10 Retirement Resolutions: Pay Down Your Mortgage

US News and World Report had a little piece where they discussed some good New Year’s resolutions related to retirement and I thought that I’d put each of them through their paces. The fifth retirement resolution was to pay down that home mortgage.

Pay down your mortgage. “Try to figure out ways to reduce your mortgage rather than add to it,” says Pond. “You don’t want to be paying off your mortgage when you’re 80.” He also recommends downsizing to a smaller home when you retire or even while you are still working. “Many people who live in urban areas can reduce their living expenses by up to 40 percent,” he says, “simply by moving to lower-cost and often more climate-friendly locales.”

Hmmmm, while this is a good idea in principle, you have to evaluate whether your next dollar should go towards your mortgage or to something else. Certainly, owning your home is an extremely laudable achievement and something you’ll want to have done by the time you’ve retired (that’s just another fixed payment that you don’t have to make) but depending on where you are in your life, your dollars might be better served going elsewhere.

While debt is always bad, a mortgage usually has a much smaller interest rate when compared the typical 20% rates of credit cards. Mortgages also have the benefit of having the interest being deductible, something that credit card debt doesn’t have.

Source: US News and World Report