I just turned 65 and have 20K from a house flip. I got the money when I cashed in a 25K job savings account 401(k). I paid about 5K in penalties to cash it in. I'm drawing social security but plan on stopping it as I'm working again and contributing to social security. I think I can earn up to 10k from the new job before it affects my eligibility for social security. I still owe $170K on my house to buying it down is an option.

I have some money in retirement investments. About 125k in annuities and $10k in a separate IRA. I received the 20K from the house flip but got the money from the cash in of the Savings IRA. I have about $15K in a liquid Emergency fund. I will probably retire within 5 years.

Is it better to pay down my mortgage or invest the 20K in ETF's or even a CD or another IRA? Seems like nothing I do brings in any income from the cash.

  • 2
    I'm confused: is the $20k from a house flip or from your 401k? Do you have anything left in retirement investments? When are you thinking about retiring?
    – Ben Miller
    Jun 4, 2016 at 12:44
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    Not to be pedantic, but there were no penalties. At your age, you can withdraw all you wish. There was 20% mandatory withholding, $5K, but you potentially get back any or all of it depending on your overall tax situation. Ignoring the list of exceptions, those under 59.5 with have ordinary tax due along with a 10% penalty. Jun 4, 2016 at 13:57
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    Needs more information about your existing retirement savings besides social security and how your income/expenses are now. Jun 4, 2016 at 18:41
  • You are not going to do any investing on any money you need in the next 5 years. Its way to risky. So I am afraid all you can do now is try to keep up with inflation. Also it would be nice to know your mortgage rate when asking this question. Jun 6, 2016 at 13:36

1 Answer 1


I think the basic question you're asking is whether you'd be better off putting the $20K into an IRA or similar investment, or if your best bet is to pay down your mortgage. The answer is...that depends.

What you didn't share is what your mortgage balance is so that we can understand how using that money to pay down the mortgage would affect you. The lower your remaining balance on the mortgage, the more impact paying it down will affect your long-term finances. For example, if your remaining principal balance is more than $200k, paying down $20k in principal will not have as significant an effect as if you only have $100k principal balance and were paying down $20k of that.

To me, one option is to put the $20k toward mortgage principal, then perhaps do a refinance on your remaining mortgage with the goal of getting a better interest rate. This would double the benefit to you. First, your mortgage payment would be lower by virtue of a lower principal balance (assuming you keep the same term period in your refinanced mortgage as you have now. In other words, if you have a 15-year now, your new mortgage should be 15 years also to see the best effect on your payment). Further, if you can obtain a lower interest rate on the new loan, now you have the dual benefit of a lower principal balance to pay down plus the reduced interest cost on that principal balance. This would put money into your pocket immediately, which I think is part of your goal, although the question does hinge on what you'd pay in points and fees for a refinance.

You can invest, but with that comes risk, and right now may not be the ideal time to enter the markets given all of the uncertainties with the "Brexit" issue. By paying down your mortgage principal, even if you do nothing else, you can save yourself considerable interest in the long term which might be more beneficial than the return you'd get from the markets or an IRA at this point.

I hope this helps.

Good luck!

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