Money Wisdom: Carrying a Mortgage in Retirement is Your Call | Business

If you have a mortgage on your home, you may be wondering if you should pay off the loan before you retire or continue to make monthly payments during your retirement years. The decision is personal – and in some cases, very emotional – depending on your feelings about debt in general and retirement.

If this was strictly a dollar and cent decision, I would recommend seriously considering the financial benefits a mortgage could offer in this economic environment. But if you’re not comfortable with having debt in retirement, there’s no point in me pulling out a calculator and proving it’s better to keep the loan. Going over the numbers is useless if your instinct is telling you to pay. And that’s perfectly fine. The decision should be one that allows you to sleep well at night.

My parents, who were children during the Great Depression, thought it was risky to owe money to any person or institution. They didn’t buy anything on credit and paid off their mortgage as quickly as possible. There was a lot of emotion in our household around the subject of debt. Looking at the world through their eyes, I understand this point of view. Today, as a financial advisor, I know that debt continues to be an emotional topic for many people and I respect their feelings.

I also understand the opposite point of view. If the idea of ​​holding on to mortgage debt until retirement doesn’t apply to you, consider crunching the numbers to determine if it’s financially beneficial to continue making monthly mortgage payments.

If you have a low-interest fixed-rate mortgage, you can get away with not chasing a gain. For example, why withdraw money that yields 6% to pay off a mortgage at 3 or 4%? You can benefit from the interest rate differential and if you itemize your tax return, use the mortgage interest deduction to reduce your tax liability. And there’s another benefit: if your home’s value goes up, a mortgage provides leverage that can boost your return. Finally, remember that the savings you keep are money that you keep in control. It’s up to you to manage and spend.

Maintaining a mortgage works well in this example because it is a low fixed rate loan. If you have an adjustable mortgage or a high interest rate mortgage, now is a great time to think about refinancing (no points, no closing costs, etc.) at today’s low fixed rates. If you’ve never considered a 15 or 20 year loan before, you want to explore these options now. Naturally, refinancing only makes sense if you plan to stay in your home for the foreseeable future and don’t plan to downsize.

I’m generally not in favor of making financial decisions based on emotion, but I believe it’s one of them…and may even be at the top of the list. There’s no right or wrong answer here, so trust your emotions and make the choice that’s right for you.

Joel Johnson is Managing Partner of Johnson Brunetti, a Connecticut-based retirement and investment firm. He lives in Tolland.

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