Posted: 12/18/2025 2:32:45 PM EDT
[Last Edit: M-231][Edited]
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I have a combo of Roth and IRA that's approaching what I owe on my house. I have twenty years to retirement, and owe about a third of what my house is currently valued at, with no other major debt. I'm thinking, if I cashed out my retirement accounts, took the hit on the early withdrawal, and paid off the house, then aggressively reinvested the house payments (and I'm assuming there's a large dip/crash coming) until I retire, would I be an idiot? I have other retirement accounts besides these. I'd like to be debt free. All my stocks I consider "gone" until the day I cash them out, meaning I figure the market can collapse at any time, but my house.... It's real and I live in it. Thoughts? ETA The house currently has a debt of $130k at 6%. The stocks are all S&P. |
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Originally Posted By jos51700: I have a combo of Roth and IRA that's approaching what I owe on my house. I have twenty years to retirement, and owe about a third of what my house is currently valued at, with no other major debt. I'm thinking, if I cashed out my retirement accounts, took the hit on the early withdrawal, and paid off the house, then aggressively reinvested the house payments (and I'm assuming there's a large dip/crash coming) until I retire, would I be an idiot? I have other retirement accounts besides these. I'd like to be debt free. All my stocks I consider "gone" until the day I cash them out, meaning I figure the market can collapse at any time, but my house.... It's real and I live in it. Thoughts? ETA The house currently has a debt of $130k at 6%. The stocks are all S&P. You gonna owe tax on that money? On first blush, I would say no. I’m not in business in anything remotely related to anything financial. In fact, I would classify my opinion as substandard. 
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peach fuzz
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That sounds like a HORRIBLE plan and I LOVE being debt free. How many years left on your mortgage? While your interest rate seems high, it’s not high by historical standards. Remember this saying: “Time in the market beats timing the market” Do you get a match from your employer? If so, are you contributing enough to get the match? If you pay off your house now with invested money, you lose 20+ years of market growth AND the extra taxes you will pay. You lose TIME IN THE MARKET. |
"It behooves every man to remember that the work of the critic is of altogether secondary importance, and that, in the end, progress is accomplished by the man who does things."
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too many unknown variables to realistically give you a good recommendation. my own bias and speculating on information not provided I would recommend not selling the stocks. I would look at cutting expenses or selling items to throw at the mortgage instead of selling stocks. look at your monthly expenses and see if there are items you can save on or cut out of your bills. tv subscriptions, cell plans, eating out, fancy coffee, etc. its amazing how much the little stuff adds up to per month can you make extra payments? how many years payments on the home loan do you have? just making one extra payment a year can make a big difference to paying off the loan early |
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Huge no. Market rate of 8-12% earninings. Mortgage rate of what 3%,4% at worst 7%? Then there’s tax and penalties for early withdrawal. Now if it was a brokerage account and not a retirement account where you can cash out at any time all you have to pay is capital gains tax. You’ll also lose the mortgage interest deduction on your taxes not that that should bind you to anything but it exists. |
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| No. Just make 2 equal payments on your mortgage of half the total, 2 weeks apart. You will pay off your mortgage much sooner than if you make one whole payment per month. Don't sell your stocks. |
My own view is that left-wing positions largely come about from resentment, I agree with Nietzsche, a resentment about the surrounding social order. They have privileges, I don't. Or, I have them and I can't live up to them. Roger Scruton
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Simple answer (the details are a bit more complicated) Invest at least 15% of your income into retirement accounts. If you want to be debt free then make extra principle payments on the mortgage. Figure out what date you would like to be debt free and then do the math on how much extra you need to pay to make that date. Don’t make extra principal payments unless you are funding your retirement accounts at 15% or more. Remember….you want time in the market. |
"It behooves every man to remember that the work of the critic is of altogether secondary importance, and that, in the end, progress is accomplished by the man who does things."
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Originally Posted By jos51700: I have a combo of Roth and IRA that's approaching what I owe on my house. I have twenty years to retirement, and owe about a third of what my house is currently valued at, with no other major debt. I'm thinking, if I cashed out my retirement accounts, took the hit on the early withdrawal, and paid off the house, then aggressively reinvested the house payments (and I'm assuming there's a large dip/crash coming) until I retire, would I be an idiot? I have other retirement accounts besides these. I'd like to be debt free. All my stocks I consider "gone" until the day I cash them out, meaning I figure the market can collapse at any time, but my house.... It's real and I live in it. Thoughts? ETA The house currently has a debt of $130k at 6%. The stocks are all S&P. No, use stock dividends to pay mortgage. You basically keep your money and your home. Get a financial advisor. |
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Originally Posted By ColtRifle: Simple answer (the details are a bit more complicated) Invest at least 15% of your income into retirement accounts. If you want to be debt free then make extra principle payments on the mortgage. Figure out what date you would like to be debt free and then do the math on how much extra you need to pay to make that date. Don’t make extra principal payments unless you are funding your retirement accounts at 15% or more. Remember….you want time in the market. This |
ARFCOM GD hates everything so don't freak out if you catch grief for what you like. Unless you like AKs, then GFY.
