Ready For Retirement

Should I Take a Small Mortgage Into Retirement?

May 26, 2020 James Episode 8
Ready For Retirement
Should I Take a Small Mortgage Into Retirement?
Show Notes

Our topic on this episode of the Ready for Retirement podcast is whether you should retire with a mortgage. Many people believe that carrying a “small” mortgage into retirement with them will be advantageous in terms of tax deductions, but the reality is that unless your mortgage is rather large or you contribute to charity significantly, you will likely be better off using the standard deduction. 

In association with episode 7 of the podcast, where we discussed how much money you should have in order to retire, it is very important to consider your monthly expenses, the largest of which is likely your mortgage payment. Keeping in mind that your financial goal is to outlive your money, evaluate your portfolio returns when determining if your income can support a mortgage. 

It is also worth mentioning that there is a psychological component to this discussion as well. There is an element of stability and peace that comes with knowing you own your home outright before you retire, but if this is not a big factor for your wellbeing, then you may be fine continuing to pay a mortgage into retirement.

The two key risks of carrying a mortgage into retirement are having higher expenses and the sequence of return risk. There isn’t a whole lot you can do about the volatility of the market at the time you retire or afterward, but it is important to get advice from a professional regarding how best to account for this fluctuation.