The Pros and Cons of Paying off Your Mortgage Before Retirement


Written by Rachel B.

Your home is likely your largest asset, so it’s natural for you to want to pay off your mortgage before retirement. However, whether or not this is financially feasible will depend on a variety of factors, such as your timeline for retirement, current savings, financial goals, and spending habits.

While paying off your home pre-retirement may seem ideal, carrying your mortgage into retirement may not be a bad idea, especially if you’re making enough to cover the monthly payments. However you should assess your current financial situation and weigh the pros and cons of each option before making any decisions. To help, here’s a breakdown of your options:

The Pros of Paying Off Your Mortgage

Getting rid of your greatest monthly expense can free up cash flow to support other financial ventures and cover living expenses in retirement, which could be especially helpful when you exit the workforce and are living on a lower, fixed income. Paying down your mortgage early can also save you from paying interest over time, offering cost savings in the long-run.

In general, it makes sense to pay off your mortgage early if you have built up enough savings to adequately support your post-retirement needs, such as medical and living expenses. However, you should remember you’ll likely spend more once you have more free time in retirement, so it’s also important to factor in additional spending before deciding whether you’re able to pay off or pay down your mortgage.

If you were to carry your mortgage into retirement, it would only make sense to invest in opportunities if they offered a rate of return that exceeded your mortgage interest. Whereas, if you were to prepay your mortgage, you could begin funneling your money into other financial ventures and low-risk investments, such as treasury securities and bank-insured certificate of deposits, which are guaranteed to yield higher returns once they reach maturity.

If you have accrued enough equity in your home, but lack sufficient retirement savings to pay off your mortgage in-full, you may want to consider alternatives like only paying down a lump sum of the principle or refinancing your mortgage. By refinancing, you may still be able lower your monthly payments and interest rate, or even change your loan type, to help ease financial burden.

The Cons of Paying Off Your Mortgage

Depending on your circumstances, there may be drawbacks to paying off your mortgage before retirement. According to Consumer Reports, many financial advisors advise against prepaying your mortgage for a variety of reasons. For one, using excess cash to pay off your mortgage

leaves you with less cash to put toward living expenses and potential investment opportunities. Dipping too far into your personal and retirement savings can also put you in a tight spot as it can inhibit your ability to save for retirement, college, unplanned expenses, or any other major purchase.

In addition, by prepaying your mortgage, you’ll lose out on the mortgage interest deduction, which means you won’t be able to deduct mortgage interest on your tax return. This may bump you into a higher tax bracket. For many homeowners, the ability to deduct mortgage interest plays an important role in their overall financial and tax strategies, so you may want to consider whether or not you’ll still be able to itemize your deductions, even without mortgage interest.

You should also consider the opportunity cost of putting money toward your mortgage rather than other outstanding debts. In some cases, it may make more sense for you to reap the tax benefits of adding to your retirement plan or paying down debts that may have higher interest rates, such as credit card bills, student loans, and car loans.

Your current life stage can also impact your decision to pay off your mortgage. If you’re nearing retirement, you may want to be more conservative with your money. Instead of taking unnecessary risks by investing in the market, you may want to keep your mortgage instead. That way, you know you’re locked in on a set interest rate and monthly payment without needing to make risky investments.

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As you weigh your options, it’s important to be realistic about what you can and can’t afford. By setting reasonable expectations and discussing your options with a financial advisor, you’ll ensure you make the best choices based on your financial circumstances.

Perfecting Retirement

When I initially retired my head was full of optimistic visions and pleasant expectations along with perhaps a small dash of fear regarding how the rest of my life was going to play out. I looked forward to pursuing that list of things I always wanted but was not sure I had enough to fill 20 or 30 or more years. Now entering year eight of retired life I think I understand myself a bit better. With some effort and a little luck I have been able to define a retirement program that works best for me – at least to this point.

I have always been a lover of books and retirement provides me guilt free hours to peruse whatever subject interests me at the moment. I keep five or six books stacked in the corner of our two-seat rocker for easy access during the day. Since I never know what will pique my interest du jour I maintain a potpourri ranging from history to adventure to Stephen King to theology. The perfect reading experience finds me switching from one to the next as what entertains me is dynamic and shifts.

