Per the “Keeping a Mortgage After 65…” article. Whatever helps you sleep well at night is what you should do.
We paid off our mortgage before we retired because we had only $20K left and we wanted zero debt in retirement. We then paid cash for our current house (and netted a significant sum from rightsizing to a much lower COL area). The “return” on this investment has far exceeded anything we have in the market and is easily liquidable. So, not only are we not paying interest, we get to enjoy living in a lovely new home whose value has almost tripled since we bought it.
(And, yes, I understand that everyone’s mortgage amounts and financial positions are different. I’m only offering my story as an example of how I think differently from some people who feel they get a better return on their money by keeping their loans and have a better use for cash.)
While we’re going to be happy that our mortgage is paid off next year, I really wish we wouldn’t have paid so much off of it the last couple of years before retirement. It’s a little over a 2% rate, and it sure would have been nice to access that money to buy our forestry property instead of taking from our 401K, paying high taxes, and borrowing to pay the taxes. Of course, maybe we would have spent it on something else crazy, had no idea we were going to purchase this property and we didn’t know that interest rates would be going up so quickly, but still!
The mortgage after 65 has a lot to do with how much equity you already have in the house. Some people basically just keep refinancing (at 30 years) and never gain significant equity in the house. They treat the mortgage like a rent payment, not looking to accrue value in the house.
On the other hand, if your mortgage is not a large percentage of the home’s value, why not pay it off and get it over with. Clear out that final 20K and be done.
We took out the largest mortgage we have ever had when we bought our retirement house. We can afford it, it’s at 3%, we have no desire to pay it off early.
The house has doubled in value, and we have waterfront with a dock. No regrets.
We dragged our feet a few years after kids done with college to pay off the mortgage. It was 6.5%, but…… the way mortgage work it is in the last years that you are paying mostly principal. We just liked the simplicity of retirement planning with cash flow needs at a lower level starting day1.
Yes there are some people that find ways to spend money they shouldn’t, so they borrow off of their 401k, they keep a home mortgage by refinancing and cashing out equity.
But usually not the folks on this thread.
I wish I had pulled more $$ out of our home (back to back, 10 year 2.5% interest, first on remaining mortgage, and second time to draw out some money for home updating). Neither loan had a loan origination fee (both with credit unions). However, in view of other uses of the money, and also the second amount had a monthly payment of $1400/month, and a desire to keep that low amount. Hindsight is 20-20.
We are getting a bit more cash flow now, as the two annuities that matured over a year ago have now been in place for a year, and we have cash coming from those (max amount w/o penalty).
So building up for home projects. Also like having the chunk of money in investments that are after tax funds that we have the ability to use to assist DDs with down payment on a home w/o much juggling of finances.
The home behind us just went on the market and has a pending sale within less than a week. Another neighbor (very good friend) is putting her home on the market soon, so will have some idea of current price points with various home features.
With interest rates now higher - and if you are paying loan origination fees and a good amount on closing costs, may reconsider if wanting to refinance or take a home mortgage in retirement.
“A son is a son until he takes a wife; a daughter a daughter is a daughter for life”. Somewhat true culturally for some. The Chinese/Asian has held onto some with a son being the one to carry on for elderly parents - thus the desire to have the son when it was one child only policy in China, and so many baby girls being adoptable from China. Depends on family dynamics, family traditions and specifics within household/nuclear unit and wider family. Some take seriously the inclusion of caring for older relatives (and having older relatives interact frequently with the nuclear family unit including a lot of interaction with the children). While many older parents today like having the economic and physical autonomy (and independence) to take care of themselves in their ‘golden’ years - and “not be a burden” - including some responsibilities by adult children is not a bad thing if it can be done in a win-win manner.
Currently, we are quite involved with DDs and their families (one with BF, the other with SIL and 4 Gkids) - we spend time together, we are available to ‘help them out’ (child care help with one spouse unavailable, other things with single DD/BF), and we are a bit of a safety net. We have flexibility in our schedules and with our resources to be of assistance. We have LTC insurance, but know, when the time comes, if one or both of us need coordination of health care, that DDs will make sure we are taken care of. DD1 has a lot of knowledge as BSN/RN.
