Should You Pay Off Your Mortgage Before Retiring?
In an ideal world, you might want to pay off your mortgage. With no mortgage, you don’t need to withdraw as much to maintain your lifestyle. Also, if you’re debt free, you have substantially more flexibility to weather difficult financial markets once you start living off the returns from your retirement portfolio.
On the other hand, if you still have a mortgage and it’s more than 5% of your retirement savings, you may do more harm than good to your nest egg if you pull out a big chunk of dough to pay off the loan. With the stock market expected to rise as the country finds its way out of COVID, leaving money in your retirement account means you may realize gains on more invested capital.
If you decide to carry your mortgage into retirement, the real issue becomes how low you can get your monthly payments. Today’s historically low interest rates allow you to refi your loan to do just that. Caveat: lenders require you to meet debt-to-income ratios no matter what, so it’s a good idea to refi before you retire, while you still have demonstrable income.