MW 'I love being debt-free': I'm in my mid-50s and buying a house. Do I take out a $400K mortgage or use my Roth IRA?

By Quentin Fottrell

'I'll fund $500,000 of that from the sale of my current house'

"You only live once and, given that you can afford it, I fully support your dream-home ambitions." (Photo subject is a model.)

Dear Quentin,

I'm about to purchase a house for $900,000.

I'll fund $500,000 of that from the sale of my current house. For the rest, I could take $400,000 out of an inherited Roth IRA that must be liquidated within 10 years. Or I could take out a $400,000 10-year mortgage at a fixed rate of about 5.5%, and keep the Roth invested and liquidate it at the end of the 10 years after it has grown tax-free (it's entirely invested in Vanguard Growth Index Fund Admiral Shares).

I love being debt-free. I haven't had a mortgage in about 15 years, and I'm in my mid-50s. That said, it seems obvious that I'd be ahead in 10 years if I pay 5.5% interest on a $400,000 loan while earning, conservatively, around 10% annually on $400,000 invested.

Are there other types of loans you'd consider besides a mortgage?

What would you advise?

House Buyer

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You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com. The Moneyist regrets he cannot reply to questions individually.

There's another great feeling that I'd like you to familiarize yourself with: the power of compounding with your Roth IRA.

Dear House Buyer,

There's no greater feeling than being debt-free, and some people prefer to live their life that way. Not everyone has the choice, but you do, so take a bow. You've obviously worked hard to build up that equity in your home, and you also have $400,000 in an inherited Roth IRA. In this case, however, I don't think it makes sense to liquidate your Roth IRA.

Last year, the Vanguard Growth Index Fund Admiral Shares VIGAX VIGAX had a return of more than 19%, including dividends. (It's been closer to 10% if you take an average over the last 30 years.) As a 10-year mortgage would have an interest rate of 5.5%, or possibly even less if you have excellent credit, it's a no-brainer to take out a mortgage for the next 10 years and allow your Roth to grow, and then pay off the remainder of your loan when it's time to liquidate the Roth.

I understand that it's nice to have no debt, but there are good types of debt - such as a mortgage, as long as it's within your budget and the house will increase in value - and bad types of debt, like credit-card debt and some personal loans with double-digit interest rates. And there's another great feeling that I'd like you to familiarize yourself with: the power of compounding within your Roth IRA.

Potential returns

Given that you have $400,000 in a Roth IRA invested primarily in VIGAX, if the fund achieved returns in line with its historical long-term averages, your investment could grow to $1.5 million or even $1.9 million over the next 10 years, twice the value of the home you are planning to purchase. That's assuming annual returns in the range of 14%-17%.

The beauty of this (albeit rough) calculation is that you don't actually have to make any withdrawals from this fund over the next 10 years. The aforementioned estimate assumes no additional contributions or withdrawals, although the real-world results would obviously be subject to market volatility. When the time comes, all withdrawals would be tax-free.

One of the many financial actions you should take in your 50s is to pay down debt and/or downsize to cut costs, but given your inheritance, it does not make sense in this case, especially if you have your heart set on that $900,000 dream home. You only live once and, given that you can afford it, I fully support your dream-home ambitions.

Extra contributions

Because you're over 50, you can make catch-up contributions to tax-advantaged retirement accounts, such as an IRA or 401(k). And for 2026, the Internal Revenue Service has increased contribution limits. Fidelity recommends saving at least 15% of your pre-tax income, including any employer match. "If you're not there yet, consider increasing your contribution by 1% each year until you are," it adds.

For IRAs, the base contribution limit is $7,500, and the catch-up contribution is $1,100. For 401(k)s and other workplace retirement plans, the base contribution limit is $24,500, while those who are 50 and older can add $8,000 in catch-up contributions, up to $32,500. Health savings accounts allow an extra $1,000 contribution at age 55 on top of the standard limits of $4,400 for self-only coverage and $8,750 for family coverage.

Fidelity says your insurance coverage should change in your 50s. Disability insurance still matters if you're working, life insurance may need adjusting based on your dependents and estate goals, it adds, and an umbrella policy can help shield your assets from major claims. Long-term care insurance is also worth a look given that costs rise quickly with age and health can affect eligibility.

Enjoy your dream home and allow your Roth to experience bountiful growth.

Don't miss: 'It's my money': My $800K inheritance is paying for a $1.6 million house. Shouldn't I decide where my husband and I live?

Check out the Moneyist private Facebook group, where members help answer life's thorniest money issues. Post your questions, or weigh in on the latest Moneyist columns.

Previous columns by Quentin Fottrell:

'The house has quadrupled in value': I bought a house with my brother, but he did not contribute. How do I fix this?

My sister is buying our parents' $3 million house, but wants to deduct $100K for renovations. Who's right?

'I'm simply exhausted': I'm 55 and have $1.3 million for retirement. Can I retire next year?

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-Quentin Fottrell

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February 09, 2026 21:15 ET (02:15 GMT)

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