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Put down the Dave Ramsey podcast and step away slowly.. Debt is not always bad. |
Posterity! You will never know, how much it cost the present Generation, to preserve your Freedom! I hope you will make a good Use of it. If you do not, I shall repent in Heaven, that I ever took half the Pains to preserve it.---John Adams
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Originally Posted By intheburbs: Put down the Dave Ramsey podcast and step away slowly.. Debt is not always bad. Even Dave Ramsey would tell him not to do that. |
"It behooves every man to remember that the work of the critic is of altogether secondary importance, and that, in the end, progress is accomplished by the man who does things."
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That would be insanely stupid from the math perspective. 10% penalty plus regular income tax. If that $130k extends up into higher tax brackets it would be even dumber. An infinitely better option would be to reduce your retirement contributions and put that amount towards your mortgage to pay it off faster. I would not reduce your retirement savings below the amount required to get all of the matching available to you. |
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Three accounts are separate from my work account (which I get an awesome 1% match). But, points made, I will consider. If it was just $10k, I'd pay it off in savings. Budgeting is always good but I pretty much pay all bills and spend all money on needs, spend the rest on savings, then I can't waste it on stupid shit (unless Kings has another police trade in Smith for under $300) I don't have $130k of stuff to get rid of, but if I did, I'd do that!! |
| There is a good chance the market performs with double digit returns in the next couple years, lets say 15%. You would be giving up 15% to save 6% plus the penalty of taxes you may owe. There is nothing wrong with having a little debt if it allows you to have cash in the market and you have a safety net if needed. |
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No to any early withdraw to pay off the house. That would be a REALLY bad financial decision IMO. Most extreme I'd go is stopping any new contributions to 401k and IRA's that are above any corporate match. Then take everything you can monthly and throw it at the mortgage. And that's being extreme in wanting to pay off the house. Our interest rate was sub 3% back in 2009-2020 so we kept the mortgage and piled as much as possible into 401k and IRA's. But with a 6% mortgage I can see a stronger case for wanting to pay it off. |
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Originally Posted By jos51700: I have a combo of Roth and IRA that's approaching what I owe on my house. I have twenty years to retirement, and owe about a third of what my house is currently valued at, with no other major debt. I'm thinking, if I cashed out my retirement accounts, took the hit on the early withdrawal, and paid off the house, then aggressively reinvested the house payments (and I'm assuming there's a large dip/crash coming) until I retire, would I be an idiot? I have other retirement accounts besides these. I'd like to be debt free. All my stocks I consider "gone" until the day I cash them out, meaning I figure the market can collapse at any time, but my house.... It's real and I live in it. Thoughts? ETA The house currently has a debt of $130k at 6%. The stocks are all S&P. Even WITHOUT tax and penalty, that would be the dumbest thing you could possibly do. Add in tax and penalty, and it is monumentally stupid. You will never recover that time in the market, and investing your old house payment will never be able to catch it up. Do the math..... this is making bad decisions so you "feel" better about debt. But all you are doing is locking in a reduced amount of money in the future. |
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Originally Posted By intheburbs: Put down the Dave Ramsey podcast and step away slowly.. Debt is not always bad. Dave would never and has never recommended doing what he is proposing..... so you are building a straw-man argument here. Even Dave knows this is dumb as hell. |
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Originally Posted By HDSledge: No. Just make 2 equal payments on your mortgage of half the total, 2 weeks apart. You will pay off your mortgage much sooner than if you make one whole payment per month. Don't sell your stocks. What's this wizardry? |
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That man is a homo and a liar-TrojanMan
Hell, a Ford just breaks down on you. It doesn't fall apart AND try to kill you at the same time-Bloodsport2885
That man is a homo and a liar-TrojanMan
Hell, a Ford just breaks down on you. It doesn't fall apart AND try to kill you at the same time-Bloodsport2885
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Originally Posted By Chromekilla: What's this wizardry? https://www.experian.com/blogs/ask-experian/why-paying-your-mortgage-twice-a-month-can-save-you-serious-money/ Not all lenders support it. Mine did not. |
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Originally Posted By FALARAK: https://www.experian.com/blogs/ask-experian/why-paying-your-mortgage-twice-a-month-can-save-you-serious-money/ Not all lenders support it. Mine did not. |
