I've been considering paying off my mortgage with my 401k balance. Some particulars, I'm in WA state in the US, and I'll turn 60 in about a week.
I have enough in my 401k with my current employer to pay off the balance of my mortgage. Maybe not quite pay it all the way off, but well within a few thousand either way.
FWIW, I have other investments as well that total roughly $300k that are completely separate from my 401k funds.
My mortgage is currently at 2.75% on roughly $138k-ish balance (I don't have a pay-off amount from my mortgage company, so I'm just looking at the current balance). It's a 15 year fixed loan that matures in 2028. The house is currently worth somewhere between $450k & $500k.
My 401k YTD performance is 16.5%, and 1 year is 10.7%. on a balance (today) of $150k-ish and I'm currently putting 25% of my paycheck into 401k (with a 4% match from my employer).
I'm looking at retiring in about 5 years, sooner if possible.
My question is, given these variables, is it wise (or possible) to pay off my mortgage with my 401k, then bump my 401k up significantly so I hit the maximum contribution of (currently for >50 year olds), $25k / year. I'd also max out Roth IRA contributions for my wife & me as well as our HSA funds (which can also be invested if you don't use them) which are similarly tax exempt.
In my head this makes some sort of sense, but I'm not a financial person.
Is this (A) possible, (B) advisable, and (C) what pitfalls might there be (taxes, penalties, market instability, etc.)? I don't know how to do this calculation so I'm hoping I've provided enough information to get the help.