I’m 64 and about to retire in a year. I’ve got to environ $165,000 on my house with no further debt. I have nearly $850,000 in retirement savings, $2,200 a month from a pension, about $2,300 a month from Social Security benefits, and $300 a month from my ex-wife’s pension. I also drive Uber for around $1,500 a month.
Does it make sense to pay off my house when I retire?
See: I’m 67 and retired with $57,000 left on my mortgage and $600,000 saved for retirement – do I have to pay off my house now?
Dear reader,
You ask one of the most common questions we get at CNET about retirement savings and spending — whether it makes sense to pay off a mortgage before retirement.
The answer is, as you might expect: it depends. This situation is very personal to the individual. Some people have absolutely no problem retiring with a mortgage, while others are stressed about having that debt hanging over their heads when they leave the workforce.
What you need to do before you can even answer this question is write down all the expenses you expect to have in retirement and add a little extra cushion for what you don’t expect. (You should aim to have an emergency savings fund easily accessible in case of an emergency…perhaps six months of expenses would suffice, although some retirees like to be very conservative and have a whole year on a bank account.) When listing your expenses, include everything – big bills, like your mortgage, taxes, utilities, groceries, gas for the car, medical needs, as well as smaller and more flexible, such as vacations, gifts for loved ones, hobbies, entertainment, TV and magazine subscriptions, pet care, etc.
Compare your expenses to your income, but don’t include your Uber income (or any other income you may have). How do you feel about that? Is it too tight? More than enough? This can help you decide if you want this mortgage payment listed.
Also see: I have a $250,000 mortgage, with 24 years remaining on the loan. Should I sell stocks to pay off the mortgage before I retire in a few years?
Also consider if paying it off in advance will require you to keep working a bit longer and if you are interested in doing so. You probably don’t want to dip into your $850,000 to pay off the mortgage because that would leave you with less than $700,000. You should have as much as possible in retirement savings before you retire. It may sound cliché, but advisors are right when they say you can borrow for a home or an education, but not for your retirement. On the other hand, if you continue to pay your mortgage for the next few years, and even add a little more capital when you can, you will end up with “bonus” money when you are already home. retirement and you’ll have all that extra money.
This only works if you can financially afford the mortgage in retirement and are emotionally comfortable doing so. If the thought of having that bill in retirement as you lose some of your income is causing you stress and maybe even keeping you up at night, it won’t do you any good. In this case, I would suggest trying to find a balance and contacting a qualified financial planner to help you go through the details of your financial plan and help sort it out.
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