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Originally Posted By jos51700: I have a combo of Roth and IRA that's approaching what I owe on my house. I have twenty years to retirement, and owe about a third of what my house is currently valued at, with no other major debt. I'm thinking, if I cashed out my retirement accounts, took the hit on the early withdrawal, and paid off the house, then aggressively reinvested the house payments (and I'm assuming there's a large dip/crash coming) until I retire, would I be an idiot? I have other retirement accounts besides these. I'd like to be debt free. All my stocks I consider "gone" until the day I cash them out, meaning I figure the market can collapse at any time, but my house.... It's real and I live in it. Thoughts? ETA The house currently has a debt of $130k at 6%. The stocks are all S&P. Have you done the math on both of your alternatives here to game it out and see which one puts you theoretically further ahead? If not, why not? First, this seems like a decision where actually running some numbers would help make the right answer plainly obvious. Second, it would create an illustration that you could share with others so they could critique your assumptions. But I will cut to the chase, your idea is retarded. You are going to suffer an early withdrawal penalty, likely some taxes, and lose the tax free / tax deferred nature of gains on any money you already have invested in those accounts with ZERO ability to catch up later due to the statutory limit on contributions...all to save on 6% interest on a debt? That's breathtaking levels of retarded, please don't do that. |
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Originally Posted By Chromekilla: What's this wizardry? Originally Posted By Chromekilla: Originally Posted By HDSledge: No. Just make 2 equal payments on your mortgage of half the total, 2 weeks apart. You will pay off your mortgage much sooner than if you make one whole payment per month. Don't sell your stocks. What's this wizardry? He's talking about making the equivalent of making 13 monthly payments per year instead of 12. There's no wizardry to it whatsoever. It's not a financial hack, it's literally just paying more per year to accelerate principal repayment. Reorganizing it into payments 2 weeks apart has very little to do with it. You could simply just pay an extra 8.3% on your regular monthly payment and achieve about the same effect. It bothers me a little bit that it's always sold like some kind of genius magical financial trick because it'd be better if people just understood how interest works because there is nothing special about paying an extra 8.3% per year. It could be 5% or 10%, or whatever, and it would still have some commensurate impact on accelerating the repayment of your loan if that was your goal. |
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i agree with the dont do it crowd above. simple math - how much would you have to take out from the IRA to net 130k after tax and penalty? 160? 170? so youre giving up tax deferred earnings on 160/170 to save 6% on 130. no thanks |
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I hate debt, but that would be a dumb move. You would not only give up gains, but pay a premium to pay off your house. Another way to think of it is a prepayment penalty or setting yourself behind on your reinvestment with an up front loss. You'll need bigger gains than if you just did it the normal way. |
Get both is the answer.
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Originally Posted By Chromekilla: What's this wizardry? You'll can do nearly the same with sending extra principal in the one payment a month. |
Get both is the answer.
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Originally Posted By 1168RGR: Dogpiling in with another “don’t do that”. That strategy is almost guaranteed to harm your wealth and financial freedom. And I say that as a dude that hates debt and pays more than his monthly obligation, even with a lower APR. Me too! My only non month to month debt is the house. I could pay it off but it mathematically doesn’t make sense. I’d pay 24% or more in income tax to withdraw it. I could wipe my Roth out to pay for it but that doesn’t make sense to me. 3% interest out on mortgage interest which is a write off (not that big of a deal but it is there) and 8-12% made on my investments. Why would I trade that set up. That said, I will pop extra on the mortgage now and again. I will likely pick up on that again in January. Vehicle loan is done. I would have put a couple extra payments on the mortgage but I had some insurance and other stuff due. It does bug me not to make those extra payments. |
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Originally Posted By shrimpmoney: Dave Ramsey would tell him it's a horrible idea. The only time he will break the glass if it's to avoid bankruptcy. Originally Posted By shrimpmoney: Originally Posted By intheburbs: Put down the Dave Ramsey podcast and step away slowly.. Debt is not always bad. Dave Ramsey would tell him it's a horrible idea. The only time he will break the glass if it's to avoid bankruptcy. While Dave Ramsey’s advice isn’t applicable to every person and every situation, the average person would be in better financial shape if they followed Dave’s advice. Dave’s advice is frequently misrepresented by many people…..especially on this forum. |
"It behooves every man to remember that the work of the critic is of altogether secondary importance, and that, in the end, progress is accomplished by the man who does things."
Theodore Roosevelt
Theodore Roosevelt
