Should I Retire With a Mortgage?

Does holding a mortgage into retirement make sense? Recently I was quoted in about this subject. In “Is Refinancing Before Retirement Wise” I made several points on the subject including:

Those who have a long term steady stream of income such as a large Social Security and/or a pension benefit are more likely to be able to afford mortgage debt during retirement. The more you have to rely on the financial markets, the riskier this becomes.

What About Refinancing?

When you refinance, not only should you look at the breakeven time frame where the total monthly cost savings exceeds the cost of closing, but you should be very careful to also factor in the extra payments if you extend the term of the loan.

Deductible interest isn’t usually as robust during retirement as during your working years because you are usually in a lower tax bracket. Also as the mortgage term continues in the future, less of the payment will be deductible interest and more will represent the principal of the loan as it amortizes.

It's More Than Just The Money

The decision can mean more than numbers. Sleeping well at night has value also.

Ultimately the optimal decision depends on the individuals circumstances. Most of the time, it is wise to eliminate your debt before your retire. However I have had several cases where holding a mortgage during retirement held little risk. If you are considering refinancing and are within ten years of retirement, I would highly suggest doing your due diligence and seeking expert guidance to see if this makes sense for you.

About the author

Jeffrey N. Bogue, CFP®

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