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Politics : Ask Michael Burke
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To: accountclosed who wrote (35224)11/4/1998 2:03:00 PM
From: Mama Bear  Read Replies (1) of 132070
 
"In the end it is the same. 22%, 18%, 16%...whatever it is. Is it smart to expect better returns in the brokerage account than withdrawing the money to pay off the credit card rates? "

I guess it all depends on the interest rate and the level of debt service. I'm in no hurry to pay off my 7 1/2% mortgage, because I can easily exceed that in my trading account. But that is all the debt service I feel comfortable with. It would not matter to me if it were an unsecured (read credit card) loan if I had an equivalent rate. The 7 1/2% loan is of course tax deductible. As you say, it depends on the overall picture. I'm firmly in the camp that believes it's ok to borrow sensibly to increase income. Like risk tolerance in the stock market, it's an individual matter.

"Is it smart to expect better returns in the brokerage account than withdrawing the money to pay off the credit card rates?"

There are instances when it's a given. My husband's employer matches his 401k contributions 1:1 up to 6%. We could have stopped the contributions to the plan and paid off the debt much faster. I think you'll agree that it would have been imprudent to give up the instant 100% return on pretax money to retire debt with post tax money at even a 22% interest rate.

Barb

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