Pay Off My Mortgage Before I Retire?

About half to two-thirds of new clients we meet with these days are Baby Boomers age 55 and older who want help determining their retirement finish line and devising a plan to get there. Roughly seventy-five percent of them come to us with a mortgage still on their personal balance sheet, even though they oftentimes have the means to pay it off. So should you or should you not carry a mortgage into retirement?

Here are three reasons to consider getting rid of your mortgage before you retire:

  • Risk management
  • Flexibility
  • Peace of mind

Risk Management. Carrying a mortgage into retirement comes with a definite risk/reward trade-off. Mathematically speaking, if you’re able to earn a higher return on your investments than your mortgage interest rate, you’d end up ahead in the long-run. However, having to draw income from your investments to pay a monthly mortgage creates unnecessary timing risk and a prolonged market downturn could severely damage your ability to meet your retirement income needs in the long-term.

Flexibility. A mortgage-free retirement allows greater financial flexibility. Not having to support a monthly mortgage payment can free up cash flow that can be used for other opportunities. Alternatively, if your lifestyle does not change from what you were accustomed to before paying off the mortgage, your cash flow needs will be less in retirement. This can help to reduce your draw-down of assets in retirement, which greatly increases your chance of not outliving your assets.

Peace of mind. There’s a strong sense of peace that comes with living debt free. Peace of mind cannot be measured in finite terms. It’s an intangible feeling you cannot put a price on. See for yourself how great you feel when you know that you own your house free and clear.

Overall, it makes a lot of sense to enter retirement free from debt obligations, including a mortgage. How to tackle the mortgage to make sure it’s gone before you say goodbye to your full time work is something that will be different for everyone. Your strategy will be dependent on pre-retirement cash flows, the makeup of your current net worth, and your income tax situation.This is where we can help you. We can review your current situation, help you develop goals for retirement, and create a strategy to get you there.  Contact Kristalynn Redstone for more information.

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