Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
carry my mortgage into retirement?
Old 09-05-2017, 03:42 AM   #1
Dryer sheet aficionado
 
Join Date: Sep 2017
Location: exeter
Posts: 36
carry my mortgage into retirement?

We just downsized last year from a big-a$$ house to something smaller, lower maintenance. Unfortunately, now have fresh 30y mortgage of $347K at 3.625%. Have about $110K in equity.

I am 61yo and would like to leave the rat race in < 3yrs if possible. I currently have $770K in liquid retirement assets (IRA,401K)

Also have 176K in older pension. Wife has $842K lump sum retirement assets. She is 57yo.

Cash flow estimates tell me we will be ok to carry the mortgage into retirement. However, 30yrs is a long time to have that hanging over our heads and it makes me uncomfortable.

Would it be a bad idea to dip into my retirement to pay off the mortgage?
Emotionally, I don't like having a lot of debt.
__________________

__________________
albireo13 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-05-2017, 04:33 AM   #2
Thinks s/he gets paid by the post
DrRoy's Avatar
 
Join Date: Dec 2015
Location: Michigan
Posts: 1,621
That's not a bad rate. It really comes down to what you are comfortable with. Also, is your return on the assets that you would have to sell higher than the 3.625%? If so, you might keep it. How about refinancing into a 15 yr or paying down the principle faster?
__________________

__________________
"The mountains are calling, and I must go." John Muir
DrRoy is offline   Reply With Quote
Old 09-05-2017, 04:44 AM   #3
Dryer sheet aficionado
 
Join Date: Sep 2017
Location: exeter
Posts: 36
Considering tax deduction, I'm actually paying ~2.6%.

Probably doesn't make sense to pay it off. Still .. the cash flow would look much nicer. : )
__________________
albireo13 is offline   Reply With Quote
Old 09-05-2017, 04:47 AM   #4
Dryer sheet aficionado
retired1's Avatar
 
Join Date: Jun 2011
Posts: 38
Carrying mortgage into retirement is certainly not the best feeling. Dipping into retirement funds to pay for mortgage is always a bad idea. We paid additional principal payments with every payment. Every time we had extra chunk of money, we'd throw to mortgage. It has saved us lots of $ in interest.
__________________
retired1 is offline   Reply With Quote
Old 09-05-2017, 04:51 AM   #5
Full time employment: Posting here.
 
Join Date: Mar 2015
Location: philly
Posts: 819
lol, I must be an anomaly, I have no problem whatsoever having a mortgage in retirement. Like you my interest is low (3.125%) and I calculated my firecalc score with the the monthly mortgage.

so I'm comfortable with having the mortgage payment, now I say that with a caveat. I have the funds liquid in an after tax account. so if all heck breaks loose I can pay it off. that's a huge comfort.
__________________
My darling girl, when are you going to realize that being "normal" is not necessarily a virtue? it sometimes rather denotes a lack of courage~Aunt Francis
bclover is offline   Reply With Quote
Old 09-05-2017, 04:53 AM   #6
Recycles dryer sheets
Red Badger's Avatar
 
Join Date: Jan 2017
Posts: 299
We retired with 9 years left on a 15 year mortgage(3 1/8 interest). We see no valid reason for early pay off. The mortgage is just one more item on our monthly expenses YMMV.
__________________
Never let yesterday use up too much of today.
W. Rogers
Red Badger is offline   Reply With Quote
Old 09-05-2017, 05:18 AM   #7
Recycles dryer sheets
 
Join Date: Jan 2017
Location: Des Moines
Posts: 237
You will find a lot of opinions on this topic here. We have not had a mortgage for over 7 years and I love not worrying about it. Very liberating for me, IMO.
__________________
Retired in 2013 and we are living the dream!
iloveyoga is offline   Reply With Quote
Old 09-05-2017, 05:44 AM   #8
Dryer sheet aficionado
 
Join Date: Sep 2017
Location: exeter
Posts: 36
well, our 7-10 year plan is to downsize further, hopefully to a smaller mortgage, to possibly a condo. In this case there's no rush to pay it off. I'd be only earning 2.6% on that money.

I'm just looking for every way possible to streamline my entry into retirement.
__________________
albireo13 is offline   Reply With Quote
Old 09-05-2017, 06:14 AM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,507
My mom got a new mortgage in her 70's, so age has little to do with a mortgage.

But finances has everything to do with a mortgage.

