Should I buy out mortgage?

Question

Hi I was recently laid off from a well paying job. I do have some money set a side. so for the current time i am ok. Sometimes life smacks you in the face and you all of a sudden see everything. I originally was paying 2 times the principal on the loan for my townhouse. I bought the townhouse 6 years ago so that would be about 2014. I am 64 and will be 65 in June of 2021. I do have the option to start receiving my social security next year. I put a down payment of $90k on the townhouse. I have the remainder of the mortgage which is $200k. I did roll back the monthly mortgage payment to the original value of $1.5k till i reorganize. If my job continued i was going to take my social security early at 65 to pay the monthly mortgage. I do have enough that i can easily buy out my Mortgage which would save me over $100k. I like to work and am seeking employment again. here are my questions::

1. as far as the state and federal tax, if i took a lump sum or $200k out of my IRA i assume that will be seen as income. would i be taxed at the rate i was when employed or would i be taxed at a higher rate?

2. would it be better to go on paying the monthly mortgage or maybe paying a round $9-10k each month for 20 months or so?

I am thinking it is always better to payoff dept......when you can

1. as far as the state and federal tax, if i took a lump sum or $200k out of my IRA i assume that will be seen as income. would i be taxed at the rate i was when employed or would i be taxed at a higher rate?

2. would it be better to go on paying the monthly mortgage or maybe paying a round $9-10k each month for 20 months or so?

I am thinking it is always better to payoff dept......when you can

Edward B. · Answer

@Bill Jackson, no one can honestly answer your question about what is best without knowing your financial circumstances and goals better. I can tell you this

1. you will pay tax as if you had earned that $200k from your job unless it is a Roth. Add to that any other earned income for the year. So if you made $50k that year you would be taxed as if you had earned $250k.

2. Highly highly dependent.

Your last statement is true if you are a Dave Ramsey fan. The vast majority of real estate investors would disagree with you. Also, on the social security front, your payment goes up 8% every year you wait to start drawing until age 72. So bear that in mind. There are certainly circumstances where it might make sense to take it early, but know one can tell you that without knowing more about you.