Comments about ‘Paying off home mortgage with IRA is 'financial suicide'’

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Published: Monday, Feb. 25 2013 12:20 p.m. MST

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tdwds
South Jordan, UT

IRA's, 401K's, ANY government sponsored tax lien like these are dangerous to invest in, in the first place!! Get educated people, there are much better, less costly options for retirement planning.

Kellie Wood
Orem, UT

The LDS church for decades has counseled that we should pay off our mortgages asap. THEN we can invest in other retirement options besides the basic monthly savings that are ongoing. If I were this family I would pay off the entire mortgage now. The dollar isn't going to be worth much when oil countries switch from the dollar to the Yen or other currencies for payment of Oil. That could happen in 2016. Better to count their losses from the IRA now then to count their losses from a worthless IRA in 2016.

Max
Charlotte, NC

Kelly,

Paying of a mortgage is sometimes good idea (but sometimes not. Leverage can be a useful tool if you know what you are doing) but not at such a ridiculously high cost. The LDS Church would never encourage such a thing. To incur the taxes and penalties would indeed be financial suicide. Also, if you wait until you have paid off a mortgage to start saving for retirement, you have lost precious time for your money to be compounding in a retirement plan.Albert Einstein called compounding the eighth wonder of the world and the most powerful force in the universe. John Maynard Keynes called it magic. Time is your best friend when saving. Also, if you pay off your mortgage with your IRA, WHAT DO YOU LIVE ON IN RETIREMENT? Your house can't feed you. At that point, your only options would be to sell your house and buy a smaller one and this may not leave enough to live on or you could do a reverse mortgage which should typically used as a last resort, not part of a financial plan.

K
Mchenry, IL

They aren't getting any money coming in. They have to take out from the Ira anyway. How much in interest would she be paying if she paid off the mortgage the remaining life of the loan?

There will still be some money remaining in the account. It will be easier to meet the rest of the bills with the mortgage gone.

When they are employed again they can use the money they would have spent on the mortgage to build up the retirement.

Shamal
Orlando, FL

Isn't there some portion of your 401k/IRA that you are aloud to put towards a home without paying a penalty? $10,000 seems to ring a bell. Not sure on the stipulations. Someone else can google it:)
I don't disagree with the math argument of which option will cost you more, but equity in your home is an investment towards financial security as well and reducing that bill that you have to reconcile every month counts for something.
I envy those who have eliminated their greatest monthly expense..

American First
Merced, CA

DON'T LISTEN TO THE OBAMEDIA! Get your money out of the stock market NOW while it's high! The entire market is being falsely sustained and manipulated by government spending and money printing, true indicators such as GDP, housing prices and Unemployment tell the real story about the state of the U.S. economy. It's just a matter of time before Obama's hostile takeover of the U.S. Free Market will collapse the entire system. It's sabotage!

Floyd Johnson
Broken Arrow, OK

Kellie

Who exactly in the LDS Church has counseled to delay retirement savings until after a mortgage is paid off? Decades ago, retirement did not exist as it currently does. The previous model was an employer sponsored pension and mortgage rates were 18%. Under that model, paying off a mortgage was clearly a priority. With mortgage rates at the level of inflation (mine is 2.1%) it is very reasonable for some individuals to make prudent deposits into a personal retirement account.

Nancy L.V.
Las Vegas, NV

Sadly, I agree with American First that our county's financial system is on the verge of collapse. In view of that, using your dollars to pay off your mortgage while the dollars are worth something makes very good sense. I always say follow your "gut level" feeling. As for me, I've cashed out my 403b and Roth IRA!

atl134
Salt Lake City, UT

@American First
The market probably will go down the next week or two but because of sequestration spending cuts, not any of that other stuff you railed against.

xscribe
Colorado Springs, CO

Why cash out the Roth? It's tax free!

justired
Fillmore, UT

the lds church has never counseled me to pay off my mortgage first, especially not by cashing in my IRA or 401k, and i've been going regularly for over 70 years. that is false, dangerous, and jumping to unwarrented conclusions.

i agree with the statement in the article, cashing out before full retirement age, is financial suicade (like getting your exercise by jumping off a cliff).

