Liquidating debt

The loan payment may be smaller than the monthly payment toward the debt and be at a lower interest rate.However, if you leave your job for any reason, your loan may either become due immediately or be treated as a withdrawal and subject to penalty.An example would be borrowing ,000 to buy a car that does not help you earn any more money at work. If we take a strict view and exclude debt taken on for the purpose of speculating, say, in the housing market, almost all of this mountain of new debt has been of the non-self-liquidating variety.And here’s the one thing we need to remember about this kind of debt: It represents future consumption taken today.

This can be a good option if you are paying a much higher interest rate on your debt than you are making on your IRA investments.In other words, a preference for a car today acquired via debt is really just another way of saying that having the car NOW has a higher ‘value’ than having a car’s worth of purchasing power in the FUTURE. And, finally, remember that there are only 2 ways to make a debt go away: 1) Pay it back 2) Default on it Unless you are the federal government in which case you can always go for the third option: 3) Print money to pay the debt.The federal government always favors this last option because so very few people correctly perceive the (inevitable) resulting inflation for what it really is, a hidden tax that erodes the value of all existing money, whereas everybody understands that raising taxes directly takes their money away.Withdrawals may also be taken from a Roth IRA, which is funded with after tax dollars.With this type of account, you can use the funds to pay off debt with no repayment needed.

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