Enter your mortgage and your retirement account. See what a lump-sum payoff really costs in tax and Medicare surcharges, and what each path leaves you with years later.
Not financial advice. This is a simplified, illustrative model in today's dollars for a married couple filing jointly, using 2026 federal brackets and Medicare Part B surcharge tiers, a constant real return, and a payoff funded entirely from a traditional IRA. It ignores state tax, Social Security, market swings, Part D surcharges, ACA subsidies and your own situation. Use it to compare choices, not to predict your future. Talk to a fee-only fiduciary advisor or CPA before acting.
Lump-sum payoff ends with
$1,370,777
Keeping the loan ends with
$1,563,967
Keeping is ahead by
$193,190
Your numbers
Defaults are the couple from the video. Change anything.
The mortgage
$50k$600k
2%8%
530
$0$30k
The retirement account
$400k$4M
$20k$150k
0%7%
1%5%
1035
5572
The sliced payoff
25%75%
KEEPING THE LOAN VS A ONE-SHOT PAYOFF
—
Lump-sum payoff
—
Sliced payoff
—
Keep the loan
—
What each path leaves at the end
Lump-sum payoffSliced payoffKeep the loan
Path
Ending IRA balance
Behind keeping the loan
Runs out
Gross IRA withdrawal for a one-shot payoff
—
Tax on the one-shot payoff
—
Medicare surcharge triggered
—
Real cost of the loan
—
What the payoff costs, and what it saves
Item
Amount
Keep or pay off, at other rates and returns
Ending balance of keeping the loan minus a one-shot payoff, with your other inputs held. Positive means keeping the loan wins.
Verdict
Before you act
1Subtract inflation from your mortgage rate. That is the real cost of the loan, and the number to beat.
2If the money comes from a pre-tax account, multiply the payoff by the gross-up shown here before you decide.
3Medicare looks back two years at your income. Check the surcharge lines before you move a dollar.
4If you pay it off, slice it over two or three tax years, and keep a cash buffer outside the house.
Get the payoff checklist, the tax and Medicare worksheet, and the questions to bring to your tax professional.
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Illustrative estimate only, not financial, tax or legal advice. All figures are in today's dollars with a constant real return. Living withdrawals are taken at the start of each year, then the balance grows. Federal tax uses 2026 married-filing-jointly brackets and the standard deduction, with no age-65 add-ons and no state tax. The Medicare line is Part B only, looks at income two years back, and is taken from the IRA with a rough 12% tax gross-up. When you keep the loan, each year's payment is withdrawn from the IRA with its tax. Property tax and insurance are the same in every path and are shown for context only. Returns are constant, so sequence-of-returns risk is not modeled. Tax law, thresholds and premiums change every year; confirm current figures with a CPA or fee-only fiduciary advisor.