Retirement & Taxes

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Mark Cappel

UpdatedDec 14, 2009

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

My husband is a PA public school employee who will soon be retiring. He will be receiving approximately $50,000.00 of taxable (20%) contributions from his retirement account. My husband is 58 and I am 55. My question is, should we roll it over into an already existing tax shelter for a later time when we’ll be in a lower tax bracket or should we use it to pay off (along with $18,000 from our savings) one of our two mortgages?

I think what you are saying is that upon retirement, your spouse will receive a $50K contribution from his employer that is taxed at a rate of 20%, and you are wondering if you should take the distribution now, less 20% in taxes, to pay down your mortgage or if you should roll the distribution into a IRA-like account.

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. You need to analyze your cash flow, your other expected future income, your current tax bracket, and what bracket you're likely to fall in at the time you start drawing on your retirement funds.

You should also weigh how much of a return you can expect on your investments compared to the costs of paying down your mortgage.

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

Best,

Bill

bills.com