In the Kiplinger article “The Case for Carrying a Mortgage Into Retirement,” journalist Maurie Backman explores why entering retirement with a mortgage may make financial sense, particularly for homeowners with a low, fixed interest rate. The article examines the potential benefits of preserving liquidity, keeping funds invested, managing taxes, and maintaining greater financial flexibility.
Our Chief Investment Officer and CEO, Steven Rogé, explains that paying off a mortgage before retirement is not always the clear-cut choice it may appear to be.
For retirees with a manageable mortgage payment and a rate around 3% or lower, keeping the loan may preserve cash for unexpected expenses and other retirement priorities. Once those funds are used to pay off a mortgage, accessing the home’s equity again may be difficult or expensive, especially when retirement income makes qualifying for a new loan more challenging.
Steven also highlights the potential tax consequences of paying off a mortgage with money from an investment portfolio or retirement account. Selling appreciated investments could generate capital gains, while a large IRA withdrawal could increase taxable income and potentially trigger higher Medicare premiums. For some retirees, available cash may be more effectively used to pay taxes on strategic Roth conversions or support other long-term planning opportunities.
Although investments are not guaranteed to outperform a mortgage rate, a low-rate mortgage may allow retirees to keep more of their money working toward other goals. Ultimately, the right decision depends on each retiree’s cash flow, tax situation, financial plan, and personal comfort with carrying debt.
Click here to view the full article.
For tailored, fee-only guidance on managing your wealth or questions about investment strategies, please contact our team of CERTIFIED FINANCIAL PLANNERTM (CFP®) professionals for a complimentary discovery call at 631.218.0077, or click here. We would be happy to show you how our financial planning process can help you stay on track and achieve your financial goals. You can also send us a message directly.
R.W. Rogé & Company, Inc. is an independent, fee-only financial planning and investment management firm serving clients locally and virtually across the country, with Long Island, New York, and Beverly, Massachusetts office locations. R.W. Rogé & Company, Inc. was founded on a “client first” culture and proudly commits to acting in your best interest as a fiduciary. We have helped clients Plan, Achieve, and Live® the life they want since 1986. To learn more about how we do this, as well as our process, explore our detailed overview of services and approach.
