Withdraw from 401K or Roth 401K to pay off Rental Property

[Walter Wintermute]

Hello,

I am 62 and nearing retirement. I have a remaining rental property with a $120 K mortgage. Unfortunately, this property has a variable interest rate that is currently 6.5 %. Reviewing my 401K over the past 5 years, it's averaged 5 %. I have enough money in my 401K to pay off the Rental. Alternatively, I could use money I have saved in my Roth 401 K to pay it off, tax free. However, this would reduce my total retirement savings to about 450,000 K. I have three other rentals that i own, free and clear. I see these four rentals providing us a regular stream of income during retirement. In a situation like this, does it make sense to pay off the final rental, or is this a really bad idea?

[Basit Siddiqi]

6.5% interest that you are paying and assuming you are in a 30% tax bracket means your real interest rate that you are paying is closer to 4.5%

5% > 4.5%

I would not pay it off early