From: Mesquite, Texas

Dear TaxMama,

I have a IRA with my credit union and I was wanting to cash it in to pay off my house. I am 57 years old.

What penalties would I pay or could I even cash it out?

It was a 401k plan I had with my previous employer. When I left there I changed it over to an IRA.

Thanks,

Mary

 

 

 

Dear Mary,

Please don’t do that!

If your IRA isn’t earning more than your mortgage, then move the account to something more profitable.

You can also refinance your mortgage to get a lower rate.

But pulling the money out of your IRA….?

You’ll have a 10% IRS penalty for early withdrawal. You’ll have IRS taxes at your highest rate, including the income from the IRA. Why?

Wait until you’re 59 1/2 and start drawing money as you need it. You won’t pay penalties. Your taxes will be at a lower rate…and you’ll be better off.

That’s just my opinion.

Best wishes,

Eva Rosenberg, MBA, EA