Author Topic: 403b contributions OR Home Equity that is tax free? Which is better deal?  (Read 2129 times)

  • 5 O'Clock Shadow
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  • Posts: 2
Salute to the Mustachians...  This is my senario.  52 years old, planning to retire by 55 or 57. I am in the 28% tax bracket. My main home has a mortgage balance which I planned to sell and use the equity tax free dollars to build on the second home and make that our retirement residence.

What i am thinking is.... would it be better to pay down my current mortgage and have more tax free dollars from the sale of my home...or is it better to contribute those funds to my 403b which does not have a match and will be taxed 15% on any payouts. 

Any thoughts for or against that strategy?  Which is better ...a bigger balance on my tax deferred annuities....or tax free equity when i sell my home?

Thanks for your consideration.


  • Senior Mustachian
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  • Posts: 11036
1) The 15% you mention is your expected income tax bracket in retirement.
2) The mortgage interest rate is "low" (e.g., ~3% )

Put the money in the 403b.

Take $100 in salary.  You can
1) Invest all $100 in the 403b, earn ~7% (historical average) then pay 15% when you withdraw principal and returns later.
2) Pay 28% tax now and save 3% on the $72 lower mortgage balance.

  • 5 O'Clock Shadow
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  • Posts: 2
Thanks for your good common sense and helping me to see the obvious.