Ask the consultant. I am 81 with a mortgage of $118k and an IRA worth $110k.Should I withdraw from my investments to pay off my mortgage?
I am 81 years old. I have a mortgage balance of $118,300. I also have an individual retirement account (IRA) of $110,000 invested. Should I withdraw the money from my investment and put the money down the mortgage?
– Octavio
The best choice for you will depend on what the rest of your finances are like and what your ultimate goal is.Regardless of why you’re asking this question, I think you should consider how much it might affect your cash flow. on as well as your flexibility to absorb unexpected costs.
Ask the consultant. I am 81 years old with a mortgage of $118k and an IRA worth $110k.Should I withdraw from my investments to pay off my mortgage?
Think about what made you ask this question in the first place.The optimal choice for you depends in part on your personal “why.”
Do you want to do what will lead to the highest financial return? In that case, this is more of a math problem. Comparing your mortgage rate to your expected return on investment and the risks involved will be a key element.
Want to simplify things? If so, and you can get rid of the mortgage entirely, this will certainly do it. You’d get rid of two accounts, with both payments, withdrawals, and tax filing implications. I made decisions that weren’t strictly justified on the table because they would reduce the complexity for me.
Do you have concerns about your heirs? I’ve had conversations with retirees who didn’t want to leave their beneficiaries with an unpaid mortgage. If that’s part of what drives you, talk to an advisor and attorney about your estate planning. They’ll help you understand yours options and will be able to guide you.
What is the immediate impact on your budget and cash flow?
Ask the consultant. I am 81 years old with a mortgage of $118k and an IRA worth $110k.Should I withdraw from my investments to pay off my mortgage?
Whatever your reason, make sure you don’t leave yourself without enough size liquid assets.
Do you take money out of your IRA regularly and use the money as part of your regular budget?
One thing I wonder about this particular point in your situation is that taking out the entire balance will not completely eliminate the mortgage.You will still have the payment, but without the IRA paying it off.
Assuming this is traditional tax-deferred IRAyou have to pay taxes on the whole amount, so be sure to factor that in. But even if we ignore the tax effect, you’ll still owe about $8,300 on the mortgage : If not, can you comfortably cover the payment until it’s paid off without relying on an IRA to be sure you’re not behind financially? corner where you have a mostly paid house but then struggles to catch up.
You may not rely on an IRA at all. If you can live off your Social Security, pensions, or other savings, that’s great. You may only be taking required minimum distributions (RMDs). that you have to do from an IRA and don’t need the money to get by.If that’s the case, of course, this is less of a concern.
Consider what makes you ask this question, plus the cash flow implications and tax implications of withdrawing from your IRA. Those considerations will help inform your final decision.
Brandon Renfro, CFP®, is a financial planning columnist and answers readers’ questions about personal finance and tax topics. Email AskAnAdvisor@smartasset.com and your question may be answered in a future column.
Please note that Brandon is not a member of the SmartAsset AMP platform, is not an employee of SmartAsset, and has been compensated for this article.
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