Next year, I am considering an interesting strategy. Although my fiancé will qualify for a Roth IRA for the 2007 tax year, our marriage will make her ineligible for the 2008 year.
Unfortunately, I don’t think we are going to have the cash in hand to fully fund the Roth by the tax deadline. Between the wedding and honeymoon (we plan on paying cash for both), cash is going to be a little tight going into the summer. I am considering tapping the HELOC to fully fund her contribution for the 2007 tax year.
This is my thought:
1. At her 2007 tax bracket, a Roth IRA is a great deal.
2. We are unlikely to have the opportunity to fund a Roth anytime soon. Even if we could, our combined tax bracket will make it much less attractive.
3. Although our finances are OK, we are a little light in the emergency fund. Because we could withdraw our contributions without penalty, the Roth offers us a chance to have an extra $4,000 set aside for emergencies. While not a good long-term solution, it gives us a little cushion until we have time to add to our cash position.
4. I figure we could pay off the loan within 6 months.