Being Mortgage Free Can Enhance Your Retirement
The long-debated question of whether to pay off your mortgage before retirement often sparks discussion. Here are five reasons why becoming mortgage-free can enhance your retirement and improve your financial well-being:
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Monthly Cash Flow Freedom
- Reduced Expenses: Eliminating your (most likely) largest monthly liability can free up significant cash flow each month.
- Flexibility: In retirement, it’s all about having the flexibility to cover unexpected expenses or pursue hobbies and travel.
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Lower Stress Levels
- Financial Security: Just knowing you have a paid off home can reduce financial stress.
- Peace of Mind: Without the burden of a sizeable mortgage payment, you have the ability to enjoy retirement with greater peace of mind.
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Opportunity Cost
- Investments: You are able to allocate more of your savings to investments like stocks, bonds, or real estate, if appropriate.
- Potential Returns: These investments can provide higher returns than servicing a fixed-rate mortgage.
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Leaving a Legacy
- Inheritance: A home unencumbered by debt can leave a more substantial inheritance for your heirs, perhaps allowing a sentimental family home to stay in the family.
- Financial Freedom: Your beneficiaries, especially a surviving spouse, won’t be saddled with your mortgage debt.
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Financial Flexibility
- Potential Downsizing: If you elect to downsize your home in retirement in terms of market value, you move to a lower priced area and use some of the equity for travel, hobbies, or additional income. Note that downsizing in size does not always translate to a lower price point.
- Long Term Care: The paid off home in retirement provides another source of funds that the second spouse could use for a long-term care stay. If the first spouse spends down all the portfolio assets, the second spouse can sell the house and have all of that equity to fund long term care needs.
Utilize a Mortgage Payoff Calculator
Since most mortgages are structured over 15–30 years, aim to pay yours off before retirement. If your current schedule extends beyond that, use an online calculator to see how much extra principal you need to pay each month to align your payoff date with retirement.
Click here to use our online mortgage payoff calculator!
Benefits of Being Mortgage-Free
Paying off your mortgage before retirement can provide significant financial benefits, from increased cash flow and peace of mind to greater flexibility for investments, legacy planning, and long-term care. By eliminating this major expense, you open the door to a more secure and enjoyable retirement, allowing you to focus on what truly matters. Take the steps now to align your mortgage payoff with your retirement goals, and set yourself up for a future of financial freedom and opportunity.
Have questions? Feel free to contact us.
Missie Beach, CFP®, CDFA®
Senior Financial Advisor, Wiser Wealth Management
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