Mortgages in Retirement
Apr 5, 2019
Kevin Kreilach, CFP, partner, Jehl & Kreilach

Anyone who has gone through the process of mapping out their retirement knows there can be a lot to keep in mind. Saving, investing, anticipating medical costs and making sure you have enough tucked away is just the start. One question many people overlook is: “Should I pay off my mortgage before I retire?” The answer is more complicated than you may think.

Maintaining a Mortgage in Retirement

Opportunity cost: Imagine you have $300,000 set aside to pay off your mortgage. But rather than using that to pay off your mortgage, you invest it. It’s tempting to stop making a payment, but what if that $300,000 earned a hypothetical 6 percent for the next five years. You would have more than $400,000. Your house may appreciate in value over the same period of time, but you should consider all your choices for that money.

Make your mortgage work: Many homeowners benefit from a mortgage interest deduction on their taxes. Here’s how it works: the amount you pay in mortgage interest is deducted from your gross income, which reduces your federal income tax burden. But remember, the further along you are toward paying off your mortgage, the less interest you’re paying.

Eradicate (other) debt: Before you pay down your mortgage, any extra cash might be better suited to paying off other kinds of debt that carry higher interest rates, especially non-deductible debt, such as credit card balances.

Retire Your Mortgage

Don’t throw money away: Your mortgage may be a large part of your available capital. Eliminating unnecessary subsidies can significantly reduce the amount of cash you need.

Home is where the heart is: There’s a value to your home beyond money. It’s where you raised your children, made fond memories, and you may want it to remain in the family. Paying off the mortgage may help make your home part of your legacy. Afterall, some things you just can’t put a price on. 

Jehl & Kreilach Financial Management

Phone: (260) 420-0268


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