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Cashing out a pension

Last post Tue, May 14 2013 5:40 AM by Retired Empty Nester. 11 replies.
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  • Fri, Apr 13 2012 1:03 PM

    • mariao57
    • Not Ranked
    • Joined on Fri, Apr 13 2012
    • Posts 1

    Cashing out a pension

    My husband will retire in two years.  We have a mortgage that was recently modifyed and runs for the next 20 years.  I just started receiving a monthly pension.  My question is would it be worth looking into cashing out a portion of this pension in order to pay off the mortgage when my husband retires?  Thank you all in advance.

  • Fri, Apr 13 2012 6:56 PM In reply to

    • itsmi
    • Top 500 Contributor
    • Joined on Thu, Jul 5 2007
    • Posts 126

    Re: Cashing out a pension

    Hi Maria,

    Welcome to the forum.

    Cashing out a pension is a personal choice. Only you and your husband can decide on this.

    I will suggest that you sit down and ask yourself some questions considering your age. Will you be able to maintain the paid for house (repairs are costly), property tax increases for you area, inflation, etc. in twenty years? What happens if you become a widow? Will you have to sell the house because it takes two pensions to maintain it? Or is your house too large for you to clean when you get older? If you or your husband become disabled, are you close to medical facilities, would you have to move, and how much do you currently owe on the house and how much interest you are paying are all factors.

     Consider this from all angles, make a list of questions to yourself and your future self before you decide. Sometimes seeing it in writing is an eye opener.

    Hope this helps in some way. If it were me I would not do it.



  • Fri, Apr 13 2012 7:17 PM In reply to

    Re: Cashing out a pension

    Maria, before considering any of your options, the number one priority is to ensure your spending is under control and you are living on a written household budget. Plan out your spending with hypotheticals and plenty of "what ifs". The best spent money and investment is always in a paid off home. If you have a $200,000 mortgage, you will pay $87,500 just in interest. This is $365 month after month after month. Do what you can to pay it off AFTER you have eliminated all of your personal debt.
    I am a Personal Financial Coach helping individuals across the country save money, get out of debt, and live financially free without selling insurance, investments, or fancy software. Just plain 'ole common sense principles that work.
  • Fri, Apr 13 2012 9:05 PM In reply to

    • grame
    • Top 50 Contributor
    • Joined on Tue, Feb 22 2011
    • Kingdom of Callaway
    • Posts 1,950

    Re: Cashing out a pension

     Please research the tax liability issues if you take this all at once.

    I declare to you that woman must not depend upon the protection of man, but must be taught to protect herself, and there I take my stand. ~Susan B. Anthony
  • Fri, Apr 13 2012 10:25 PM In reply to

    Re: Cashing out a pension

     Not if its the 401k those suckers you got to pay a penality for for drawing out to early from what I heard I paid back tax on that one and finally finished paying it all off 5 years ago Im only 50 and wow that hurt think hard first I think talk to the banker on this one don't get stiffed like I had to I had to pay my hospital bill off which I did 5 years ago still if you need back up later in life that you don't have it. it will hurt abit money wise I mean up to you???

  • Sat, Apr 14 2012 8:28 AM In reply to

    • rolo
    • Top 50 Contributor
    • Joined on Wed, Apr 4 2007
    • Michigan
    • Posts 1,932

    Re: Cashing out a pension

     As cheapchic and another poster said--you will pay taxes and fees if this is a 401k type pension--about 40% goes to the taxes and fees.  My financial adviser says the only time you should cash out your pension is to avoid foreclosure and/or bankruptkcy. 

    What to consider before using retirement funds to pay off the mortgage:  can you/dh afford the cost of the house, insurance, taxes, and onging maintenance/repairs going into your retirement years?  


    "People take different roads seeking fulfillment and happiness. Just because they're not on your road doesn't mean they've gotten lost." ~~ Dalai Lama XIV -

  • Sat, Apr 14 2012 6:37 PM In reply to

    Re: Cashing out a pension

    What are we talking about here?  A 401K, an IRA or a company pension.  I've not heard of a partial cashout of a company pension ... usually it's a lump sum and that's it. 

       Definitely talk with someone about tax liabilities if you do this ... and will you have enough to live on (now and later) should you put this pension money toward the mortgage?

  • Mon, Jun 11 2012 3:36 PM In reply to

    • PeterS1
    • Not Ranked
    • Joined on Mon, Jun 11 2012
    • Posts 2

    Re: Cashing out a pension

    If you are planning to withdraw pension to pay off mortgage, then you must have second source of income from where you can easily manage your lifestyle expenses. Take a paper, write down your fixed expense, do the proper math and then take decision.

    - Peter

    I am 2nd year student of Masters in Finance, I run an investment advisory InvestmentGeekz with my own research and views on various investment options.

  • Sat, Jun 16 2012 4:10 AM In reply to

    • Stonecold
    • Not Ranked
    • Joined on Sat, Jun 16 2012
    • United States
    • Posts 1

    Take More Cautious Step

    Hello Maria, As you're planning to cashing out pension, it's a big decision. If you're planning to do some business or spend it in some good source then you can manage a good amount not all the money needs to be cashout. I suggest you to cahsout only 50% money and then spend it after give it in a bank. You can use it and bank will give you interest too.
  • Fri, Feb 22 2013 10:42 AM In reply to

    Re: Cashing out a pension

    If it were me, I would sit down and compare the tax implications of cashing out now compared to the interest costs you would pay over the life of the loan (as mentioned in previous posts here, there is usually a penalty in addition to the taxes you have to pay for withdrawing funds from a retirement account). As others have also said, though, the type of retirement account you are talking about can make a difference...401K, IRA, Roth IRA. The Roth would have less fewer tax implications.
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