I have $2,000-$3,000 to either put in a retirement account or use to pay down debt but I am not sure which would be best for me at this time.
I am 65 and work. I intend to retire at 70, but could do so sooner. My debt includes a $68,000 mortgage at 4.78 percent; $9,000 home equity loan at 4.88 percent; credit card loan of $7,500 at 3.99 percent and a second credit card loan of $8,500 at 1.99 percent.
Considering the current state of the financial markets and how close I am to retirement, should I invest the $2,000-$3,000 in an IRA or use it to pay down my debt?
My inclination is to use the extra money to pay down debt or possibly to supplement your emergency fund if your emergency fund is on the low side. None of your debt is at a high rate (which would ordinarily make me want to see the money invested) but you will be retiring soon and it would be nice if you could enter retirement with as little debt as possible.
Right now you have $16,000 in credit card debt. That is quite high. I see that the rates are low, but I have to wonder if these rates carry an "expiration" date. If these rates are fixed, I would leave use your extra money to pay down some of the more expensive debt, like the home equity line. (That being said, you should still be trying to pay down your credit card as aggressively as you can.) You are not living within your means if you carrying that level of credit card debt.
These days, with the market so rocky and the job market looking worse and worse, there is definitely something to be said for having a ready supply of cash. In this blog, I have always been an advocate of having an emergency fund. Generally, I recommend a fund equal to 3 to 6 months of your necessary monthly expenses.
Now, more than ever, this emergency fund is critical. If you are worried about your job and your financial security, build this fund up to 6 months of expenses as quickly as you can. Money in the bank can do a lot to ease a worried mind.
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