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Old 05-02-2015, 06:23 PM
 
2 posts, read 2,114 times
Reputation: 11

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Well, I'd like to thank each one of you for your advice, it is really tempting the option of cashing out but at the same time I been uneasy about if I'm doing the right thing, no seems to be clearer that holding my horses and keep doing what I'm doing (living tightly) it's the way to go... once again thanks to all. ;-)
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Old 05-02-2015, 06:59 PM
 
Location: Durham NC
1,190 posts, read 1,299,327 times
Reputation: 926
Quote:
Originally Posted by Burkmere View Post
I know it's controversial, but I'd always want a mortgage if I had a house! Especially at these rates!
Pay 10 to save 5? I would not take money out of a retirement account. Just try to pay down what you can every month no matter how small of an amount.
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Old 05-02-2015, 07:07 PM
 
Location: Michigan
2,248 posts, read 1,471,811 times
Reputation: 5172
Get some housemates, and charge them the prevailing rent in your area! Use that money to pay back your mortgage, over and above your normal monthly payment. It'll be paid off in no time, and then you can start building up your money for retirement.

P.S. It would be easier to answer with more options, if we knew your age, income, and monthly outgo for bills.
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Old 05-02-2015, 07:10 PM
 
Location: Florida
4,375 posts, read 3,712,866 times
Reputation: 4116
Very bad idea to cash out and payoff the mortgage. Maybe get some help with budgeting.There maybe some ways to cut your expenses.
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Old 05-02-2015, 07:24 PM
 
Location: Grove City, Ohio
10,138 posts, read 12,400,312 times
Reputation: 13987
Quote:
Originally Posted by frgg View Post
Hello everyone:

I'm 49 years old and I count with about $100k on a retirement plan, but also I owe about $96k for the mortgage of my house, I was planning to cash out our money from the retirement plan to ease the monthly payments and at the same time to start saving for the future little by little to replenish the money we used for the mortgage which by the way I never been able to save for any 401k programs because the tight of the economy; so as I said this is my chance to pay off my house and start fresh with no house payments, so my questions to all of you is to advise me if I'm doing the right thing or maybe a mistake using our money this way...I need your help please.

FRGG
I will echo in with everyone else... huge mistake!

On top of federal income tax, along with very possible state income taxes if you live in a state with a state income tax, there's that pesky 10% penalty of early withdrawals before the age of 59 1/2.

Take out $96,000 and pay at least 35% on federal and state income taxes leaving you with $62,400. Subtract from that the 10% early withdrawal penalty and there goes another $9.600 leaving you with $52,800 which means you will still have a mortgage of $47,200 after squandering nearly all your retirement savings.

Huge mistake, don't do it!
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Old 05-02-2015, 08:45 PM
 
Location: Bend Or.
1,126 posts, read 2,460,899 times
Reputation: 948
Quote:
Originally Posted by nicet4 View Post
I will echo in with everyone else... huge mistake!

On top of federal income tax, along with very possible state income taxes if you live in a state with a state income tax, there's that pesky 10% penalty of early withdrawals before the age of 59 1/2.

Take out $96,000 and pay at least 35% on federal and state income taxes leaving you with $62,400. Subtract from that the 10% early withdrawal penalty and there goes another $9.600 leaving you with $52,800 which means you will still have a mortgage of $47,200 after squandering nearly all your retirement savings.

Huge mistake, don't do it!
It may seem that your tax bite would not be that big, but realize everything you take out is added to your normal taxable income to calculate your tax bracket. So 35% is probably pretty accurate. And also your state tax is figured the same way so it could be pretty large. and the money you have to take out to pay these taxes? guess what? Its taxable! Welcome to the world of the 401K

So right now between these two accounts you are net positive 4K.
After taking your 401K out and paying your mortgage down, which would probably be closer to 55K. you are net - $55,000 You still have a 55,000 mortgage and No 401K at all.
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Old 05-02-2015, 10:02 PM
 
Location: Saint Johns, FL
1,193 posts, read 944,320 times
Reputation: 1267
I'll agree. Don't do it !
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Old 05-03-2015, 04:27 AM
 
3,753 posts, read 9,611,799 times
Reputation: 7050
I would suggest almost making a game out of how little money you can live on. There is a blog from Cornwall, England where a woman and her husband did just this to pay off a huge debt. They could not get out of their big house because of the debt and got mad.

They paid off the debt, started on the mortgage and finally were able to sell the albatross and move to a much smaller house. They continue to save on everything and enjoy a really nice life.

Frugal Queen

I also recommend an old book from the library, Your Money or Your Life. I like how it makes people think about money.

Your question is the biggest problem with self directed retirement accounts.
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Old 05-03-2015, 04:30 AM
 
71,778 posts, read 71,875,234 times
Reputation: 49331
personally trying to live like a pauper doesn't sound like a game i would want to play.
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Old 05-03-2015, 05:14 AM
 
Location: Central Massachusetts
4,800 posts, read 4,855,118 times
Reputation: 6379
Quote:
Originally Posted by frgg View Post
Hello everyone:

I'm 49 years old and I count with about $100k on a retirement plan, but also I owe about $96k for the mortgage of my house, I was planning to cash out our money from the retirement plan to ease the monthly payments and at the same time to start saving for the future little by little to replenish the money we used for the mortgage which by the way I never been able to save for any 401k programs because the tight of the economy; so as I said this is my chance to pay off my house and start fresh with no house payments, so my questions to all of you is to advise me if I'm doing the right thing or maybe a mistake using our money this way...I need your help please.

FRGG
Quote:
Originally Posted by frgg View Post
Well, I'd like to thank each one of you for your advice, it is really tempting the option of cashing out but at the same time I been uneasy about if I'm doing the right thing, no seems to be clearer that holding my horses and keep doing what I'm doing (living tightly) it's the way to go... once again thanks to all. ;-)


Good and wise choice. At 49 you would not be starting out fresh anyway. Some interesting tips towards the end. "Rent a room or two out!" Hmmmmm might not be good if you are married though my house seems to work out since I am renting to family. Well not exactly renting. I take care of nephews from Korea while they go to school. The parents pay us to take care of them. I am in a unique situation so not many can do what I do.

Still there are many things you can do but that would not work until you are 59 and a half. If you were there I might say okay but..... you would have to take into consideration the tax burden you would incur. You would need 30% more then the mortgage to make it a clean pay out. In 10 years you would have that but in 10 years your mortgage will be 10 years older and less for pay out.
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