This week, I’m talking about being debt free in retirement - why this is so important and how to take steps now to become debt free by retirement. 

Today, I’m answering a question that I get asked all the time: 

“Ashley, what about my house? Should I pay off my mortgage, so I don’t have a mortgage in retirement?”

Good question! And not an easy question to answer because like most retirement planning related questions, the answer varies depending on your situation. 

Mortgages tend to be big debts. You might still owe $100,000 or more on your house by the time you enter retirement, so it’s no small feat to pay off your house. 

Now, many people say that the mortgage interest tax deduction helps them with their taxes. That may be true, but you are still handing over your hard-earned money - principal and interest over to the bank every year and the tax deduction is just a portion of that, so it just isn’t that compelling when you compare it the flexibility in your finances with not having a monthly mortgage payment at all. 

So yes, I think it’s wise to pay off your mortgage before retirement if you can make that happen. Especially if you’re like most American households where your mortgage is your largest monthly expense and it makes up about a third of your monthly expenses. So if you can free that up in retirement by paying off your mortgage, imagine what kind of breathing room it will give you with your finances?!

Yesterday I talked about using a debt amortization calculator as you make progress on eradicating your debt. I’m revisiting that today, because it will be a crucial tool for paying off your house and seeing if it can be done before retirement. 

Here’s how the amortization calculator works with your mortgage: Let’s say you have 15 years left on your mortgage and you’re 9 years from retirement. How much would you need to add to your monthly payment to pay off your mortgage the same month that you plan to retire?

When you use an amortization calculator which you can easily find online for free, you can enter extra payment amounts to figure out how much you would need to add to your mortgage every month to pay it off early by a certain date. 

When you actually run the numbers with an amortization, you might be surprised to learn that knocking those 6 years off your mortgage is totally doable, and not as burdensome as you might have expected.

I’ll link to a favorite amortization calculator of mine in the show notes, so you can run the numbers for yourself. You can find the link and all the show notes for this episode - episode 712 - in Apple Podcasts or Google Play by searching for the “One Minute Retirement Tip with Ashley.” 

Mortgage Amotization Calculator >>> https://www.bankrate.com/calculators/home-equity/additional-mortgage-payment-calculator.aspx

That’s it for today, but before you go...If you haven’t already left a review for the One Minute Retirement Tip, please consider leaving an honest review in Amazon or Apple Podcasts. I read them all, so feel free to leave any feedback or topic suggestions there too. 

Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip.

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