FYI your situation is NOT different. Pay off the house like everyone else does. Increase your principal payment each month. Tackle it. Don't rob your retirement accounts.
It’s so much more than paying the penalty and taxes!! You lose out on compound growth which is the worst of them all. Stop obsessing on paying off the house! A paid off house doesn’t buy your food or pay your bills, money does. Even when your mortgage is paid off, you don’t have a paid off house. There are taxes as well as expenses. Focus on growing your assets so you will have enough for retirement and by then you should have the mortgage paid for anyway.
@@nicholasgunter3838 you missed his point He is saying that the caller is saying that is too much debt, which it shouldn’t be because their income as high enough for that to not be that much of
When I left my job I cashed out my 401k and payed off our house in full. With the interest saved over the course of a 30-year loan, only made sense at the time. I was lucky enough to find a career that offers a pension, and my wife's 401k we feel confident about our retirement. Fast forward 5 years, we now rent out the house we paid off which generates $3000 a month in rent, and including our combined monthly income of $7,500 were actually doing better. We're using the income from the rental to put towards the principal of our current mortgage, but I would say cashing out my 401k was the best decision I made 🤷♂️
@@Dametime213This is the one piece that Dave leaves out. The 10% tax penalty is fair to call out as equivalent to interest on a loan. The normal tax though….you’ll pay that whether you take it out now or in retirement. The only potential difference being what your tax rate is now vs. in retirement (could be higher or lower). I’m looking at my 10% tax penalty against the interest saved over the life of the mortgage PLUS the immediate cash flow increase you get today (vs. an estimated return 20, 30, or more years from now if you make it). Consider the time value of money as well (money is worth more today). I wouldn’t wipe out retirement to pay a mortgage, but taking out a portion of it early, could still be a good option for some.
Dave mentioned in one of his shows that he knows a guy who does not understand 401(k)s, the stock market or anything else and is self-employed. He invest in real estate for his retirement. He didn’t seem to think that was a bad idea. I wish that he would go into more detail about the comparison of interest on a mortgage compared to the tax penalty. The one thing I will say is that in my opinion, 90% of folks would just blow the money they saved on the mortgage and then be left without a retirement.
They need to let the callers speak. They never asked why? I got the impression this guy was tired of working while his wife is at home. I think his real question was "can I pay off my house and quit my job and do something less stressful since we'll be debt-free with over 300k in the market at a relatively early age?" But they just steamrolled the guy. And yelled at him about how much he was making. If you're going to hang up on callers and give every single one the same blanket vague advice why even take calls? Their advice could have been "plan to work 5 more years. Pay the house off early then go do something else. By that time you'll be debt free with over 700k in investments."
The caller needs to shut up long enough to listen to the advice he's apparently calling in for. Also he needs to learn how to answer a simple question instead of dodging it.
completely understand your view point. He 100% is tired of working that 150k job or something else is going on and he doesnt want debt so the current job is no longer required
I just inherited an IRA and I don't think I'll ever live long enough to see retirement. I honestly just wanna pay what's left on our house... maybe rent it out... I wish I wouldn't have to take a huge hit pulling it out.
Guy already is convinced to pay $80k to pay $253k. @3.5% interest he has about 17yrs off. Paying $100 extra per month would already be 76k in interest. If he paid an extra $1600 a month. He’d only be paying $34,500 in interest and have it paid off in 9.5yrs. With $150k income that’s very possible.
@@Sexy40baby1 Dave has already run the numbers many times before (my guess), so he knows the basic math of the situation, but I agree, a numbers breakdown would be more convincing than just yelling at the caller.
This guy called in expecting to get praised by Dave for paying off debt but with a really stupid idea. Mortgage your future retirement to pay off lower interest mortgage debt LOL!
As others have said you’ll pay taxes on the withdrawal eventually. But what if you have $1M, make $300K salary, and use ~$400 to payoff 2 mortgages and prep for your next property. Yes, you lose the compound growth but what’s wrong with owning 3-5 homes by the time you reach “retirement” age God willing.
Dave’s right of course, but what is interesting is that he uses math to explain why he’s right here while ignoring emotion. If the caller had a very low interest mortgage with the payoff amount in cash earning more someplace else, Dave would rant on about how he should just pay it off while ignoring the math.
Dave always exaggerates this. It’s really only the 10% penalty he’ll lose. Caller will have the 25% taxes (depending on his retirement rate) taken out when he withdraws his money eventually anyway, so he’ll lose that money eventually.
Not really. Aside from the penalty, this would be true about any money he uses towards his house, regardless of source. Whether it comes from his 401k or cash that he otherwise could be investing, extra payments come at the expense of compounding interest.
Summary of call: Dave finally discovers math. With $150k income, its not going to take much to get bumped into the 32% tax bracket and then shortly thereafter, into the 35% bracket. Add in the withdrawal penalty and you are at 45% tax rate for much of the money withdrawn.
