Invest in IRA vs HELOC vs Family Loan

[Insanity]

Alright, I have a decision to make.  I am not sure what do with some extra money (I'll know the exact number within a few weeks).

1) Invest it in the Roth IRA/IRA for the tax break for 2013 Taxes
2) Pay off a HELOC (rate is about 6.5% )
3) Pay off a Family Loan (rate is low, but amount is high)

I'm thinking the answer will be do the investment in the Roth IRA and then use the benefit to pay down the HELOC?  The Family Loan isn't a "pressure" on the family - it is just something we will be paying a good bit every month to get rid of.  Thoughts?

[Bruised_Pepper]

6.5% isn't a guaranteed return on the market.  I'd consider paying down the HELOC first.  However, if you don't have an emergency fund, and you feel you need one, a Roth could satisfy that need.  (Just in case you didn't know, you can withdraw your contributions from a Roth IRA at any time)

EDIT: Also, you won't get a tax break for contributing to a Roth: it's taxed up-front.   If you're considering a traditional IRA, I would just pay the HELOC first, as you won't have the tax-/penalty-free withdrawals with a traditional (as far as I know). 

DOUBLE EDIT: OMG IT'S INSANITY!!!!!!!!!!!!!! 

[Wanderer]

Roth gives you zip benefit on taxes, but it's a good idea if you have no retirement savings.  It kind of depends on how old you are, how much you have in retirement savings already, and how much you expect to be putting into it in the next couple years.

The trouble with delaying putting money into a Roth or other IRA is once that time window passes, you lost the opportunity to invest the money.  It's often better to have put in $5k 10 years ago and nothing since than $10k today. 

On the other hand, it's also good to pay down 6.5% loans and pay back family members. 

[Insanity]

Thanks for the feedback..

Just to clarify a few things:
E Fund is well stocked (I should have probably paid off the HELOC before this anyway, but since the job situation is still in flux as you can tell by my other post, I've been hesitant to deplete the E-Fund).

Retirement - We do have money in retirement.  I used some of my "salary" from my contract position and put it in a Solo 401K for a salary deferral investment, plus I did have some regular 401K investment. 

I think I just answered my own question -- between cash, investments, and credit there is no reason to still have that HELOC.

Thanks for the sounding board :)

[Thegoblinchief]

Yeah, I'd pay the HELOC off. Once I get debt-free, I'm going to be extremely debt-averse, except maybe...maybe in business ventures.

I think a guaranteed 6.5% return is pretty spiffy (happens to be the interest rate on a large portion of my debt, so except for tax-deferred contributions, that's where extra $ is going).

[Cheddar Stacker]

Sounds like you have it figured out, but whether you pay off the HELOC or not, you might want to try to get a better rate on that. Even if you plan to carry the balance at $0, if you ever plan to use it for something it would be nice to have a more competitive rate. Mine is a variable rate at 3.75% right now.

[Insanity]

Sounds like you have it figured out, but whether you pay off the HELOC or not, you might want to try to get a better rate on that. Even if you plan to carry the balance at $0, if you ever plan to use it for something it would be nice to have a more competitive rate. Mine is a variable rate at 3.75% right now.

That rate was pretty much driven by the amount of the loan in relation to the appraised value of the house.  Which was a bummer at the time.  We thought we were going to get a lot better. They also have a $75 fee associated with it (and this is through the bank where we have our savings/checking and kids accounts at!).  Definitely need to look elsewhere for a HELOC. 

Thanks for pointing that out.