Comments on: 0% Balance Transfer To Fund Roth IRA?

By: tinyhands

tinyhands — Mon, 25 Jun 2007 20:01:24 +0000

In my mind this is equivalent to asking if you should invest a 12-month 0% APR loan in an 18-month (or more) CD: You better only do it if you’re SURE you can pay off the debt, because you’re going to going to wish you hadn’t if you can’t.

By: Patrick

Patrick — Fri, 22 Jun 2007 13:20:52 +0000

Wow. I hadn’t thought of that scenario. Your answer for paying into a Roth before the end of the tax year is a good one.

Credit card arbitrage is not for everyone, and if you have researched it and determined it is a risk you can assume, then I agree, the 2 scenarios you laid out are just about the only ones where doing a balance transfer to fund a Roth is a good idea. The only other scenario I can think of that may make it worthwhile would be expecting a windfall of cash such as a bonus, raise, commission, etc. which would be enough to cover the fully funded Roth. Then you can pay the minimum on the credit card balance, then pay it off in full just before the interest kicks in.

By: Richard

Richard — Thu, 21 Jun 2007 06:14:15 +0000

Err.. keep in mind that even contributions are subject to withdrawal penalties within the first few (5?) years of opening….

By: CPA1298

CPA1298 — Wed, 20 Jun 2007 22:38:55 +0000

In January 2006 I took out $16k to max out the Roth IRAs for 2005 and 2006; it turned out great when I made a tax-free 18%. Paying them off was a little rough; I had the cash flow, but only barely.

By: Tim

Tim — Wed, 20 Jun 2007 21:02:00 +0000

if you have the money already, i’d do it in a heart beat. not only will you earn interest on the money you already own, but you will potentially start earning return on the $4k in the roth. if you are pretty secure in your finances and have the amount budgeted over the next 12 months, i’d still do the BT.

By: jim

jim — Wed, 20 Jun 2007 17:21:18 +0000

Sorry alex

By: alex

alex — Wed, 20 Jun 2007 16:51:54 +0000

I realize the wise answer is usually “It Depends” but this answer bores me. There is something more entertaining about unwise, screaming, jumping up and down answers. I demand such answers from this blog. Less wisdom, more bread and circuses!

By: plonkee

plonkee — Wed, 20 Jun 2007 16:38:49 +0000

If you don’t have the cash now, but have the space for the contribution in your budget (i.e. you have $500 pcm available for 8 months) and you did balance transfer arbitrage now, if the market goes up over the year you will have made money.

Unless I’ve got something wrong?