Draining 56% of a $700K IRA to pay off a 3.2% mortgage: a costly mistake
As seen on the 24/7 Wall St. homepage on October 25, 2026.
Paying off cheap debt by reducing your liquidity is among the worst choices you can make Why would you even consider this?
An unemployed 59-year-old wants to drain 56% of a $700,000 IRA to pay off a 3.2% mortgage, and the sub's verdict is unanimous: that converts cheap debt into a taxable withdrawal and gutted liquidity right when a job is hardest to find.
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A 59-year-old software professional, unemployed and finding age a barrier to re-entering the workforce, posted to r/personalfinance asking whether to withdraw from his IRAs to clear a $390K VA mortgage before the 2028 elections. His plan was to split the withdrawals across 2027 and 2028 in hopes of staying in a lower tax bracket.
The community pushed back hard, with the top comment from user Werewolfdad calling paying off cheap debt by reducing liquidity "among the worst choices you can make." Other commenters echoed the same logic: at 3.2%, the mortgage rate is roughly in line with inflation, meaning the debt is essentially free in real terms, while the remaining IRA balance could stay invested and compounding.
The poster's reasoning centered on the fact that 51% of his current mortgage payments go toward interest, which he described as draining his money faster than anything else. Commenters were direct in addressing this: the percentage of a payment that goes to interest on an amortizing loan is not a measure of efficiency or loss, and it does not change the true cost of borrowing, which is fixed at 3.2%.
The poster noted he will need to begin drawing from his IRAs within about nine months just to cover ongoing mortgage payments. He turns 59 and a half by April 2027, so timing those withdrawals carefully matters for avoiding early-withdrawal penalties. Several commenters noted two large pretax withdrawals would push his taxable income well up regardless of the two-year split.