• Question
  • Mortgage payoff or invest?

    Asked by a 56 year old man from Saint Peters, MO on 12/31/2019

    I am paying $800 extra/month on a 4% mortgage to have it done in 10 vs 30 years (recent refi to pay college loans). My retirement plans say I will make over my current income. Should I be concerned about having a mortgage in retirement? Would I be better off investing the money in Roth IRA? I have about seven years to retirement at 65.

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Answers

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  • Great question, it is wonderful that you are thinking about the cost-benefit analysis of your mortgage. To answer this question specifically, you will need to work with an advisor who can help you view this question in context of your overall financial life.

    Having a mortgage in retirement can be a good or bad thing depending on your spending habits, cash flow, peach of mind, taxes, savings, income, location of savings, etc. You should be thinking about all of these implications as you make a decision. In some cases, paying a mortgage in retirement can be a good thing because there are tax affordances. In other cases, it makes sense to relieve the obligation and cost of living liabilities.

    Saving into a Roth IRA may afford you more flexibility as you will have access to the cash with no penalty within a few years (and access to some cash now if you have held the account for more than 5 years). If you don't have a healthy emergency fund and brokerage account this could be a preferred option as once you pay down the mortgage you do not have access to the money spent.

    The above are general considerations, to make the best decision for your needs you should work with a financial planner and run the numbers.

  • Login to rate this answer:   Answered on 1/20/2020
**All above answers are provided as general information only. No warranty is made regarding the fitness or accuracy of the information provided in this answer. You should seek advice from a licensed CPA, attorney or CERTIFIED FINANCIAL PLANNER™ as to your unique financial situation.