Reading at night is an important part of the regimen. I prefer holding a real book and turning pages so rarely use a Kindle. But it can be challenging to find proper illumination for my old peepers. I recently discovered the BenQ e-Reading Lamp a multi-adjustable dimmable lamp that does the trick. It lights up my pages and with the intensity adjustment is easy on my eyes. The only challenge it works so well my wife has confiscated it for her jigsaw puzzling. Apparently the natural light helps her see the true color of pieces which typically becomes difficult as it gets dark. You can check it out on Amazon if reading or puzzling is your thing.

A few years into retirement having workied through my to-do list and read to my heart’s content I realized I would need more to occupy my days. Golf is not my thing. I have yet to find the right volunteer opportunity although I have joined a few community efforts. A portion of my day goes to exercise, gardening, hiking, playing the piano, and futzing around the house. But it was not enough. I hoped to avoid the situation of a fellow retiree who left his job five years ago and is now like a caged tiger pacing endlessly while looking for something – anything – to do.

So I began to investigate possible part time opportunities in the area. Ideally I wanted nothing stressful, no more than three or four days a week for about five hours a shift. I was incredibly fortunate to find the perfect gig pouring wine at a small tasting room within walking distance of home. I love working with my boss, meeting new people and sharing great wine. Unfortunately after two and a half years the winery is closing down – now what? 

I need to do something. There are other tasting rooms – lots – in the area but what I found at Mercy was almost too good to hope for again. Still, I plan to do some research to see if I might find another. Where we live tourism and hospitality are the main industries. If the tasting room doesn’t work out I am not sure where else I might end up. Stay tuned for updates.

A few years back we inherited a dog from a friend of our son. My wife and I discussed possibly adding a hund down the road but when this particular opportunity knocked (or barked as it were) we answered. Frank the Boston Terrier has been a welcome addition to our family. Where we live dogs are as numerous as leaves on a tree. Everyone has one or more and local establishments are dog-friendly to a fault. Frank is a never ending source of energy as he chases the ball to the point of exhaustion (his as well as mine). And his unconditional welcome of love whenever we come home is something we look forward to. There is never a dull moment when Frank is on duty.

So a typical retirement day for Dave looks like this: up about 7:00 for breakfast and throwing the ball for Frank-the-dog during which time I sneak in some stretching; select a book from the stack for a bit of reading; head out for a walk on the beach or hike at the club or workout; back for a late morning feeding (me not Frank); walk to the tasting room where I pour for my five hour shift swapping tales with my boss and reading between tasters; home for a glass of wine before dinner (my kind of homework); dinner; catch up on the current choice of sitcom/series on TV (we dropped cable some months ago so are more selective with what we watch while paying $150 less per month); to bed for a little reading then sleep.

My wife retired a few years after me. She found it a bit challenging shifting from full-time-all-the-time to down time. It quickly became apparent that keeping engaged and socially active was essential to her sanity. So after six months doing “nothing” she temped part time at a local law firm. A little work mixed in with fun proved the right combination. Her typical day looks like this: up around 6:00; jigsaw puzzle for an hour (no less than 1000 pieces considered); cup of tea and newspaper which includes daily Sudoku puzzle; off to yoga/barre/pilates class; on to work until 5:30; home and dinner and recreational TV (she typically does something while watching the tube like knitting or catching up on internet news); to bed for reading of her latest book. The missus, not one to sit still for long, recently joined the Board of Directors for a local non-profit where she can deploy her super attention to detail and hang out with some neat people.

For us successful retirement requires we stay busy, keep moving, keep our brain challenged, keep the body as fit as possible (getting harder by the day), and make the most of our freedom. We have learned to appreciate quiet moments and down time, to recharge and go with the flow. We look for a balance between activity and rest, on and off, busy and not so busy. We try to pay attention – you never know what may be out there that is a perfect fit for your interests and skills. And just enjoy – after all that’s what retirement is all about, right?

Facts to Know About Buying a Retirement Condo

Written by John Moran

If you and your spouse are looking for a new place to call home for your Golden Years and retirement, you may be considering purchasing a new home or condo.

