🏡 Should I use 401k to pay off mortgage for spousal security?
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🏠 The 401(k) Mortgage Dilemma
When a sudden disability cuts your income, paying off your mortgage to reduce monthly expenses sounds like a safe move. But raiding a 401(k) to do it often destroys more wealth than it saves.
Even if you qualify for a disability exception to avoid the 10% early withdrawal penalty, you still owe ordinary income tax on every dollar you pull out. Plus, you lose years of compound growth. This calculator shows exactly how much wealth you sacrifice by cashing out a retirement account to pay off a low-interest mortgage.
💳 Mortgage Details
Enter the details of the mortgage you want to pay off. A low interest rate means your debt is cheap. This makes it mathematically harder to justify paying it off early with invested funds.
📉 401(k) & Taxes
To pay off a mortgage from a pre-tax 401(k), you must withdraw enough to cover both the mortgage balance and the taxes owed on the withdrawal. This gross amount is what you lose from your retirement nest egg.
🔗 See Also
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📊 Results
Bottom Line
Keep invested
Gross Withdrawal Needed
Upfront Tax Bill
Mortgage Interest Saved
Lost 401(k) Growth
Net Wealth Lost
Calculator updated by heyfinfam (v26.9.0) · View history
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Disclaimer: This content and any calculations provided are for informational purposes only. The views, calculations, and methodologies expressed are those of the author and do not necessarily reflect those of this platform. Not financial advice. Users are solely responsible for any decisions made based on this information.