[Daniel Kletke]

I have about $40,000 in a line of credit on my house @ 8.0% variable. I am 68. Should I use $40K of my $250,000 401 K money to pay off this line of credit? Then use the money I am paying on the loan (about $400 per month) to rebuild the 401 K?

[DianeV Sr Loan Officer]

This is a tough one to answer. You should check with a tax expert who will analyze your whole financial picture to see what is best for you. A lot will depend on your total annual income, whether you need a tax write off ( interest on the loan is tax deductible if it is on your primary residence), etc.

[ScottGem]

Since you are 68, you can take a distribution without penalty, but you will still pay taxes on that amount. Depending on the effect this has on your taxable income, it may be very costly to do. Another factor is what income is the 401K currently earning? Since the interest on the HELOC is tax deductible, that reduces the effective interest rate. So your 401K may be earning more then the effective interest rate.

You have to look really hard at all the numbers to see if this makes sense for you. My suspicion is that it won't.