As a natural transition in life is to retire one may ask the question: Should I have a mortgage during retirement?
Is it better to own your home free and clear? Or are you better off using your nest egg for another purpose, such as having that financial cushion for the unforseen.
The answer to that question can be one of the more important financial decisions when headed into retirement whether to pay off a home mortgage or not.
Having a mortgage in retirement can be tough because retirees will need to spend some of their savings on mortgage payments. If you still have a few years left before retirement, Here are some ways to become mortgage-free:
–Figure out your retirement date and time your mortgage payoff to the same year. This is a good option if you have no consumer debt and are already maxing out your 401(k). Otherwise, work on those items first.
–Plan to downsize or move to a lower cost location after retirement. Selling your house after you retire can be a good option to get rid of the mortgage. If you are lucky, you might have enough equity to purchase another home in a more affordable location.
–Refinance right before retirement. If the home doesn’t have a lot of equity, then refinancing to a better rate might help. You will have to keep the mortgage, but the monthly payment will be lower.
Retirement Renting vs Home Ownership
Where to live is one of the bigger decision that retirees face. Decisions between keeping the family home, downsizing to a smaller home, or rent a home to eliminate the stress of upkeep and expense of monthly expenses of home ownership.
Things to think about:
- What is your budget for renting or ownership?
- Do you view a home as an investment or just another cost of living expense?
- Have you though about the risks that come with ownership such as unexpected costs and can your budget tolerate those expenses?
The Bottom Line
To summarize, deciding whether to own a home in retirement is a decision that can be made by examining several key points:
- Decide whether you are looking to make an investment or just budget a cost of living.
- Figure out what you want to spend after taxes, and do the math to determine your budget for renting and ownership.
- Seriously consider how much risk you’re willing to undertake. Do you want worry about market prices? Can you afford the financial risks of maintaining the property?
- Keep in mind that there is a direct relationship between the size of your liquid assets and your ability to tolerate the financial risks associated with ownership.
Unfortunately, these sorts of decisions have little to do with hard facts and more to do with soul searching. Retirement is supposed to be carefree and enjoyable; examine your situation and only undertake the costs and risks that will allow you to sleep well at night.
Be sure to call Doug in the morning and set up your free consultation to review your plan or make one!
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Should You Have A Mortgage During Retirement Segment 1
Retirement: Rent vs Own
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