Taxable Roth and non-Roth IRA Accounts
I want to pay off my mortgage in one lump sum and to do so I need to use a Roth account ($43,000.00) and a non-Roth account ($20,000.00) plus $36,000.00 from my own savings. How much tax can I expect to pay in taxes?
Terry Says
WAIT! Why would you pay off your mortgage? What interest rate does it carry? If it’s below 7% you don’t want to do that — especially if it means taking money out of your retirement account.
That would almost always be a horrible mistake. And the taxation depends on how long you’ve held each contribution in your Roth, and how much is earnings, as your age. Your traditional IRA would be taxed completely as ordinary income. That’s a LOT of taxes — and your retirement accounts would be wiped out.
WORSE: If you are on Medicare, that type of additinal income would certainly raise your Part B and Part D monthly premiums.
Please write back with details, or get some tax advice before making this move.
