401K withdrawl to pay down/off mortgage?

[tvguy]

that's assuming your home's value is greater than what you paid off. in the case of the last home we sold-within months of our sale the home value plummeted such that even now (13 years later) the value is less than the selling price we received. granted, we sold right before the housing bubble burst BUT no matter what the housing market is-a home is only worth what someone will pay for it.

you can buy a home for x amount of dollars and through whatever means pay it off BUT THE BUYER MARKET DETERMINES THE VALUE-SO IF 'THEY' DECIDE YOUR HOME IS ONLY WORTH 1/10TH OF WHAT YOU BOUGHT IT FOR-YOU WILL NEVER GET A MORTGAGE TO 'GET YOUR MONEY BACK'.

real estate values go up and down-it's based on what the market will pay. it's great to think that your home will increase in value but market trends ebb and flow so no one should consider their home as a savings mechanism.

I'd rather have a paid off house worth less than I paid for it because it still have equity in it I can borrow against.
If I have a mortgage and the value of the house falls below the loan, i have no equity to pull money from.
Investments can lose value too. I can't live in my stock portfolio, I can live in my house.

 

[RamblingMad]

I'd rather have a paid off house worth less than I paid for it because it still have equity in it I can borrow against.
If I have a mortgage and the value of the house falls below the loan, i have no equity to pull money from.
Investments can lose value too. I can't live in my stock portfolio, I can live in my house.

Owning a home means you have control over your cost of living. You have frozen it at the time of purchase whether you got a good deal or paid too much. You don’t have to worry about rent increasing. That’s not a nice peace of mind. The biggest worries then are maintenance and property tax increases.

It’s telling that healthcare is the strongest performing equity sector. And REITs have been the strongest asset class.

 

[tvguy]

Owning a home means you have control over your cost of living. You have frozen it at the time of purchase whether you got a good deal or paid too much. You don’t have to worry about rent increasing. That’s not a nice peace of mind. The biggest worries then are maintenance and property tax increases.

It’s telling that healthcare is the strongest performing equity sector. And REITs have been the strongest asset class.

I'm in California, so my property taxes are pretty much set in stone. 2% a year max increase. Maintenance you can plan for.

 

[Hikergirl]

As long as it is making money for you and you aren't struggling to pay bills I wouldn't touch it.
You may find in retirement you need it, as opposed to just wanting to use it now.

 

[mrodgers]

Yup, that's what happens to regular people with divorce and kids. At age 44 I only owned a car, bicycle, laptop, and clothing with 1 years worth of retirement funding. I'll be 50 when child support stops at which point I will be able to start saving for a down payment. It's fine temporarily while I finish off the support but I don't want to be living in a trailer park the rest of my life.

 

[RamblingMad]

Yup, that's what happens to regular people with divorce and kids. At age 44 I only owned a car, bicycle, laptop, and clothing with 1 years worth of retirement funding. I'll be 50 when child support stops at which point I will be able to start saving for a down payment. It's fine temporarily while I finish off the support but I don't want to be living in a trailer park the rest of my life.

Sound like my uncle. He got divorced and moved into a trailer park. Life doesn’t always go according to plan.

 

[DebbieB]

401ks and IRAs are money to be used for retirement. Period. So no. But I would certainly look at other ways to pay off the mortgage. I can't imagine being 58 and still having a mortgage.

I bought my first house at age 52 with a 30 year mortgage. I’ve been paying extra and hope to have it paid by 67.

 

[barkley]

I bought my first house at age 52 with a 30 year mortgage. I’ve been paying extra and hope to have it paid by 67.

i think it's fairly normal to have a mortgage into one's 60's. i think about my peers and most of us didn't buy our first home until at least our mid to late 20's and back then the 30 year fixed was the standard. those were our 'starter' homes and for the most part everyone moved up or away at least once or twice down the line-starting yet another 30 year mortgage. even with the popularity of the 15 year mortgages now i'd be inclined to suggest to a new home buyer going w/ a 30 year-there's less than 1/2 % interest rate difference (at least at my credit union) and you're obligating yourself to a lower monthly payment (a godsend if there an income drop/short term stop) and you can always do as we did on our current and massively accelerate payoff with extra payments as you can afford to do so.

in general i think the average age of first time home buyers is going up and the numbers seem to support it-recent reports show on average that 32 seems to be the norm.