This guy is bringing in about $7500 a month after taxes, 401K, and even the worst healthcare costs imaginable. $1600 a month is not a huge burden. He could pay off his house in a few years making that kind of money. If he's on BS6, he should just throw $5000 at the mortgage every month if he's that keen on getting out of debt.
It kind of depends on what the IRA's are invested in. If he's just holding cash in them then yes this solution makes sense. If he's invested in the stock market with it and making ~8% per year with that $500k then no it makes no sense to pull it.
It would still be a bad idea. Because if invested in cash he could easily re-class his investments to equities within his IRA. Not to mention he is paying a big penalty on that money as Dave mentioned - 35 percent at least.
My worry is Uncle Sam coming up with some "emergency" so they can call in the mortgages they have in Fannie Mae and Freddie Mac...then I might consider this.... maybe
@Austin Duke by 2030 you will own nothing and you will like it...by the way...do you realize how much land the Federal Government owns already... it's alot
So I have an important question regarding an 401K to IRA rollover situation. I plan on retiring when I'm 55 with an estimated 2.3 million just in my 401K pending the market holds up. Now not waiting until 60 would cost me about another 1.2 million so I'd much like to retire on 3.6 million instead. The only problem is I want to retire at 55 and be done working. My question is if I rollover my 401k to a Roth IRA or another IRA option, will I still hit that goal even without my company 5% into my 401k? In those 5 years that is?
If you're in the USA.…the age in which you can draw from your ROTH it's is 59 and a half without penalties...but I don't recall of there are any other stipulations or not involved.
@@motoryzen of course, and by then I should have enough saved up just in my own savings to not need to touch my pension or 401K until then. So I think I'm on a good course
I didn't invest anything in 401ks or IRAs. I made a fast fortune. I went into Art dealing with Hunter Biden. We sell $ 500,000 original Hunter Biden Art pieces to anonymous buyers. We have made a fortune by giving buyers access to " The Big Guy".
Wow.. the fact the he was even seriously considering this option blows my mind. Especially if he bought this house or refinanced back when interest rates were in the 2-3% range.
I have 60,000 in a 529 account. My daughter chose not to go to college. Question??? Should I pull it and pay the 10% penalty and pay taxes on the earnings to pay off my Boat. Or should I let it stay in the market??? I owe like 52,000 at 5.49% intrest. Surely this is more than the 10% penalty and taxes on the earnings in the long run
Why does he give this advice and cite math, yet tell people to not take a 401k match to pay off debt at 5% interest? Makes no sense. Ramsey is garbage advice for stupid people who can't think
Caller: my situation is a little bit different. [Proceeds to describe EXACTLY the situation Dave's advice is for]
Yeah, as soon as he said his situation was different I was thinking "yeah right".
Yeah, I was expecting him to say he had 50M in IRA or something. Not quite…
No, it isn't different.
Pulling from a retirement fund is just about the worst thing someone can do financially. Penalties, compound interest loss…etc. just terrible!!!
Yep. This post wasn’t implying that…
FYI your situation is NOT different.
Pay off the house like everyone else does. Increase your principal payment each month. Tackle it. Don't rob your retirement accounts.
0:44 That look on Dave's face of "no your situation isn't going to be different." 😂
Knowing that was coming is the reason I came to this video
Plus by the time he's 60, that roth will be worth about $4.6 million, without putting anymore in!!
It’s so much more than paying the penalty and taxes!! You lose out on compound growth which is the worst of them all. Stop obsessing on paying off the house! A paid off house doesn’t buy your food or pay your bills, money does. Even when your mortgage is paid off, you don’t have a paid off house. There are taxes as well as expenses. Focus on growing your assets so you will have enough for retirement and by then you should have the mortgage paid for anyway.
If $1600 a month is to much debt when making $150k a year, then they really need to reevaluate their budget.
Why? It’s only 13% of their gross. That’s pretty sensible
@@nicholasgunter3838 you missed his point
He is saying that the caller is saying that is too much debt, which it shouldn’t be because their income as high enough for that to not be that much of
Plus loss of tax deferred compound growth. Really bad idea
Caller is so confused. No way should he carry through this harebrained scheme.
Exactly!
If he does this stupid plan it will cost him millions in retirement.
When I left my job I cashed out my 401k and payed off our house in full. With the interest saved over the course of a 30-year loan, only made sense at the time. I was lucky enough to find a career that offers a pension, and my wife's 401k we feel confident about our retirement. Fast forward 5 years, we now rent out the house we paid off which generates $3000 a month in rent, and including our combined monthly income of $7,500 were actually doing better. We're using the income from the rental to put towards the principal of our current mortgage, but I would say cashing out my 401k was the best decision I made 🤷♂️
Was there a tax penalty?
