A recent study from the Boston College Center for Retirement Research shows that today more Americans than ever are carrying a mortgage into their retirement years. The research found that among those in the age 60 to 69 age group, 41 percent were still making mortgage payments. Interestingly, one out of two of those retired mortgage borrowers has enough in investments and savings to pay off the mortgage in full right now.
So why would they hold on to those monthly payments? The study suggests that many believe it is better to keep the home loan and the associated tax benefits in order to keep their wealth more liquid. While there are many people who obviously feel this is the smarter path, the research study concluded that investing in retirement years without having paid off the mortgage is essentially investing with borrowed money. I think that makes sense; if there was a financial emergency, the liquid funds and investments would be used up and there would be no money left to pay the mortgage. The home could be foreclosed on and the retirees could find themselves homeless.
For me it would truly be about peace of mind. I know that financially savvy individuals can use tax credits to their advantage as they deftly maneuver the stocks and bonds scene, but there is plenty of emotional relief that comes from having something as big as a house paid off in full. I am sure you can still make your money work really well for you even if you first pay off your mortgage and then go crazy with investing.
The study doesn’t really address the 20 percent of retired 60 to 69-year-olds that do not currently have the money to pay off their home loans. That is obviously a much more precarious situation. Social security is not usually enough to cover a mortgage payment in addition to living expenses. Will the next big foreclosure wave come in the next decade as seventy-somethings run out of money?