It is generally accepted to be “financially” better to carry the mortgage on than to pay it off whenever investment returns outpace the mortgage rates. All retirement calculators say we are good to carry our mortgage for an infinite number of years. As a result of the above, a mortgage payment was always in our plan.
I have recently re-assessed this from many different angles and have decided to change my long held plan. By paying off the mortgage now, it reduces our annual income needs. I am thinking that is a better plan in the event of a major market correction. It also allows us to be more aggressive in our AA, not that higher returns are needed. The potentially higher returns of a higher stock allocation over the long term, could help to cover LTC without having to tap into the home, or provide an added inheritance for our heirs. We could be comfortable at or above our current lifestyle on either SS alone, or our remaining assets even considering a 30%-40% downturn in the market.
The dollars needed to pay off the mortgage will come from our Roth’s so there will be no taxable event. We are both >65 and have had the Roths for over 10 years. No tax related issues there. We are looking at Roth conversions over the next 4+years to reduce the RMD’s and to replenish our Roths’ available cash for some untaxed, unexpected expenses. Once RMD’s hit, we will have the RMDs’ taxes to pay whether we use that money or reinvest.
I know that this is a personal decision on so many levels. It seems that I am gravitating toward simplifying the monthly recurring bills as time moves on rather than trying to squeeze out the last penny from every aspect of our life. I wonder how many others have changed their retirement financial plans, mortgage or other, as they actually entered RE?
