Editor's note: This is one of the 20 tough financial questions posed in the “Do This or That?” cover story in the September 2011 issue of Kiplinger’s Personal Finance. Use the drop-down menu above to consider other financial conundrums and the right answers for you; share your own experiences and insights in the Discuss field at the bottom of this page.
Pay off the mortgage if you are nearing retirement and would like to be debt-free—and you have enough nonretirement money to pay it off. (Every penny you withdraw from your 401(k) or traditional IRA is taxed at your ordinary income tax rate, plus you may pay a 10% early-withdrawal penalty, depending on your age.)
Dumping the debt also makes sense for conservative investors who don’t think they can earn a higher interest rate on the cash than the rate on their mortgage. Make sure you have sufficient savings left over to handle large future expenses, says Bud Hebeler, retirement-planning expert and creator of www.analyzenow.com.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Keep your mortgage if you can comfortably handle the payments and you enjoy sizable tax deductions for your mortgage interest—and you don’t need the emotional satisfaction of being mortgage-free. Or do a little of both: Accelerate your mortgage payoff by paying a little extra each month or refinancing with a shorter-term loan. In early July, the average rate on a 15-year fixed-rate mortgage was 3.8%, according to Freddie Mac. If you’re within a few years of retiring your mortgage, closing costs are likely to outweigh the benefits of refinancing. Run the numbers with a refinancing calculator at www.mtgprofessor.com.
SEE ALSO:
-
Take Charge of Retirement Spending With This Simple StrategyTo make sure you're in control of retirement spending, rather than the other way around, allocate funds to just three purposes: income, protection and legacy.
-
Here's How To Get Organized And Work For YourselfWhether you’re looking for a side gig or planning to start your own business, it has never been easier to strike out on your own. Here is our guide to navigating working for yourself.
-
Roth IRA Contribution Limits for 2024 and 2025Roth IRAs Roth IRA contribution limits have gone up. Here's what you need to know.
-
How to Find Foreclosed Homes: Best Foreclosure Listings SitesMaking Your Money Last Find foreclosed homes for sale on these foreclosure listing websites. Search for properties on these free, paid or government sites.
-
Luxury Home Prices Rise as the Rich Dodge High Mortgage RatesLuxury home prices rose 9% to the highest third-quarter level on record, Redfin reports, growing nearly three times faster than non-luxury prices.
-
Four Tips for Renting Out Your Home on Airbnbreal estate Here's what you should know before listing your home on Airbnb.
-
Five Ways to a Cheap Last-Minute VacationTravel It is possible to pull off a cheap last-minute vacation. Here are some tips to make it happen.
-
How to Figure Out How Much Life Insurance You Needinsurance Instead of relying on rules of thumb, you’re better off taking a systematic approach to figuring your life insurance needs.
-
Amazon Big Deal Days Is Coming! We’ve Got All the DetailsAmazon Prime To kick off the holiday season with a bang, Amazon Big Deal Days runs Tuesday, October 8 and Wednesday, October 9.
-
How to Shop for Life Insurance in 3 Easy Stepsinsurance Shopping for life insurance? You may be able to estimate how much you need online, but that's just the start of your search.
