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use pension to pay off house?
Old 12-21-2018, 06:11 PM   #1
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use pension to pay off house?

I expect to retire in a year. We owe ~$310K on our mortgage, at 3.625% 30yr. I was thinking of taking lump sum on pension and paying off the mortgage.


Bad idea?
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Old 12-21-2018, 06:26 PM   #2
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Considerations
- A lump can put you in a higher tax bracket if distributed at once.
- Check your SPIA IRR versus mortgage rate. For me, the difference is 2% favoring pension annuity.
- Do you have retiree healthcare tied to pension payments?
- How many years left on mortgage?
- what is ratio of monthly pension to mortgage P&I?
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Old 12-21-2018, 06:49 PM   #3
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Originally Posted by albireo13 View Post
We owe ~$310K on our mortgage, at 3.625% 30yr. I was thinking of taking lump sum on pension and paying off the mortgage.
Why? Are you having a hard time sleeping at night while holding this (inexpensive) mortgage?
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Old 12-21-2018, 07:44 PM   #4
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You have a very good interest rate especially after inflation.
I would not pay it off with pension money or any other money.
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Old 12-21-2018, 08:57 PM   #5
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You really should keep the mortgage at such a low interest rate. I would never suggest borrowing against a pension or 401k/IRA to payoff real estate. We gave up a lot to save for our future in retirement.

We knew our job was not going to last to age 65, as the company was consolidating operations into fewer cities. We owed relatively little on our house, but we went ahead and sold it for list price and moved to an ultra low cost of living city. And there, we bought a less expensive, smaller house downsizing to where we would have no mortgage in retirement. And our plan of action worked out very well.
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Old 12-21-2018, 08:59 PM   #6
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Yes, bad idea for you. Great idea for Uncle Sam, you'll owe him a bundle in taxes.
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Old 12-21-2018, 11:50 PM   #7
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Originally Posted by albireo13 View Post
I expect to retire in a year. We owe ~$310K on our mortgage, at 3.625% 30yr. I was thinking of taking lump sum on pension and paying off the mortgage.


Bad idea?
Even though I am in the " pay off your mortgage early " camp, I would not forgo a pension to do this.
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Old 12-22-2018, 12:46 AM   #8
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Yes, bad idea for you. Great idea for Uncle Sam, you'll owe him a bundle in taxes.

+1.... very bad idea...
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Old 12-22-2018, 07:37 AM   #9
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I'm big on paying off a home but I'm not sure on this one....


How old are you and are you in good health?
What's your mortgage payment and how many years do you have left?
Fixed interest rate?
How much is you pension every month?
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Old 12-22-2018, 08:28 AM   #10
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Hi,
I am 63yo and in good health. Both parents still kicking ... Dad is 94, Mom is 88.

Have 27 yrs left on a fresh mortgage. Emotionally, I hate the idea of having the mortgage for possibly the rest of my life.
Still, the numbers say don't pay it off.
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Old 12-22-2018, 08:30 AM   #11
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Quote:
Originally Posted by albireo13 View Post
Hi,
I am 63yo and in good health. Both parents still kicking ... Dad is 94, Mom is 88.

Have 27 yrs left on a fresh mortgage. Emotionally, I hate the idea of having the mortgage for possibly the rest of my life.
Still, the numbers say don't pay it off.

What is your mortgage payment and your pension?
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Old 12-22-2018, 08:32 AM   #12
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Quote:
Originally Posted by albireo13 View Post
Hi,
I am 63yo and in good health. Both parents still kicking ... Dad is 94, Mom is 88.

Have 27 yrs left on a fresh mortgage. Emotionally, I hate the idea of having the mortgage for possibly the rest of my life.
Still, the numbers say don't pay it off.
Leave emotions out of finances and investing. They make you do unwise things like paying a large tax on a lump sum pension. If you need a reason to keep the mortgage, think of it as someone letting you use a lot of their money at a very reasonable loan rate.
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