Quote:
Originally Posted by retiredguy123
The financial advisor's recommendation to borrow money is crazy. Don't borrow money when you have money.
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That may be true if you have that money under your mattress but it isn't as clear if you have to pay to access the money and/or if the money is working for you where it is.
- In this case, there is an $11K fee (taxes) to access the $50K needed.
- By year three the loan has cost $11K in interest which makes it look like the loan will be more expensive going forward.
- However, money in the IRA is working for them.
- Accurately predicting returns requires a crystal ball much better than the one I have. Some will say 5% over time, others will say 10%, and still others will anticipate a downturn and losses.
- If the returns are 8% then leaving the $60K in the IRA will result in $4800 in gains each year. Yes, that is taxable but with a 22% tax the net will be over $3700.
- At 7% and a 15 year payoff, the loan will cost $30K in interest
- At 8% over 15 years the $60K in the IRA will earn $70K in simple interest alone (less 22% in taxes is still $56K)
Depending on what the market decides to do, borrowing money today could result in a net *gain* of over $25K in 15 years.