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We are 66.
Thank you for your follow-up, Robert.The reason I asked is over the concern of a potential penalty if you were 59 1/2 or less in age. That is no longer an issue. To answer your issue directly, estimate your tax basis for the funds that you would receive from the IRA. If you are singly under $36,250 or jointly under $72,500, then your tax rate is at 15%, and therefore it would make sense to pay down the higher interest as the funds you would be removing would be under amount you'd be covering for interest. However above those thresholds the rate jumps to 25%, making the funds too 'expensive' to remove, and then the rate you are paying for the interest is actually lower than the value of the funds that you would have on-hand. In that case paying the funds down as you are currently doing would make more fiscal sense.Hope that helps.
Our income is under the 76K number and we pay taxes as we take the funds out of the 401K. So does it still make sense to reduce the 401K by 12K?
Robert,It would make sense if you have substantial savings since if you pay down the debt quicker, your income (rather your savings) will increase as you will be spending less on interest going forward, and you would therefore be able to earn and amass more savings in the long term. Hope that helps.