Sign Up

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
cancel
Showing results for 
Search instead for 
Did you mean: 
tob2009ias
New Member

We owe $18,000 on our mortgage, would it be wise if I took $18,000 out of my 401K via my employer to pay it off? We currently have $78K +- in that account.

We also have a 2nd 401K with approx. $11,000 and I have a retirement plan with UPSF (25 years of service) If I do pay the mortgage off, I will definitely increase my contributions to the 401K I have with Old Dominion Freight Line.
1 Best answer

Accepted Solutions
MichaelL1
Level 15

We owe $18,000 on our mortgage, would it be wise if I took $18,000 out of my 401K via my employer to pay it off? We currently have $78K +- in that account.

If you are under age 59 1/2, you will get hit with an early withdrawal penalty of 10%, plus pay regular income tax on it.

So if in the 25% tax bracket and 10% penalty plus state taxes (if in a taxed state), that can be approx. 40% in taxes.  Personal decision, but that is a lot of taxes, when you could pay extra on the mortgage and crack it out shortly. 

Below is a link to the tax brackets for 2017 (based on current tax law).

http://www.savingtoinvest.com/federal-irs-tax-brackets-tax-rates-and-other-tax-updates/

View solution in original post

3 Replies
MichaelL1
Level 15

We owe $18,000 on our mortgage, would it be wise if I took $18,000 out of my 401K via my employer to pay it off? We currently have $78K +- in that account.

If you are under age 59 1/2, you will get hit with an early withdrawal penalty of 10%, plus pay regular income tax on it.

So if in the 25% tax bracket and 10% penalty plus state taxes (if in a taxed state), that can be approx. 40% in taxes.  Personal decision, but that is a lot of taxes, when you could pay extra on the mortgage and crack it out shortly. 

Below is a link to the tax brackets for 2017 (based on current tax law).

http://www.savingtoinvest.com/federal-irs-tax-brackets-tax-rates-and-other-tax-updates/

SweetieJean
Level 15

We owe $18,000 on our mortgage, would it be wise if I took $18,000 out of my 401K via my employer to pay it off? We currently have $78K +- in that account.

Also, 401(k) plans are protected in bankruptcy, but homes generally are not.
SweetieJean
Level 15

We owe $18,000 on our mortgage, would it be wise if I took $18,000 out of my 401K via my employer to pay it off? We currently have $78K +- in that account.

Also, 401(k) plans are protected in bankruptcy, but homes generally are not.
Dynamic AdsDynamic Ads
Privacy Settings
v