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Should I pay off the balance of a loan with money from an investment account?

I am in my late 50's and inherited a substantial IRA, investment account, and large home. Instead of paying PA inheritance tax out of the investment account, my financial advisor had me take out a line of credit at a bank that was secured with the investment account while I sold the house. After estate expenses, I was able to pay off $330,000 of the loan and have a balance of $220,000. I asked my advisor to pay the balance from the investment account and he is dragging his feet. He wants me to pay it in smaller chunks while I pay some principal and all the interest due each month (approximately 4.3 percent variable). I want to pay the whole thing now. He is so hesitant about me touching this account. Why would I not want to pay the balance off now?

Banking, Debt, Estate Planning, Choosing an Advisor, IRAs
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April 2019

I think the only reason to hold on to the debit balance is if your investment advisor is earning more than 4.3% on the portfolio.  If that's the case then by paying it off, you would forego the spread between the return you are getting and the 4.3% interest cost.  We hold leveraged portfolios for clients and invest the assets (at least partially) in income-generating preferred and common stocks that produce about 7%.  We do this because the margin rate is about 3.5% so the client nets about 3.5% on the money he has borrowed.  I think your advisor might be doing the same thing.  Depending on the size of your "substantial" investment account, a debit balance of $220,000 might be sustainable and actually work to your advantage.  In fact, if you hold a lot of common stocks, it has already helped you a lot because the market is up about 17% this year (and up slightly from its previous highs last September).  If you are concerned about investment risk then it might be an OK time to sell some of the investments and retire the loan.  But as I mentioned, it all depends on what you are earning from them.

April 2019
April 2019
April 2019
April 2019