Personal Investment & Financial Planning Q`s/Roth IRA



Thank you for taking the time to answer my question. I am a very conservative individual and am concerning with the present economy. I have a small Roth IRA that I contribute $500 per month. I have about $64,000 in that account. I am 51 and my wife is 53. I want to take $30,000 out of my Roth IRA to pay off the mortgage. I am concerned about a market drop and losing my investment. To counter this move I would continue to put $500 in an IRA account for me and then start putting $500 in an account for my wife. In five years I would make up the $30,000 by contributing to my wifes IRA. I would also have peace of mind that the mortgage is paid and that if the market falls I did not lose my investment.
I presently pay $700 per month and will have it paid off in four years if I elect not to take money out of my Roth IRA.
Does this make sense or am I just worrying too much?

Dear John,

First, congratulations on your methodical saving.  Best thing you could do.

In general terms, when you have a need for cash, it is better to first take it from your taxable accounts, then your ROTH (no tax on a withdrawal if you are over 59 ½ and have met the five year test), then your IRA (you may incur tax).  Even if you are under age 59 ½, you can withdraw contributions you have made to your Roth IRA anytime, tax and penalty-free. However, you may have to pay taxes and penalties if you withdraw earnings in your Roth IRA.

Given that you have only four years to go on your mortgage payments without tapping your ROTH, the best thing to do may be to apply the payments that you were going to make into your ROTH and instead apply them to paying down the mortgage faster.  Essentially, you are investing in your home rather than the stock market, and you will be guaranteed to save on the interest cost of the mortgage – there is no comparable “guaranteed” return in the market equivalent to the interest cost of your mortgage.  

If you want to take contributions out of your ROTH to pay down the mortgage, and you do not take more than the contributions you have previously made, you are effectively moving your investments from your ROTH to another tax-deferred asset: your home.  Your principal residence has an exclusion from any gain on sale of $500,000 for you and your spouse.   The value of your home also appreciates tax free, but that investment is far less liquid than a ROTH if you should ever need to tap into the value.  Being mortgage free is a great feeling, and you will be there soon.

There is good reason to be worried about the valuations in the stock market, but I am not a believer in trying to time the market.  If you are concerned about your ROTH investments, you may be better off to reorient your portfolio to a more conservative position, e.g. more fixed income (bonds, which also come in a spectrum of relative risk) than equities, more utilities and REITs than consumer discretionary or tech stocks, etc.  Combine this strategy with paying down your mortgage faster with after tax dollars that you would otherwise have put into your ROTH, as described above, may be your best strategy while keeping your ROTH assets compounding tax free.

Hope this is helpful.  Good luck

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John Guilford Kerr, CFP, CFA


I can answer questions related to personal financial planning, asset allocation, private equity investment analysis, fixed income, mutual fund, ETF, and stock questions, estate planning (basic), education planning, insurance planning, and business financial planning.


I have thirty-eight years of experience in finance, in the U.S. and internationally, for both public and private corporations. I have specialized in personal and small business financial planning and investment advisory services since 2005.------ - ten years commercial banking, New York, Paris, Houston, Charlotte, Atlanta---- - six years treasurer of a publicly traded health care company, Philadelphia----- - six years international project finance (Bechtel), San Francisco, Manila, London----- - five years head of international hotel development (Hyatt), Chicago---- - eleven years personal financial planning.----- Registered Investment Adviser, Hawaii---- FINRA General Securities Representative - Series 7---- FINRA Uniform Combined State Law - Series 66---- Resident Producer Insurance License, Hawaii-, Accident and Health or Sickness, Life, Variable Life and Variable Annuities

CFA Institute of Hawaii---- Certified Fiancial Planner Board of Standards, Inc-----. National Association of Personal Financial Advisers----- Financial Planning Association----- National Association of Tax Professionals

Project Finance Yearbook - 1997 / 1998 "Manila Water & Sewerage System Concession"----- "The Road To Helsinki, An Analysis of European International Relations Leading to the Conference On Security and Cooperation in Europe"' published 2015.

Certified Financial Planner, Certified Financial Planner Board of Standards, Inc.---- Chartered Financial Analyst, CFA Institute----- Certificate in Financial Planning, Boston University---- Masters in Foreign Affairs - University of Virginia---- Bachelors of Arts, Government - Ohio University

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