From the video
Keep the loan or clear it with your 401(k)
You came from the video How Much 401(k) Does a $220,000 Mortgage Need? This is the worksheet from it, built to run on your loan. One side is what it takes in a 401(k) to keep paying the mortgage month by month. The other side is what it takes to clear it in one withdrawal, after federal tax. The gap between them is the number that matters. Free.
Get the free Retirement Money Blueprint, plus the Keep the Loan or Clear It worksheet
Fill in your balance, your rate, the payments you have left and your other income. Out come both sides, the gap between them, the loan rate where the answer flips, and what splitting a payoff across two tax years saves. The video's couple is on the sheet too, so you can check the arithmetic. The Retirement Money Blueprint and its workbook come with it.
Keep the Loan or Clear It worksheet (Excel)
The same worksheet as a PDF, to print
Run both sides on your numbers
The boxes start with the video's couple. Change any of them and everything below updates. Use only the principal and interest part of your payment, because tax and insurance stay either way.
Side one: keep the loan
| Monthly principal and interest | |
| Monthly 401(k) withdrawal to land that payment, at Payment ÷ | |
| Simple multiply: every withdrawal added up Too high, because the money left in the account keeps earning | |
| 401(k) needed today to keep the loan, at a year |
Side two: clear it in one withdrawal this year
| Withdrawal that leaves the full balance after federal tax | |
| Federal tax on that withdrawal | |
| Taxable income in the payoff year | |
| Senior deduction kept that year (of in a normal year) |
| Split the payoff across two tax years (December and January): total withdrawn | |
| Federal tax on the split | |
| Tax saved by crossing New Year's Day | |
| 20% the plan withholds on a one-year payoff paid to you | |
| Left to owe (or refunded, if negative) when you file | |
| Loan rate where keeping and clearing cost the same |
The rate ladder
Same balance, same payments left, same bracket and return as above. Only the loan rate changes. Clearing costs the same on every row, because the bank wants the same balance whatever the rate. Your own rate is highlighted when it matches a row.
| Loan rate | Monthly P&I | 401(k) to keep | 401(k) to clear | Keeping is ahead by |
|---|
The video's numbers
A couple, both 65 or older, filing jointly. $220,000 left at 4% with 15 years to go, $60,000 a year of other income before tax, every 401(k) dollar pre-tax, 2026 federal tax only.
| Line | Amount |
|---|---|
| Monthly principal and interest | $1,627.31 |
| Monthly withdrawal at the 12% bracket ($1,627.31 ÷ 0.88) | $1,849.22 |
| 401(k) needed to keep the loan, at 5% (4%: $250,000 · 6%: $219,139) | $233,844 |
| Withdrawal to clear it in one year | $276,087 |
| Federal tax inside that withdrawal | $56,087 |
| Keeping wins by | $42,243 |
| Split across two tax years: $261,539 withdrawn, $41,539 tax | saves $14,548 |
| Loan rate where the answer flips | about 6.54% |
Where the tax on a payoff comes from
The withdrawal lands on top of your other income. In the video's case that makes about $336,087 of income in one year. The standard deduction for a couple who are both 65 or older is $35,500 ($32,200 plus $1,650 for each spouse). What is left climbs through the 2026 brackets: 10% up to $24,800 of taxable income, 12% up to $100,800, 22% up to $211,400 and 24% up to $403,550. Almost $90,000 of the withdrawal is taxed at 24%.
The new senior deduction is up to $6,000 for each spouse 65 or older (2025 through 2028). It shrinks by 6% of income above $150,000 for a couple, and it is gone at $250,000. A one-year payoff usually wipes it out. The monthly draws, at 12%, never come close.
The monthly side uses a flat bracket to keep it simple. The note under the results shows the exact-bracket figure, which is usually a little lower, so the keep side here is on the careful side.
When clearing it can make sense
- The payoff money is already taxed. Cash, a regular investment account or a Roth account does not carry this income tax. Selling investments can still bring a tax on the gain, so ask a tax pro first.
- Your rate is high. On the video's numbers, clearing starts to win just above 6.5%.
- Peace of mind is worth the gap. If the gap on your row is small and the payment keeps you up at night, clearing it is a fair choice. Splitting it across two tax years, if your plan allows, keeps more of it.
Whichever side you pick, property tax, insurance and the roof stay with the house. Paying off ends the principal and interest, and that is all it ends.
Your Keep the Loan or Clear It worksheet
Filled in from the calculator above. Print it and take it to your tax pro.
| 1. Mortgage balance | |
| 2. Interest rate | |
| 3. Payments left | |
| 4. Other income per year, before tax | |
| 5. Filing status | |
| 6. Monthly principal and interest | |
| 7. Monthly 401(k) withdrawal (line 6 ÷ (1 − bracket)) | |
| 8. 401(k) needed to keep the loan, at the return chosen | |
| 9. Withdrawal to clear it in one year | |
| 10. Federal tax inside line 9 | |
| 11. Line 9 minus line 8 | |
| 12. Two-tax-year payoff: total withdrawn | |
| 13. Loan rate where the answer flips | |
| 14. My 401(k) money is (circle one): pre-tax · Roth · after-tax |
The one question for the company that runs your 401(k): If I took this out in two parts, in December and January, how much would you withhold on each?
Federal tax only, 2026 rules. State tax may come on top. Withdrawals before age 59½ can also carry a 10% penalty, which is not included. The return is a what-if, not a forecast: if markets drop early, a pot can run short. Education, not financial advice. Check your numbers with a tax pro before you move money.
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The four questions this worksheet does not answer
Can you recast your loan, or is it FHA and cannot be recast at all? When can your PMI come off, and against which value? What will escrow do next year? Should retirement money go near the house at all? The Payoff Planner Pro answers all four on your own numbers.
See the Payoff Planner Pro →One payment of $97. Nothing renews. 30 days to change your mind.