Would you use a part of your retirement account to pay your mortgage?

[Ray From Cleveland]

Listening to the Hugh Hewitt show yesterday, he came up with an idea I found intriguing.

He suggested that our legislatures allow us to withdraw up to 25% of our retirement money if it was used exclusively to repay our mortgage. It's a one time deal and the tax on that withdrawal would only be 10%.

So if you have 100K in your IRA, you would be able to withdraw 25K of that money and payoff or repay some of your mortgage. The tax cost would be $2,500, but the long run savings would be realized in a year or two.

He claimed he ran his idea across several people including representatives, and they all thought it would be a great idea. I do too. I would love to be able to do that. So I thought I would bring up the question on USMB to see what you think, and if the opinions were drawn on political lines.

 

[Timmy]

Would there be any bar to re financing ?

 

[Ray From Cleveland]

Would there be any bar to re financing ?

I don't think so. But the question is why don't we have more common sense legislation like this........ you know, practical things like the Do Not Call list when Bush was President. After all, if what Hugh says is true and representatives like the idea, why don't they introduce it as legislation?

 

[RodISHI]

One should have their home paid for before retiring. The bankers dreams came true when they talked everyone and their brother into mortgages their homes til death. Of course that was pleasing to the tax man as the housing market bubbles and he can raise taxes on everyone which in turn raises all the funds for the government employees. What a vicious cycle and mess they created for so many peoples who listened to them.

 

[MarathonMike]

Is it really a net benefit to you? It would depend partly on what your mortgage interest was and what you would potentially be giving up in your IRA money investment return wouldn't it? And how many years you have left on your mortgage. What we did was refinanced to a 15 year mortgage and tried to double up on payments or pay extra every month until it was paid off.

 

[Ray From Cleveland]

One should have their home paid for before retiring. The bankers dreams came true when they talked everyone and their brother into mortgages their homes til death. Of course that was pleasing to the tax man as the housing market bubbles and he can raise taxes on everyone which in turn raises all the funds for the government employees. What a vicious cycle and mess they created for so many peoples who listened to them.

I don't know about you, but I'm paying an arm and a leg in mortgage interest. The only reason I haven't used my retirement account is because of all the penalties and high taxation. My tax preparer said it would amount to nearly 40% if I tried to do that.

So why not introduce such a law? If you don't want to touch your retirement account, you don't have to. But allow people to use their own money the way they desire without government trying to orchestrate your decisions.

 

[Ray From Cleveland]

Is it really a net benefit to you? It would depend partly on what your mortgage interest was and what you would potentially be giving up in your IRA money investment return wouldn't it? And how many years you have left on your mortgage. What we did was refinanced to a 15 year mortgage and tried to double up on payments or pay extra every month until it was paid off.

Most people do if they are in the position to pull it off. But many are not.

I don't see how you couldn't save money no matter where you are at with your mortgage unless you have plans to pay it all of by next year or something.

 

[MarathonMike]

In general it seems like you would come out ahead except for the case where you are nearing the end of your mortgage term and the payments are mostly going to principle and not interest.
It's some sort of sliding scale where at the beginning of say a 30 year mortgage for sure you come out ahead but somewhere toward the end you don't.

 

[RodISHI]

One should have their home paid for before retiring. The bankers dreams came true when they talked everyone and their brother into mortgages their homes til death. Of course that was pleasing to the tax man as the housing market bubbles and he can raise taxes on everyone which in turn raises all the funds for the government employees. What a vicious cycle and mess they created for so many peoples who listened to them.

I don't know about you, but I'm paying an arm and a leg in mortgage interest. The only reason I haven't used my retirement account is because of all the penalties and high taxation. My tax preparer said it would amount to nearly 40% if I tried to do that.

So why not introduce such a law? If you don't want to touch your retirement account, you don't have to. But allow people to use their own money the way they desire without government trying to orchestrate your decisions.

I agree people should be able to use their own money from retirement accounts to pay off their mortgages. We paid for the home first, used the money we didn't have to pay in interest to fix and upgrade the house and put the rest into building the businesses. Having the home paid for allowed us the freedom to build the business back then and make our own choices. To my notion the banks were just sucking off of everyone with the home mortgage deductions so any legislation like that needs to be watched carefully.

 

[Timmy]

Would there be any bar to re financing ?

I don't think so. But the question is why don't we have more common sense legislation like this........ you know, practical things like the Do Not Call list when Bush was President. After all, if what Hugh says is true and representatives like the idea, why don't they introduce it as legislation?

I worry that people will cash out retirement, pay down mortgage , then refi to buy a pool and new car .

In the end they still have a mortgage and now no retirement.