That tax expense is postponed, but not avoided, by funding the home improvement with a HELOC.
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The point is about the cost of money being used, nothing else. The home improvement has to be done, and there isn't a high enough balance in the taxable bank/investment account. So you pick one or the other,
The cost of money from an IRA is one time fixed.
The cost of money of a HEloan is for as long as you have a balance, plus there is a cost of application.
The incremental tax rate is 22% and there is no IRMMA threat.
If the cost of a home equity loan is 7% and the average stock market gain is 8%, but is barbell shaped, there's not alot of difference between the two on average, but a lot depending upon the year.
Given GDP is negative,
Given that the dollar is falling,
given that container shipments from the far east are still falling
given the BB is an interest rate payment block buster,
I would err on the side of caution and pay the one time tax burden
versus assuming the stock market will continue huge annual gains.
So far this year, the market return is very low for the season YTD period.
good luck in your financial assumptions.