Even if if mortgage wasn’t tax deductible I would not liquidate a Roth to pay a 5.375% mortgage. Once liquidated the tax advantaged status is lost forever. The chance at making more than 5.4% nominal over 30 years is pretty high.Assuming MFJ, 23k interest, 10k SALT and no other deduction only 4k is tax-deductible when compared with 29k standard deduction. It is better deal to pay-down the mortgage than buying those bonds.I would not stop Roth contributions or liquidate Roth assets to pay of a 5.4% mortgage. To the extent you have extra liquidity going forward you can pay down some and reduce the balance but it wouldn’t be a high priority for me.
I wouldn’t get hung up on the future interest cost, because probably half of it is inflation.
To take this a step further - I’m not necessarily recommending you do this, but to illustrate a point:
- you could take the payoff money in Roth and invest it in a treasury bonds or TIPs ladder. Long term bonds are about 4.4-4.6%. TIPS are at 2.2-2.3% real plus inflation which to me is the better option.
- your mortgage interest is about $23k. Presumably with property taxes and state income or sales taxes, and maybe charity, you are itemizing, so you after tax interest expense is less than 5.375, at least on a portion of the mortgage.
That’s what I would do and how I view it. Others may feel differently and that’s fine.
Statistics: Posted by JBTX — Mon May 27, 2024 12:57 am — Replies 15 — Views 1202