Is this a good idea?
2007-07-29 09:58:26 · 5 answers · asked by Bette 1 in Business & Finance ➔ Personal Finance
There probably isn't a right or wrong answer to this.
Obviously, you can withdraw the money from the 401k penalty free because of age (assuming it is his 401k) but it would be taxed as ordinary income.
A lot depends on your other income. If you withdraw the $52k in one year then 85% of the social security would end up being taxed.
Personally, I would withdraw enough each year to make a big dent in the mortgage but a small enough amount to stay under the limit for taxation of the social securtiy. If you both are over 65, you can make up to $19,600 (I think) without paying a dime in federal income taxes.
Meet with an accountant and he or she can run some numbers for you.
2007-07-29 10:15:10 · answer #1 · answered by Wayne Z 7 · 0⤊ 0⤋
Another thing to consider is the benefit (or lack of benefit) from the mortgage interest deduction. The interest paid on the mortgage is probably worthless to you as a tax deduction for several reasons: the standard deduction for a married couple over 65 filing jointly was $12,300 in 2006 and will probably be higher in 2007. The interest paid on the remaining $52,000 mortgage balance shouldn't be more than $3,640 (7% interest rate assumed). You would need to have over $8660 in other itemized deductions to see any tax reduction due to the mortgage interest paid.
If you withdraw $52,000 from the 401k to pay off the mortgage your taxable income will increase by $52,000. However, in future years you will need to withdraw less money from your 401k (by the amount of the monthly mortgage payments) and thus have a lower taxable income.
2007-07-29 10:30:38 · answer #2 · answered by skipper 7 · 0⤊ 0⤋
You need to "do the math" for each of a number of scenarios:
Are you still earning a wage? Do you file taxes jointly? Your husband will be taxed on 401(k) withdrawals at his regular income tax rate, if you file together you can still write off some interest (if you are still working & any interest is still owed)...
Sometimes it's worth paying off just so you know it is gone!
Best wishes!
2007-07-29 10:08:14 · answer #3 · answered by Anonymous · 0⤊ 0⤋
Answer this question to get the answer.
What rate of interest are you paying on your mortgage?
What rate of interest are you receiving on your monies invested?
I think you will find it will be better to pay off your mortgage
You should speak to an Independant Financial Advisor and go by his advice
If you live in UK ignore advice from "Thin Kaboutit" as he is from USA
2007-07-29 10:07:28 · answer #4 · answered by brianfromnorthernireland 3 · 0⤊ 0⤋
Depends on how much you have in your 401k.
2007-07-29 18:49:23 · answer #5 · answered by Anonymous · 0⤊ 0⤋