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Help Me Retire

Aug. 15, 2020, 11:57 a.m. EDT

I’m retired, my wife isn’t — how should we pay off our $60,000 mortgage before she retires?

Have a question about retirement, including where to retire? Email HelpMeRetire@marketwatch.com

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By Alessandra Malito, MarketWatch

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Refinancing the mortgage is one option, if you decided you were okay with having some sort of a home payment in retirement. It would be best to apply for a refinanced mortgage while your wife is still working, Simmons said. Banks and lenders prefer working with clients who are still earning income, even if they have a sizable amount of money in savings, he said. We’re also in a low-interest rate environment right now, said John Pilkington, a senior financial adviser at Vanguard, which makes it an opportune time to refinance the mortgage. There are additional costs associated with refinancing however, so you should weigh the pros and cons of that decision (and determine whether it’s even worth it based on what your interest rate is now versus what it would be when refinanced).

There are advantages for paying off a mortgage before retirement, of course. Taking that major source of debt off the table means you’ll need less income in retirement, and that would lead to less money distributed from retirement accounts, said Nadine Burns, president and chief executive officer of A New Path Financial. “The less you take out, the less in taxes due,” she said.

Also see: I’m a 32-year-old stay-at-home mom, and my husband earns $150,000 a year. Will I ever be able to enjoy a retirement?

Paying off the mortgage before or right at retirement is also an emotional decision. Even if the numbers suggest someone would be financially fine having some sort of a mortgage while retired, that path isn’t for everyone and could cause undue stress. Nobody wants that either.

“It can be financially practical for them and mathematically in their benefit, but if they can’t be comfortable with that, it doesn’t do them much good,” Romano said. If paying off the mortgage is a goal of yours, there are ways to do so.

You can ramp up your payments with excess savings from your monthly income. You could also take a chunk of your liquid assets to pay off most of that mortgage now and then pay off the rest while your wife is working, for example. If you do the latter, try to use money that’s earning a low rate of return, such as from a money market or regular savings account, Simmons said.

Remember: you’re in control of your mortgage, not your lender, and that’s an advantage, Romano said. Your payment is the same in the first month of having a mortgage as it is in the last, which means your inflation-adjusted dollars used for your cost of living and purchasing power is outpacing your mortgage payments. Being in control, instead of at the hands of your lender, also means you have the ability to ride the mortgage out until the very end or, in many cases, pay it off faster than expected.

If paying the mortgage off before retirement is something you think you have to do but you don’t necessarily want to do with your savings or retirement assets, the good news is: you can wait it out. But if you decide you’d really like that mortgage paid off before your wife retires, try to do it as painlessly as possible, such as using money that’s earning low rates of return and cash that won’t affect your near- and far-off retirement goals.

Letters are edited for length and style.

Have a question about your own retirement savings? Email us at HelpMeRetire@marketwatch.com.

Alessandra Malito is a retirement reporter based in New York. You can follow her on Twitter @malito_ali.

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