 

[tvguy]

i think it's fairly normal to have a mortgage into one's 60's. i think about my peers and most of us didn't buy our first home until at least our mid to late 20's and back then the 30 year fixed was the standard. those were our 'starter' homes and for the most part everyone moved up or away at least once or twice down the line-starting yet another 30 year mortgage. even with the popularity of the 15 year mortgages now i'd be inclined to suggest to a new home buyer going w/ a 30 year-there's less than 1/2 % interest rate difference (at least at my credit union) and you're obligating yourself to a lower monthly payment (a godsend if there an income drop/short term stop) and you can always do as we did on our current and massively accelerate payoff with extra payments as you can afford to do so.

in general i think the average age of first time home buyers is going up and the numbers seem to support it-recent reports show on average that 32 seems to be the norm.

30% age 65 and older have a mortgage according to this. So most don't.
https://www.quora.com/At-what-age-does-the-average-person-pay-off-their-mortgage

 

[RamblingMad]

i think it's fairly normal to have a mortgage into one's 60's. i think about my peers and most of us didn't buy our first home until at least our mid to late 20's and back then the 30 year fixed was the standard. those were our 'starter' homes and for the most part everyone moved up or away at least once or twice down the line-starting yet another 30 year mortgage. even with the popularity of the 15 year mortgages now i'd be inclined to suggest to a new home buyer going w/ a 30 year-there's less than 1/2 % interest rate difference (at least at my credit union) and you're obligating yourself to a lower monthly payment (a godsend if there an income drop/short term stop) and you can always do as we did on our current and massively accelerate payoff with extra payments as you can afford to do so.

in general i think the average age of first time home buyers is going up and the numbers seem to support it-recent reports show on average that 32 seems to be the norm.

Having a mortgage into your 60s, you’ll want to make sure you have enough income coming in to make use of the interest deduction. If you can’t deduct all of it, does it make sense to have a mortgage?

As for paying down faster, this is the same investment test. Do you think you’ll make more invested versus your effective interest versus peace of mind? The answer is different for everyone.

 

[barkley]

30% age 65 and older have a mortgage according to this. So most don't.
https://www.quora.com/At-what-age-does-the-average-person-pay-off-their-mortgage

i never said 'most', i said it's fairly normal and the article you provided from a couple of years ago supports that it is trending UP (granted, the data used in the article is 8 years old)-

"The Consumer Financial Protection Bureau says the percentage of homeowners ages 65 and older with mortgage debt increased from 22 percent in 2001 to 30 percent in 2011. Among homeowners 75 and older, the rate more than doubled, from 8.4 to 21.2 percent."


more recent reporting/data (3/18 washington post-source) substantiates my belief-

"A recent “Retirement and Mortgages” survey by American Financing, a national mortgage banker, found 44 percent of Americans age 60 to 70 have a mortgage when they retire, with as many as 17 percent saying they may never pay it off.

the survey found 32 percent predict they will be paying their mortgage for at least eight more years and 11 percent say it will take six to eight years before their last loan payment.

another 14 percent say it will take three to five years to reach the payoff, and 7 percent say it will take one to two more years. Twenty percent of those who retire with a mortgage will pay it in full within one year.


so in 2001 the average numbers were 22%
2011 it increased to 30%
2018 it increased to 44%.

these kind of numbers tell me that it's in no way abnormal for someone in their 60's to have a mortgage and if the trend continues on it's current path it looks like w/in about 8 years over half of 60 somethings will.

