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Is it wise to pay off mortgage with 401k?


Any compelling reason to contribute to a 401k if my employer doesn't match?Would you liquidate your 401k to pay off debt in this situation?Paying off mortgage or invest in annuityShould I pay off my mortgage, begin retirement savings, or build my emergency fund?Would it be advantageous for me to pay off these two credit cards and cancel them with a 401k loan?Should I get a Doctor's mortgage or a 15 or 30 year conventional mortgage?Paying off Mortgage with unsecured debtKeep my second 401k or pay a chunk of mortgage?Overpaying or look to pay off mortgageCan I reduce the tax penalty on a 401k loan default by making an additional contribution?






.everyoneloves__top-leaderboard:empty,.everyoneloves__mid-leaderboard:empty,.everyoneloves__bot-mid-leaderboard:empty margin-bottom:0;








3















I've been considering paying off my mortgage with my 401k balance. Some particulars, I'm in WA state in the US, and I'll turn 60 in about a week.



I have enough in my 401k with my current employer to pay off the balance of my mortgage. Maybe not quite pay it all the way off, but well within a few thousand either way.



FWIW, I have other investments as well that total roughly $300k that are completely separate from my 401k funds.



My mortgage is currently at 2.75% on roughly $138k-ish balance (I don't have a pay-off amount from my mortgage company, so I'm just looking at the current balance). It's a 15 year fixed loan that matures in 2028. The house is currently worth somewhere between $450k & $500k.



My 401k YTD performance is 16.5%, and 1 year is 10.7%. on a balance (today) of $150k-ish and I'm currently putting 25% of my paycheck into 401k (with a 4% match from my employer).



I'm looking at retiring in about 5 years, sooner if possible.



My question is, given these variables, is it wise (or possible) to pay off my mortgage with my 401k, then bump my 401k up significantly so I hit the maximum contribution of (currently for >50 year olds), $25k / year. I'd also max out Roth IRA contributions for my wife & me as well as our HSA funds (which can also be invested if you don't use them) which are similarly tax exempt.



In my head this makes some sort of sense, but I'm not a financial person.



Is this (A) possible, (B) advisable, and (C) what pitfalls might there be (taxes, penalties, market instability, etc.)? I don't know how to do this calculation so I'm hoping I've provided enough information to get the help.






mortgage 401k







share|improve this question
























  • Does the employer even permit this? Many do not allow a withdrawal while still employed. Are you planning to stay in the house or sell it once you retire?

    – JoeTaxpayer♦
    1 hour ago


















3















I've been considering paying off my mortgage with my 401k balance. Some particulars, I'm in WA state in the US, and I'll turn 60 in about a week.



I have enough in my 401k with my current employer to pay off the balance of my mortgage. Maybe not quite pay it all the way off, but well within a few thousand either way.



FWIW, I have other investments as well that total roughly $300k that are completely separate from my 401k funds.



My mortgage is currently at 2.75% on roughly $138k-ish balance (I don't have a pay-off amount from my mortgage company, so I'm just looking at the current balance). It's a 15 year fixed loan that matures in 2028. The house is currently worth somewhere between $450k & $500k.



My 401k YTD performance is 16.5%, and 1 year is 10.7%. on a balance (today) of $150k-ish and I'm currently putting 25% of my paycheck into 401k (with a 4% match from my employer).



I'm looking at retiring in about 5 years, sooner if possible.



My question is, given these variables, is it wise (or possible) to pay off my mortgage with my 401k, then bump my 401k up significantly so I hit the maximum contribution of (currently for >50 year olds), $25k / year. I'd also max out Roth IRA contributions for my wife & me as well as our HSA funds (which can also be invested if you don't use them) which are similarly tax exempt.



In my head this makes some sort of sense, but I'm not a financial person.



Is this (A) possible, (B) advisable, and (C) what pitfalls might there be (taxes, penalties, market instability, etc.)? I don't know how to do this calculation so I'm hoping I've provided enough information to get the help.






mortgage 401k







share|improve this question
























  • Does the employer even permit this? Many do not allow a withdrawal while still employed. Are you planning to stay in the house or sell it once you retire?

