If you're new here, you may want to subscribe to my RSS feed. If you have any questions, please see my policies page or if you would like to contact me, you can do so here. You can find out more about me here. I sincerely thank you for visiting!

In just my last post I commended the “expert” on CNNMoney on his recommendation of pairing a Roth IRA with a 401(k). Unfortunately, he’s back to missing the mark with today’s installment.

The question had to do a with a $3,500 windfall from selling a car. The reader asked if he should put it into a Roth IRA or pay down his $8,000 credit card balance first. He starts out all good and logical by suggesting to pay down the debt because the reader will never approach the return necessary to make the investment have a higher return than the interest rate on his credit card.

Then he goes off the reservation and discusses why the reader should actually open the Roth with the majority of the money if not with all of it. It is true that people are irrational and may just spend the credit card debt back up. However, since the person is asking the question it seems like they have realized that they need to save rather then racking up credit card bills. The reader is paying more than the minimum already, so it doesn’t sound they’re completely financially strapped.

It’s hard to tell intent from a reader question, but I’d have a hard time telling someone to do anything other than pay off credit card debt first. Free Money Finance is having a similar discussion over a similar USA Today article that punted and said to do both (gee, you think?). Overall, I would always suggest plowing the money into credit card debt and then using the free cash to go into savings (emergency or retirement).  

Technorati Tags: Roth IRA, credit card, credit card debt