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Spouse suffers from severe depression. Should I cash out IRA funds to get mortgage to a manageable amount? – Sue

By on December 30, 2011
Spouse suffers from severe depression. Should I cash out IRA funds to get mortgage to a manageable amount? – Sue

My husband suffers from severe depression and has lost 2 jobs in the last 2 years leaving me financially vulnerable. I need to plan my finances as if I were the only one bringing in an income.

I have 2 children…1 in college with tuition costing me $25,000/year. I currently own a home worth $330,000 with an outstanding mortgage of $217,000. I’m torn between selling my house and using half of the proceeeds to pay for college and downsize to a smaller house with a mortgage of approximately $150,000 which is all I can afford on my salary.

Obviously, that makes the most financial sense. I have a 9 year old and moving would be another change for him and it’s already been a rough year! The mother in me is thinking that maybe I should withdraw from our IRA to get my current mortgage to a more manageable amount so that my son doesn’t have to move. We currently have $300,000 in retirement funds.

I’m 43 making $53,000/yr, vested in a state retirement system and will have access to a trust fund for my retirement. Would cashing out some of our IRA funds be the worst decision I could make?

Sue

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One Comment

  1. Michael

    December 30, 2011 at 7:35 pm

    Hi Sue,

    There could be penalties and taxes involved with withdrawal from your IRA, so be sure to account for that cost if it were to occur.
    Given the information you shared, if I were in your position with the same set of facts/assets valued, I would sell and relocate attempting to keep my son in the same school if possible to lessen the amount he would need to adjust.
    Having said that, there are aspects to your local real estate market that are best referred to a local broker. Do you happen to have any brokers or agents in your circle of contacts that you would trust to give you straight answers about your situation and what is happening in your market? Putting your home on the market at the price that would attract buyers while competing with a high amount of REO and short sale inventory may mean taking a lower purchase offer (if there is that kind of inventory to compete with).

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