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Use HELOC or Retirement Funds to fund home project?

Submitted by brucegalvin@rev... on 3 August 2009 - 8:33pm

Not sure where to put this question. I don't know how to test the two scenarios. Here is the background;

Given the change is tax laws to make alternative energy (geo thermal and/or solar)very attractive (30% tax credit with no maximum) I want to figure out which approach would be better to make my home energy neutral (no carbon foot print) by installing a solar system that will provide enough energy to cover heating/cooling of home and hot water. The cost of the installation is $67,000. The 30% energy tax credit is on $50,000 of this project plus another $1,500 for heat pump tax credit.

How do I pay for this? I am over 59 1/2. I can withdraw the money as an in-service withdrawal from my 403(b) account (I have significant money to do this) or I can take out a HELOC initially and then pay it off using my in-service withdrawal in the following two years.

Can you tell me how to test these two scenerios to figure out which will provide the higher standard of living?

Thanks,
Bruce

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Submitted by Laurence Kotlikoff on 4 August 2009 - 4:33pm.
1

Hi Bruce, You want to set up a base case where you enter your current energy costs as special expenditures. Then set up another profile where you enter the costs of the new system as a special expenditure, the tax credits as special receipts, and the lower costs of energy over time as lower special expenditures than in the base case. Then compare living standards across the two cases. Please call me at 617834-2148 to discuss further. best, Larry

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