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Pay off mortgage with 401k withdrawal?

By Terry Savage on December 13, 2016 | Housing / Real Estate

60 years old facing impending downsizing...over $600k in IRA/401k jointly. $100k mortgage...would it make sense to pay off mortgage with 401k, taxable, but no penalty, to get through a potential rough patch of possible unemployment? Given the run-up in the market, thinking of taking gains as opposed to trying to recover from inevitable market correction...Not sure what to do...Thanks.

Terry Says

No, it would not make sense to lose out on all future tax-deferred growth of your 40l(k).  Having to make a mortgage payment will keep you under pressure to find a new job -- and that may not be so bad!  But what you SHOULD do now -- before you lose your job, is make sure you have refinanced to the lowest fixed-rate mortgage possible.  That will make the burden bearable. If you're worried about a correction in the market, just make a more conservative choice of investments in your retirement accounts, perhaps more in a money market fund where you can't lose money!



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