I will retire in 2018 with $210,000 in my 401(k), a $3,000 pension payment and social security benefits; should I use my 401(k) to pay off my $85,000 mortgage, which will cut my living expenses in half?

I’m retiring in October of 2018 at 60 years old. I will have approximately $210,000 in my 401(k). I will be collecting a pension of $3,000 a month, and then social security later when I need more income. I owe $85,000 on a 30-year fixed rate mortgage at 4.3 %. My mortgage payment for my condo is $800. If I didn't have to make that $800 payment every month, my living expenses would be cut in half. (My monthly expenses are currently $1,650). I have $30,000 in savings and no credit card debt. Should I consider paying off my mortgage with my 401(k)? 

Debt, Retirement, Pensions, Social Security, 401(k), Real Estate
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February 2018

Sounds like you are in relatively decent shape for retirement, given that your living expenses are more than covered by pension and eventually SSI.  Quick question about your $3,000/mo pension - What would happen if the company stopped paying it? Is this a possibility?  I know many clients that have retired only to have that ugly surprise come up after the fact.

An after-tax and after-fees rate of return on a balanced portfolio would probably be similar to the cost of your 30-year 4.3% mortgage.  Therefore, not much of an investment arbitrage opportunity.  Seems also like you could pay down the mortgage a bit with your $30,000 savings.  Typically 6 months living expenses is a good rule of thumb to keep on-hand.

You wouldn't want to use 401K funds to pay down the debt, every dollar withdrawn from it is considered taxable income.  You may want to defer taking distributions from your 401K until Required Minimum Distributions at age 70.5 kick-in.  This gives you a good 10 years to got for capital growth without placing a burden of income on it.

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