Retiring with mortgage debt: 4 things to consider

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Consider retiring with mortgage debt vs paying off your mortgage before retirement. Many will tell you to pay off your mortgage and many will tell you there are great reasons to have a home mortgage in retirement. There are strong opinions on both sides of the question. You can best solve the dilemma by having a thorough understanding of your financial situation. Don't try to answer this question before you have created a budget with variations.

One item used as a strong reason to buy real estate is now largely irrelevant which is the property taxes and mortgage interest deductions. Since the tax law changed in 2018, the big tax break was given to everyone and in particular, those over age 65 have killed that reason to retain debt. In addition, most people don't understand when you hear someone saying "I will write this off" what that means. The tax cuts have created a situation where the standard deduction covers almost all debt for retired persons.

There is a good chance that your retirement income will not be sufficient to need any tax breaks. This is a good thing in some sense, it prevents people from spending money just to get a tax deduction. Our example of a typical retired person's income and expenses below shows the effect of the 2018 tax changes on your income. I would love to write at length about taxes but you can read one of our articles about how the 2018 tax changes benefited retired people.

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