The theme this week on the Retirement Quick Tips Podcast is: Save More or Pay Off Debt Before Retirement?

Today, I’m talking about my top 3 reasons why you’ll be glad you paid off your mortgage before retirement. If it’s just not possible to pay off your mortgage before retirement, paying it off as soon as possible - even if that means you won’t pay it off until year 5 or year 8 or even year 10 of retirement is still worth the effort…because the month that you can end that big mortgage expense is the month where your money is freed up for more discretionary and fun things. 

Which brings me to my 1st reason why you’ll be glad you paid off your mortgage ASAP, which is the freedom and flexibility it gives you with your spending. The median mortgage payment for Americans in 2019 was $1,609/mo. That’s over $19,000/ year thats going to your mortgage payment. 

For most Americans, their income is lower in retirement compared to their working years, so if you still have that mortgage payment every month, it’s eating into your fun money.

The 2nd reason why you want to pay off your mortgage as soon as possible either before or in retirement is because it’s likely your biggest monthly expense. Many Americans don’t live satisfying retirements, often due to health reasons or they simply can’t afford to do much else other than sit in front of the TV all day. 

But when you free up what’s likely your biggest monthly expense, you have more money to do meaningful things like travel, or pursue a hobby, or just buy plane tickets to visit your grandkids a few times a year without the guilt. 

The mortgage payment is fixed. Unless you sell your house, move and downsize, you’re not going to be able to stop making those payments, so if you can get rid of that big expense it’s going to give you so much more flexibility and breathing room with your finances. 

The 3rd reason why it’s a good idea to pay off your mortgage is peace of mind. When you get rid of your mortgage payment, most of your other necessities are far less expensive, so you have more flexibility with your spending. Let’s say your income in retirement is $5,000/mo from various sources. If $1,500 of that is going toward your mortgage and you wipe that out, now a lot more of your income is going toward discretionary spending, vs. spending on needs. 

That means if you want to take a big trip, or there's a recession and you need to reduce your portfolio withdrawals, you won’t feel the pain because you have the breathing room to cut your income and spending, since most of it is now discretionary, with maybe only ⅓ or ½ going toward necessities like groceries, bills, gas, taxes, etc. 

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast.  

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance