I’m 67 and retired with $57,000 left on my mortgage and $600,000 saved for retirement — ought to I repay my dwelling now?

I’m able to dwell comfortably on the $5,200 I obtain month-to-month from my pension and Social Security barring something catastrophic. My pension and SS meet my primary wants and bills, so I don’t plan to faucet into my 401(ok) account till I’m 72 and am required to take action. There isn’t a lot left over for something “fun,” nonetheless, as I’ve two grownup youngsters, one grandchild with one on the best way, extra cash tends to go of their course.

My query. I personal a house price roughly $275,000 and pay a month-to-month mortgage of $800. I’ve $57,000 remaining on the mortgage. I’ve a seven-year mortgage at 2.65% that I refinanced in 2020, so 5 years remaining. Should I repay my home with what financial savings I’ve or proceed paying a mortgage till I finally have to maneuver to a home with no stairs.

Thank you for any recommendation you might have.

See: My spouse and I are in our 50s with $300,000 in a 401(ok) and $700,000 in a pension. Will we’ve got sufficient to ‘live a simple life’ in retirement? 

Dear reader, 

This is an age-old query and I’m glad you requested it. Many different retirees marvel the identical factor as you, and could also be in related monetary circumstances the place they’re capable of pay the payments and have cash saved of their retirement accounts. 

The reply usually will depend on your private state of affairs and emotions about debt. If you’ll be able to deal with the truth that you owe this cash in your mortgage, then it’s not dangerous to have it. Your rate of interest is implausible, you’re able to making the month-to-month fee from simply your pension and Social Security with out tapping into your 401(ok) and you’ve got a lot of your own home already paid off — all wins. Not everybody feels snug having any debt in retirement, even when it suits inside their money inflows, and people are the individuals that basically have to weigh their choices. 

At the tip of the day, you actually don’t wish to drain your retirement accounts for a mortgage you’re capable of pay. 

Another means to have a look at it — examine your fastened rate of interest to what you could be incomes in your portfolio. For instance, you may have $500,000 in a 401(ok), and relying on the way it’s invested, it’ll in all probability have a return charge increased than your mortgage charge, advisers stated. 

Check what your investments really are although. Some retirees are invested too conservatively as a result of they suppose they should deplete all danger from their portfolios to protect that cash for retirement — whilst you could not need as a lot danger as a 25-year-old simply beginning their 401(ok) with 40 years to go till retirement, you do need your belongings to stretch the remainder of your lifetime, which suggests there’ll must be some danger. Talk to your adviser, and in case you don’t have one, contact your 401(ok) administrator that will help you make sense of what’s occurring in your account. 

Want extra actionable suggestions on your retirement financial savings journey? Read MarketWatch’s “Retirement Hacks” column

Also, take note you’d must pay tax in your 401(ok) distribution to repay your mortgage, so that you’re withdrawing greater than $57,000. The extra you are taking out, the much less your account has to work with to develop over time.

“If she’s able to cover the mortgage and other expenses from cash flow from pension and Social Security income then she should avoid taking that large taxable distribution,” stated Byrke Sestok, an authorized monetary planner of Rightirement. 

Since you’re not but 72, you may additionally wish to take into account some conversions to a Roth IRA, Sestok stated. Over time, transferring some cash from a taxable to a tax-free account may prevent 1000’s of {dollars} in tax liabilities sooner or later. You can be paying the tax on the present distribution, so that you wish to keep inside a threshold that retains you from bumping into the next tax bracket — a monetary adviser or skilled accountant may assist you make sense of that.

As I stated earlier than although, there’s an emotional part to this query and it’s not one to be ignored. While from a monetary perspective, it is sensible to maintain your mortgage and proceed to pay it as is, you do must be snug, stated Paul Winter, an authorized monetary planner and founding father of Five Seasons Financial Planning. If you’re unable to sleep at evening since you’re pondering of this mortgage hanging over your head, that’s not good both. “The optimal financial decision for an individual is not always the right decision for the person,” stated Susan Mitcheltree, an authorized monetary planner and associate and director of communications at Berman McAleer. “We are humans, so we need to balance both the finances and our emotions to determine the best course of action.” 

Also see: I’m 60, a faculty bus driver and bartender with $165,000 saved for retirement and a spender mentality – ‘is there any hope for me?’ 

Still, you’re in an excellent state of affairs – and it’s essential to do not forget that.

“If she is comfortable (financially and emotionally) making the mortgage payment with her income, there’s not much economic benefit to paying it off early,” stated Matt Stephens, an authorized monetary planner and founding father of AdvicePoint. “It’s a very low interest rate and her payments will mostly go to principal anyway since she’s at the end of the loan.” 

You additionally don’t know what the long run holds. You could have to faucet into your 401(ok) for one more, extra pressing cause, and once more, you additionally need that cash to be there for you in your outdated age. 

And so far as money move goes — ask your self what you’d do with that additional $800 you’re at present utilizing to pay your mortgage each month? Would that “found” cash go towards additional spending, or would you be investing it?

“I urge clients to be very intentional about how to handle the money that is no longer needed for mortgage payments,” stated Jesse Sell, an authorized monetary planner and managing principal of Prevail Financial Partners. “It can easily result in increased lifestyle spending in situations such as the one you described.” 

Readers: Do you may have options for this reader? Add them within the feedback under.

Have a query about your personal retirement financial savings? Email us at HelpMeRetire@marketwatch.com