Retirement & Taxes

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READER QUESTION

Should we deplete our retirement accounts and savings to pay-off our mortgage?

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Bills.com Resident Expert
Dec 12, 2011
BILL'S ANSWER

I confess that I do not quite follow all of your facts in your message. I think what you are saying is that upon retirement, your spouse will receive a $50K contribution from his employer that is taxes at a rate of 20%, and you are wondering if you should take the distribution now less 20% in taxes, or all of the distribution and roll it into a IRA-like account.

If my paraphrasing of your question is accurate, then the answer is a no-brainer. I really dislike the idea of depleting your retirement account to zero your mortgage. Find a good investment counselor and put your retirement account to work for you. If your retirement counselor cannot create a greater return on your investments than the interest rate on your mortgage, then you are better off paying-off your mortgage.

If your investments can earn you 7 percent and you are paying 5 percent on your mortgage, then you are money ahead hanging onto your mortgage and your savings and retirement account. If my hypothetical numbers are reversed, then get rid of the mortgage.

I hope this information helps you Find. Learn. Save.

Best,

Bill

www.bills.com

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