Financial Plans On Post Retirement Mortgages
Should you pay off your mortgage before retirement? Before you will be able to answer this question, you must evaluate your expected post-retirement circumstances. This should be an ongoing process from now, into, and throughout your retirement. What is your personal comfort level with carrying secured debt, given your expected income and cash flow during retirement? Will your taxable income and cash flow decrease? Do you expect your home's value to change as you reach retirement age and beyond? What is the interest rate on your current mortgage? How many years are left on your existing mortgage? The answer to these questions will help you to decide whether you should carry a mortgage into retirement.
The first item to evaluate is your comfort level with secured debt, given your expected income and cash flow during retirement. Even if the indicators show that it would be economically wise to carry a mortgage during retirement, you probably should not do so if you will feel burdened to the extent that your peace of mind and/or health could be affected.
Will your taxable income and cash flow decrease? Some retirement distributions will be taxable income as opposed to return of capital. Social Security monies may be taxable to some extent as well. If your cash flow during retirement will allow you to comfortably make the mortgage payment, and you are able to itemize your taxable deductions, then you may receive a tax benefit by carrying a mortgage. Consult a CPA or your financial advisor to evaluate your possible tax savings.