Q&A: Should I Pay Off Debt with IRA or Sell a Rental Property?

USA Today - Q: My wife and I plan to retire early this year. Our IRAs, which are worth about $500,000, are stagnant. They haven't gained anything over the years. On the other hand, our three rental properties are gaining (after deductions) 6%, 6% and 3% in rental income. Each property has about $120,000 in equity. One property is paid off. Unfortunately, with fortune there is debt; we also have a $100,000 home equity line of credit on our primary residence that needs to be paid off soon. With this said, we are considering a couple of decisions to secure our financial future: 1) Sell one property and pay off the equity line, income tax and real estate fees. 2) And draw $80,000 from an IRA and pay off one rental property since they are prone to gain more than an IRA. Do these decisions make sense or is there a better one? – Jim Johnson

 A: So, one of the first things to address is your "stagnant" IRA, says John Salter, an associate professor in the personal financial planning department at Texas Tech University in Lubbock, Texas.

If your IRAs aren't generating returns, now would be a good time to create, especially if you don't have such a document, an investment policy statement, a blueprint for your investments. This sort of document will help you figure out, based on your investment goals, time horizon, and risk profile, how to allocate your assets, when to rebalance your funds and your expected rate of return.

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