Should You Pay Off Your Mortgage?
Should You Pay Off Your Mortgage? As you approach retirement, you may be wondering if you should pay off your mortgage. There are pros and cons to both sides of the argument, according to Beau Kemp of Sensible Money.
Key Takeaways
- Run your retirement plan both ways—with the mortgage paid off and with ongoing payments—to compare the actual impact on your financial picture before deciding
- If most assets are in a traditional 401(k)/IRA, paying off a large mortgage in one lump sum could push you into a higher tax bracket; consider spreading the distribution over 5 years to stay in a lower bracket
- Compare your mortgage interest rate against your expected investment return over the remaining mortgage term; if you expect to earn more investing the money, keeping the mortgage typically makes more financial sense
- Factor in inflation and your home's appreciation through leverage—a fixed mortgage payment loses purchasing power over time, especially during high-inflation periods, making it less burdensome in future years
- Balance statistical analysis with personal values; if eliminating the mortgage payment provides significant peace of mind and won't jeopardize your retirement success, that psychological benefit may justify the decision even if the numbers suggest otherwise
Should You Pay Off Your Mortgage? As you approach retirement, you may be wondering if you should pay off your mortgage. There are pros and cons to both sides of the argument, according to Beau Kemp of Sensible Money. Check out more videos featuring Beau Kemp by visiting Beau's profile page: https://www.finstream.tv/featured/beau-kemp/
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