Want to get mortgage paid off. Need advice

[rockrv22]

My wife and I just had our 1st baby. We owe about $18000 on our house. My goal was to have it paid for when the baby arrived but that didn't happen. I have the money but that would get into our emergency fund. Would it be ok to take out like $15000 out of roth ira and pay it off? P.s. we have been paying alot extra every month.

[Jluke]

Congrats on the newborn!

I would not touch your roth money.

At an 18,000 balance I would consider that mortgage basically paid off. Ride it out.

What IS the rush?

[rockrv22]

Peace of mind

[Jluke]

Peace of mind

As a new parent (and someone who had a paid off home before 40) I would gain more peace of mind having a larger emergency fund.

[TexasHusker]

Finances are all a matter of what is itching you. If a $18K balance on your mortgage is itching you, then do what you need to do to scratch the itch and give yourself some peace.

Just because your itch isn't the same as someone else's doesn't make it invalid.

I don't have an itch about paying off mortgages - I have about $750K in outstanding mortgages - all of which I could get rid of by the end of July if that was an itch that was bothering me. But everyone's itch is different.

If it's worth it to you to take money out of the Roth and get the mortgage off the books, by all means do it.

[disneysteve]

If it's worth it to you to take money out of the Roth and get the mortgage off the books, by all means do it.

Before you do, plug 18K into a savings calculator and figure out what that would be worth at retirement if you left it alone, growing tax-free, until you are 65 or 70. Seeing as you just had your first child - congrats by the way - I'm guessing you are relatively young, perhaps under 30. So let's say you can let that 18K grow for 35 years and earn an average annual return of 6% which is very achievable. Your 18K would grow to about $147,000! That's how much retirement money you are giving up by paying off the mortgage with that money instead. If you can do without it for 40 years, it would be up to just about $200,000.

Maybe you're willing to forgo that for some peace of mind today, maybe not.

Me, I am a firm believer in the fact that the R in IRA stands for RETIREMENT. I'm not touching my retirement accounts for anything other than retirement unless it literally involves saving my life or the life of a loved one.

[snafu]

1st, Congratulation to you and wife. It's so exciting and exhausting to be new parents. 2nd, having taken care of finances and accumulating a significant ROTH account makes you part of an small but smart and important segment of the population when the majority carry too much debt.

I understand that you made a commitment to yourself to pay off the mortgage before the baby arrived but that didn't happen. Can you identify what put you behind in your plan? Have you reviewed upcoming expenditures for the next six months? Are there any adjustments that could be made to squeeze small sums to reduce mortgage principal? Can you identify any items that you no longer use or need that could be sold to add to the project? Is there any over time or skill set that could add income? Since you are in charge, do you think you could move the target date to year's end and reassess? I'd plan for a New Year's Mortgage burning ceremony.

[rockrv22]

I think I just set my goal to high. We are doing pretty well I guess for our age. If we stick with paying what we have been doing new years is pretty good goal.

[Keshet]

If I were in your shoes, I'd just keep paying whatever extra I could on the mortgage every month until it is paid off. We paid off ours about 18 months ago, and yes it felt great. But I would not dip into retirement savings to do so.

[msomnipotent]

Unless your interest rate is high, I would get more peace of mind with a big emergency fund. Babies are expensive and they get more expensive as they age.

[Milly]

Hooray! Congrats on your little one. First recommendation: if you are sleeping as well as I did for the first few months of my kids' lives, don't make any drastic decisions. You just aren't at the top of your game right now.

As for my actual opinion... (remember, opinions are like armpits, everyone has them and most of them stink)... I also am coming up to the end of my mortgage. I had made the goal of paying off my house by the time I'm 30 and am on track to do it with $29k left and me 28 years old. I think we probably have similar feelings about knocking out debt and fighting for goals.

Where we may differ is in what we consider debt. If I short my retirement account to pay off my mortgage, I'm just shifting the debt in my mind. I'd be in debt to myself. On the other hand, if I have a savings account with as much money as I owe on my house and I could transfer it to pay it off any day, I am debt free. Sure, I could have an emergency, spend some savings, and not be debt free anymore, but it is actually better than sitting on a $0 balance and a $0 debt. Sometimes you need liquid cash.

My husband's retirement account has the option of borrowing against it and paying it back into your own retirement account at a tiny rate (I think the rate is supposed to reflect what would happen if we invested it all in government bonds, but I'd have to look into it). It seems like a no brainer to trade a 4.6% mortgage for a 2-3% loan that we are paying the interest to ourselves. Heck, we could even stop our contributions over the company matched amount and put it on the loan instead (since it goes the same place anyways). We'd be completely debt free so fast.

We won't do that though. Why would we risk putting our retirement goals at risk so that we could meet our "hey, this would be really nice" goals? It just doesn't make sense to me.

If I was to do that though... Here's how I'd do it:
I would only take money out of my government bonds portion of my portfolio and leave the balance further skewed towards the risky fluctuating funds. I'm locking in the slow and steady rates already with my loan interest. I wouldn't be able to take advantage of any major market drops though since my slow and steady money isn't readily available to pour back into the depressed stocks.

As a side note: I am also highly considering not reaching my goal. Not because it is too hard, but because new opportunities and new information have arrived. The US dollar has many troubles ahead and I also want to give my extended family some capital to get their old cabin on a solid foundation.

[Nutria]

I have the money but that would get into our emergency fund. Would it be ok to take out like $15000 out of roth ira and pay it off?

Paying off the mortgage is NOT an emergency, so IMNSHO... absolutely not.

[Fishindude77]

Leave your IRA alone, that tool is for retirement. Just push extra hard making extra payments, etc. and you can knock that $18K mortgage off quickly. Good luck !

[myrdale]

I am assuming your savings is separate from the IRA.

Do not touch the IRA.

You absolutely have done the correct thing piling up money prior to the baby being born.

At this point, I think I would leave what you have saved alone, and just attack the mortgage aggressively each month, with the overall goal to have $0 left each month after everything is paid with out touching the savings. If you were to get in trouble at some point, you would have the savings available, but attacking the mortgage head on, it will be gone within a year or so.