A ‘Buy‑Back‑Your‑Bandwidth’ Decision Guide
The Midnight Question
The call usually starts the same way:
“David, I’m thinking about borrowing from my IRA to wipe out the mortgage—sound smart?”
Behind that question is fatigue. Debt feels heavy; cashing out feels liberating. Yet the numbers—and the future you’re buying into—tell a different story.
The Hidden Tax Price Tag
Clients often miss the true cost: “Older folks want to take big distributions to pay off their mortgage… but your interest paid is a lot less than the taxes paid.”
Example:
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$400,000 mortgage balance
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3.5 % interest rate
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24 % marginal tax bracket
Liquidating a 401(k) could trigger roughly $96,000 in federal taxes alone—effectively turning a 3.5 % loan into a one‑day 24 % bill.
Emotional ROI vs. Numerical ROI
Eliminating a mortgage feels amazing—but at what opportunity cost?
| Merit | Trade‑Off |
| Monthly cash‑flow relief | Loss of compounding on withdrawn assets |
| Large, irreversible tax hit | Simpler estate picture |
| Psychological “clean slate” | Less liquidity for future goals/opportunities |
The 3‑Step “Bandwidth Test”
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Stress‑Test Cash Flow – Does the mortgage actually threaten your monthly margin, or is it more psychological?
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Compare After‑Tax Costs – Stack loan interest against expected portfolio return after taxes.
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Model Both Futures – Run each scenario through a full plan: taxes, market swings, lifestyle goals. Clients often exhale when the side‑by‑side makes the smarter path obvious.
Real‑Life Prevention Story*
One retiree was set to pull six figures from an IRA to be “debt‑free for good.” A quick projection showed the lump‑sum tax bill plus lost growth would delay her other dream—funding grandkids’ college—by almost a decade. She kept the low‑rate loan, redirected extra cash to a 529 plan.
Myth‑Busting: “But Advisors Are Expensive…”
The biggest myth ambitious people hold? Cost. They fear paying someone else will eat up returns, yet ignore that one bad, untaxed decision can dwarf professional fees.
Your Next Move
Big money moves shouldn’t be gut‑driven. They deserve a framework—then execution you can delegate to an advisor you can trust.
Hand it off, buy back your bandwidth, and keep money pulling you forward—not tripping you up.
Thinking about a six‑figure decision? Let’s run the numbers together before taxes or regret run away with your cash. Schedule a Consultation → and let’s talk about your current situation today.
*This is a hypothetical situation based on real life examples. Names and circumstances have been changed. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments or strategies may be appropriate for you, consult your advisor prior to investing.