Is it always wise for a retired person to pay off one's mortgage? Seems to me that it would be better to have the funds invested,growing, & compounding rather than tied up in one's home. You would also enjoy the mortgage interest tax deduction benefit. Yes, you would need a larger income in retirement to cover mortgage payments & the larger income might mean larger taxes but the invested amount could conceiveably grow and produce enough to cover the mortgage & taxes plus leave one with extra funds. Any thoughts?
for mawhinney:Please try searching this board for the term "mortgage"; there are about 23 such messages now, including yours. The issue is fairly thoroughly hashed out there.I carry no mortgage in retirement, but count the value of my house as part of the fixed income portion of my portfolio. Works for me; I sleep well. I wouldn't be willing to have all my assets in the stock market, even if I do miss out on some great gains.Regards,Chips
<<I carry no mortgage in retirement, but count the value of my house as part of the fixed income portion of my portfolio. Works for me; I sleep well. I wouldn't be willing to have all my assets in the stock market, even if I do miss out on some great gains.>>I agree. Part of my early retirement strategy was paying off the mortgage and being debt free. I'm sure some arithmetic genius will come up with a formula that refutes that, but I too like feeling secure.
It all depends on the rate of return you could get on invested money. Example: 100K invested with a 100K mortgage at 7%. You can deduct the interest on your income tax and may actually be only paying about 4.5% depending on your federal tax bracket and state tax rate. If you then invest the 100K and average 10% or more, you will definitely come out ahead even after paying taxes on the 10%. Of course there are many other variables. My brother in law who retired recently was advised to take out a 150K mortgage on his new house, rather than pay it off, and invest the 150K in the market. The 1% of assets he pays his advisor each year, probably had some bearing on the advice he got. The advice may work out depending on how his investments do, but don't agree with what he is paying his advisor.
>>Is it always wise for a retired person to pay off one's mortgage?<<If you've owned your house for several years you've already paid most of the interest that's deductible. So, you have NO write-off(or very little) left.In this case, you could pay off the house- and if you're post retirement income is still so large that taxes are eating you alive, you could buy a couple of duplexes. The rent would pay the mortgage, and you get the write-off. I hope this helps.Eddie
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