 

[tvguy]

i never said 'most', i said it's fairly normal and the article you provided from a couple of years ago supports that it is trending UP (granted, the data used in the article is 8 years old)-

"The Consumer Financial Protection Bureau says the percentage of homeowners ages 65 and older with mortgage debt increased from 22 percent in 2001 to 30 percent in 2011. Among homeowners 75 and older, the rate more than doubled, from 8.4 to 21.2 percent."


more recent reporting/data (3/18 washington post-source) substantiates my belief-

"A recent “Retirement and Mortgages” survey by American Financing, a national mortgage banker, found 44 percent of Americans age 60 to 70 have a mortgage when they retire, with as many as 17 percent saying they may never pay it off.

the survey found 32 percent predict they will be paying their mortgage for at least eight more years and 11 percent say it will take six to eight years before their last loan payment.

another 14 percent say it will take three to five years to reach the payoff, and 7 percent say it will take one to two more years. Twenty percent of those who retire with a mortgage will pay it in full within one year.


so in 2001 the average numbers were 22%
2011 it increased to 30%
2018 it increased to 44%.

these kind of numbers tell me that it's in no way abnormal for someone in their 60's to have a mortgage and if the trend continues on it's current path it looks like w/in about 8 years over half of 60 somethings will.

My only experience is with two neighbors. Both have lived in their homes 30 years, and elected to take equity out. Something both regret.

 

[barkley]

My only experience is with two neighbors. Both have lived in their homes 30 years, and elected to take equity out. Something both regret.

i personalty feel that the tweaking of the name from 'second mortgage' to 'home equity line of credit' removed allot of the stigma that prevented most homeowners from ever tapping into thier home's perceived equity, and in the cases i've known it seemed like what was originally intended as a one time/'we'll pay it off quick and be done with it' experience turned into a revolving door of incurring more (largely) consumer debt results in pulling out more money over and over again (until many end up upside down when housing prices drop).

 

[seashoreCM]

The 401K may have some investment subchoices that will make it behave somewhat like an IRA. If so you should be able to make a different subchoice, for example to reduce the chance of stock market loss, every 12 months or so. This means it might not make any difference whether it is or was rolled over into an IRA.

You may be able to make small outright withdrawals without incurring the 10% penalty. Depending on your 401K rules and subchoice, there may be maximum yearly withdrawal depending on a hypothetical schedule of uniform annual withdrawals starting at your current age and running for your statistically expected lifetime.

Meanwhile some IRAs also offer subchoices, for example to try for stock market returns and gains yielding more than a bank CD might offer.

If you used the tax table to pick out your total tax, estimating your tax bracket for additiona income is reasonably easy. Add a thousand dollars to your taxable income and pick out the corresponding tax amount from the tax table. Figure out the difference between this new hypothetical amount and the original amount you picked from the tax table (do a subtraction). Divide by ten to get the tax bracket. Make a separate calculation for state income tax.

(We did not say add one hundred dollars and pick out the new amount from the table because, due to rounding to the nearest dollar, the tax bracket percentage you get can be off by several percent given the close spacing of the numbers you picked from.)

 

[tvguy]

The 401K may have some investment subchoices that will make it behave somewhat like an IRA. If so you should be able to make a different subchoice, for example to reduce the chance of stock market loss, every 12 months or so. This means it might not make any difference whether it is or was rolled over into an IRA.

You may be able to make small outright withdrawals without incurring the 10% penalty. Depending on your 401K rules and subchoice, there may be maximum yearly withdrawal depending on a hypothetical schedule of uniform annual withdrawals starting at your current age and running for your statistically expected lifetime.

Meanwhile some IRAs also offer subchoices, for example to try for stock market returns and gains yielding more than a bank CD might offer.

If you used the tax table to pick out your total tax, estimating your tax bracket for additiona income is reasonably easy. Add a thousand dollars to your taxable income and pick out the corresponding tax amount from the tax table. Figure out the difference between this new hypothetical amount and the original amount you picked from the tax table (do a subtraction). Divide by ten to get the tax bracket. Make a separate calculation for state income tax.

(We did not say add one hundred dollars and pick out the new amount from the table because, due to rounding to the nearest dollar, the tax bracket percentage you get can be off by several percent given the close spacing of the numbers you picked from.)

401k rules have changed over the years. I found some old paperwork from 1981 that said I could take out my money and only pay the income tax due.....no 10% penalty......if I used the money to buy a house, car, or pay medical bills or pay for a child's education. Congress over the years has changed that.

 

[MrsPete]

My other thought is to withdrawal and tell my son to pick any private college he wants and use it for a private college.

