Today’s Wisdom:

Depending on who you talk to, you might get conflicting advice on whether you should pay off a mortgage before retiring. There’s never one answer that applies to everyone, but one of the reasons people consider keeping the mortgage is to benefit from the tax deduction. Is that correct? We’ll explore that question and more in this episode.

What You’ll Learn:

Paying down debt should be a priority for anyone approaching retirement, but what about your mortgage? This is the one debt that can often be carried into retirement but are you doing it for the right reasons?

We had a question come in recently about whether it was beneficial to keep paying off the mortgage slowly to take advantage of the tax deduction from the interest. You’ll find a variety of opinions on whether having a mortgage once you’re retired is a good or bad thing, but it always depends. There are plenty of creative ways to tackle a mortgage in order to save you money in retirement so lean on an advisor.

But to answer this specific question, it starts with making sure you are, in fact, writing off your mortgage interest. If you’ve had the mortgage for a long time, you might not have much interest left. Along with that, recent tax changes made the use of itemized deductions a lot less likely. So you need to check on that to see if you’re actually getting the tax benefits you holding onto that mortgage for.

Having that monthly debt payment might be fine in retirement, but you should always have a plan that makes it clear whether it’s beneficial or not.

Another question we received asked about an old SIMPLE IRA and what to do with it.  When you leave an employer, you typically have a number of options for what you can do with your old plan. The general guidance we’d give is to move the money somewhere else to give you a wider variety of options.

That might not be the case for everyone, which is why we have meetings with individuals. So in this case, you can roll over the SIMPLE IRA into another IRA without having to pay taxes and it’ll give you more control. No matter what type of employer account you have, they’re all the same once you leave that job.

Leaving money in your old retirement accounts doesn’t qualify as diversification either. A lot of people think it’s beneficial to have money on different platforms with different investments, but we often find that many of these accounts have the same investments. On top of it not really benefiting you from a diversification standpoint, it’s simply just easier to manage your money if you’ve rolled it over into one single account.

As always, we encourage you to take advantage of our Money Map review process to address questions like these or any others that you might be curious about.  

0:19 – Mailbag question on SIMPLE IRA  

1:53 – Different types of employer accounts

5:15 – Mailbag question on having a mortgage in retirement

7:19 – Money Map retirement review