Stock and Mortgage

Stock and Mortgage
0.0 0.0 0.0 0.0 0.0 0

#1

I want to pay off my mortgage ($122,000) when i retire with my stock money from my retirement fund.

What taxes will i have to pay?


#2

Hi @Deborah9458! Thanks for your question. To answer, it would help to have a bit more information. Let’s start here: How old will you be when you take this distribution from your retirement account, and what kind of retirement account do you have?


#3

I will be 64 years of age


#4

Hi, @Deborah9458, and welcome to the community!

If you got a tax break when the money went into your retirement account (which is the case with most 401(k)s, for example), you’ll pay income taxes on any withdrawals.

If you didn’t get a tax break on the money going in, you’ll get one when it comes out. If it’s a Roth, there won’t be any taxes owed. If it’s a traditional IRA and you made contributions that weren’t deducted on your tax returns, you’ll pay income taxes on the portion that represents your gains.

In any case, since you’ll be over 59-1/2, you won’t pay penalties on the withdrawal.

BUT…you want to make sure you’ll have plenty of money left over after paying off your mortgage. You’ll want to have enough money to live on. Here’s a column I wrote that might help:

Hope that helps, and please let us know if you have any other questions!


#5

Hi @Deborah9458! Welcome to the community! As Arielle notes, the answer to your question will depend on both your age and the type of retirement account.

For example, if you have your retirement savings in a Roth IRA, then you wouldn’t owe any taxes on money you withdraw after age 59-1/2. (Here’s more on Roth IRA withdrawal rules.) But if your money is in a 401(k) or a traditional IRA, then generally speaking, if you withdraw money after age 59-1/2, you’ll owe income taxes on that money (people who withdraw money at younger ages would also owe a penalty for early withdrawals). Keep in mind, pulling out a big chunk of money from a 401(k) or IRA could easily push you into a higher tax bracket for that year, so that’s something to consider. One option might be to pay off your mortgage using a series of retirement-plan withdrawals over the course of a few years.

Also, there’s the question of: is paying off the mortgage the best use of that money? Here’s a story that looks at some of the pros and cons of paying off a mortgage when (or before) you retire.

Does that help a bit?