@@jmrichards5910 there was the 10% early withdraw penalty, and it was taxed at 20%, which you'll be taxed for at any point when you withdraw it
@@Dametime213This is the one piece that Dave leaves out. The 10% tax penalty is fair to call out as equivalent to interest on a loan. The normal tax though….you’ll pay that whether you take it out now or in retirement. The only potential difference being what your tax rate is now vs. in retirement (could be higher or lower). I’m looking at my 10% tax penalty against the interest saved over the life of the mortgage PLUS the immediate cash flow increase you get today (vs. an estimated return 20, 30, or more years from now if you make it). Consider the time value of money as well (money is worth more today). I wouldn’t wipe out retirement to pay a mortgage, but taking out a portion of it early, could still be a good option for some.
Dave mentioned in one of his shows that he knows a guy who does not understand 401(k)s, the stock market or anything else and is self-employed. He invest in real estate for his retirement. He didn’t seem to think that was a bad idea. I wish that he would go into more detail about the comparison of interest on a mortgage compared to the tax penalty.
The one thing I will say is that in my opinion, 90% of folks would just blow the money they saved on the mortgage and then be left without a retirement.
They need to let the callers speak. They never asked why? I got the impression this guy was tired of working while his wife is at home. I think his real question was "can I pay off my house and quit my job and do something less stressful since we'll be debt-free with over 300k in the market at a relatively early age?" But they just steamrolled the guy. And yelled at him about how much he was making. If you're going to hang up on callers and give every single one the same blanket vague advice why even take calls? Their advice could have been "plan to work 5 more years. Pay the house off early then go do something else. By that time you'll be debt free with over 700k in investments."
It is the Ramsey show, not the Pornvox Vids 2 show, that is your why.
@@alinatamashevich3354 😅
My impression is that there's something else going on, but I don't know if the caller would've said what it is.
The caller needs to shut up long enough to listen to the advice he's apparently calling in for. Also he needs to learn how to answer a simple question instead of dodging it.
completely understand your view point. He 100% is tired of working that 150k job or something else is going on and he doesnt want debt so the current job is no longer required
NO
On 150k income. In a couple years it can be paid off easily.
If he wants to pay it off faster. She should get a job.
I just inherited an IRA and I don't think I'll ever live long enough to see retirement. I honestly just wanna pay what's left on our house... maybe rent it out... I wish I wouldn't have to take a huge hit pulling it out.
Check to see if you will have to pay penalties on an inherited IRA. You may not since it’s inherited
Guy already is convinced to pay $80k to pay $253k. @3.5% interest he has about 17yrs off. Paying $100 extra per month would already be 76k in interest.
If he paid an extra $1600 a month. He’d only be paying $34,500 in interest and have it paid off in 9.5yrs.
With $150k income that’s very possible.
you know if someone on the show would break the mathematic numbers down like you did, people would see that things can be done differently
Doesn’t even include the lost opportunity cost of pulling 330k+ out of a growing fund. At a modest 7% return would have over 600k in 9yrs.
@@Sexy40baby1 Dave has already run the numbers many times before (my guess), so he knows the basic math of the situation, but I agree, a numbers breakdown would be more convincing than just yelling at the caller.
Math is amazing. People will still dispute it.
Knoxville, TN is the home of the University of TN.
I assume the caller is not a graduate of the school's College of Finance.
This guy called in expecting to get praised by Dave for paying off debt but with a really stupid idea. Mortgage your future retirement to pay off lower interest mortgage debt LOL!
As others have said you’ll pay taxes on the withdrawal eventually. But what if you have $1M, make $300K salary, and use ~$400 to payoff 2 mortgages and prep for your next property. Yes, you lose the compound growth but what’s wrong with owning 3-5 homes by the time you reach “retirement” age God willing.
Dave’s right of course, but what is interesting is that he uses math to explain why he’s right here while ignoring emotion. If the caller had a very low interest mortgage with the payoff amount in cash earning more someplace else, Dave would rant on about how he should just pay it off while ignoring the math.
Stop contributing as much to your IRA and use the excess to pay off the house faster
I agree. Makes enough sense to me...(baby step 4 here just started)
That is another good option - Don't pull out...just put less in and put that extra ONTO your principal....
This is why I don’t invest in a Roth ira but instead I do a taxable account. I can pull money whenever I want and it’s simple.
Why do people call in with this dumb question all the time?
Pardon my ignorance but can't you withdraw your contribution at no penalty?
Add to his bad decision the record low mortgage rates. We are paying off our mortgage soon, and I feel almost sad to let go of that low rate.
Dave always exaggerates this. It’s really only the 10% penalty he’ll lose. Caller will have the 25% taxes (depending on his retirement rate) taken out when he withdraws his money eventually anyway, so he’ll lose that money eventually.