You seem to have the idea that private colleges are superior to state schools. In my state that is absolutely not true. Most of our state schools are strong academically and are places I'd be pleased for my kids to attend ... whereas, we have a slew of small private schools (with big price tags) that are filled with kids who aren't particularly academic /didn't leave high school with strong transcripts, but whose parents wanted them to go to college. This doesn't describe all our private schools, of course, but it describes the majority.

Would you be okay with leaving it alone (or rolling it into an IRA), and knowing that you COULD put it towards the mortgage at any time?

This sounds like a nice moderate point-of-view. You weren't using it, it's growing ... let it be.

401ks and IRAs are money to be used for retirement. Period. So no. But I would certainly look at other ways to pay off the mortgage. I can't imagine being 58 and still having a mortgage.

I can see that military people are somewhat "behind the 8 ball" in terms of home ownership ... but, at the same time, if you've waited 'til later in life to start the mortgage process, you should've been able to put aside a larger downpayment.

As a general rule of thumb, yes, you'll be better prepared for retirement if you own a paid-for house. This essentially means you've "locked in" your housing costs ... you have no monthly cost, and you can predict your taxes and maintenance pretty well.

Go talk to a professional adviser who can assess your whole economic situation.

Excellent advice. We are seeing one little sliver of your finances. Go to an expert and "lay it all out on the table" for him or her.

i think it's fairly normal to have a mortgage into one's 60's. i think about my peers and most of us didn't buy our first home until at least our mid to late 20's and back then the 30 year fixed was the standard ... in general i think the average age of first time home buyers is going up and the numbers seem to support it-recent reports show on average that 32 seems to be the norm.

It may be "normal", but I'm not convinced it's the wisest path to long-term financial stability /retirement. If you're postponing home ownership, you should definitely have that goal in mind and stock away something every month towards your downpayment.

i personalty feel that the tweaking of the name from 'second mortgage' to 'home equity line of credit' removed allot of the stigma ...

Totally agree ... in the same way car dealerships offer "leases" because they know people would balk at the idea of "renting" a car for everyday use.

 

[tvguy]

I can see that military people are somewhat "behind the 8 ball" in terms of home ownership ... but, at the same time, if you've waited 'til later in life to start the mortgage process, you should've been able to put aside a larger downpayment..

Or, if you buy in a low cost community, pay cash for your first house right out of the military like my FIL and my wife's BIL did.
My wife is addicted to the Home Town home renovation show. Amazing there are still places in the U.S. where you can buy a house for $12,000, do a top to bottom remodel for $60,000 in remodeling and walk away with a great house for well under $100,000.

 

[floridafam]

Not even five years ago, our house was “worth” half of what we paid for it. The mortgage meltdown took a toll on Florida and the country. Could that happen again? You betcha.

 

[barkley]

Not even five years ago, our house was “worth” half of what we paid for it. The mortgage meltdown took a toll on Florida and the country. Could that happen again? You betcha.

absolutely.

we saw the housing bubble burst in california over the course of less than 30 days. neighborhood houses that weeks earlier would have gotten multiple over ask bids on the day they were listed............. sat...............with no sales/closings in our entire city for over 30 days-and at that point the prices were bottoming out big time. the $619,000 sales price home we sold in 2006-a few years later sold for less than $95,000 (less than half what it sold for as new/double sized lot in '99)-the same houses are selling today for little more than they sold for in 2004.

i look at some of the housing markets and i know they can't be sustained-all it takes is a downturn in the economy (or the loss of a major employer in a given region).

 

[LovesTimone]

There are pro's and con's to this... best advice is to sit down with a financial planner to really be able to get the best value for your money and help you map out and reach your retirement goals...and prepare for just in case stuff that life throws at us...

A friend that worked with DH, had a similar situation, they decided to cash it out and pay off the house... it was a instance of they had to either cash it out or roll it over.... which for them worked out in the long run, his wife became quite ill several years after, he was able to retire at 63... he said if the house wasn't paid for he would not have been able to retire.... After she passed away, he sold the house and made quite a bit of money, while he was home caring for her, he did a bunch of upgrades.... he paid cash for a retirement home in a 55+ community (mobile home) ... and put a very large chunk in the bank... so for him paying off the house worked in their favor...