Is Paying off Your Mortgage Good for Retirement Income Planning?
One way to make your retirement income planning is eliminating as many expenses as you can while you still have the benefit of a regular paycheck so you will end up with less expenses and more resources in your golden years. Completing your mortgage payments can a good way to lower overall retirement expenses and try to be debt-free when you retire as these payments can take a huge chunk out of your monthly budget. Of course, there are other factors you need to consider before deciding to pay off your mortgage before retirement, or undergo mortgage refinancing to decrease the amounts you need to shell out for monthly payments.
The main concern many workers have with completing their mortgage payments and owning their homes outright is that there are other financial goals that need addressing, including contributing enough money to a 401K or paying for the college education of your offspring. These compete for priority when it comes to your overall financial resources, and may need to be reprioritized depending on your circumstances, especially if you do not earn enough disposable income to take care of all these expenses.
For the most part, refinancing your mortgage loan can be beneficial to your retirement income plans if savings are applied to your mortgage. For instance, modifying a home loan of $200,000 to lower the rate from 6% to 5% and retaining the original payment plan for a decade can reduce how much you have to pay towards it by an extra $24,169; sizeable savings that can go towards other expenses that may take centerstage.
Saving for college is important due to the returns your child gets after school, which can be multiple times the actual costs. However, nearing college means that new contributions will benefit less from tax advantages, such as non-taxable gains. In the first year of college, you may consider placing these savings into mortgage pre-payments or 401K contributions. Current income may be used to compensate in case of a shortfall of funds for educational costs.
If you can complete your mortgage payments prior to retirement without sacrificing other priorities, do so. If you cannot pay off your mortgage then, try to refinance and reduce retirement expenses. Reducing debt, paying for educational costs, and saving up for retirement are priorities you will need to address - examine the details of your personal and financial circumstances before you adjust your income planning strategies.
About the Author:
Katherine Smith is an author who specializes in financial topics concerning seniors. Puritan Financial Group gives seniors reliable investment options to help them strengthen their income planning strategy. For more information on how Puritan Financial Group can help you, please visit our website at http://www.puritanlife.com/solutions/retirement_planning.
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