#RetirementPlanning #MortgageFreedom #FinancialSecurity
🏡 The fear of still having a mortgage at 60 is a common concern among individuals who feel they are lagging behind in terms of personal finance. But is this fear based on ego or is there a legitimate financial concern? Let’s dig deeper into why this sentiment exists and whether it’s truly a cause for worry.
Financial Concern or Ego Trip?
It’s natural to want to enter retirement with a sense of financial security and stability. But the fear of still having a mortgage at 60 may be more about ego and societal expectations than actual financial risk. It’s important to evaluate whether this fear is rooted in practical concerns or simply a comparison to what others have achieved by a certain age.
Why Does It Matter?
Many people believe that having 100% equity in their home by retirement is crucial to their financial wellbeing. But why is this such a concern? Let’s break it down:
Financial Stability: Owning a home outright can provide a sense of financial security and stability in retirement.
Interest Costs: Paying off your mortgage before retirement can save you from paying high interest costs over time.
Cash Flow: Having a mortgage-free home means lower monthly expenses and greater cash flow in retirement.
Net Worth vs. Mortgage Debt
Instead of fixating on paying off your mortgage by a certain age, it’s more important to focus on your overall net worth and financial preparedness for retirement.
Retirement Savings: The amount you have saved in retirement accounts, such as 401(k) or IRA, should take precedence over mortgage payoff.
Equity and Debt: Consider the equity in your home, along with any non-mortgage debt, when evaluating your net worth at retirement.
Financial Flexibility: Having a substantial retirement fund and manageable debt may outweigh the urgency of paying off your mortgage.
Making Informed Decisions
If you have a significant amount saved for retirement, the remaining mortgage balance may not be as pressing of a concern. For example:
High Retirement Savings: If you have a substantial amount saved for retirement, having a mortgage may not significantly impact your financial security.
Selling Options: If you are worried about affording a mortgage in retirement, selling the house and paying off the mortgage with the proceeds is an option to consider.
Cash Flow Considerations: Assess your ability to cover mortgage payments in retirement and consider alternative housing options if needed.
Reassessing Your Financial Priorities
Ultimately, the focus should shift from the sole goal of paying off your mortgage before retirement to ensuring a comprehensive financial plan for your golden years.
Financial Security: Evaluate your retirement savings, investments, and overall financial stability as the primary concern.
Housing Choices: Consider whether owning a home outright aligns with your lifestyle and financial goals in retirement.
Seeking Professional Advice: Consult a financial advisor to assess your overall financial picture and make informed decisions about mortgage payoff and retirement preparedness.
In conclusion, the fear of still having a mortgage at 60 may stem from societal pressures or a genuine concern for financial security. Instead of fixating on mortgage payoff, it’s crucial to evaluate your overall net worth, retirement savings, and cash flow in retirement. By focusing on a comprehensive financial plan, you can make informed decisions about housing and retirement without succumbing to unnecessary fear and pressure.
It’s about cash flow and minimizing monthly expenses as compared to your new lesser retirement income. While I agree with you to a point, withdrawing money from your 401K (which you can do at 59.5) to pay off your house still results in a paid off house. There are other ways to pay off a house besides 1 mortgage payment at a time over 30 years.
But yes, it’s ultimately about net worth.
Personally speaking my motivation from paying mortgage off early is so that I can taper off the amount I’m working. Was working 6 days a week at 20. Then 5 at 25 and now 4 at 37.
There’s also just a general feeling of comfort knowing no matter what happens you own your home outright.
Risk averse. I could ask why people invest in a 60% stocks and 40% bonds portfolio vs 100% stocks and get the same answers and have the same discussion.
There are two sides to the calculation: How much you have as income and monthly spend. Since mortgage costs are one of the highest monthly recurring costs, paying it off helps reduce the monthly spend which reduces the amount of monthly income needed to retire. However I will say that I think people overestimate the safety of having a paid off house. They seem to think that if the house is paid off no one can take it from them ever. But just try not paying your taxes and see what happens. Housing costs don’t go to zero with a paid off mortgage.
I don’t really hear people say it’s “crucial”, but it is more of a personal preference side of finance than the purely math side. I paid my home off simply because I absolutely hate debt and having no debt makes my life nearly stress-free on the financial side of things. But if it makes more sense to a 60 year old person to invest that monthly payment rather than pay-off their home, there is nothing wrong with that, as long as they are happy with that arrangement and they’ve baked that cost into their retirement plans.
Also for some other people, having a large asset, like a home, that is paid off, means they can tap some of that equity later, if they need to. This isn’t a reason for me personally, but it could be for some others that are at or nearing retirement age.
I see people all the time on these forums that say they will never own a home, they will literally rent forever, and that’s a valid lifestyle if they are happy with it. It’s all good in the end if you are ok with the risks and benefits of the arrangement and have included it in your financial plans.
