By Alessandra Marito
Questions about your retirement savings? Email HelpMeRetire@marketwatch.com
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Both my husband and I are retired. According to our fiduciary investment officer, about $80,000 in our bank savings account, $10,000 in our checking account, and $257,000 in our very low risk money market account. The dollar continues to grow. We both have adequate pensions and social security and have no problems paying our monthly bills.
We got married late in our mid-40s and moved several times. We bought our last house about a year and a half ago and have her $132,000 in debt at a fixed rate of 30 years.
The big question is whether the housing should be repaid.
thank you,
to repay or not to repay
See also: I’m 49, have $1.2 million in savings, and just lost my job — can I trust a retirement calculator that says it’s okay to retire?
Regardless of whether or not the
Paying off a home may sound like a dream, but it can easily become a nightmare when it comes to drawing down a good chunk of your savings.
If you can afford to pay your monthly bills and are comfortable doing so, there is nothing wrong with taking out a mortgage. A mortgage is a debt, but it is not considered a “bad debt” like a credit card. Interest rates are high these days, but if you can afford to pay this bill, it’s worth owning.
Think of it this way. If your mortgage is $132,000 and you have about $350,000 in savings, checking, and money market accounts, you’ll need more than a third of the money you set aside to pay off your mortgage.
But the temptation is real, and for some homeowners, so is the pain of shouldering some kind of debt. If you can’t stand taking out a mortgage, talk to your trust advisor. You said this person is a “contact”, but I’m not sure if that means you have a professional relationship and are a customer. If not, now might be a good time to start working with a qualified financial planner, such as a certified financial planner, who can help you review all your assets and understand the best next steps.
If you’re wondering if you should pay off your mortgage in retirement, you’re not alone. This retired reader said she was thinking of paying off her mortgage with a portion of her $300,000 on a 403(b) plan because interest rates were “to die for.”
In response to another couple considering paying off their mortgage, advisers said paying off a mortgage can be an “emotional” accomplishment rather than just a financial accomplishment.
Other advisers said interest rates could play a very important role in deciding what to do. I don’t know what your interest rate is, but let’s take this as an example. Money kept in a retirement portfolio may generate income at interest rates higher than mortgage interest rates (e.g. 5-9% compared to mortgage interest rates of about 4%). Or maybe it’s the same rate, in which case it’s break even. Of course, with some rates hovering around his 7% mark and, until recently, uneasy market volatility, weighing the pros and cons of that view might be a bit difficult. yeah.
One adviser described it as “rich home, poor cash,” meaning you’ve paid off your home but have little liquidity.
See also: I retired at 67 with $57,000 left on my mortgage and $600,000 saved for retirement. Should I pay off my home now?
However, there are many factors to consider when making this decision. For example, home equity is a useful resource for retirees and may actually help some retirees struggling to keep up with inflation.
When deciding what to do with your mortgage, take this opportunity to look at your financial situation in the form of a “big picture”. For example, you didn’t mention how old you and your husband are, but you said you manage low-risk assets. That’s great if it works, but if you’re likely to be decades away from retirement, you should be saving for the rest of your life. Considering your risk tolerance, ask your fiduciary advisor if there are strategies you can deploy to help you and your investments.
Always, always have a backup plan. Social Security probably won’t go anywhere, but say there was a pay cut for the beneficiaries (Congress never allowed that to happen, but kind of be the devil’s advocate, and in a decade or so it’s actually let’s say it will be) — would you say? Can you still live comfortably and pay all your bills? How many eggs will be in your nest by then, and how many more eggs might you likely have to collect from it each year? Does your pension have an expiration date? Or are there future tax implications? These are all questions you should have the answers to. Again, a qualified advisor who works in your best interest can help you find those answers.
Readers: Any suggestions for this reader? Add them in the comments below.
Questions about your retirement savings? Email HelpMeRetire@marketwatch.com
-Alessandra Marito
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(Closed) Dow Jones Correspondence
09/02/23 1408ET
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