If one needs to withdraw more money every year to make payments, then those withdrawals -- unless from a Roth -- will probably increase your adjusted gross income which could in turn change your tax credits, health premium credits, headroom needed to make Roth conversions, whether your social security is taxed, whether you pay a tax rate of 0% on LTCG and qualified dividend income, and so on.

That is, the consequences could be huge, but you wouldn't necessarily know it without running "What if?" tax returns.

Of course, if you take a big chunk out of tax-deferred retirement assets you would get hit with a big tax bill, but if you have a taxable account and can get money out without too much in the way of taxes (return of capital is tax-free, capital gains can be offset by losses, capital gains are taxed at a lower rate), then it might be better to take a one-time hit and then enjoy tax-savings for many years to come.

In other words, you have to do some sample tax returns and cannot rely on advice that you get on the internet.
__________________
LOL! is offline   Reply With Quote
Old 09-05-2017, 06:26 AM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 15,674
Quote:
Originally Posted by albireo13 View Post
....Would it be a bad idea to dip into my retirement to pay off the mortgage? ...
Yes, it is a bad idea. Your retirement account withdrawals will be taxed and probably throw you into a higher tax bracket. If you have substantial qualified dividends or long-term capital gains from equities in taxable accounts it throws you from the 15% tax bracket to the 25% tax bracket that is especially bad as your marginal tax rate is 30% until ordinary income fills in the 15% bracket.

Also, it is more likely than not that your investment income on retirement assets will exceed your mortgage interest.

If yu do refi or change homes, look at a 15 year as rates are about 1/2% lower.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 09-05-2017, 06:51 AM   #11
Full time employment: Posting here.
Aerides's Avatar
 
Join Date: Nov 2015
Posts: 608
I would also recommend re-fi to a 30, and pay down more aggressively these next couple of years if you like, then decide at retirement which way to go.

Paying it off might not always make financial sense, but there is a luxury of knowing "it's paid for" that doesn't have a price tag.
__________________
Aerides is offline   Reply With Quote
Old 09-05-2017, 07:41 AM   #12
Thinks s/he gets paid by the post
 
Join Date: Dec 2014
Posts: 1,551
Quote:
Originally Posted by albireo13 View Post
Considering tax deduction, I'm actually paying ~2.6%.

Probably doesn't make sense to pay it off. Still .. the cash flow would look much nicer. : )
Why I ask is I itemized before ER because my state, local, and real estate taxes exceeded to the standard deduction. In ER this is not so. I assume the interest reduction assume all the interest is deductible. Will it be? Or will much of the interest go to offset the standard deduction?

you note you have a chunk in 401k/IRA and wife has a lump sum (I'm assuming this would be moved to IRA?? Do you have any after tax funds? If you are pulling $ out of retirement account that will be taxed. This may burn more retirement $ than needed.

If you plan on downsizing, it may be easier before you retire as loans may be easier to get while you have an income.
__________________
bingybear is online now   Reply With Quote
Old 09-05-2017, 02:38 PM   #13
Dryer sheet aficionado
 
Join Date: Sep 2017
Location: exeter
Posts: 36
yes, likely to downsize again to simplify before retiring.
Last year was a big upheaval with moving expenses and some repair bills, etc.
Now we are in a much better place, cashflow-wise so, the next few years will be focussed on saving and clearing off debt.
With excess cash, I am thinking maybe we create some liquid after-tax savings instead of paying down the mortgage.
__________________
albireo13 is offline   Reply With Quote
Old 09-05-2017, 03:41 PM   #14
Recycles dryer sheets
Red Badger's Avatar
 
Join Date: Jan 2017
Posts: 299
Quote:
Originally Posted by Aerides View Post
I would also recommend re-fi to a 30, and pay down more aggressively these next couple of years if you like, then decide at retirement which way to go.

Paying it off might not always make financial sense, but there is a luxury of knowing "it's paid for" that doesn't have a price tag.
+1 on last sentence. While we carry our mortgage in retirement, many others here have said they sleep better at night by paying it off, irrespective of the financial merits of doing so. I completely understand. For us, a big part of jumping into the abyss was our planning. Ike said it best, "plans are useless but planning is essential."

Good luck!
__________________
Never let yesterday use up too much of today.
W. Rogers
Red Badger is offline   Reply With Quote
Old 09-05-2017, 04:38 PM   #15
Thinks s/he gets paid by the post
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 4,765
It matters very little, subject to individual tax situations. People seem to worry about carrying a large monthly expense, but the alternative is a considerably smaller retirement nest egg. Works out to more or less of a wash. Having a paid off mortgage can make it easier to sleep, but so is having a larger investment account, with the ability to pay it off anytime you wish.

