Should You Pay Off Your Mortgage Before You Retire?

Hey, everyone. Bill Lethemon here for Should you pay off your mortgage
before you retire? And this is a question we actually
get quite often in our practice And I think it’s a good one. I think it’s really something more
people should be thinking about, Because as we’ve talked about
in some of the other video blogs Is your mortgage is most likely
one of your largest expenses, At least it is for many people, As they’re in the accumulation phase
of their retirement planning. So, what do you do with
your mortgage pay outs? Well, there’s a couple of things. First of all, I think it’s important
to look at how your Mortgage payment may be affecting
your overall cash flow. And I think that’s really, probably
the most important thing. So, for example, let’s say you have
a $2,000 a month mortgage payment. So, obviously, doing some
simple math on that, You’re paying $24,000 a year to make
those mortgage payments. So, we could do, again, some
pretty simple math here, Using the 4% rule that we’ve talked
about in some of the other videos. And if we divide 0.4% into 24,000, It actually tells us that you need
to have about $600,000 In assets to be able to generate
$24,000 a year of income And have a pretty good
chance of that is going to Last you for the rest
of your lifetime. So, that’s pretty significant. So, I think for most of us, We should probably be looking
at some ways that We can improve our
cash flow and housing, Again, is probably one of the best
ways of doing it. Because, again, it’s probably
one of our largest expenses. So, a couple of things,
so if you’re still working, One of the things that
I highly recommend, Is aggressively paying off that
mortgage as best as you can, Between now and
the time that you retire. Because that’s just gonna have a big impact,
potentially for you, in retirement. A couple of other things, If you do end up having
a mortgage in retirement, I would really take a look
at a couple of things. Number one, is if you have a relatively
small mortgage balance, Maybe consider taking some assets
and paying off that mortgage balance, Especially if that’s something that’s going
to improve your overall cash flow. For example, in that example
that we just used, If you have a $2,000 a month
mortgage payment, And maybe you only owe
$75,000 or $100,000 Maybe it makes sense to take that
$75,000 or $100,000 out of your portfolio, Pay that mortgage off. And it’s gonna have, like I said,
a $24,000 improvement on your cash flow. The other thing, is if you
maybe have a little bit Longer time to pay yet
on the mortgage, You could consider maybe
re-financing that. Maybe instead of being on a 10
or 15 year mortgage payment, Maybe stretch that out to maybe
even a 30 year mortgage. That would drop your payments and take
some pressure off of some of that cash flow, Reduce the amount
of money that you have To take out from some
of the investment accounts. So, those are a couple of strategies
that you can use. But again, you want to look at number
one how that is affecting your cash flow. The final strategy that I want to talk
about here, is the down size strategy, And I think this is a big one. I think a lot of people probably
have it in the back of their mind, That maybe downsizing their house
is something that might make sense. It could potentially help them get to where
they want to be for retirement. So, let’s take that same example, Let’s say you have a house
that’s a $600,000 house. Maybe you still owe a couple
of hundred thousand dollars on it, So you have $400,000
in equity in that house. Maybe instead of keeping that
mortgage and that big house, Maybe you down size
your house a little bit. Sell the $600,000 house,
buy a $400,000 house, Basically wipe out that debt entirely. And that could have, again, a huge
impact on your overall cash flow. So, anyway, think about how the mortgage
is affecting your cash flow and again, If you haven’t already, check out
our blog on We’ve got some great resources
there that you can access. We also have our three-part
mini-workshop live right now as well, I’ll put a link here in the post
to check that out. There’s some great worksheets that
you can really do some planning to, Kind of map out some of this cash flow. And see where you’re at towards
some of your retirement goals. So, with that, have a great evening. And I’ll see everyone back
here on tomorrow’s video blog. Thanks.

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