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Payoff Mortgage

Posted: Wed Nov 07, 2018 7:03 pm
by dylanand
Ok, first world problems but..

$1M in non retirement assets
$600k in Roth IRA / $1M other IRA's/401k
4 Investment Props - all mortgages paid off finally and providing income
Age 48. Plan to retire / work part time now.
Only mortgage left is primary mortgage at $300k and I want to pay it off.

Thinking about $100k from Roth IRA and $200k from Assets - About $500k is in MM earning 2%
I would sleep better is mortgage is paid off and be debt free.
Should I use the Roth? Just don't know where to pay it off from.

Re: Payoff Mortgage

Posted: Wed Nov 07, 2018 7:56 pm
by megabad
What is the interest rate on the mortgage in question?

Re: Payoff Mortgage

Posted: Wed Nov 07, 2018 9:13 pm
by Mursili
I can't answer whether using your Roth is a good idea. What I can say, from many other similar threads, is that you can only know that paying off your mortgage is an optimized financial decision with hindsight. It depends on the future.

You did not ask whether you should pay off your mortgage, but rather how. I will not help you with that - and for that I am off-topic, I suppose.

Due to your age, I assume that you would use your Roth contributions for some of the payment and that you meet the requirements for withdrawing such contributions.

Re: Payoff Mortgage

Posted: Wed Nov 07, 2018 9:26 pm
by Patrick584
500k in MM? Why wouldn’t you pay it all from this fund and keep money in Roth. You can hold MM in Roth and it is just as liquid and you don’t have to pay taxes on the earnings. Tax shelters should be utilized as much as you can.

Re: Payoff Mortgage

Posted: Wed Nov 07, 2018 9:28 pm
by Watty
dylanand wrote:
Wed Nov 07, 2018 7:03 pm
$1M in non retirement assets
....
Thinking about $100k from Roth IRA and $200k from Assets - About $500k is in MM earning 2%
Why earth would you take the money out of the Roth when you have it sitting in a money market account?


I agree that paying off the mortage makes sense.

Re: Payoff Mortgage

Posted: Wed Nov 07, 2018 9:34 pm
by Gibby45
Does the 1M in non-retirement assets include the rental properties and the $500k cash? What is the interest rate on the primary residence? Are you definitely sold on paying off the mortgage? I would be very hesitant to pull money out of a Roth account to pay off a mortgage. That money would continue to grow tax free at a rate likely to be greater than the interest rate on your mortgage in the long run. Are you able to deduct the mortgage interest or are you taking the standard deduction? You would do better to have mortgages on the rental properties as that would be tax deductible and coupled with depreciation would reduce any tax owed on the rental income. Do you have any desire to leave money to anyone? If so, I wouldn't tap the Roth. My $.02 would be to use the rental income to pay the mortgage on the primary residence over the normal amortization schedule and let the Roth account grow. If you have made up your mind to pay off the mortgage then it seems the cash in the money market account is the best source (assuming it's not part of your retirement account(s)).

Re: Payoff Mortgage

Posted: Wed Nov 07, 2018 9:47 pm
by delamer
Patrick584 wrote:
Wed Nov 07, 2018 9:26 pm
500k in MM? Why wouldn’t you pay it all from this fund and keep money in Roth. You can hold MM in Roth and it is just as liquid and you don’t have to pay taxes on the earnings. Tax shelters should be utilized as much as you can.
My thoughts exactly.

Why would you give up the tax free earnings on the Roth, especially since you wouldn’t have any taxable gains if you use the MM?

Re: Payoff Mortgage

Posted: Wed Nov 07, 2018 10:38 pm
by Grt2bOutdoors
delamer wrote:
Wed Nov 07, 2018 9:47 pm
Patrick584 wrote:
Wed Nov 07, 2018 9:26 pm
500k in MM? Why wouldn’t you pay it all from this fund and keep money in Roth. You can hold MM in Roth and it is just as liquid and you don’t have to pay taxes on the earnings. Tax shelters should be utilized as much as you can.
My thoughts exactly.

Why would you give up the tax free earnings on the Roth, especially since you wouldn’t have any taxable gains if you use the MM?
+1 - Roth is the last money I would touch. Tax free money forever is something that is very valuable, why squander it?

Re: Payoff Mortgage

Posted: Fri Nov 09, 2018 12:21 am
by dylanand
Wow. Sorry just learning the forum. You all are awesome.
Mortgage rate is 4%. I just want to use as much non retirement assets as possible, I know that is counterintuitive but I sleep better at night that way. Not worried about retirement really. And the Roth IRA is in MM earning 2% and I am very defensive right now so I like the idea of paying all my loans off. If this was 2002 or 2009 then I would be much more bullish.

Re: Payoff Mortgage

Posted: Fri Nov 09, 2018 12:33 am
by dylanand
I mean I want to use retirement assets, as much as possible

Re: Payoff Mortgage

Posted: Fri Nov 09, 2018 12:36 am
by 3504PIR
You’ll pay a heavy price to pull IRA money to pay you’re mortgage. If you’re ok with the penalty, which I would think of as interest, then do it. Personally, I wouldn’t pay extra to the government to pay it off.

Can you post if you’ve calculated the penalty and how much it would be to do this? Given the amount vs interest due until payoff would help.

Re: Payoff Mortgage

Posted: Fri Nov 09, 2018 1:05 am
by Watty
dylanand wrote:
Fri Nov 09, 2018 12:33 am
I mean I want to use retirement assets, as much as possible
Why you said you had a million dollars in non-retirement assets. It still is not clear why you would not use that to pay off the mortage.

Re: Payoff Mortgage

Posted: Fri Nov 09, 2018 2:47 am
by dylanand
Yea I am really wishy washy here and you all are right. I had read you can take out contributions anytime tax free (no penalty is my read, no 10%) and I contributed and paid taxes on the rollover as the one time contribution about 15-20 years ago now. I like having non-retirement assets as more options - more invest props, a larger primary house, or just other things. It really doesn’t make sense I guess. Thanks everyone for the input.