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Is Paying Your Mortgage Off Before Retirement a Good Idea?

By Sixty and Me March 17, 2019 Lifestyle

The day we close on a new house, we start looking forward to our final payment. Over the years our savings build up and retirement is in the not-so-distant future. It seems like the perfect time to pay off our mortgage and live debt-free, but is this a good idea? Join us in discussion with financial expert Pam Krueger who explains why this decision may or may not be to your advantage. Enjoy the show!

If you’re pondering whether or not you should pay off your mortgage before retirement, you’re not alone. And according to financial expert, author, and PBS co-host Pam Krueger, you’re also in a very good position to start with.

Having enough money in savings to pay off your mortgage entirely and live completely debt-free is a goal that some people will never reach. While the prospect sounds appealing, it’s not always in your best interest according to Pam Krueger.

Weighing the Pros and the Cons

There are two different ways to look at this option- that is from a financial standpoint and from an emotional standpoint.

Pam says that from a financial standpoint, if you have several years left to pay on your mortgage, then paying it off early will save you a considerable amount of money that would otherwise be lost to paying interest on your loan.

The money that you are no longer paying in interest every month becomes the return that you are now guaranteed to get on that savings. And as Ben Franklin is credited with saying, “A penny saved is a penny earned.”

From an emotional standpoint, paying off your mortgage early certainly brings great emotional relief and a feeling of success and financial freedom. The sense of security is comforting, and it seems like a win-win situation.

However, from a financial standpoint, if your savings are not far exceeding the amount left on your loan, you may find that paying off your mortgage upfront can leave you strapped for cash. Emotionally, you may find it burdensome to be unable to participate in the life you always imagined after retirement.

Moving or Staying

Another huge factor in making the decision to pay off your mortgage early or continue paying it into retirement is deciding how much longer you plan to stay in your home. This plays a big role in your decision.

If you plan to stay there for years and you have enough in savings to keep you happy while your savings builds back up, then paying off your mortgage makes good sense. But if you plan on moving 5 years down the road, then putting all your money into a house you’re going to be leaving is not a wise investment.

Considering Your Tax Deductions

Another huge factor to consider is the tax break that you could be losing by paying off your mortgage early. The loss could be significant if you have a long life left on your mortgage and are forfeiting that interest deduction.

Getting Sage Advice

With so many factors and options to consider, Pam highly recommends seeking council from a CPA who is trained and well-versed in comparing all possible scenarios that you could be facing. With the latest sophisticated software, CPAs are able to give extremely accurate outlines of your current financial situation and your future possibilities.

Have you considered paying off your mortgage early? Is the emotional security now more important to you than the financial benefit may be to you later? Have you considered moving again or do you hope to stay in the house you’re in? Join in the conversation below.

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The Author

Sixty and Me is a community of over 500,000 women over 60 founded by Margaret Manning. Our editorial team publishes articles on lifestyle topics including fashion, dating, retirement and money.

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