What should I do?????

[eromro2]

I need some financial help! I recently retired and took a buyout from the company I worked for and I am trying to decide what to do with a bill I have. I have a home equity loan that has a 23,000. balance on it with a 8 % interest. Should I take some of the money from the buyout and pay this off completely because I am only getting about 5.5% interest on the buyout money. This is the only bill I have besides a mortgage so then I would be debt free. Does this make sense to do this any help is greatly appreciated.

[LuxLiving]

I'd say it seriously depends on your other retirement assets and the income streams you have set up for surviving retirement.

Do you have any low interest rate CC's w/high enough limits that you could balance transfer this amount?

[poundwise]

You don't say how much the total buyout figure was, however, I don't know that it would affect my response.

I'd pay the HEL off in-full, this month, and be done with it.

[boomeyers]

I agree with Lux, do you need it for your retirement? If not, pay that sucker off and be free!

[jIM_Ohio]

You didn't paint a big enough financial picture for me to suggest one way or other.

In general it does not make sense to pay off house while working (meaning invest any proceeds in investments which historically return 7-12% while borrowing money at rates which approach 5-6%.)

In general when retired, it makes sense to be debt free.

Paint a more complete picture of retirement assets, asset allocation, and income situation, and I might add more.

[disneysteve]

Perhaps I'm missing something, but I don't know if the rest of the financial picture makes any difference. If OP keeps the money earning 5.5% in savings, he is losing ground with an 8% loan, even if the interest is deductible.

I'd say to pay off the loan regardless of anything else.

The only exception would be if you could invest that money in something earning a higher rate than what you are paying on the loan.

[jmjj215]

I'd like to know the whole picture as well.

[disneysteve]

I'd like to know the whole picture as well.

I'm all in favor of more info, but can someone explain how the "big picture" might change your advice in this particular case?

[jIM_Ohio]

I'm all in favor of more info, but can someone explain how the "big picture" might change your advice in this particular case?

Sure-

if this person was behind on accumulating a retirement nest egg and could put this money into some dividend paying stocks in a taxable account, then work another 2 years to aggressively pay down mortgage... I think overall picture would be better than paying off mortgage, then working to fund retirement.

Because of interest rate/return rate differences, the longer the money stayed invested before tapping into it, the better the financial outcome.

[Ima saver]

I would pay it off as soon as possible.

[disneysteve]

Thanks Jim. I agree. If OP is willing to take more risk with this money, he may be able to outperform the loan interest rate. I guess I was looking at it strictly as stated, that the money would otherwise sit in a savings account a 5.5%. If the choice is pay off the 8% loan or hold the money earning 5.5%, that's a simple question. If we add more options, I'd agree that there might be a better choice.