02 Jan Should I take from my IRA to pay for a new kitchen?

Q. I have an inherited IRA that is not subject to the 10-year rule. I’m planning to redo my kitchen next year and I’m debating an interest-free financing deal vs. taking out more than my RMD just to pay cash for the renovations. I can take the money I need without ending up in a higher tax bracket. What should I do?
— Unsure

A. It’s a great question.

If you value the peace of mind you’ll gain from paying for your renovation with cash, and you’re confident the IRA withdrawal won’t push you into a higher tax bracket, then this option may be very appealing to you.

While interest-free financing sounds like a good deal, it is always important to remember that you’ll still have to make those payments, which could impact your cash flow down the line, said Matthew DeFelice, a certified financial planner with U.S. Financial Services in Fairfield.

Additionally, he said, some interest-free deals are limited to a certain time frame, and you may have to complete payments within a set period. If you miss a payment or carry a balance beyond the offer period, the interest could hit you retroactively, he said.

“If you don’t mind reducing the balance in your IRA, taking a distribution to pay for your new kitchen allows you to get the full amount you need without worrying about sticking to any specific financing terms and your cash flow will be unaffected,” he said. “Additionally, if tax rates happen to go higher in the future than they are today, you ultimately may have paid tax at a lower rate on the funds you took out.”

However, this option may not be what mathematically gets you farther ahead, DeFelice said.

One of the biggest advantages to not being subject to the 10-year withdrawal rule is your ability to continue to “stretch” the IRA distributions over your lifetime, he said.

“IRAs are designed to grow tax-deferred throughout your retirement, so it is not just the cost of the kitchen renovation you are losing out on – you are also losing what that money would have grown to over time,” he said.

If you don’t need to use the IRA funds and can comfortably finance the renovation without dipping into your retirement account, it might make sense to preserve that money and let it continue to grow tax deferred, he said.

Financing the renovation may give you flexibility to pay over time, especially if the interest-free deal has favorable terms.

“Clients ask all the time whether they should aggressively pay off their 2 ½-3% mortgages they locked in when rates were so low, and our answer is usually the same – at that level it makes sense to use `other people’s money’ to finance the loan, since you should be able to earn more than that over the long term in a fully diversified moderate growth portfolio,” he said. “If you can borrow at 0%, the arbitrage math works substantially more in your favor, even if it is typically for a shorter amount of time than a 30-year loan.”

And while you said the withdrawal wouldn’t put you in a higher bracket, you’re still going to need to pay taxes on the money you withdraw, he said. Depending on your overall income, the withdrawn funds could bump up your tax liability slightly or put you in a higher effective tax rate than you realized, he said.

For example, if the kitchen renovation costs $100,000, you might need to withdraw $130,000 to cover federal and state tax – reducing your IRA balance further and adding extra taxable income than you expected to. With interest-free financing, there’s no immediate tax hit at all. You can pay in installments without impacting your taxable income for the year, DeFelice said.

Additionally, if you have other financial needs or investment opportunities that unexpectedly arise in which zero-interest financing is not an option, keeping funds on hand in your IRA may be advantageous, he said.

As long as you can handle the monthly payments from a cash flow perspective, you build in more flexibility financing the kitchen renovation with a low interest loan, he said.

“And the good news is that this does not have to be an all-or-none decision. If you’re still unsure, a mix of both could work well for you – financing part of the renovation and using your IRA for the rest,” he said. “As always, you should check with a qualified tax professional to review what if any impact additional distributions from your inherited IRA will have for you.”

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This story was originally published in January 2026. 

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.