Date: Sun, 9 Oct 2005 11:06:36 -0500
From: revheck@linuxwaves.com
Newsgroups: misc.invest.financial-plan
Subject: Re: Borrow to fully fund retirement accounts?
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HW "Skip" Weldon wrote:
> On Sun, 9 Oct 2005 06:18:58 -0500, revheck@linuxwaves.com wrote:
>
> As for the tax rate profit from deducting the contribution - I'd
> hesitate to call it "profit".  The tax saving is deferred, not free.
> You'll pay it back later.


Yes, I should not have called it "profit."  However, I can think of
several reasons why you would end up with more total equity/money
at retirement by borrowing to fully fund your account.

1. You might end up in a lower tax rate at retirement, in which case
the original tax deduction  would be a profit.

2. In the long-run, diversified investment in stocks should grow faster

than the (tax-deductible) Heloc interest.

3. Home equity counts against parents available assets for
college aid calculations, but retirement accounts don't.  You might
end up with more college aid with this approach.

4.  In case of bankruptcy, creditors can take your house, but they
can't
take your retirement accounts.

Finally, many people may not be maximizing their retirement
contributions, because they are afraid they may need those funds
sometime during th year. If they have a good line of credit, however,
they could go ahead and sign up for maximum retirement contributions.
If they need the money, they can draw on their line of credit;
if they don't, or if they pay down the line later,
they have contributed (and saved) more than they would have.

This works to encourage more savings as long as people don't abuse the
line
of credit by drawing out more than they contribute! (But I'm talking
about 
disciplined people here.)