Newspaper article The Topeka Capital-Journal

Paying Interest May Be Better Choice Than Cash

Newspaper article The Topeka Capital-Journal

Paying Interest May Be Better Choice Than Cash

Article excerpt

Dear Bruce: I retired two years ago at 60. I was a factory worker for 40 years and was lucky enough to belong to a profit-sharing plan and then a 401(k). My retirement is over $800,000. I am drawing a little over 5 percent right now.

I would like to purchase a smaller motor home ($40,000 to $50,000). My financial adviser said no problem, but he suggested buying it at a low interest rate and he will make the payments out of my account. I would like to pay up front so I won't have a loan hanging over my head. I was wondering what you thought. -- D.J.

Dear D.J.: If you are dead certain that you don't want a debt, then pay cash and go!

However, the other part of the equation is, how much is that $50,000 earning now? If it is earning more money than the low interest rate the motor home would cost you, then you are clearly better off to take the low interest rate and keep the money invested. …

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