Welcome to our new lineup of “Ask the Experts” contributors on money matters.

They are Kevin Young, a certified financial planner and owner of Young Wealth Management, based in Davis and Sacramento; Glenn Kenes, managing director of investing with Barber-Kenes Capital Management Group in Auburn and Roseville; and Michelle Goff, an estate planning attorney with Goff, Conway-Spatola Law Group in Sacramento.

They’re available to answer your questions on personal finances, investing and wills/trusts. To access their free advice, go to www.sacbee.com/ask. You also can get free advice on state and federal taxes from Internal Revenue Service and state Franchise Tax Board experts.

Launching our new trio, Young answers a reader’s question about paying off a mortgage.

I’m a 74-year-old retiree with about $57,000 and less than five years remaining on my house mortgage. Am I better off taking money from my IRA to pay off the mortgage? I would have to pay roughly $12,000-$13,000 in taxes to cover the money coming out of my IRA, but the $1,150 monthly mortgage payments would become extra spending money. Hence, in a year’s time, I would have made back the tax expense. After that, the next four years would give me an extra $55,000 in spending money. I do have a pension and Social Security income. About two-thirds of my IRA would still be intact after paying off the mortgage. If paying off the mortgage is not a good idea, what would it cost to get a new five-year mortgage at today’s rates?

I would not recommend making a distribution of $57,000 from your IRA to pay off the remaining balance of your mortgage. Freeing up the monthly mortgage expense can appear to make sense, but it comes at a very high cost.

Increased costs include taxes on the additional income, and a possibly higher marginal tax bracket. Also, there could be tax consequences to your Social Security benefits.

In addition to increased taxes, you’d be taking a liquid asset (your IRA) that can be used for cash flow needs and turning it into an illiquid asset (your house), which may continue to depreciate in value.

The option of refinancing your current mortgage makes sense. Since the loan size is small, most lenders do not offer the “no points-no closing costs” option, so you’ll have to pay about $2,500 in closing costs. However, your break-even point is short term.

Based on quotes from a local mortgage broker, I found that you could refinance your $54,000 mortgage balance for the term/rates/monthly payments shown below:

• 30-year, 3.87 percent, $268

• 20-year, 3.75 percent, $338

• 15-year, 3.50 percent, $404

• 10-year, 3.25 percent, $557

(Property taxes and home insurance are not included.)

Bottom line: I’d recommend that you consider refinancing your mortgage, rather than touching your IRA to pay it off.

– Compiled by Claudia Buck

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