Mort­gage vs. Re­tire­ment

The Record (Troy, NY) - - BUSINESS -

Q I’m think­ing of pay­ing off my mort­gage with money from my IRA. Should I?— B. C., Greens­burg, Penn­syl­va­nia

A Think twice about it. With a tra­di­tional IRA, if you’re younger than 59 1/ 2, with­drawals will be taxed at your or­di­nary in­come tax rate, and you’ll face a 10 per­cent early with­drawal fee, too. In ad­di­tion, the amount you with­draw will boost your tax­able in­come, po­ten­tially mov­ing you into a higher tax bracket. Mean­while, by wip­ing out your mort­gage debt, you’ll lose your mort­gage in­ter­est tax de­duc­tions. Think also of your mort­gage in­ter­est rate, and com­pare it to the growth rate you ex­pect for your IRA hold­ings. If your mort­gage rate is 5 per­cent, pay­ing any of it off early es­sen­tially “earns” you 5 per­cent. If you think you would have earned 5 per­cent with your IRA in­vest­ments, you’re not com­ing out ahead. Cash­ing out a re­tire­ment ac­count also means that money won’t be able to grow for you over time ( tax- free, in the case of a Roth IRA). Do the math for your par­tic­u­lar sit­u­a­tion, but con­sider keep­ing your IRA and try­ing to make ex­tra pay­ments on your mort­gage when you can. Just a few ex­tra pay­ments each year can shave years off the loan and save you many thou­sands of dol­lars in in­ter­est pay­ments.

Q Where can I look up the cost of liv­ing in var­i­ous cities? — D. Z., Spokane, Washington

A There are lots of handy cal­cu­la­tors on­line, and you can find a bunch by Googling “cost of liv­ing.” Some are more de­tailed than oth­ers, break­ing out cat­e­gories such as hous­ing, food, trans­porta­tion, util­i­ties and health care. Re­mem­ber that some ex­pense cat­e­gories will be more of a fac­tor for some folks than oth­ers. Want more in­for­ma­tion about stocks? Send us an email to fool­

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