Episode 18: Should I Pay Off My Mortgage Before Retirement?
Have your question answered on the Money Wisdom Question Series!
Thank you for joining us for Episode 18 of our Money Wisdom Question Series, where we film answers to common financial and retirement investment questions. Today’s question is, “Should I pay off my mortgage before retirement or carry the payments into it?”
Having a Mortgage in Retirement
A lot of analysis can be done if you’re in this situation. If you can get a decent mortgage rate it probably makes sense to have that mortgage in retirement. If you have a low enough rate and it’s fixed, instead of paying off that mortgage you can take your money and do something else with it. You can take that money and invest or spend it. Another option is to use that money for additional retirement income. By choosing to have a monthly mortgage payment, it allows you to have control over the cash instead of paying off the debt and giving it back to the bank.
Not Having a Mortgage in Retirement
Now, the other side of that is people asking why would someone want to have any debt in retirement? People, sometimes depending on what generation they grew up in, want to get out of debt as quickly as possible and don’t want to owe any money to anyone. Their idea of having a mortgage in retirement if they don’t have to doesn’t make sense to them.
In some scenarios, it makes sense to carry a mortgage in retirement, invest the difference. You pay 4% interest and its tax-deductible. Maybe you make 6% interest. There’s a spread in there. It’s how banks make all the money that they make on an interest rate spread. It costs them less than what they can make on their money. We could have this whole long intellectual argument, but for some of you, it just makes sense to have no debt in retirement.
The Decision is Yours
This is an individual decision and some financial planners really get this wrong because they tried to appeal to the logical side of this argument when in reality we are emotional creatures. We need to have peace of mind and feel good.
Everyone needs to enjoy their retirement and for some people, that means paying off that mortgage. For others, it means I want to have control over that money that I would have given to the bank. I don’t mind making a monthly payment to the bank that way I have the cash to do something else with it, whether that’s spending or investing it.
The decision is yours. It’s a tough question to answer without knowing someone individually.
Thanks for joining me and I hope you found this information helpful!
P.S. If you enjoyed this topic and want to learn more, you’ll love this podcast episode where I talk about a similar subject.
P.P.S. Feel free to submit questions here for a chance to have them answered!
Information presented in our podcasts is considered current as of the created date. Over time, some information presented may become stale. We recommend you consult with your Financial Professional before making any changes based on information contained here.
Johnson Brunetti is a marketing name for the businesses of JB Capital and JN Financial.
Investment Advisory Services offered through JB Capital, LLC. Insurance Products offered through JN Financial, LLC.
The guarantees provided by any type of insurance contract are based on the claims-paying ability of the insurance company.
Related Resources
-
Estate Planning Must Haves
Estate planning can be a time-consuming and overwhelming process, but it’s a crucial step in securing your family’s financial future and cementing your legacy. By working closely with an estate pl… -
What Updates Can We Expect for Social Security in 2025?
A new year means new rules for retirement plans. Let’s start with one of the largest sources of income for millions of retirees: Social Security. What changes can we expect in 2025? Heath Gross… -
Getting It All Together for Retirement
After a long, fulfilling career, the time has come to embrace the next chapter. You may have envisioned the age at which you’d retire since you began working, but it’s important to distinguish bet… -
Key Questions for Planning Your Retirement Income
Replacing your income in retirement is a significant undertaking that raises many important questions and requires careful planning. First and foremost, it’s essential to have a retirement income … -
Health Care Expenses in Retirement
Of all the expenses to expect in retirement, health care often makes up a significant portion of your costs. Monthly premiums, out-of-pocket expenses, and services not covered by Medicare can quic… -
Income Planning 101
You’ve spent the last few decades saving for retirement but are you truly prepared? To help address any concerns or uncertainties you may have, you need an income plan – one that considers every f… -
Maximizing Your Social Security Income
Social Security can serve as a safety net for many retirees, sometimes acting as a primary source of income. However, the program is highly complex with over 500 ways to claim benefits. Even one o… -
How Much Money Can I Spend in Retirement?
“How much can my spouse and I realistically spend in retirement at age 62 with $1 million saved?” Today’s hypothetical couple is asking the very question that most pre-retirees ponder when gearing… -
What Steps Should I Take If My Retirement Savings Fall Short?
One of the biggest fears today’s pre-retirees and retirees face is running out of money in retirement – but what happens when that once-distant fear becomes your reality? Today’s question addre… -
How Will I Receive Income from My Retirement Savings?
Today’s question centers around the core of retirement planning – how do I turn my retirement savings into retirement income? After decades of building up your nest egg, life after work introduces…