Not really. Aside from the penalty, this would be true about any money he uses towards his house, regardless of source. Whether it comes from his 401k or cash that he otherwise could be investing, extra payments come at the expense of compounding interest.
Summary of call: Dave finally discovers math. With $150k income, its not going to take much to get bumped into the 32% tax bracket and then shortly thereafter, into the 35% bracket. Add in the withdrawal penalty and you are at 45% tax rate for much of the money withdrawn.
So, no free lunches?
This guy is bringing in about $7500 a month after taxes, 401K, and even the worst healthcare costs imaginable. $1600 a month is not a huge burden. He could pay off his house in a few years making that kind of money. If he's on BS6, he should just throw $5000 at the mortgage every month if he's that keen on getting out of debt.
What do you mean the worst Healthcare costs? He didn't even bring that up
@@residentevil2928 meaning his company healthcare plan sucks and he has super high premiums.
Yeah, he just needs to be patient getting his mortgage completely paid, just like the rest of us. It won't take him long making that much money.
It kind of depends on what the IRA's are invested in. If he's just holding cash in them then yes this solution makes sense. If he's invested in the stock market with it and making ~8% per year with that $500k then no it makes no sense to pull it.
And, if he is holding cash in IRA's he needs to call Dave again straight away. (with a phone that works)
It would still be a bad idea. Because if invested in cash he could easily re-class his investments to equities within his IRA. Not to mention he is paying a big penalty on that money as Dave mentioned - 35 percent at least.
My worry is Uncle Sam coming up with some "emergency" so they can call in the mortgages they have in Fannie Mae and Freddie Mac...then I might consider this.... maybe
My gut has had me feeling this for a while.
@Austin Duke by 2030 you will own nothing and you will like it...by the way...do you realize how much land the Federal Government owns already... it's alot
@Austin Duke hopefully by own you mean paid for and have the deeds in hand...if so...way to go!
@Austin Duke unfortunately most folks think that having a mortgage or a car payment means they own it
@Austin Duke what happens if you stop paying on the mortgage with a balance left?
I don't know why this is in the Millionaires area. This guy may not get there.
Didn't really understand what Dave was sayin till here 4:09
So I have an important question regarding an 401K to IRA rollover situation. I plan on retiring when I'm 55 with an estimated 2.3 million just in my 401K pending the market holds up. Now not waiting until 60 would cost me about another 1.2 million so I'd much like to retire on 3.6 million instead. The only problem is I want to retire at 55 and be done working. My question is if I rollover my 401k to a Roth IRA or another IRA option, will I still hit that goal even without my company 5% into my 401k? In those 5 years that is?
How old are you
@@musicpro7278 29 currently contributing 15% into my companies 401K with 5% match.
@@tr3slech3s nice
If you're in the USA.…the age in which you can draw from your ROTH it's is 59 and a half without penalties...but I don't recall of there are any other stipulations or not involved.
@@motoryzen of course, and by then I should have enough saved up just in my own savings to not need to touch my pension or 401K until then. So I think I'm on a good course
He'd lose $15k of growth every year by pulling 250k from his 401k. Don't do it!
I didn't invest anything in 401ks or IRAs. I made a fast fortune. I went into Art dealing with Hunter Biden. We sell $ 500,000 original Hunter Biden Art pieces to anonymous buyers. We have made a fortune by giving buyers access to " The Big Guy".
You’re making much more in IRA than it costs for your mortgage. Don’t make quick poor decisions.
What if it was from a Roth?
Wow.. the fact the he was even seriously considering this option blows my mind. Especially if he bought this house or refinanced back when interest rates were in the 2-3% range.
The only cost is the 10% penalty. He will have to pay the taxes either way at some point (maybe at a smaller rate though).
One of the dumbest questions I have ever heard.
Don't do it....never pull from a retirement fund - you're going to get HIT WITH TAXES and PENALTIES....
Might as well 👍🏻
Sell the house
PENALTIES! No....
I have 60,000 in a 529 account. My daughter chose not to go to college. Question??? Should I pull it and pay the 10% penalty and pay taxes on the earnings to pay off my Boat. Or should I let it stay in the market??? I owe like 52,000 at 5.49% intrest. Surely this is more than the 10% penalty and taxes on the earnings in the long run
Why does he give this advice and cite math, yet tell people to not take a 401k match to pay off debt at 5% interest? Makes no sense. Ramsey is garbage advice for stupid people who can't think
Can't eat the house. This guy understands nothing about interest and sunk in costs. He makes $150k wow who employs him for that much.
Can't live in a IRA
@@alinatamashevich3354 Can't take out a loan to retire on.
@@jackjackson7170 That is a stupid statement.
@@alinatamashevich3354 So there are loans for retirement? Sign me up.
@@jackjackson7170 That is a ignorant comment
Ww3 is gonna start in December. Just take all the money out and enjoy our last month's Alive
🤣