I am 63 with a $37,000 dollar Heloc at 9%. Should I pull from my 401K to pay down this high interest Heloc and start putting the extra money away to build my savings. We have $950,000.00 in our 401k's and we have no debt and our main mortgage is paid off. I plan to retire at 66 with both a pension and social security.

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    How much are you contributing to your 401(k) right now? Could you reduce contributions and just pay off the HELOC over the next few years with your current income? Mar 30 at 4:42
  • I would be reluctant to pull money out of the 401k with the penalties added atop, Brian's suggestion is more sound to just contribute less to it and instead use the extra available cash to pay it down instead, you will in total lose less money on that approach, Mar 30 at 15:37
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    @GµårÐïåñ: what penalties? OP is 63.
    – Hilmar
    Mar 31 at 13:23
  • That is a general rule, OP is not the only one who is going to read responses to questions. They may not have penalties, but if they are still actively contributing to it, then better off not to and if they are not contributing to it but have income should use that first since they will lose earnings and if they don't have income then they are already withdrawing from it which makes the question moot. Mar 31 at 14:10

1 Answer 1


I don't have a simple answer. Taking a loan from the 401k is generally a bad bet since it costs you the tax-advantaged growth of that money. But this close to retirement... I'd say the answer depends strongly on how much return you're getting from the investments within the 401k.

Note that this doesn't have to be an all-or-nothing decision; you could pay down the loan without completely paying it off.

You might also want to just look at refinancing that HELOC. In a very quick web search I see one vendor specifically offering to refinance HELOC loans at 8.2%. And as @littleadv said, if you have refinance your mortgage or take a new mortgage in a way that leaves you with money to pay this off, that would probably get you a significantly better rate. Revolving lines of credit generally are more expensive than simple loans for the same amount.

At least it isn't a credit-card debt at twice that interest rate!

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    Refinancing into a cash-out mortgage is probably going to be cheaper since LOC rates are usually a bit higher than regular loan rates.
    – littleadv
    Mar 30 at 3:47
  • In case neither you nor littleadv noticed, the OP says that there is no main mortgage, and so refinancing it to get cash out is not an option. Mar 30 at 13:34
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    @DilipSarwate: But taking a new mortgage, rather than a revolving HELOC, may be possible and worth considering.
    – keshlam
    Mar 30 at 13:41
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    I took the advice of paying down the loan by half and than finishing up the loan by decreasing the 401k contribution by 5000.00 for the next year and using that money to pay off the rest of the Heloc by making agressive monthly payments. Thank you for the advice. We should be mortgage free by Nov of 2025 and still have the Heloc open in case of any emergencies in the future. Mar 30 at 17:18
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    @DilipSarwate heloc is a type of mortgage, and regardless you can take out a new mortgage if you have enough equity
    – littleadv
    Mar 30 at 23:06

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