@larrywa2
As I said there are no special tax rules that will trip you up here.
Financially, I would look at your IRA investment returns. This is a fairly complicated topic and I can only touch on it here. But as a simple example, paying off your camper loan is the equivalent of investing the money at 5%. Right now, I have a small conservative investment portfolio that returned an average of 4.5% over the past 5 years, and a more balanced portfolio that returned 8% over the same time frame. Assuming those rates tracked into the future (which is a complicated question all its own) I would be ahead over time if I cashed out the small portfolio and paid off the camper, but I would be behind if I cashed out the more aggressive portfolio because I would be giving up 8% to make 5%. It would make more sense to invest the other $30,000 in the higher-yield portfolio and then pull the monthly payment out of the IRA each month for the camper, I would be making 8, and paying 5, so I would be slightly ahead.
That ignores the effect of inflation (which makes a fixed payment cheaper in real terms the farther into the future you look), and it ignore the effect of tax rates (the 22% rate will go up to 25% in 2026 if Congress does nothing, while the two presidential candidates have very different ideas about what the tax rates should be in the future).
If you sell the camper, and have paid it off in full first, what will you do with the sales proceeds? You can't invest them back in the IRA unless you have compensation from working. You would have to invest in a regular broker account and pay the yearly taxes on capital gains, interest and dividends. What can you get for the camper? If you can get $20,000 (and wow, are you upside down) maybe you should only withdraw $10K and pay off $30K+$10K so you can keep the rest in the IRA. Would paying off the camper really make it easier to sell? Why does the buyer care, as long as you clear the lien when they take possession? If you are underwater you have to pay the bank, of course, but should you pay the bank the whole amount now, or only pay the minimum you need to pay when the time comes? (Goes back to the investment yield rate compared to the loan rate.)
Anyway, whole books could be written on the subject. But there are no special tax problems if you withdraw a lump sum to pay off the camper.
