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Much as I hate paying interest on a loan, it's apparent that paying extra on the principle as often as I can (which I've been doing) is a better plan.

If you are paying ordinary income tax rates on the money you are using to pay down the loan, then it doesn’t matter if you use IRA money to do so as long as you don’t push yourself into the next tax bracket.

At the risk of making you an older fart than you already are, aren't you in age range where you must take RMDs anyway? Not that this will pay off the truck, but from your post it sounds like you may not be doing so from that IRA?

From his first post, he’s 75, so yes he is subject to RMD. I missed it as well, I thought he was only 73.

It is good to have some liquid $$ for emergencies, so there’s that. I don’t think it’s worth refinancing for a 1% gain, lower, if even able.

With the end of the year coming up you could easily split it up to control any taxable amounts in 2026, then start on 2027.

I’m already lightly planning 2028, a year with an expected low W-2 to liquidate a 529 account.

One option would be to withdraw from the IRA each year just up to the level where it would trigger higher taxes if you took more. e.g. if you are in the 10% tax bracket, you could withdraw a bit so that you are just $1 under the next higher bracket (12%).

Unfortunately, in retirement there are numerous thresholds at play which make it a complicated and tedious process to figure out how much more tax you pay for another $1 withdrawal from your IRA.

I expect that taking out the entire $20k will trigger some taxes bigger than you might think.

Another option is to sell some investments in a regular brokerage account that have long-term gains. If your other income is below $98,900 then your long-term capital gains are taxed at 0%. That's for married filing joint. Keep in mind that those long-term capital gains do add to MAGI which is used to figure out how much of your Social Security is taxable, and is used for some other tax credits.

And one other option is to sell some investments which have a loss. The losses can be deducted to reduce your taxable income.

I don't know of any simple website or product to figure out all these thresholds and traps. If you do your own taxes with Turbo-Tax or similar, you can what-if some scenarios.

The big trap is IRMAA which burns you for a whole calendar year. Another is your SS being pulled into being taxable income. That one ratchets things up fast.

Yes, RMD. A whopping $1400 annually after taxes. Still, that's a couple loan payments...

No, I would not do that. Look for other ways to pay the debt down on the truck. Vehicle payments (loan) suck.
I agree there should be ways for your ira to earn more that 3%.

At your age and income you could take distributions with minimal tax implications and use that money to pay it down/off.

If you have a cash reserve of the same amount why not pay of off with cash, put the payment back in savings every month? You still have the investment in the event of a dire emergency. Or the truck as an asset to sell.

Pay yourself the interest.

When I was in a similar situation, I just paid more than required. Monthly payments as scheduled, and then, when I sat down each week to pay bills, I would just throw some more at the loan principal. Every little bit helps.

Check out SATA and STRC

IMO, doesn't make any sense to withdraw that money to pay off the truck. As others have said you're going to pay more in additional taxes and fees than you are going to save by paying off the loan.

Bigger question is why is it only earning 3% fixed? With a little effort not taking on a huge amount of risk you can do better than that but it needs to be part of your overall financial plan.

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Bigger question is why is it only earning 3% fixed? With a little effort not taking on a huge amount of risk you can do better than that but it needs to be part of your overall financial plan.

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The IRA is at 3% because it's CD based and fixed and that was the rate when originated. I am 75 and extremely risk averse.

Inflation is a risk as well.
If you aren't keeping up with inflation, you are losing buying power.

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I would investigate lower interest rate for the truck.

Can you pay extra on the loan's principle (we did that for many years on our home payment)?

Also, would you have a penalty if you pulled money early from the CD?

^^^ I suspect most loans these days don't have pre-payment penalties. I've done lots of extra principle payments in my time.