"I am almost 65, still working," Pat wrote. "I have a pretax 401(k) with a local bank and another 401(k) with my employment. I make $34,000 a year. I am thinking about cashing in my 401(k) with the bank (approximately $20,000) and using it to pay down my mortgage. How much of this $20,000 will I actually get to pay towards my mortgage? And how will it affect my next year's tax statement?"

Jeff says that, since Pat is 65, he won't face the same penalties David would face.

"If you take money out before age 59½, you pay taxes on the money as if you earned it that year, plus you pay an additional 10 percent penalty," Jeff says. "If you're over 59½, you pay taxes on that money as if you earned it that year, but there's no 10 percent penalty."

As for tax implications, Jeff says, withdrawing the money will add that extra $20,000 to Pat's income for the year. If that means a change to a higher tax bracket, Pat will pay at a higher tax rate.

Based on some quick calculations (without all necessary information, mind you), Jeff guesses that Pat would pay about $4,500 of that $20,000 in taxes. That would leave about $15,500 to help pay down the mortgage. Whether or not that is a good way to use the 401(k) money is something Pat will have to decide.

But now that we've answered some basic questions, how about some philosophy? We'll get into that next week.

For now, if you have financial questions, send them to gkratz@desnews.com or to the Deseret News, P.O. Box 1257, Salt Lake City, UT 84110.

E-MAIL: gkratz@desnews.com