Everyone hoping to retire someday knows that they’ll need a good investment plan to make that happen. With more and more companies defaulting on their pension obligations and Social Security heading for stormy waters, more and more consumers are realizing that they alone will be providing for their retirement. Individuals will have to use individual retirement accounts and other tax-advantageous retirement accounts in order to make sure there’s money around when age 65 hits.
There’s always the question of where one should put their investments for retirement. There’s the standard set of mutual funds, stocks, bonds, gold and real estate, but there’s another investment that you can make that will pay a guaranteed rate of 14.57%. This may seem like an odd number to have a guaranteed rate of return, which is true, but 14.57% is the average standard fixed rate for credit cards as of August of 2007 according to bankrate.com.
Think about it for a second. For every one-hundred dollars of credit card debt that you have, you are paying on $14.57 a year in interest. If you didn’t have that $100 of credit card debt, you wouldn’t be paying that interest leaving more money in your pocket. It would be just the same if you kept the credit card debt and found an investment that paid that much in return.
Chances are you do have some credit card debt to take care of, so this is going to work for just about everyone. MSN Money tells us that the mean average for credit card debt in North America today is over $8,000! This statistic is of course skewed upward since there are a small percentage of families which have well into the six figures of credit card debt because of severe financial irresponsibility, but most families have some amount of credit card debt that needs to be taken care of.
14.57% is an amazing rate of return that’s guaranteed. You might be able to get something similar to that in the market over a long period of time, but it’s certainly not guaranteed. Out of all the guaranteed investments out there, you’ll be lucky to get 6% or 7%. Paying off your credit cards will net you twice the rate of return any investments that are almost always guaranteed, such as money market accounts, savings accounts, and certificates of deposit.
If you have a lot of savings or money in a non-retirement investment account, take it out and pay off your high-interest consumer debt. You wouldn’t borrow on a credit card to put money into a savings account! The same mathematics apply here! If you have any credit card debt, take care of it immediately. Paying it off is going to give you a much better rate of return than if you were to put money in an investment account.
