Maybe someone here can help me figure this out.
I turned 59 1/2, and I have an IRA with about $500K. My wife has recently semi-retired and has started taking her social security, but I am still working and plan to for 5 years. I have a mortgage, for about 320K on a house with about $750K value.
I also have a HELOC that I established to clear out the kids education expenses. It is about $175K, and currently I am paying interest only. Interest right now 5.75%, so payment is about $762/mo.
I'm thinking I'd like to clear it out, but of course, my traditional IRA means a hefty tax on it. Without a big withdrawal, we'd be with the 22% rate, but (by my calculation) with would soon be into 24% bracket with a big withdrawal. (Oh, yeah, and we live in CA, so 9.3% marginal rate.
- I will need to pay minimum 1% per month in principal starting in 7 years, plus interest. If we don't pay it off, that'll be a tough payment to make ($2250).
- HELOC rate is adjustable, and might be 6.50 in a couple of years.
- HELOC interest is not deductible.
- Paying an extra 2% tax
- Market has been good to my IRA -- but, to me, it seems like it may be near a top.
- Tax rates are comparatively low right now.
Without starting any fights, I'd say there is significant chance that party controlling the White House could change in 2020. This could mean both that:
- the Market could drop, possibly very fast
- the tax rate could be adjusted higher
My financial advisor has suggested that the conservative investments I should be in are likely to be less than 6% moving forward, so maybe a withdrawal makes sense. But the tax considerations make it difficult.
Anyone have any thoughts? Anything I forgot to think about?