$135K Mortgage and $400K Roth - Would You Take Money From Your Roth To Be Mortgage-Free? Here's What Suze Orman Says To Do

Many Americans approaching retirement face a common question: should you tap into your retirement savings to pay off your mortgage?

On her "Women & Money" podcast, personal finance expert Suze Orman addressed this dilemma from a listener in his early 60s, providing insight that could help others in similar situations.

The Question from a Listener

Jody, just shy of 64, has about $400,000 in a Roth IRA and an emergency fund. His home, which he calls his "forever home," is worth just under $1 million, and he still owes $135,000 on his mortgage. His monthly payment totals about $1,000, including taxes and insurance.

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Jody asked Orman if it made sense to withdraw $135,000 from his Roth to pay off the mortgage completely and enjoy being mortgage-free.

Suze Orman's Advice

Orman broke down the numbers. Of the $1,000 monthly payment, she estimated roughly $562 likely goes toward the mortgage, with the rest covering taxes and insurance. That means paying off the mortgage would reduce the monthly cost by only half.

On the other hand, she said that leaving $135,000 in the Roth could generate about $900 per month if invested at an 8% return — more than the $562 saved by eliminating the mortgage payment. She told Jody it's smarter to leave the Roth intact and keep making mortgage payments, even if his mortgage payment is $100–$200 more than her estimate.

Americans Are Tapping Retirement Accounts

Jody isn't alone in thinking about dipping into retirement savings. In 2024, 4.8% of 401(k) account holders took hardship withdrawals, often to pay rent or mortgages and avoid foreclosure, according to Vanguard.

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Financial experts caution that while this can provide short-term relief, it comes at a long-term cost. "A 401(k) is intended to fund your retirement, and withdrawing money prematurely can lead to significant penalties and lost retirement savings," CPA Steven Sarrel told Realtor.com.

Unlike Roth IRAs, some 401(k) plans allow loans or hardship withdrawals. But borrowing or withdrawing money from retirement accounts reduces the power of compounding, which can seriously impact your financial future.

Alternatives to Withdrawing from Retirement

If mortgage payments feel heavy, experts recommend other strategies before touching retirement funds:

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Cut expenses or earn extra income: Side hustles or part-time work can help cover monthly payments. Talk to your lender: Forbearance, loan modifications, or loss mitigation programs may reduce immediate pressure. Refinance your mortgage: Adjusting the loan term or interest rate can lower monthly payments. Consider home equity options: A HELOC or home-equity loan often comes with lower interest than personal loans or credit cards.

Most experts agree that withdrawing from retirement accounts should generally be a last resort.

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The Takeaway

For Jody — and others in similar situations — Orman's advice is clear: don't tap your Roth to pay off a relatively small mortgage. The potential growth of the retirement account usually outweighs the savings from being mortgage-free.

Sometimes, carrying manageable debt while letting your investments grow is smarter than giving up long-term gains for short-term relief. With a little planning, you can stay on top of your mortgage and preserve your retirement security.

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This article $135K Mortgage and $400K Roth - Would You Take Money From Your Roth To Be Mortgage-Free? Here's What Suze Orman Says To Do originally appeared on Benzinga.com

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