Financial Planning for Generation X & Y Women
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Expert Q&A Archive

Mortgage in retirment vs. Tax benefit for mortgage payments
Is it better to have a mortgage in retirement or to take the tax benefit that you would have from making a mortgage payment?
Gary Silverman, CFP®:
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My preference for most people is to have the mortgage paid off at or early into retirement. Yes, there can be tax advantages in paying a mortgage, but there is also interest to be paid. And the allure of making 10-15% returns on the money that you'd otherwise be using to pay down a 5-6% [interest rate] loan is appealing. But most folks' risk aversion rises in retirement, and, with a lesser income need from your investments, you could actually ramp up the risk/return of the portion that is left.

That said, everybody's situation is different and should be examined by someone who can know all of the facts and emotions surrounding the issue. Watch out though. There are some financial advisors that would urge you to not pay off the house, not because it is good or bad advice, but because that leaves them with more commissions or fees for themselves.
Kim Nourie, CFP, CPA:
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In order to determine if you have a tax benefit from your mortgage payment, you need to understand your standard deduction and your potential itemized deductions. It gets more complicated if you might be in an AMT (Alternative Minimum Tax) or Itemized Deduction phase-out situation, but let's assume that does not apply here. In 2009, if you are married and filing jointly, your Standard Deduction is $11,400. If your itemized deductions do not total more than $11,400, there is no tax benefit to having a mortgage. For single individuals, your 2009 Standard Deduction is $5,700.

As far as having a mortgage in retirement, many people say you are better off not having a mortgage in retirement, as typically your income needs are drastically lowered by having no mortgage payment; however, you should consider having enough liquidity (readily available funds) to cover any lump sum cash needs you might have in retirement, such as a major house repair.

Good luck with your decision making!
Bettye J. Banks:
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It's all about the $$$$! How much do you save by paying a mortgage instead of the taxes? Do the math! This is a matter of choices, but personally I can't think of a better financial position than having a paid -for house, a paid-for car, and money in the bank. Estimate your tax obligation and set aside 1/12 of that amount each month so you will have the funds available when tax time rolls around. Having that mortgage obligation over your head is just as scary as having the tax obligation, your choice.

I strongly suggest that you contact a HUD-approved housing counseling agency and sit through a counseling session with a certified HECM counselor. State your questions and take heed of their advice. You can get the name of an approved agency through the HUD website online at or by contacting the National Foundation for Credit Counseling at You call also call NFCC toll-free at 800-388-2227 for the office closest to you.
Rosemary Ervin, CPA:
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The tax benefit from making mortgage payments is a valid argument for keeping a mortgage in retirement. One of the cornerstone principles of retirement planning is to be debt-free before retirement. An income and cash flow analysis done by a financial planner will provide better insight, as this is, again, a very personal decision. What are monthly income and expenses, what State are you living in and what is the alternate source (and/or use) of the funds? Essentially, where are you getting the money from to pay the mortgage off before retirement? Recall, as the mortgage ages, the principal payment portion increases and the interest diminishes. It is only the mortgage interest that is deductible, not the entire mortgage payment. Hope this helps
Pablo M. Bianchi, CFP:
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Again same idea as above. It will all depend on what the retirement analysis will tell us, as well as what is the inflow and outflow of cash. It is almost like asking an Orthopedic Doctor, without an X ray or an MRI, “Should I have my knee scoped or should I have surgery? “

What do you think the doctor would say?
Delores Lenzy - Jones, CPA, CIA:
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Recommend paying off your mortgage prior to retirement. You will still have property and school taxes to pay, which you can take a deduction for.