Age is a factor beyond just 59 1/2 for the no penalty on withdrawal. If you're drawing SS, or have Medicare, income thresholds apply to taxation on those
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At least yours is not credit card debt with the associated incredibly high interest rates!!
Snce money market funds are currently paying about 4 1/2 to 4 3/4% your equity line is probably not costing you a bundle. There's a good chance your investments are doing better than what the interest rate on your credit line is. You would have to make that determination.
If you itemize and spent your home equity line on home improvements the interest may be tax deductible. If so then the loss of the tax deduction has to be considered into the equation.
On the chance you don't know, while the extra income may place you in a higher income tax bracket, it's only the taxable income that is above the bracket level that gets taxed at the rate.
As already said the big jump for married filing jointly is above 94,300. Any taxable income above that level breaches the 22% bracket (instead of 12% and lower below that) and stays there until you get above 201,050.
Here's the best Dave Ramsey part of me coming out and it's kind of dumb since I don't know your circumstances. I'm blue skying thoughts and none of them may apply to you.The things that come to my mind are;
Do you have enough cash to not get caught if something comes up. No reason to pay down the home equity line if you end up having to use a credit card in an emergency and carry a balance.
Do you have any debt with a higher interest rate than your equity line? Without knowing, any credit card debt would probably be a better first choice to pay down / off.
Is there anyway to increase free cash flow without drawing on the 401k.
I.E.
If there is any significant savings that is sitting in a brick and mortar bank? Unless it's one of the very few that actually pays some interest, moving money to get a actual return could be an option; but if you're talking a few thousand instead many thousands it won't make much of a difference.
Is there a reasonable life style change that might free up some cash (to apply to the credit line)? If push came to shove for me, I'd be dumping some of my Comcast services, though I will say I get super cheap cell phone service through them (a plan I'm grandfathered into). Even without push come to shove it's on my list to investigate alternatives.
Do you take advantage of an FSA if work offers it to you?. It has to be planned from a contribution vs. need standpoint but FSA dollars come out of a pay check tax free are used tax free.The contributions to the FSA account reduce your taxable income.
And that's the end of my thoughts, good luck and good planning!
