A reader writing to MarketWatch's personal-finance advice desk this week disclosed holding $8 million in traditional IRAs and posed a question the column does not field every Wednesday: should the couple liquidate a portion to buy a house in cash and skip the mortgage entirely.
The reader's reasoning, quoted in the July 22 piece, is that paying taxes upfront is preferable to paying mortgage interest over the life of a loan.
The arithmetic involves federal ordinary-income tax rates that top out at 37 percent, state income taxes depending on residency, and the possibility of a single withdrawal large enough to trigger additional Medicare surcharges under the IRMAA thresholds — none of which the question appeared to account for.
Financial planners contacted in the piece suggested a multi-year Roth conversion ladder as an alternative, a strategy that spreads the tax hit rather than concentrating it in one filing year.
The column did not specify what kind of house $8 million in IRAs was being considered against.