As retirement approaches, you may wonder whether you should enter your golden years free of mortgage debt. What a refreshing feeling of financial freedom! But while the idea of living mortgage-free is appealing, the right choice for you will ultimately depend on your overall financial picture.
Reasons to Pay Off Your Mortgage Early
Your feelings aren’t wrong! Paying off your mortgage before retirement can confer some important benefits, such as:
- Eliminating a major monthly expense can reduce stress, bring peace of mind, and increase your financial security in retirement.
- Without a mortgage, you may need less income to cover your (now lower) monthly living expenses.
- Paying off your mortgage early is like earning a guaranteed return equal to your mortgage interest rate.
Reasons to Keep the Mortgage
Before you leap into an aggressive plan to pay off your mortgage early, just know that there are a few reasons that it can be the less desirable choice:
- Aggressively paying down your mortgage could cost you other opportunities; you might earn a higher return by investing those extra funds instead of using them to pay off a relatively lower-interest loan.
- Mortgage interest may be deductible, depending on your situation, so you will lose that income tax deduction.
- Keeping more cash on hand can be beneficial, especially if your investments are performing well.
After weighing the pros and cons of paying off your mortgage early, the decision will depend upon your financial goals, risk tolerance, and lifestyle preferences. A financial advisor can run the numbers with you and help you analyze your situation to make an informed decision. Call us to schedule an appointment, and together we will craft a plan that helps you enter retirement confidently.