Hi, I am 64 years old and ready to retire in a year. I owe about $165,000 on my house, with no other debt. I have about $850,000 in retirement savings, $2,200 a month from a pension, about $2,300 a month in Social Security benefits, and $300 a month from my ex-wife’s pension. I also drive Uber for about $1,500 per month. Does it make sense to pay off my house when I retire? See: I’m 67 years old with $57,000 owed on my mortgage and retired with $600,000 in retirement savings — should I pay off my house now? Dear reader, you ask one of the most common questions we get at MarketWatch about retirement savings and spending — if it makes sense to pay off the mortgage before retirement. The answer is, as you might suspect: it depends. This situation is highly individual to the individual. Some people have no problem entering retirement with a mortgage, while others are weighed down by the thought of this debt when they leave the workforce. What you need to do before you answer this question is write down every single expense you expect to incur in retirement, and add a little extra cushion for those you don’t expect. (You should aim to have an emergency savings fund that’s easily accessible should an emergency arise… maybe six months worth of expenses, though some retirees prefer to be more cautious and have a full year’s worth in their bank accounts.) When listing your expenses Do include everything—big bills, like your mortgage, taxes, utilities, groceries, gas for the car, medical needs, as well as smaller, more flexible expenses, like vacations, gifts for loved ones, hobbies, entertainment, television, and magazines. Subscriptions, pet care, and more. Look at how your expenses compare to your income, but don’t include your Uber earnings (or any other earnings you have). How do you feel about it? Is it too tight? More than needed? It can help you decide if you want to include that mortgage payment on the list. See also: I have a $250,000 mortgage, 24 years left on the loan. Should I sell stocks to pay off the mortgage before I retire in a few years? Also decide if you will need to continue working a little longer to pay it off ahead of time, and if you are interested in doing so. You probably don’t want to tap into your $850,000 to pay off the mortgage, because that would leave you with less than $700,000. You should have as much as possible in retirement savings before you retire. It may sound cliché, but advisers aren’t wrong when they say you can borrow for a home or education, but not for your retirement. On the other hand, if you keep paying off your mortgage for the next few years, and even throw a little extra toward the principal when you can, you’ll get “bonus” money when you’re already retired and have it all. That extra cash. This only works if you can financially afford a mortgage in retirement and you are emotionally comfortable doing so. If the thought of going into retirement while you lose some of your income gives you some stress, and maybe even keeps you awake at night, it won’t do you any good. In that case, I would suggest you try to find some kind of balance and consult a good financial planner to help you figure out the details of your financial plan and help you sort it out. Readers: Do you have suggestions for this reader? Add them in the comments below. Have a question about your own retirement savings? Email us HelpMeRetire@marketwatch.com