If you have to sell funds with large gains to pay it off, you will take a big tax hit now. But as was said above, if you have more expenses in retirement you may need to be selling each year, which can push gains into being taxable, limit favorable Roth conversions, or take you out of an ACA subsidy. So figure out what works best for you, and sleep well with either one less big expense, or a bigger pot of gold.
__________________
RunningBum is offline   Reply With Quote
Old 09-05-2017, 05:43 PM   #16
gone traveling
 
Join Date: Mar 2017
Location: New York City
Posts: 2,838
Quote:
Originally Posted by iloveyoga View Post
You will find a lot of opinions on this topic here. We have not had a mortgage for over 7 years and I love not worrying about it. Very liberating for me, IMO.
Me too, If the stock market tanks and im using those funds to pay off my mortgage it could get expensive.
__________________
Blue Collar Guy is offline   Reply With Quote
Old 09-05-2017, 05:57 PM   #17
Recycles dryer sheets
 
Join Date: Apr 2013
Location: Fishers
Posts: 363
We carried a mortgage into retirement but our rate is only 2.75% and we are paying an extra $650 per mo. so it will be gone in the next 5 years. If the market tanks we can stop paying the extra principal if need be. Have fund sources outside of market investments that will cover basic expenses in a worst case scenario so those funds wouldn't need to be accessed anyway.
__________________
wmc1000 is offline   Reply With Quote
Old 09-05-2017, 07:10 PM   #18
Full time employment: Posting here.
 
Join Date: Dec 2010
Location: Midwest
Posts: 815
Another situation where the true answer is not a payment, or no payment. Paying off the mortgage does not remove your entire monthly payment, just the "financial" side of the payment. Taxes and insurance are still payable, yet rarely figured into the "pay off your mortgage before retirement" argument.

In our case, with a 3.5% mortgage, the principal and interest is about $375, but our total payment is about $600 each month (including property taxes and insurance). Paying off the P&I would only save us $375 monthly, NOT $600. Because taxes are paid semi-annually and insurance annually, there is a tendency to think $600 a month will be freed up if we went mortgage free.

Personally, I would rather have the $$ in the bank and pay the 3.5%.
__________________
brucethebroker is offline   Reply With Quote
Old 09-06-2017, 05:18 AM   #19
Thinks s/he gets paid by the post
 
Join Date: Dec 2014
Location: Florence, AL/Helen, GA
Posts: 1,988
I just like to keep my business in retirement simple. And not having any liabilities gives me a certain peace of mind.

If we still had a mortgage, chances are we would have to Mickey money around to make payments and that would require Rollover IRA withdrawals not being made until RMDs at age 70 1/2.
__________________
Bamaman is offline   Reply With Quote
Old 09-06-2017, 05:27 AM   #20
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 15,674
Quote:
Originally Posted by Bamaman View Post
....If we still had a mortgage, chances are we would have to Mickey money around to make payments and that would require Rollover IRA withdrawals not being made until RMDs at age 70 1/2.
Not at all in our case. When we refinanced our 15 year mortgage I set up 1 80 automatic payments and haven't had to touch them.

Plus, the mortgage interest deduction increases the amount that I can convert into Roths each year and stay in the 15% tax bracket because our our property and state income taxes ~ the standard deduction so our itemized deductions exceed the standard deduction by the amount of our mortgage interest and charitable contributions.

But all of this is academic because the OP does only has tax-deferred funds and was asking if he should do big withdrawals and pay the taxes to generate funds to pay off his $347k mortgage.... are people advocating paying off the mortgage in this thread really advocating that he withdraw $347k of tax-deferred money and pay the tax (let's say $70k... so total withdrawals of $417k) just in order to be debt-free?
__________________

__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Downsizing: carry a new mortgage or buy outright? BBQ-Nut FIRE and Money 10 12-05-2014 05:23 AM
When is a carry-on not a carry-on? Rich_by_the_Bay Travel Information 56 12-18-2009 07:19 PM
How much life insurance do you carry? laurence Young Dreamers 66 07-27-2006 01:47 PM
Capital Loss Carry-over Question kjpliny Other topics 3 01-28-2006 11:56 AM
Pay off or carry mortgage? runnerr FIRE and Money 15 01-14-2006 08:52 AM

 

 
All times are GMT -6. The time now is 06:00 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.