Quote:
Originally Posted by CoachKandSportsguy
you are basing the decision on future events repeating, which may or may not occur.
Without basing the events on future events occurring, but today's cost of money only, which would you pick? The financing decision reduces discretionary income on a fixed income, versus maintaining the current cost of lifestyle. This type of reasoning increases the cost of retirement lifestyle unnecessarily.
One can always borrow based upon pledging assets, which is called leveraging up and getting more aggressive about borrowing money. Retirement should be about deleveraging and more conservative to guarantee longevity of assets.
increasing personal risk of mandatory future payments against a personal property improvement doesn't make alot of risk management sense for a retired couple with a fixed income, who are currently enjoying their cost of lifestyle.
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If you want safe then pull all the money out of the IRA ASAP so their future retirement is not affected by potential market downturns in the future.
If you can trust the market to have positive returns over the duration of their retirement then trust the market to have positive returns over the duration of the HELOC.
Depending on how difficult or expensive it is to make withdrawals from the IRA, if the market returns are as little as 7.5% per year (/12 for the monthly earning) they will have a net gain leaving the money there and taking monthly withdrawals to pay the HELOC. (beyond the middle of the loan the earning rate can even be less than the loan rate and still have a net gain)
There is a risk, everyone's risk tolerance is different, long-term past performance is not a predictor for short term gains/losses, and all the rest. The math is straight forward, the market is unreliable in the short term, and it's impossible to know what any individual might choose given the information.