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Jul 26 2010 12:00AM

Question


I am not collecting unemployment insurance, but I am unemployed in the state of Oklahoma. I purchased a house, putting down $50,000 and taking out a $65,000 mortgage. I currently have $15,000 to live on while trying to get a job. I am 57 years old. I have a mutual fund account — 50 percent invested in an annuity and 50 percent in stocks. In my deferred annuity, I have $94,000 and in my rollover Individual Retirement Account (IRA) I have $78,000. I am debating whether to buy my house out right with the rollover IRA (with 10 percent penalty and 12.5 percent for the federal government tax) and be done with it and save the interest on my home.

Answer


“The answer depends in part on the interest rate of your mortgage,” said John W. Peterson CLU, ChFC, CFP®, CWP, of The Peterson Company. “Unless it is a high interest rate I would not use your IRA to pay it off.”

The better option, if you need to access some money for living expenses, might be your annuity. “Most annuities will allow you to withdraw 10 percent penalty-free after the first year,” he said. “In addition, since you are not employed, withdrawing some money from your IRA should not put you in a bad income tax bracket, either.”

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