Should I Pay Off My Mortgage Before Retirement?

Should I Pay Off My Mortgage Before Retirement?

This is a question that is frequently asked during retirement planning sessions. All of our parents believed that it was important to retire without a house payment. Certainly, not having a house payment makes retirement much easier, but one must be very careful about how much they are willing to spend to make that happen. Becoming “House Poor” is a very real concern. This is a term that describes someone who puts all of their money into their home, and has no cash savings outside of the home to utilize. The reason this is a bad thing is that if you are retired and you own a $300,000 home that is completely paid off, but you have no savings, it is nearly impossible for you to access the equity in your home. It is hard to get a loan if you don’t have significant income, and while their are certain mortgage tools you can use to extract value from your home, this is not an ideal situation to be in. Becoming “House Poor” is something that you definitely want to avoid during retirement. If you read between the lines, I am basically saying that you should not pay off your house while neglecting your other retirement accounts (such as your 401K or IRA accounts). If you can afford to build up your retirement accounts and pay down your mortgage, then this can be an excellent strategy. If you can afford to do only one of these, please focus on building your retirement nest egg. You can always pay off your house with the money later, and you will have much more flexibility in your future finances. Not to mention, you will continue to get years of tax-deductible mortgage interest, tax-deductible 401K contributions, and tax-deferred 401K growth. When you add all of this up, you will be very glad that you took this advice.

Retirement Junkie is a website that the Hagopian Institute put together as a source for free information to help people prepare for retirement.  Please visit, and follow MrEmergingMedia on Twitter for more retirement tips, along with other fun offerings from Todd Hagopian and the Hagopian Institute.

About Todd Hagopian (@ToddHagopian)

Todd Hagopian received his BA from Eastern Michigan University with a major in Political Science. After graduation, he worked as a Financial Advisor and a Bank Manager before returning to school. He attended Michigan State University, where he completed an MBA with a double-major in Finance and Marketing. Todd is now a Senior Product Development Manager for a Fortune 500 company. He frequently writes about business issues, social media strategy, and political issues that he finds important. Enjoy the blog!

Posted on December 26, 2011, in Investing and tagged , , , , , , . Bookmark the permalink. Leave a comment.

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