Shamal
Orlando, FL

Floyd

To answer your question, I don't know that any guidance from church authorities has been that specific, but President Hinckley did refer to paying interest as bondage and gave the example of President Faust paying off his Mortgage quickly despite favorable interest rates and the sense of piece(content) that came from doing so.

I've seen some get zealous and put everything they can scrape together to do just this and put themselves into a stressful liquidity(lack of) problem.

An interesting thought that may be obvious to some- Homeowners are in a far better position when the market drops than borrowers. If the need arises, not owing the bank enables you to sell at whatever the depressed value of your home might be and buy someone else's under the same depressed market prices.

one vote
Salt Lake City, UT

Better to buy gold and hope bubble bursting will no go below $900.00.

Twin Lights
Louisville, KY

Kellie Wood,

I think you may be confusing LDS church council with that of Dave Ramsey.

The pamphlet One for the Money shows savings as part of the budget right along with debt payments.

It counsels:

"With the exception of buying a home, paying for education, or making other vital investments, avoid debt and the resulting finance charges."

AND

"Beyond the emergency liquid savings, families should plan for and utilize a wise investment program preparing for financial security, possible disability, and retirement. Avoid all proposals for
high-risk investments and get-rich-quick schemes."

UteMiguel
Go Utes, CA

I don't agree with the alarmists saying that the dollar will soon become worthless. But let's assume for a moment they are right. Why would you cash out your IRA to pay off a debt that will soon become trivial (who cares if you owe 100k if the dollar is worthless)?

If the doomsayers are right, it would be better to cash out your IRA and invest in gold or foreign currencies (or food and guns).

toosmartforyou
Farmington, UT

Ok, folks: Pres Hinckley said once "Get a modest home and get it paid for. Then if something unforseen happens to the world financil markets, your wife and children will have a roof over their heads." Then he went on to say that he wasn't predicting "gloom and doom" but that his father had given him that advice and he found it to be good.

Look around you and see how many people have anything but a "modest house." The castle's they've mortgaged to live within own them, not the other way around.

As always, do what is best for you in your own situation. What is right for one person is not right for another. I can assure you, however, from personal experience that paying off the mortgage brings a feeling of peace and security that debt never will, regardless how much future earnings you think you are earning for retirement. Be smart!!

VST
Bountiful, UT

There are lots of back-seat amateur financial advisers and fear-mongers posting above.

As for me, I will stay with my own CFP certified professional financial advisor, which only costs me about $1K per year, which is easily earned back in less than one week.

American First
Merced, CA

@atl134

So you agree that Government spending is what's boosting the stock market right now? That's my point, Government is broke...it's all political, fake...anyone who doesn't see that Obama has pulled a 'watch what my other hand is doing' while he's used government to buy up and subsidize the US economy needs to leave the movie theater. Remember the good ole' days when American consumer confidence actually drove the markets? America will never be China or Europe, socialism is as foreign and toxic to the Free Market economy as influenza is to the human body.

Herbert Gravy
Salinas, CA

When did the truth become "fear-mongering"? This economy is shakier than Elvis' hips, and getting worse by the minute. The greatest "fear-monger" is at the helm trying to scare us all re sequestration, etc. We now have a "house of cards" which must surely fall. This economy cannot be sustained or corrected with the current policies being employed. Good luck to all of us!

USAlover
Salt Lake City, UT

I paid off my mortgage at age 40...on my birthday, as a present to myself. The teller at the bank didn't know what to do. She said she had worked there 14 years and no one had ever come in to pay off their house. I got a handshake from her and the bank president who had to come show her what to do.

I've also funded a small IRA and chose instead to use other chunks of money to pay off my mortgage. My IRA is about where it was 10 years ago plus the principle I added. Very little interest gained.

Owning my home has brought more financial peace of mind than any single thing...EVER! I'm now free to invest more aggressively than ever because nobody can take away the one thing we need everyday...somewhere to sleep.

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