    – JoeTaxpayer♦
    1 hour ago














3












3








3








I've been considering paying off my mortgage with my 401k balance. Some particulars, I'm in WA state in the US, and I'll turn 60 in about a week.



I have enough in my 401k with my current employer to pay off the balance of my mortgage. Maybe not quite pay it all the way off, but well within a few thousand either way.



FWIW, I have other investments as well that total roughly $300k that are completely separate from my 401k funds.



My mortgage is currently at 2.75% on roughly $138k-ish balance (I don't have a pay-off amount from my mortgage company, so I'm just looking at the current balance). It's a 15 year fixed loan that matures in 2028. The house is currently worth somewhere between $450k & $500k.



My 401k YTD performance is 16.5%, and 1 year is 10.7%. on a balance (today) of $150k-ish and I'm currently putting 25% of my paycheck into 401k (with a 4% match from my employer).



I'm looking at retiring in about 5 years, sooner if possible.



My question is, given these variables, is it wise (or possible) to pay off my mortgage with my 401k, then bump my 401k up significantly so I hit the maximum contribution of (currently for >50 year olds), $25k / year. I'd also max out Roth IRA contributions for my wife & me as well as our HSA funds (which can also be invested if you don't use them) which are similarly tax exempt.



In my head this makes some sort of sense, but I'm not a financial person.



Is this (A) possible, (B) advisable, and (C) what pitfalls might there be (taxes, penalties, market instability, etc.)? I don't know how to do this calculation so I'm hoping I've provided enough information to get the help.






mortgage 401k







share|improve this question
















I've been considering paying off my mortgage with my 401k balance. Some particulars, I'm in WA state in the US, and I'll turn 60 in about a week.



I have enough in my 401k with my current employer to pay off the balance of my mortgage. Maybe not quite pay it all the way off, but well within a few thousand either way.



FWIW, I have other investments as well that total roughly $300k that are completely separate from my 401k funds.



My mortgage is currently at 2.75% on roughly $138k-ish balance (I don't have a pay-off amount from my mortgage company, so I'm just looking at the current balance). It's a 15 year fixed loan that matures in 2028. The house is currently worth somewhere between $450k & $500k.



My 401k YTD performance is 16.5%, and 1 year is 10.7%. on a balance (today) of $150k-ish and I'm currently putting 25% of my paycheck into 401k (with a 4% match from my employer).



I'm looking at retiring in about 5 years, sooner if possible.



My question is, given these variables, is it wise (or possible) to pay off my mortgage with my 401k, then bump my 401k up significantly so I hit the maximum contribution of (currently for >50 year olds), $25k / year. I'd also max out Roth IRA contributions for my wife & me as well as our HSA funds (which can also be invested if you don't use them) which are similarly tax exempt.



In my head this makes some sort of sense, but I'm not a financial person.



Is this (A) possible, (B) advisable, and (C) what pitfalls might there be (taxes, penalties, market instability, etc.)? I don't know how to do this calculation so I'm hoping I've provided enough information to get the help.






mortgage 401k




mortgage 401k






share|improve this question















share|improve this question













share|improve this question




share|improve this question








edited 1 hour ago









JoeTaxpayer♦

150k25241482




150k25241482










asked 1 hour ago









delliottgdelliottg

40018




40018












  • Does the employer even permit this? Many do not allow a withdrawal while still employed. Are you planning to stay in the house or sell it once you retire?

    – JoeTaxpayer♦
    1 hour ago


















  • Does the employer even permit this? Many do not allow a withdrawal while still employed. Are you planning to stay in the house or sell it once you retire?

    – JoeTaxpayer♦
    1 hour ago

















Does the employer even permit this? Many do not allow a withdrawal while still employed. Are you planning to stay in the house or sell it once you retire?

– JoeTaxpayer♦
1 hour ago






Does the employer even permit this? Many do not allow a withdrawal while still employed. Are you planning to stay in the house or sell it once you retire?

