Would you like to submit another request? “Rising mortgage debt is threatening the retirement security of millions of older Americans,” says the “Snapshot of Older Consumers and Mortgage Debt” report. Realistically, many retirees will have more than the mortgage payment on the debt side of the equation and taxes to consider. About Us For instance, refinancing for a longer loan term could yield immediate financial relief in the form of lower payments. Some pre-retirees and retirees might be wondering if it makes any sense to pay off the mortgage on their home in the current low-interest environment. “The logic behind the rule of thumb is that your income will go down in retirement, so it would be helpful if your monthly expenses went down significantly as well,” said David Reiss, a law professor who specializes in real estate and consumer financial services at Brooklyn Law School in New York. Plus some choose to take on second mortgages through the years. Bank of America® Travel Rewards Visa® Credit Card Review, Capital One® Quicksilver® Cash Rewards Credit Card Review, matching tool like SmartAsset’s SmartAdvisor, 7 Mistakes Everyone Makes When Hiring a Financial Advisor, 20 Questions to Tell If You're Ready to Retire, The Worst Way to Withdraw From Your Retirement Accounts. The Cons of Refinancing a Mortgage in Retirement . That’s why many financial planners recommend their … We have a $10,000 tax write-off because we have a $200,000 mortgage at 5%. That is virtually unprecedented in American history. if (document.mmm_fo) document.write ("&mmm_fo=1"); But if the question is whether to take money that might be invested in other places like a 401(k) or IRA, or to pay off a mortgage, that is another question. Obviously, not having any debt in retirement is an advantage and you should strive to be debt-free if possible. Paying off the mortgage is something most homeowners hope and expect to do by mid-life. But most people don’t live in the same house for 30 years like they used to. Compare the Top 3 Financial Advisors For You. You are earning a net 3% in that scenario. 410-647-9400 For more information about the author, Jason LaBarge, visit his website at www.jasonlabarge.com. To take it further, let’s say you have a guaranteed investment paying 7% from an investment, such as an annuity. A new federal report says one-third of retirees now have a mortgage. I am frequently asked whether a mortgage should be paid off before retirement or if it’s OK to have a mortgage into retirement. A lot of the problems boomers with high mortgage balances are facing could have been avoided with some simple planning. Where to find Us. As you approach retirement, it’s up to the individual to decide whether or not they can handle a mortgage payment in addition to their regular expenses. But is it really so bad to have a mortgage payment during retirement? If you have a low interest mortgage rate, it might make sense to carry a mortgage into retirement so that you have cash on hand for investments and to continue capitalizing on the mortgage interest deduction. If you have a monthly payment of $1,500 today, in 25 years, the $1,500 you'll pay toward your mortgage would be the equivalent of around $942 of today's dollars -- … Box 608Severna Park, MD 21146 The best advice is probably to start planning early and try to live within your means. If you’re struggling to pay your monthly bills, it may be in your best interest to pay off your mortgage as soon as you are able and before you retire. If you use your savings to pay off your mortgage, you run the risk of not having enough cash to take care of emergencies that come up.” However, it’s not always a bad idea to dip into your savings to eliminate your mortgage. And at age 65, retirees can expect to pay some amount, sometimes several hundred dollars depending on income-level, for Medicare coverage. How Much Do I Need to Save for Retirement? Even though by paying off a mortgage you’ll lose the interest deduction, the peace of mind may be more than worth it. The average 30-year fixed mortgage in 2010 was 4.750%; that’s a significant difference. If you have a $200,000 mortgage at 5%, that would be $10,000. Refinancing a mortgage in retirement could have some downsides, depending on how you approach it. Even if it is sizable enough to finance your daily needs, adding your mortgage payments to the burden could jeopardize your financial position. if( width > 480 ){ A financial advisor will evaluate your complete financial situation and make tailored recommendations. document.write ("<\/scr"+"ipt>"); When planning for retirement, the factors you need to consider are your interest rate, the investment’s rate of return, and your income sources. You don’t want to find yourself constantly worrying about money during retirement because you haven’t saved enough or your investments aren’t returning quite what you expected. We will sell this house and a retirement home in North Florida.The house, we want to buy is $ 500,000. Combine that with the recent housing bubble and baby boomers are entering retirement with very high loads of mortgage debt. Is there any reason a person should make it a goal to own property free and clear by the time they retire? If you want more personalized advice, consider talking to a financial advisor. Those withdrawals typically trigger more taxes, while reducing the pool of money that retirees have to live on. '&charset='+document.characterSet : '')); [CDATA[ Most folks suggest that you retire without a mortgage. I frequently have clients who tell me they are paying off their mortgage no matter what and there is nothing I can say to change their minds. 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