You may have heard that you should pay off your mortgage before you retire. But that may be easier said than done if you bought a home later in life or have recently refinanced your mortgage.
Many people aged 65 or older are still paying a mortgage. For example, older adults living in more expensive markets are more likely to still have mortgages. The good news is that having a mortgage in retirement isn't always a liability.
There's no doubt that, with your mortgage gone, you can probably reduce the amount you may need to pull from your retirement accounts each month to cover living expenses. That's a benefit when financial markets decline because you won't need to sell as many investments that have dropped in value.
In addition, there's the psychological benefit of knowing you're free of this expense. If you're like many people, your mortgage is your largest monthly bill.
Among the commonly cited reasons given for hanging onto a mortgage is the ability to deduct interest payments from your taxable income. However, current tax law curtails the mortgage interest deduction and has significantly increased the standard deduction.
For 2026, the standard deduction is $16,100 for single filers, $32,200 for joint filers and even higher for those who have reached age 65: Those 65 or over can deduct an additional $2,000 for single filers and $1,600 each for married filers). Even with a mortgage, you may not have enough total deductions to make itemizing worthwhile.
Some argue you can use the money you would otherwise put toward your mortgage to make other investments that could possibly earn a higher return. However, because almost all investments fluctuate in value, paying off your mortgage is likely to offer a more risk-free return. Market volatility may make you wary of investing extra funds in stocks and other riskier securities.
On the other hand, if you live in a state with high property and other taxes, mortgage interest may provide you with enough to itemize and reduce income tax. Consult your tax advisor about the best choice given your situation.
Although entering retirement mortgage-free can be a sensible move for many people, it's not right or possible for everyone. Consumer debt costs have soared in recent years as the Federal Reserve raised interest rates to combat high inflation. So, if you have credit card and other high-interest debt, you'll want to whittle down those balances before paying off your mortgage. And if you haven't adequately funded your retirement accounts, you should do everything you can to boost those savings — including taking advantage of "catch-up" contributions.
Also, liquidating a large portion of your investments to pay off your mortgage might leave you "house poor," with much of your wealth tied to your home and not easily accessible in an emergency. Finally, there may be a penalty for prepaying your mortgage, though federal law limits lenders' ability to impose such penalties on many mortgages. Check with your lender for details.
Whether a mortgage will be a burden when you retire depends on specific factors such as your income stream, retirement plans and other goals. Be sure to work closely with your professional advisors, including your CPA, when planning for retirement and managing your money when you get there.
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