– JoeTaxpayer♦
1 hour ago











2 Answers
2






active

oldest

votes


















4














I will say, it is



(A) Possible



(B) No, as you are getting very cheap money at 2.75% and your 401K is giving 10+ and even if it changes to average of 7%, you are still making a lot. And if you withdraw fund s from 401k, you will pay taxes.



(C). As outlined in B, you will pay taxes on 401k withdrawal as those withdrawal will be in bulk and will raise your tax bracket.






share|improve this answer






























    3














    Besides the tax implications there is something else to consider.



    By taking the money from your 401K, and then paying down the mortgage you are moving money from retirement accounts and locking it into home equity.



    Don't get me wrong I believe that it can be an important part of retirement planning to be mortgage free by retirement. Others disagree but that isn't the point. You will be moving money that could be invested in stocks, bonds, small companies, large companies, and even international funds all while staying inside the retirement account. Now you will have 130K more money invested in your house, and 130K less in your flexible retirement accounts.



    You will have limited options to access the funds in the house. You could sell, you could get a new loan, but those have costs and may even have tax impacts.



    This also ignores the complications of taking money from a 401(k) while being employed. But so many people have multiple 401(k)s and IRA accounts it is very possible that others considering this option can use funds in old 401(k)s






    share|improve this answer























    • Yes, but the dollars need adjustment. even in the 12% bracket, it will take $148K to net the $130K to pay off the mortgage. And you all but said, "Liquidity".

      – JoeTaxpayer♦
      59 mins ago











    Your Answer








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    2 Answers
    2






    active

    oldest

    votes








    2 Answers
    2






    active

    oldest

    votes









    active

    oldest

    votes






    active

    oldest

    votes









    4














    I will say, it is



    (A) Possible



    (B) No, as you are getting very cheap money at 2.75% and your 401K is giving 10+ and even if it changes to average of 7%, you are still making a lot. And if you withdraw fund s from 401k, you will pay taxes.



    (C). As outlined in B, you will pay taxes on 401k withdrawal as those withdrawal will be in bulk and will raise your tax bracket.






    share|improve this answer



























      4














      I will say, it is



      (A) Possible



      (B) No, as you are getting very cheap money at 2.75% and your 401K is giving 10+ and even if it changes to average of 7%, you are still making a lot. And if you withdraw fund s from 401k, you will pay taxes.



      (C). As outlined in B, you will pay taxes on 401k withdrawal as those withdrawal will be in bulk and will raise your tax bracket.






      share|improve this answer

























        4












        4








        4







        I will say, it is



        (A) Possible



        (B) No, as you are getting very cheap money at 2.75% and your 401K is giving 10+ and even if it changes to average of 7%, you are still making a lot. And if you withdraw fund s from 401k, you will pay taxes.



        (C). As outlined in B, you will pay taxes on 401k withdrawal as those withdrawal will be in bulk and will raise your tax bracket.






        share|improve this answer













        I will say, it is



        (A) Possible



        (B) No, as you are getting very cheap money at 2.75% and your 401K is giving 10+ and even if it changes to average of 7%, you are still making a lot. And if you withdraw fund s from 401k, you will pay taxes.



        (C). As outlined in B, you will pay taxes on 401k withdrawal as those withdrawal will be in bulk and will raise your tax bracket.







        share|improve this answer












        share|improve this answer



        share|improve this answer










        answered 1 hour ago









        RajRaj

        2607




        2607























            3














            Besides the tax implications there is something else to consider.



            By taking the money from your 401K, and then paying down the mortgage you are moving money from retirement accounts and locking it into home equity.



            Don't get me wrong I believe that it can be an important part of retirement planning to be mortgage free by retirement. Others disagree but that isn't the point. You will be moving money that could be invested in stocks, bonds, small companies, large companies, and even international funds all while staying inside the retirement account. Now you will have 130K more money invested in your house, and 130K less in your flexible retirement accounts.



            You will have limited options to access the funds in the house. You could sell, you could get a new loan, but those have costs and may even have tax impacts.