I *was* planning on paying off my mortgage before retiring, but I refi’d to 2.5% in 2020. I’ve opted instead to keep pumping up my Roth IRA where I can earn over 5% tax free in U.S. T-Bills. If interest rates ever go down and stay down, I may apply some of those funds to my mortgage balance. But I’m suspecting that overall interest rates will be higher than 2.5% for the foreseeable future, and that I will come out ahead by investing.
Retired at 62 and still carrying a mortgage 2 years into retirement. Have the luxury of a cash flow to to pay the mortgage, so nothing for us to stress over. House is paid off in 2026. We can live with that.
For ACA, it’s better to reduce your income (in most cases, but not too low).
So if you have to take out money to pay the mortgage, you could end up paying more in health insurance premiums.
That said, I will be setting aside the cost of the mortgage in a “cash” account so I don’t have to include the mortgage payment in my retirement income needs but it won’t raise my income for ACA either. Assuming I retire before 59. Otherwise it’ll be paid off.
Because your income is fixed but expenses increase and housing is the biggest chunk of change.
My mom and stepdad are about to turn 60 and have 5-10 years left on their mortgage. They bought a house when it made sense for them to and are perfectly content with how their lives have turned out.
If my wife and I stay in our current home for the duration of the mortgage, we’ll finish paying it off around age 60.
I don’t relate to this sentiment at all.
To me, pulling $24,000 out of my 401K yearly (12 monthly payments of $2000 each) and then paying income tax on that AND also paying interest on the loan doesn’t make sense. Those are guaranteed expenses but my investments are not guaranteed.
I’m 62, house paid off two years ago because we took a 15 year mortgage. Not planning to retire anytime soon (maybe 75), but as soon as the house was paid off, I felt semi-retired.
Let me tell you about my gardening budget now. It’s glorious.
Money is emotional. It was very important to me to have a paid off house before I could relax into relaxing. (Meanwhile I’d rather never draw down my retirement savings because, well, money is emotional. I feel safe knowing it is there.)
Because most retirees are on fixed incomes and can’t easily make more money. Cash flow becomes more pressing.
I retired well this year at 55yo. I have a mortgage with a 3.2% interest rate…I (also bought a pair of cars at 1.9%). I have access to $millions in cash, but why would I pay those off? Even my play & emergency money is earning more than that.
I’ll be 60 with a mortgage (if I’m lucky and can hold on to my house that long) by I’m not concerned at all, we’re lucky enough to have a lot of equity in it. SO when my youngest child goes out on his own, we sell the current house and downsize. Even if we still owe, with the equity we’d be able to buy a smaller, more modest house outright.
For me, it’s not. I love spending other people’s money if the rate is right, of course
It’s definitely a psychological thing for most people.
Indeed, most mortgages that are a couple decades old are small enough to be covered even by social security alone.
But it’s certainly a nice sentiment to be set up with the security that even if the market goes to crap and you cannot get meaningful employment, you still have your house.
You gota understand where that conventional wisdom comes from. Most peoples largest asset by far is their home. Since it’s the largest portion of most peoples net-worth, that means not having a paid off house means having a very large amount of debt servicing going on in relation to their net-worth.
For sure, if you have $10 million in the bank and a $500k mortgage at age 60, 70, or 80, who cares. That’s not the reality for most people.
I think it means different things to different people.
My son-in-law believes it is the cheapest money you can get and won’t pay extra on their house.
I wanted mine paid off and it would have been paid off a few months ago, but I moved back to California because both my children live here and have children. Now my kids will end up paying off my mortgage when they inherit.
I have been very frugal for about 30 years. I don’t like debt and do not charge except to keep the few cards I have current.
Mine is an emotional reason because when my ex and I divorced he had hidden debt of 250K. I ended up filing bankruptcy right along side of him because my nursing job couldn’t have paid off his debt and support the children.
When you are retired, and your portfolio hits a pothole, you may need to cut expenses. You can stop eating out, skip travel and not upgrade your car. But mortgage payments will still be made in full
I hope to be lucky enough to be paying my mortgage when I’m 70. I locked at 1.75% and am drawing that out as lonnnnng as possible.
Quick isn’t always better. If you’re paying 7% interest, yeah, pay it down.
With my house being paid off, I never feel leashed to my career. I could resign my position at any time and take a part time minimum wage job and still cover my basic expenses.
The stock market has risks. All it would take is another pandemic, derivative related correction, or a skirmish between Russia, China or North Korea and NATO to cause a massive market sell off.
I prefer to have a mix of money market funds, zero debt and a reasonable mix of retirement and non-retirement investments.
With my house and other liabilities paid off, investing, discretionary spending and charitable giving doesn’t require any thought. I do far more of all three.
Having your mortgage paid off isn’t a big deal. It’s the taxes that kill you.
I have had my (30yr fixed) mortgage for less than 10 years and the property tax is almost as much as my principle, interest and insurance combined.
The older you get, the more unknown variables and common health expenses. For us, it’s not at all about ego as much as it is lessening the load early on to make room for the unknown later.