No. of Recommendations: 0


Try it one more time, assuming the original poster diverted the credit card payment into the IRA for those 15 years. Earning the same nominal 8% gains.

Or even if he diverts just half of the credit card payment into the IRA... 15 years is a pretty good period of time for compound interest, and you're allowing it to work against him...



Yup that is the missing piece in AJ analysis

Let's assume he contributes $325 month into a Roth IRA at 8%/year instead of paying down his credit card debt. (Since I don't want to figure the tax advantages of Traditional IRA) At the end of 82 months his Roth balance would be $30,590.

Aj writes
Now if the OP were to have just kept making $325 payments each month, instead of making the diminishing minimum payments, he would have paid off the CC debt in 82 months (6 years, 10 months) and would have only paid $13,414.66 in interest, while gaining $14,487.04 in interest in the IRA during that 82 months, still coming out ahead by leaving the money in the IRA.


This leaves him with a traditional IRA balance of $34,487.

I think we can agree that age 57 it is better to have a Roth IRA worth $30,590 vs a traditional IRA of $34,487.
Print the post  

Announcements

The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement