Ask an Advisor: I'm 81, Have a $118K Mortgage and a $110K IRA. Should I Withdraw From My Investments to Pay off My Mortgage?
Brandon Renfro, CFP«
I am 81 years old. I have a home mortgage balance of $118,300. I also have a $110,000 rollover individual retirement account (IRA) invested with a bank. Should I withdraw the money from my investment and put the money to lower the mortgage?
The best choice for you is going to depend on what the rest of your finances look like and what your ultimate goal is. Regardless of why you are asking this question, I think you need to consider how much it could affect your cash flow as well as your flexibility to absorb unexpected expenses.
Consider these questions as you consider your next move. ( Looking for help with a financial question? This tool can help match you with potential advisors.)
What Is Your Goal With This Decision?
Consider what made you ask this question in the first place. The optimal choice
for you depends in part on your own personal ''why.''
Do you want to do whatever is going to result in the highest financial return?
In that case, this is more of a math problem . Comparing the interest rate on
your mortgage with the return you can expect on your investments - and the
associated risks - will be a key element.
Are you wanting to simplify things? If so, and you can get rid of the mortgage
entirely, this would certainly do that. You'd remove two accounts with the
associated payments, withdrawals and tax-filing implications of both. I get it -
I have made decisions that weren't strictly justifiable on a spreadsheet because
they would reduce 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 out of concern
that they might not be able to keep the house. If that's part of what is driving
you, talk with an advisor and attorney about planning your estate. They will
help you understand your options and be able to guide you.
These are just some examples of common reasons you may be thinking about this.
My point in bringing them up is to suggest that you should first solidify for
yourself why you are considering it and what you hope to achieve. This is a
necessary step for making a proper choice. ( Looking for help with a financial
question? This tool can help match you with potential advisors.)
What Is the Immediate Impact on Your Budget and Cash Flow? Whatever your reason is, make sure you don't leave yourself without sufficient liquid assets.
Do you take regular withdrawals from the IRA and use the money as part of your ordinary budget? If so, how would depleting the IRA impact your cash flow? Do those withdrawals cover an appreciable amount of your spending?
One thing that sticks out to me about this particular point in your situation is that withdrawing the entire balance wouldn't completely eliminate the mortgage.
By The Associated Press, Copyright 2023
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