• Revenue Cycle Management
  • COVID-19
  • Reimbursement
  • Diabetes Awareness Month
  • Risk Management
  • Patient Retention
  • Staffing
  • Medical Economics® 100th Anniversary
  • Coding and documentation
  • Business of Endocrinology
  • Telehealth
  • Physicians Financial News
  • Cybersecurity
  • Cardiovascular Clinical Consult
  • Locum Tenens, brought to you by LocumLife®
  • Weight Management
  • Business of Women's Health
  • Practice Efficiency
  • Finance and Wealth
  • EHRs
  • Remote Patient Monitoring
  • Sponsored Webinars
  • Medical Technology
  • Billing and collections
  • Acute Pain Management
  • Exclusive Content
  • Value-based Care
  • Business of Pediatrics
  • Concierge Medicine 2.0 by Castle Connolly Private Health Partners
  • Practice Growth
  • Concierge Medicine
  • Business of Cardiology
  • Implementing the Topcon Ocular Telehealth Platform
  • Malpractice
  • Influenza
  • Sexual Health
  • Chronic Conditions
  • Technology
  • Legal and Policy
  • Money
  • Opinion
  • Vaccines
  • Practice Management
  • Patient Relations
  • Careers

Don't use retirement funds to pay off mortgage

Article

Determine whether to use money from a 401(k) account to pay a mortgage.

A: We discourage clients from taking any early withdrawals from retirement accounts, because it is very expensive to do so and it will reverse the retirement savings process. The combination of the income tax and early withdrawal penalty could erode up to half of any withdrawal.

Moreover, you may not even be able to withdraw money from your 401(k) at work to pay off your mortgage because you are only allowed to withdraw money from a 401(k) plan for certain hardships outlined in the plan. If you are allowed to withdraw the money, then you would have to pay income tax on the withdrawal. Depending on how much you withdraw and how much other income you have, the tax could range from 10% to 35%. You also would have to pay an additional 10% penalty if you are under age 59 1/2.

In light of these various taxes and restrictions, avoid using retirement account money to pay off your mortgage if at all possible.

Send your money management questions to medec@advanstar.com (please include your regular postal address). Answers to our readers' questions were provided by Rial Moulton, JD, CFP, CPA/PFS, cofounder of Retirement & Tax Planning Specialists, Inc. in Spokane, Washington.

Related Videos
Mike Bannon - ©CSG Partners
Jolie Apicella, JD
David Zetter gives expert advice
David Zetter gives expert advice