I will be 60 in Sept and my husband is 62. I owe 18,000.00 on my house and we have about 22,000.00 in our IRA's. I also have a 401 and will get a pension when I retire along with SS. I want to cash out our IRA's and pay off the house. The 600 we now pay for house payment will continue to go into the account we have set up and we won't touch it until I retire.
My questions. I know at our age we can now get the money out without paying a penalty but will have to pay taxes on it. I am thinking about waiting until Jan to pay the house off and then that will give me an entire year to accumulate money in that account for the taxes when they come do.
Does this sound like a smart move? I will have the house paid off in 3 years if I wait but if I do it now I will end up from my figures with more money in the bank. Just wanted another opinion before we move ahead.
Fri Jul 11, 2014 5:51 pm
oldguy Senior Member
Cash: $ 715.00
Joined: 21 May 2006
You are probably earning more from the IRA than the mortgage interest is costing? Eg, if the IRA is earning 7% or 8% and the house loan is costing only 5%, you are better off keeping the loan and letting the 7% or 8% fund compound.
Plus, if you sell the $22,000 IRA while you are both still working the Fed & State tax will probably cost over $6500 (leaving you with only $15,500). It might be better to hang on to the IRA and sell it a little at a time at age 70 1/2.
Fri Jul 11, 2014 9:13 pm
Wino Senior Member
Cash: $ 113.80
Joined: 03 Aug 2012
I'm with oldguy on this one. Instead of paying off the mortgage lump sum, and instead of paying it off as scheduled, pay it off as quickly as you can without touching the IRA. Put $800 per month toward it, or $1000 per month if you can afford it.
I agree that paying off your mortgage before retiring is a good idea, but you stated that you have not yet retired. Use your income to pay it off and let your IRA continue to grow.