Ask Terry Questions Car Loan Payoff

Car Loan Payoff

By Terry Savage on April 20, 2024 | Financial Planning / Retirement

I will be 73 in April 2025 and will need to withdraw from my IRA. I have a 17,000.00 car loan with 8.9% interest. The loan is for 7 years so I would pay 4,700.00 in interest. Should I withdraw 17,000.00 from my IRA now rather than waiting until April 2025 to pay off the car loan?

Terry Says

What you’re basically asking is whether you’ll earn 8.9% — or more — in your IRA in the coming year, so that you’d be sorry you took the money out!
And I don’t have an answer for that. But if you do take the money out, make sure they withhold enough for taxes, so you aren’t stuck paying more in taxes next year.
And if that withdrawal will push you into a higher tax bracket — or increase your Medicare Part B premiums –think twice about taking it all out in one lump sum.

Use this link to read about the income at which you pay higher Medicare Part B premiums in 2024 –or actually in the next two years, once you file your 2024 income tax return.

And consult your accountant regarding the impact of the withdrawal on your ordinary income tax bracket.

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