Dear Tax Talk,
I am over 59� and unemployed. I would like to pay off my mortgage by taking $100,000 from my standard IRA. How much taxes do I withhold?

-- Thecla

Dear Thecla,

Although it may seem like a good idea to pay off your mortgage, the tax cost of making the lump-sum payment is prohibitive. While you're over 59� years of age, you still have to pay income tax on the withdrawal. Your tax could be easily $30,000 or more, depending on state taxes. You won't save this in mortgage interest for several years. If you're set on this, you should consider doing it over a period of years to minimize your tax exposure.

If you'll need to work in the future, you may want to consider using your IRA to start a business. This is a much wiser use of your funds. If structured properly, you could even use your IRA to make the business loan tax-free. You could do this by setting up a qualified retirement plan that allows you to roll over your IRA. The retirement plan can provide for participant loans, which would be tax-free up to $50,000. You'll have to have set up the right type of plan and business structure, so I recommend you talk to a good CPA about this before taking any action.