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The Benefits of Paying Down a Mortgage Before Retirement

Ilyce Glink lays out the financial and psychological benefits of paying off your house before retiring.

Christine Benz: Hi, I'm Christine Benz for Morningstar.com. Should you pay off your mortgage prior to retirement? Joining me to discuss that question is Ilyce Glink. She is CEO of Best Money Moves, and she is also author of a new book, 100 Questions Every First-Time Home Buyer Should Ask.

Ilyce, thank you so much for being here.

Ilyce Glink: It's a joy. Happy to do it.

Benz: Ilyce, a lot of pre-retirees look at whether they should pay off their mortgage versus continuing to plow more into their retirement accounts, and I want to talk about that. What are the key benefits--aside from the psychological one of maybe being debt-free--of paying down a mortgage prior to retirement?

Glink: The first question is, what kind of cash are you going to have after you retire. Some people don't really retire. They just go from full-time jobs to sort of part-time income or they start up something in their garage, but they are still making some money coming in. Your first question is, are you even going to have a loss of cash flow? Is that going to go down? And if it is, OK, now, let's talk about paying off your expenses and what expenses can you get rid of before you hit retirement? What new expenses will you have coming into retirement? Some of those might be an increase in healthcare benefits. 

If you are trading off, let's say, mortgage debt, but you are going to have an equal amount of healthcare cost, but the income is going to roughly stay the same, you are probably in good shape. But if you aren't going to be in good shape or you think that you might need to reduce somewhere else, getting rid of that mortgage debt is a nice way to go.

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