putting money in 401k or pay off house with 401k?

[KirkPsalm]

I have a 127k owed on my home and need to pay on it 20 more years. I have 100k in 401k. Is there a senario where i use all that money to pay down on my house and then start saving again where i would come out any worse off. In other words would the investment in my home be as valuable there as it would be in the 401k investments. iv'e had the house 10 years and paid 165k and know appraised for 230k. I know this is subjective but do you think i'd lose in the long run by paying the house off and start over saving? I am currently contributing 22% in 401k and paying off the house would allow me to say even more than that. Anyway what do some of you financial savvy folks think? i'm roughly 14 years away from retirement.

 

[truefiction1]

I have a 127k owed on my home and need to pay on it 20 more years. I have 100k in 401k. Is there a senario where i use all that money to pay down on my house and then start saving again where i would come out any worse off. In other words would the investment in my home be as valuable there as it would be in the 401k investments. iv'e had the house 10 years and paid 165k and know appraised for 230k. I know this is subjective but do you think i'd lose in the long run by paying the house off and start over saving? I am currently contributing 22% in 401k and paying off the house would allow me to say even more than that. Anyway what do some of you financial savvy folks think? i'm roughly 14 years away from retirement.

I would definitely not remove 401k funds to pay off or pay down a mortgage. Why? A few reasons: One, there will likely be a 10% penalty for withdrawing your funds before age 59 and a half. Two, the income tax owed on your pre-tax contributions will be due at the time of your withdrawal. Three, you will lose the mortgage interest expense tax write-off every year. Four, you will have removed a large portion of the funds that you have in your 401k; funds that ought to be left in there so that your balance can continue to produce substantial growth. And five, there may be better options depending on your mortgage interest rate, like refinancing your house with a shorter term, like 15 or even 10 years, which could save you tens of thousands over the remainder of your mortgage term as well as shorten the years left to pay. Another option is to borrow your 401k money, but this has its downsides.

 

[HTacianas]

I have a 127k owed on my home and need to pay on it 20 more years. I have 100k in 401k. Is there a senario where i use all that money to pay down on my house and then start saving again where i would come out any worse off. In other words would the investment in my home be as valuable there as it would be in the 401k investments. iv'e had the house 10 years and paid 165k and know appraised for 230k. I know this is subjective but do you think i'd lose in the long run by paying the house off and start over saving? I am currently contributing 22% in 401k and paying off the house would allow me to say even more than that. Anyway what do some of you financial savvy folks think? i'm roughly 14 years away from retirement.

I recently looked into doing the same thing. It turned out to not be a good thing to do. In my case, the gains on my 401k far and away exceed the interest I'm paying on my mortgage. To take the money out of my 401k to pay off my mortgage, then add my mortgage payment to the amount I'm contributing to my 401k would lead to a loss. But my 401k has been returning upwards of 15 percent and my mortgage rate is below 3 percent.

 

[jacks]

Truefiction1 is spot on. Great advice. BTW it may not even be necessary to refinance to take advantage of a shorter term. Pretty much every additional dollar you put towards your mortgage payment will reduce principal. Just make sure there isn't a pre-payment penalty clause on your loan, which would be rare.

 

[Rachel20]

There's also the option of reducing your contribution and using that money to make super-payments on your mortgage instead, kind of a middle-ground approach. But you will lose any employer-match you may have, so need to take that into account (though it's usually capped, so u probably wouldn't?). I personally paid off my house first, many years ago, then upped my 401k contributions after that. Recently, I moved my 401 from stocks to bonds, but I'm much closer to retirement than you so opted for safety over higher returns.

 

[Brian Mcnamee]

I have a 127k owed on my home and need to pay on it 20 more years. I have 100k in 401k. Is there a senario where i use all that money to pay down on my house and then start saving again where i would come out any worse off. In other words would the investment in my home be as valuable there as it would be in the 401k investments. iv'e had the house 10 years and paid 165k and know appraised for 230k. I know this is subjective but do you think i'd lose in the long run by paying the house off and start over saving? I am currently contributing 22% in 401k and paying off the house would allow me to say even more than that. Anyway what do some of you financial savvy folks think? i'm roughly 14 years away from retirement.

Hi we are entering uncertain times and I believe prophetic times. The stock market is a huge bubble which will pop when the Fed stops propping it up. If you look at your plan it is probably down thousands from your peek. The market could go down half or more and with inflation rising too. If you can pay off your house you will have more cash each month but loose that write off on your mortgage which will effect your tax rate. You must decide if you think holding in a plan will be better than paying off the debt. You will save thousands in interest as well. Being debt free is a good feeling and I would lean that way as it takes the risk of losing what you have built up and if you can save what you used to pay on your mortgage and also keep saving at the rate you contributed to your plan you will do good not matter what.

 

[mama2one]

financial advisors do not recommend touching 401Ks

at your age, it would be difficult to start over on the 401K



needed to retire in each state:

What a Comfortable Retirement Will Cost You in Each State

 

[Sketcher]

You can't spend a house, you can only sell it, and you don't know what kind of market it will be when you have to sell it.

Edit: OK, you could rent it out . . . but by the time you need to do that, do you want to take on the responsibilities associated with renting it?