Never use your retirement accounts to pay off mortgage loans
I know of many people who harbored the belief that when they were badly in debt, or had a heavy mortgage to repay, they could just dip into their individual retirement accounts (IRA), withdraw the amount they needed and pay off their loans. This would mean a dent but only a small one.
If you are one such person, then this is for you. You’d be an extremely foolish person to use your IRA money to pay off mortgages and other loans. This choice actually should not exist on your list of options.
Imagine if you’ve deferred payment, then the taxes and penalties will be quite high. So, when you account for all these penalties and taxes, you may be forced to withdraw much more than you actually intended to.
And the biggest problem with trying to withdraw from your IRA is that you’ll lose your future tax-deferred returns. This means that if you withdraw something as paltry as $1,000, it could cost you over $10,000 in lost retirement income at a rate of 8% per annum or in other words, over 30-35 years, you would have lost nearly $1 million in future income! A better option would be to examine your accounts and find ways to trim unnecessary expenses.
If you enjoyed this article, please bookmark it at del.icio.us »