Should I pay debt with my IRA? or should I invest the IRA?

2 Replies

Hello ALl! first post here... My name is Adriana Vergara, I´m 35, single, no kids. Journalist background (worked in CNN for 8 years) I Now I have a soccer school in Atlanta GA, and also I became an apprentice in real state thanks to COVID and my boyfriend.

I´m trying to Straiten the boat here, to be able to start buying real estate...

So....

- I´m $34,373 in debt on credit cards. (I know.. it just happened and now it's time to make things right).
- At the same time, I have an IRA with a $68,806 net worth.

I have spent the past year helping and learning with my boyfriend who´s a realtor and who 4 years ago started doing flips. I have spent the past months reading, learning, listening to podcasts, youtube channels. etc.. and definitely I know I want to do this, I want to start with something, so one day I can talk about my own rental portfolio.

I have never bought a house before, so I still have that option to buy with a 3 or 3.5% down, but of course, my DTI is just too high...

So... the question is... Should I withdraw part of the IRA to:

  • A- Pay the total of your debt!
  • B- Pay part of the debt (at least leave it in 30%) and use the rest for a downpayment
  • C- Don´t use your IRA money to pay the debt! just find the way to use someone else's credit (I have that option as well) you put the down and go 50-50 with that person on the property
  • D- YOU have no idea what are you talking about, TRY TO DO THIS INSTEAD (please give me some suggestions!!!)

Here´s the breakdown of my cards:

  • AMEX - $19,135 (I have an installment plan, at 7.99% APR, they won't close my account when I pay off the card) (credit line 22K)
  • VISA WellsFargo - $6,865 at 21.99% APR (credit line $7,350)
  • DISCOVER - $3.369 at 11.99% APR (credit line 7k)
  • CHASE Freedom - $5,003 at 22.99% APR (credit line $5,500)

I have no more savings.


About my income: I pay myself around 3K a month and I get a 20% commission on every transaction when helping my boyfriend representing sellers and buyers.

I'm so compromised with this, that I just sold my car (I had a loan for 19k and got 20.5K for it) I know I can deal without a car right now and I want to lower down my monthly expenses to see where else I can put my money.

So... is it a good idea to use the IRA money to pay debt? or how else can I use it?

PS. I already know about the 10% taxes that I'll get charged if I decide to withdraw from the IRA, I know that I will pay a penalty (not in the first 10K if I use them in a first house). But hey... I'm just trying to find a way to start from 0 or to at least do something.

Thanks all for reading all this way!! In advance, I appreciate all the comments and suggestions.

Best regards.
Adriana.

You are on the right track to recognize the debt is a major factor, specifically CC debt. I’m no expert but me personally I would get my finances in order. CC debt is nasty and the rates they charge can be brutal. I would try and consolidate those CC loans the best you can or also look at opening a separate account that has a 0% transfer rate for 12-18 months, transfer the debt and pay it off ASAP. Once you clean that up you can focus on buying investment properties and on your way to financial freedom! 

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you