RETIREE STRUGGLE . . . . . Asset Liquidation or Mortgage Payoff?

13 May

Baby boomers approaching retirement with a mortgage balance and financial assets are faced with the question of whether or not they should liquidate assets to pay off the mortgage.

With income declining at retirement, the mortgage payment becomes more of a strain. Yet liquidating assets to repay the mortgage reduces the income being generated by the assets, and leaves the borrower with less to liquidate later on when needs may be even greater. We don’t know how much money we will need to support our lifestyle in retirement because we don’t know how long we will live, and not everyone can accumulate more wealth than we can possibly outlive.

 The case for paying down, or off, the mortgage for seniors often revolves around the fact that their mortgage rate is greater than their rate of return on their assets. Basically they earn less on their money than they pay on their mortgage: paying off a 5% mortgage with money earning 2% makes sense. If you’re a senior and your rate is more than 5% and you haven’t refinanced in the last 2 to 3 years, you will want to check current rates – you’ll be surprised.  It makes good sense to refinance your mortgage to a lower rate rather than pay it off if the senior either needs the income from their assets to live on. If mortgage repayment earns the higher return before-tax, it also earns the higher return after-tax. If income on the alternative investment is not taxable, however, returns should be compared after-tax. Again it is important you sit down with either your Lendor or CPA or financial planner to figure out what is best for you and your family.

We can help you find the right person to answer all your questions!

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