Catch up contributions using HELOC payments?

[gingersnap]

I am an older worker hoping to retire in 10 years and only have 5 years working for the G. I am making extra payments to the mortgage and HELOC to help insure retirement in the 10 year time frame. My question is should I be taking the extra payments that I am making on the HELOC (rate 4.25) and put that towards the TSP catch up?

 

[Frixxxx]

I am an older worker hoping to retire in 10 years and only have 5 years working for the G. I am making extra payments to the mortgage and HELOC to help insure retirement in the 10 year time frame. My question is should I be taking the extra payments that I am making on the HELOC (rate 4.25) and put that towards the TSP catch up?

I would say no. Caveat being you would have to make more than 4.25% on that money in TSP.

 

[alevin]

I am an older worker hoping to retire in 10 years and only have 5 years working for the G. I am making extra payments to the mortgage and HELOC to help insure retirement in the 10 year time frame. My question is should I be taking the extra payments that I am making on the HELOC (rate 4.25) and put that towards the TSP catch up?

If you are payingdown the HELOC @4.25%, that's an easy 4.25% you are "earning" by not paying it out. If you were to put those extra primary mort. payments into paying down the Heloc, instead of paying both down at the same time, you might be able to pay off both even faster. the sooner you paid off the HELOC at the higher interest rate, the faster you can put those payments into paying off the mortgage at the lower rate (or put those freedup HELOC payments to work in tspcatchup.

You need to look at whether you'd be saving more in interest at that point, still owing a mortgage, vs what you could earn in tspcatchup. what's your current primary mortgage rate?

 

[markmars]

I would say no. Caveat being you would have to make more than 4.25% on that money in TSP.

You might make more in the TSP you will be saving 4.25% by paying off the HELOC. The question is do you want to take the risk?

 

[OBGibby]

There *may* be tax advantages to keeping the mortgage/HELOC active vice paying them off in full.

 

[clester]

I also say no. It's the equivalant of borrowing to invest. Imo it's always best to pay off debt first. Especially if you're getting close to retirement.

 

[jpcavin]

There are tax write off advantages to having a mortgage unless the write off is too small to offset the standard deduction. Would have to take into account the total debt. Have to also weigh the tsp contributions and compounded earnings vs mortgage interest. Hard to answer this question without the big picture.

 

[Boghie]

I am an older worker hoping to retire in 10 years and only have 5 years working for the G. I am making extra payments to the mortgage and HELOC to help insure retirement in the 10 year time frame. My question is should I be taking the extra payments that I am making on the HELOC (rate 4.25) and put that towards the TSP catch up?

While the risk is minimal, the HELOC loan could be called by the lender. Don't say it can't happen. It happened during 'The Great Recession'. So paying it down reduces risk and is identical (as Alevin states) to earning a fixed 4.25% interest rate. The 'G Fund' earns you about 2.5%. The 'F Fund' is behaving much more like a stock mutual fund than a bond fund - its earnings are capital gains. Also, many HELOC loans are fixed for a specific time and then adjust based on something once or twice a year. My bet is that such a loan adjusts up. It always seems to work like that:cheesy:.