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Retirement Readiness: Keep the Mortgage or Pay Off the House

*Busey is a sponsor of the Mahomet Daily. This content is provided as part of that agreement.

As you ready for retirement, a common question among homeowners is: Should I keep the mortgage or pay off the house? The answer is… it depends.

Consider your home equity as part of your retirement—and analyze it as such. For example, if your mortgage is four percent and your money market is only earning one percent, you may be better off using the money market funds to pay off the mortgage.

If you keep your mortgage, your retirement savings remain intact, as does the tax deduction that comes from your monthly payment. However, downsides include the pressure of having a monthly payment during retirement and leaving a financial burden for your heirs.

But, if paying off your mortgage requires dipping into your 401(k) or reducing your contributions, then that decision isn’t advised. In fact, you may end up paying or losing more than you save—when you consider taxation at your highest tax bracket plus the potential loss of an employer’s matching contribution.

If you want to pay off your mortgage now but can’t make it happen right away without leveraging your 401(k), consider making extra payments instead. You’ll shorten the term of your mortgage without penalizing your retirement fund.

Above all else, consider the tax implications before making a decision on ending your mortgage.

For a checklist on when to keep your mortgage and when to pay it off, read the latest issue of The Pillar in the Resource Center on busey.com. Busey’s financial magazine explores this topic and others that matter most to you, your family and your financial future.

Busey can help you analyze your options and find the choice that’s right for you. Visit their experienced team today at 312 E. Main St. in Mahomet—or any of their many convenient locations—or call 1.800. 67 l Busey.

Member FDIC, Equal Housing Lender

Investment Products and Services are: Not FDIC INSURED | May lose value | No bank guarantee

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