Should You Pay Off Your Mortgage Before Retirement?

Deciding whether to pay off your mortgage before retirement is a common dilemma. While eliminating mortgage debt can reduce financial stress, it may not always be the best move for long-term financial security.

When Paying Off Your Mortgage Makes Sense

Lowering Expenses: Mortgage payments are often a retiree’s biggest expense. Eliminating them frees up cash flow for travel, healthcare, and other needs. The median monthly mortgage payment for older adults was $1,470 in 2022, making this a significant financial relief.

High-Interest Rates: If your mortgage has a high or adjustable interest rate, paying it off could save money in the long run. Conversely, if your interest rate is low (under 3.5%), it may be beneficial to keep the loan and invest savings elsewhere.

Higher Returns from Low-Risk Investments: If you can earn a higher return investing than your mortgage interest rate, keeping the loan might be the smarter choice. For instance, if your mortgage rate is 3% but you can invest in Treasury notes yielding 4%, investing may be preferable.

When You Should Keep Your Mortgage

Low Cash Reserves: Draining savings to pay off a mortgage could leave you “house rich, cash poor.” Experts recommend retirees maintain 12–24 months of liquid savings to cover unexpected expenses.

Potential Tax Benefits: Mortgage interest deductions can reduce taxable income, making it beneficial to carry the loan in certain situations. However, deductions are limited based on when the loan was acquired and its balance.

Ultimately, the decision should align with your financial situation and comfort level. If paying off your mortgage provides peace of mind without compromising liquidity, it may be worthwhile. Otherwise, maintaining the loan and investing elsewhere could be the better option.

Source: https://www.floridarealtors.org/news-media/news-articles/2025/02/pay-mortgage-retirement