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Old 05-02-2015, 04:00 PM
 
2 posts, read 2,109 times
Reputation: 11

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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
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Old 05-02-2015, 04:10 PM
 
8,820 posts, read 5,121,165 times
Reputation: 10086
I think it is a huge mistake. You will not be debt-free, you will owe the IRS big time when next April 15 rolls around. Possibly your state too, if you live in a state with income tax. When that is finally paid off, you will not have much time left to save some money for retirement.

You'd be better off to stop contributing new money to your retirement accounts than you will be to cash them in. You still have 100k growing and compounding for you, and that is huge. Don't throw that away.

Instead, focus on your budget. How much can you divert to your mortgage each month? Do you have spending "leaks", expenses which can be reduced or even eliminated? Focus on how your 100k is invested. Do you have a reasonable asset allocation plan, and are you watching your costs?
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Old 05-02-2015, 04:10 PM
 
Location: Near a river
16,042 posts, read 18,967,079 times
Reputation: 15649
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
Instead of cashing out retirement, start making one or two extra payments per year to pay down the mortgage, it will go fast. I was able to do this by tightening our belt and with freelance on top of my day job. I do not regret that route.

Extra Payment Calculator ~ Amortization Schedules ~ Accelerated Payments
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Old 05-02-2015, 04:21 PM
 
2,293 posts, read 1,558,977 times
Reputation: 2737
Quote:
Originally Posted by newenglandgirl View Post
Instead of cashing out retirement, start making one or two extra payments per year to pay down the mortgage, it will go fast. I was able to do this by tightening our belt and with freelance on top of my day job. I do not regret that route.

Extra Payment Calculator ~ Amortization Schedules ~ Accelerated Payments
I know it's controversial, but I'd always want a mortgage if I had a house! Especially at these rates!
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Old 05-02-2015, 04:32 PM
 
Location: Whereever we have our RV parked
8,762 posts, read 7,693,193 times
Reputation: 14963
Saving is hard. Leave that money where it is. I agree with others. Make payments for more than the basic payment. You'll be amazed how much faster you can pay off the house
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Old 05-02-2015, 04:34 PM
 
Location: Mount Airy, Maryland
10,459 posts, read 5,920,270 times
Reputation: 16146
Even without a penalty do NOT cash our your retirement. Unless you are investing poorly your rate of return on your investments should be higher than your mortgage interest with rates being so low for so long.. Now you figure in the tax deduction of the mortgage and the tax penalty you will pay by cashing out a retirement account at this age and this is a no-brainer.
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Old 05-02-2015, 05:39 PM
 
Location: CT
3,461 posts, read 1,854,094 times
Reputation: 4614
Bad idea! Like some others have said, you'll take a huge hit on taxes, better to take their suggestion and make extra payments on your mortgage principle. Even if you stop paying into your IRA, your $100k, assuming a very conservative investment risk to net 6% over the next 17 years (when you reach FRA), you'd have over $268K, more than double! To pull it now you'll be throwing away $168K.
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Old 05-02-2015, 06:08 PM
 
4,948 posts, read 16,517,317 times
Reputation: 2866
Leave it since beside the tax hit you also get a ten percent penalty for taking the money out. so you still would owe on the house. Also you might go into a higer tax bracket
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Old 05-02-2015, 06:13 PM
 
Location: Idaho
4,621 posts, read 4,458,547 times
Reputation: 9035
DON'T DO IT!

If you do, you will come to rue that day. Listen to the wise people here.
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Old 05-02-2015, 06:15 PM
 
35,109 posts, read 40,202,457 times
Reputation: 62049
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

Why not sell your current home and pay it off then purchase a smaller home with smaller payments, maintenance and utility bills.
Hopefully you can get enough left after the sale of your home and that paid off to purchase a smaller home with cash.
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