Should you Pay off your Mortgage before you Retire

Should you pay off your mortgage before you retire?

Well, that sort of depends on the size of the mortgage and the retirement income.
My husband and I, for example, have a shabby house that we have been paying for through refinanced mortgages for 30 years. We could have, and should have, paid off the mortgage years ago.

But, as a working couple, our income has been all over the board. There have been times when we both were working good paying jobs with great benefits and lots of over time. And, as dumb luck would have it, there were (and still are) periods, when our monthly income fails to meet our monthly needs. When these income shortages occur, we refinance the mortgage.

However, as we go through this cycle of wealth and poverty, we make sure that the resulting mortgage payment never exceeds typical rental costs for simmilar housing.

Now we are approaching retirement. As things stand, we have a mortgage. The monthly cost of that mortgage is actually a few dollars less than we would pay per month to rent a two bedroom apartment in our area. And, ironically, in our case, our reitrement income will be slightly higher than our current monthly income. So, in our case, it really doesn’t matter if we pay off the mortgage before retirement or continue it into retirement. Housing costs will continue, with or without the mortgage factor.

But, if we are somehow able to pay off the mortgage before retirement, we will be somewhat better off. We will have a fixed, but guaranteed income (a perk we have not enjoyed as members of the working class). Unfortunately, if we have excessive medical costs that are not covered by Medicare or other insurance, we would be forced to sell the home, perhaps at a low market value, and use the proceeds to appease the health care providers.

In some situations, people are actually better off not having any assets during times of economic crisis. Most government programs involve an asset test, and those programs will not provide support to a household that has an asset.

But, there are some assistance programs that are strictly income based, and have no asset test. Energy assistance, for example, does not look at household assets. That program is strictly income based. So, during our retirement even if our mortgage is paid and we don’t have that housing expense, we could qualify for government sponsored help with heat and electric costs. But, we may not be eligible for medical assistance.

It’s a gamble either way.