            This also ignores the complications of taking money from a 401(k) while being employed. But so many people have multiple 401(k)s and IRA accounts it is very possible that others considering this option can use funds in old 401(k)s






            share|improve this answer























            • Yes, but the dollars need adjustment. even in the 12% bracket, it will take $148K to net the $130K to pay off the mortgage. And you all but said, "Liquidity".

              – JoeTaxpayer♦
              59 mins ago















            3














            Besides the tax implications there is something else to consider.



            By taking the money from your 401K, and then paying down the mortgage you are moving money from retirement accounts and locking it into home equity.



            Don't get me wrong I believe that it can be an important part of retirement planning to be mortgage free by retirement. Others disagree but that isn't the point. You will be moving money that could be invested in stocks, bonds, small companies, large companies, and even international funds all while staying inside the retirement account. Now you will have 130K more money invested in your house, and 130K less in your flexible retirement accounts.



            You will have limited options to access the funds in the house. You could sell, you could get a new loan, but those have costs and may even have tax impacts.



            This also ignores the complications of taking money from a 401(k) while being employed. But so many people have multiple 401(k)s and IRA accounts it is very possible that others considering this option can use funds in old 401(k)s






            share|improve this answer























            • Yes, but the dollars need adjustment. even in the 12% bracket, it will take $148K to net the $130K to pay off the mortgage. And you all but said, "Liquidity".

              – JoeTaxpayer♦
              59 mins ago













            3












            3








            3







            Besides the tax implications there is something else to consider.



            By taking the money from your 401K, and then paying down the mortgage you are moving money from retirement accounts and locking it into home equity.



            Don't get me wrong I believe that it can be an important part of retirement planning to be mortgage free by retirement. Others disagree but that isn't the point. You will be moving money that could be invested in stocks, bonds, small companies, large companies, and even international funds all while staying inside the retirement account. Now you will have 130K more money invested in your house, and 130K less in your flexible retirement accounts.



            You will have limited options to access the funds in the house. You could sell, you could get a new loan, but those have costs and may even have tax impacts.



            This also ignores the complications of taking money from a 401(k) while being employed. But so many people have multiple 401(k)s and IRA accounts it is very possible that others considering this option can use funds in old 401(k)s






            share|improve this answer













            Besides the tax implications there is something else to consider.



            By taking the money from your 401K, and then paying down the mortgage you are moving money from retirement accounts and locking it into home equity.



            Don't get me wrong I believe that it can be an important part of retirement planning to be mortgage free by retirement. Others disagree but that isn't the point. You will be moving money that could be invested in stocks, bonds, small companies, large companies, and even international funds all while staying inside the retirement account. Now you will have 130K more money invested in your house, and 130K less in your flexible retirement accounts.



            You will have limited options to access the funds in the house. You could sell, you could get a new loan, but those have costs and may even have tax impacts.



            This also ignores the complications of taking money from a 401(k) while being employed. But so many people have multiple 401(k)s and IRA accounts it is very possible that others considering this option can use funds in old 401(k)s







            share|improve this answer












            share|improve this answer



            share|improve this answer










            answered 1 hour ago









            mhoran_psprepmhoran_psprep

            71.2k8100179




            71.2k8100179












            • Yes, but the dollars need adjustment. even in the 12% bracket, it will take $148K to net the $130K to pay off the mortgage. And you all but said, "Liquidity".

              – JoeTaxpayer♦
              59 mins ago

















            • Yes, but the dollars need adjustment. even in the 12% bracket, it will take $148K to net the $130K to pay off the mortgage. And you all but said, "Liquidity".

              – JoeTaxpayer♦
              59 mins ago
















            Yes, but the dollars need adjustment. even in the 12% bracket, it will take $148K to net the $130K to pay off the mortgage. And you all but said, "Liquidity".

            – JoeTaxpayer♦
            59 mins ago





            Yes, but the dollars need adjustment. even in the 12% bracket, it will take $148K to net the $130K to pay off the mortgage. And you all but said, "Liquidity".

            – JoeTaxpayer♦
            59 mins ago

















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