Created: September 24, 2020
Modified: September 16, 2022

Episode 18: Should I Pay Off My Mortgage Before Retirement?

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!

  • Sandy and Thomas C.
    Sandy & Thomas C. are clients of Johnson Brunetti and received no compensation for their statement.

    “We always felt our financial needs were in very capable hands. Alex Angst is great to work with. Our advisor always made us feel he had our best interests at heart and explained things so we could understand them.”

  • Robert G.
    Robert G. is a client of Johnson Brunetti and received no compensation for his statement.

    “We’ve been clients of Johnson-Brunetti for > 10 years. We’re enjoying a comfortable retirement as a result. Many thanks to Joel and our CFP, Eric Hogarth. I wish we had plugged into this decade approach back when we were in our 30s.”

  • Lisa D.
    Lisa D. is a client of Johnson Brunetti and received no compensation for her statement.

    “Working with Johnson Brunetti has had a positive impact on my life by providing me with the knowledge, confidence, and peace of mind to move forward with my retirement plans. The process of getting to this point, through their guidance, has been informative and pleasurable.”

  • Ken D.
    Ken D. is a client of Johnson Brunetti and received no compensation for his statement.

    “I view your company as one that puts my interests first. I think that is very uncommon and very refreshing. “

  • Jeanne P.
    Jeanne P. is a client of Johnson Brunetti and received no compensation for her statement.

    “Matt does an awesome job! So easy to understand and he listens to our concerns and addresses them! happy I chose your firm!”

  • Anonymous
    This testimonial was provided by a client of Johnson Brunetti and received no compensation for their statement.

    “I have been pleased with the help and service I have received from the company. I have met several team members on Eric’s team and have found all of them very well prepared to meet with me when reviewing my portfolio. I always feel that I am an important customer and appreciate that very much. I hope the firm continues to focus on the customer and maintains its great service. I think you do a great job for someone like me!!!! I’m happy I chose your firm!”

    Johnson Brunetti
    Welcome to Our New Website!
    Everything was designed with you in mind, making our retirement planning resources more easily accessible to you.
    Check out your new resource center, where everything can be organized by article type or topic
    Are you ready to speak with a financial advisor?
    Johnson Brunetti

    Investment Advisory Services offered through JB Capital, LLC.
    Insurance Products offered through JN Financial, LLC.
    Atlanta • Boston • Hartford | Tel: 800-208-7233

    JB Capital LLC is a federally registered investment adviser under the Investment Advisers Act of 1940. Registration as an investment adviser does not imply any level of skill or training. Information presented is for educational purposes only and is not intended as an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.

    JB Capital's Form ADV | Disclaimer | Privacy Notice | Client Relationship Summary

    *Information about our Affiliation with the UConn Huskies

    Johnson Brunetti is a sponsor of WFSB Better Money, WCVB Better Money Boston, WSB-TV Better Money Atlanta, WTNH Money Wisdom, and WTIC Money Wisdom.