Right now, SIL/DD1 had seen some of the help I have been able to give to not only keep their household running well/helping DD1 in SIL’s absence for 4 weeks, but some of the helpful educational tips with GD1, GS1 and GS2 – the older two are in an excellent school, but fully utilizing the after-school library resource for them. SIL will pick up some little steps in the routine to have more books available in a timely manner. Certainly, children are under no legal responsibility to take care of their elders; in Switzerland, under older inheritance rules, the son that inherited most of the father’s assets was legally required to care for mother if her assets didn’t cover her care – we ran into this with our father’s mother who was being financially cared for by dad and his other US brother - sending money to their sister who was caring for their mother (she was being neglected by son and his wife); the brother and his wife were ‘worried’ when she might need to go into long term care, as financially it would go into some of what they inherited - their legal responsibility (but no worries, their mom died w/o burning through some of their inherited wealth).
Right, and if the previous amounts/limits snap back bcos the TCJA expires in '26, the AMT will return with a vengeance. Per Urban-Brookings 7-8 million taxpayers will get hit with AMT that are not impacted today. (Before TCJA, ~5 million. were impacted by AMT.)
We do not want to be a financial burden on our only child and we want to leave an estate for our posterity (hope we have one). But there is far more to it than financials. My father is almost 95, he is a very smart man and had a great career and he has money, but he can’t make or execute decisions anymore. Eventually you are going to need an advocate/life manager no matter how much money you have. If you live long enough, you are going to lose physical and decision-making capacity and you will need an advocate who will keep your best interests in mind and make sure your needs are met and you are not abused. Anyone who doesn’t acknowledge this: I’m sorry, but hubris meets nemesis.
Exactly. Howard Hughes died with a 2.5 billion dollar estate. He was 6’4" and weighed 90 pounds when he died. Malnourished, covered in bed sores, harmed by massive painkiller usage. All that money, and nobody advocating for him.
Wow on those Nerd Wallet statistics - no wonder so many people are not prepared for retirement with those average net worth situations. Those averages are truly bleak. Some of it I see with ‘spenders’ who want to show they have very nice things, go on very nice trips, go to very fancy restaurants and events. Spend money as fast as they earn it.
IDK if the finishing college is where people realize they do need some sense with short term and long term financial goals, along with being fiscally responsible.
HH suffered from mental illness - Obsessive Compulsive Disorder and others; he pulled himself through some of the situations (like the movie showed when he had to go to Congress regarding the big spending on the airplane that was essentially useless), but he could live out his life the way he chose to – in many ways one could say he was harming himself, but his intelligence had him use his money to avoid being forced to live differently.
We expect our assets will keep us from being a financial burden - and legally we would not be a financial burden. It is a matter of DDs potentially being advocates for care decisions, and perhaps care oversight if we live geographically close.
I don’t think I ever answered your question. Our 401k is stock funds - and when it gets too large, our overall risk goes up above what we are comfortable with. So we purchase annuities to continue to get returns while preserving our capital with lower risk, and keep our overall risk at our comfort level.
Rebalancing with annuities seems like an unusual strategy. Stock funds go up, they go down, and annuities seem like a permanent solution, if the market crashes you can’t rebalance back to equities with those. Why not just rebalance with safe money market funds that pay over 5%? Or is this primarily to ensure you have an income stream?
Most folks just rebalance inside the 401k. Sell the equities and buy an Intermediate Treasury or Bond fund or Bond ladder. (but then that does not give the FA a fat commission)
Neither DH nor I have pensions. So our annuities are like a pension for us. Our longest annuity is 10 years, so it is not a ‘permanent’ solution (our annuity maturity ranges from 2027 - 2033). When the annuity period ends, we have the cash in hand to decide what to do with that money at that point. Right now we have 35% in qualified retirement (DH’s 401k), 10% in Roth IRAs, almost 28% in annuities - we currently have 5 annuities. 21% real estate (our home). We have cash value insurance (which essentially is now paying the insurance premiums; death value for beneficiaries).
I am advising our DDs to get as much of their retirement assets into after tax as they can, so the growth of their Roth IRAs will all be after tax. DD2 is part of ESOP, and they are actually getting advised today about this employee benefit. DDs have had the advantage of mom starting a Roth IRA for them, and then DD2 was able to move her state pension retirement funds (not vested - worked less than 3 years, and 10 years to vest) into IRA and then Roth IRA (and paid taxes on it at that point). DD2 also still has a stock account which she didn’t totally use up for college, so that will help her with a down payment on a home in the future. DD1 still has a small amount in her stock account. DD1 has government employment, and is also doing voluntary funding into an additional retirement account (I believe she is getting some matching). DD2 has me more involved in her retirement and investments than DD1.
True, though personally I figure why even go the bond ladder route, when you can not think about it for a second and put it into a money market? You can easily slide it on back to equities whenever you want. Vanguard’s money market is paying 5.27% 7 day yield right now. And unlike some of these bond funds, it’s not like you’re going to have negative returns (unless the world goes to heck).