There are a many number of reasons why condos are preferred for retired individuals. Condos require less work and allow its residents to travel without fear of break ins or damage. Condos also come with allowing residents to not worry greatly about maintaining outdoor areas such as yard work or exterior upkeep.

There is no doubt that there are great aspects of owning either a home or a condo. That being said, it is up to you to figure out which choice best fits you and your spouse’s desire for lifestyle when it comes to your retirement years.

For that reason, it is crucial that you know what it means to purchase a retirement condo. So here are some of the most important facts to know about buying a condo for your retirement.

The built-in community can be good…and bad

As an owner of a condo, unlike being the owner of a single-family home, you will be part of a community where majority rules when it comes to major decisions to make. This can certainly lead to frustration. The condo board might decide to use a portion of your monthly HOA dues to pay for amenities or repairs that you do not want.

That being said, that community does mean that you will easily be able to make friends and meet your neighbors. Whether you are simply walking along the hallway day-to-day, or engaging in some of the events that the HOA has set up, condo complexes offer a fantastic opportunity to build a community of friends and neighbors.

Either way, it is crucial that you review your buildings’ financial records, bylaws and other documents before you finalize the purchase.  

Condos often offer state-of-the-art features

It is quite often that homes require upgrades the moment you purchase them. Whether it’s upgrading appliances, turning your home into a smart home, or a more drastic renovation, it is quite possible that you will not be spending money once you make your down payment.

When it comes to condos, they typically come with state-of-the-art features already. Whether its granite counters, stainless and smart appliances, or an open floor plan, condos are typically great at keeping up-to-date with the latest (and longest lasting) trends.

That being said, if you want to make renovations of your own, there are typically more hoops that you have to jump through compared to when you own your own home. The HOA will typically require approving any renovations that you want to make, which could have an impact on the time, cost and ease in which you get those changes made.

 Condo fees generally continue to rise

This is especially true if the building is a classic or a bit older. Typically, these fees are to maintain upkeep of the building and make sure that the building is a pleasant place to live for you and all of your neighbors.

That being said, it can be quite frustrating to have to pay higher HOA fees for amenities or repairs that you are not interested in having (as previously mentioned).

Security measures can be great, or annoying

James of https://www.homeguidemyrtlebeach.com/best-myrtle-beach-real-estate-agents/ explains what security features you can expect if you choose to purchase a condo.

“Condos are widely known for having pretty fantastic security. Whether it’s multiple-door security that requires key fobs, cameras on the outside and inside of the building, or even a dedicated security staff, there is a general sense of safety that many residents of condos feel that homeowners simply do not.”

This added security can be fantastic if you work at odd hours of the night, have fears of being alone, or are older and don’t feel comfortable defending yourself should the worst happen.

That being said, that kind of security can be rather annoying if you do not want or need it.

Condos can bring basic life needs to you

More and more, condo developers have found ways to bring the basic necessities of life to your doorstep. Buildings often have markets or grocers of the first floor, state-of-the-art gyms, even dog-sitting and walking services are known to be available in condo complexes.

Of course, there are some downsides to this way of life. Some who end up calling a condo home will find that their life becomes insular as the need to leave the building shrinks. Certainly, this is something that every single person can control, but sometimes people do tend to fall back on what is easiest for them.

Selling your condo

This is something that you may not have to really worry about if you plan on spending the rest of your retirement in your new condo, but it is still something to keep in mind. Before you decide to sign on the dotted line and finalize the purchase for you condo, you should make sure to look into the future and consider the marketability of your new unit if you should wish to move.

This is also something to keep in mind if you plan on passing down your condo to your children, or want to sell it if you plan to move to a retirement home later in life.

One of the key drawbacks of buying a condo is that your unit will never be more than an identical unit, plus upgrades. Your investment relies directly on surround sales. That means that if another owner sells at a cheap price, that could very well impact your market value.

On top of that, the condo complex may not qualify for an FHA loan. That’s because the occupancy percentage of owners vs. tenants could exceed 50 percent. As a result of that, a purchaser would need to pay cash or obtain a conventional type of loan or mortgage in order to complete the down payment.

This restriction could impact your ability to sell and could impact the value of your condo.