- Suze Orman, Costco Connection, Vol. 31
Should We Pay Off Mortgage Early
My husband and I want to retire in December 2017. He will be 68 and I will be 65. The balance on our 15-year mortgage will be $40,420. Should we pull from our retirement savings and pay it off, or keep paying until the maturity date of September 2020? U.S., Arlington, Texas
In your particular case I don't think you should accelerate the payments. If you just keep up with the regular monthly payments, you will have the mortgage paid off in less than three years into retirement. That's fast enough.
The reason I don't think it's worth paying off your mortgage faster is because you would need to take money out of your retirement savings. I am assuming your retirement savings are in traditional 401(K)s or IRAs. Any money withdrawn from traditional retirement accounts is taxed as ordinary income in the year it is withdrawn. That means to net $40,420 you would need to withdraw a lot more.
For example, you might need to withdraw $55,000 or so in order to be left with the $40,420 you need after paying tax. And taking a big lump sum might bump you into a higher tax bracket as well.