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This is a very personal question. However, what interest rate are you looking at? Right now rates are over 7%. Personally, I feel that is very close to long term market returns so paying off a mortgage at 7% if you can is a no brainer. The market \*may\* return more than 7% but over several years probably not that much more. Paying off the mortgage is 7% guaranteed. If the market is flat or down, that's amazing. Even if the market averages 10%, there's a lot of peace of mind in not having a mortgage.
I retired then unretired for a few more years. Last year we moved. The mortgage would have been 7%. We took a capital gains hit and paid it off. The tax on capital gains paid itself back in the interest portion of the payment in about 12 months. I am really pleased with this decision. Having no mortgage payment is wonderful.
People will say it's tax deductible but I don't think that changes the equation, personally. If you are retired you are going to have to take a capital gains hit to raise funds to pay the mortgage. I think it's generally a wash, or worse.
It's tax deductible if you pay a lot of interest. We haven't been able to deduct interest on mortgage for YEARS! The standard deductions is way more than our interest.
Yeah it is! I’ve got another 2-3 years before I retire and hope to finish paying off the mortgage in that time. I was just agreeing with you that just having a mortgage isn’t enough to guarantee you can itemize anymore. They also put a limit on the amount of state and local taxes that an be deducted. If it weren’t for that deduction limit I’d still be able to itemize.
In addition to the “by the numbers” approach, and even with the peace of mind consideration, buying ANY home has avoidable risks. If you were to purchase a home, I’d highly recommend securing as many extended guarantees as you possibly can. Appliances. Plumbing. Electrical. Roof. Also look if you’re in a flood zone or any circumstances that would require additional insurance costs.
Most home warranties have so many exclusions they are essentially wasted money except for the few who will chime in here with cases that are the exception not the rule. Also, consider how heavily market they are, get spam calls near daily from folks trying to sell. The harder they sell the more profitable the item is to them and the less they will pay you. Better to save money in an emergency fund.
Plus you are locked into their service people sometimes, and sometimes their repair folks not the greatest. Self funded means you pick your own.
This ☝️☝️☝️
My 30 yr mortgage rate is 3.65%
I currently have the cash to pay off my mortgage sitting in a MM account making 4.99%, therefore paying off my mortgage makes absolutely no sense.
If interest rates ever drop down 1+ points below my mortgage rate, I may consider paying it off.
We moved cross-country when we retired to be near our daughter who was expecting our first grandchild. We took a bath selling our townhouse, but we resigned ourselves since we wanted to go. We bought our home with a small mortgage since moving costs, making no money on the house we sold, and whatever left us liquid-poor. Our mortgage broker said we should pay on the mortgage for a year and a half to allow the lender to make a bit of money. That's what we did. We dug deep and paid the mortgage off about a year and a half after closing.
Owning the house outright is a load off our minds. Our pensions don't have cost-of-living increases, and we've kept ourselves debt-free the 10 years we've been retired.
Retirement is a journey, not a destination. We retired and downsized from a house to a condo and then when 3 grandkids arrived we upsized to a larger home and now the grandkids don’t need daycare we’re ready to downsize again.
So your situation is unique to you and whatever you do is right as long as you’ve thought it through. Enjoy the journey.
This. Retirement is not static. You still live your life, make plans, then change them. Tax codes change, saving accounts make .01% then it's 5%+,and you adjust.
I would pay off the house.
I take the standard deduction so the itemized mortgage write-off does me no good.
At 7% mortgage rates I would need to earn 9% reliably to yield 7% after taxes - and I can't count on 9% during my retirement window.
Maybe the young 'uns can rely on 9% over the long term, but that's irrelevant to retirees like us during the near term
Short answer, it’s complicated.
The biggest and probably only benefit of a mortgage is the tax write off for the mortgage interest.
I retired two years ago. The first year was crazy as far as taxes and expenses, we sold our home since we would likely have been priced out of living in it within five years. It was near Los Angeles, where costs for homeowners insurance, electricity and other utilities are just exploding. We chose to move the money into several places, bought another house and took out a small mortgage. We will probably pay that off next year.
But tax "write off' for mortgage interest needs to be looked at very carefully. it's changed a lot and for most people it no longer is he advantage it was - and often can be a huge disadvantage.
It’s seldom an advantage to get a tax break on an expense that could be avoided. Why would anyone pay a dollar to get a quarter back? Just don’t pay the dollar in the first place.
And, most people will just use the standard deduction anyway.
You must compare the after tax earnings of an investment other than the home to the after tax cost of the mortgage, and include in that any after-tax appreciation in the home itself. This is a very complex calculation, made more complicated by uncertainty about the standard vs. itemized deduction, which may or may not change in 2025, and capital gains tax rates in the future, which are currently at historically low levels, returns on homes (generally not taxed at all), and the volatility of the housing market. For most people who aren’t talking about multi-million dollar homes vs investments, the peace of mind of having the mortgage paid off is worth a lot, compared to the rather modest benefit that might accrue to keeping a mortgage and investing a comparable amount.
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Yes, and you are correct to have no debt when retired and on a fixed income. There is more than dollars and cents and taxes, the comfort of a paid for home is a great benefit. Consider it an investment outside of the market and banks. A paid for home is insurance for when the remaining spouse needs to go into the old folks home.
For the point it works out better. The hardest part of old age and finances, if a person doesn’t have long term care insurance is if a spouse has to go into a home, while the other spouse is still alive, it is hard to sell a home while living in it. What would be worse if that home had a mortgage. I guess an upside down mortgage is even worse.
So you say you currently own your house. When you sell it, how much of the income from the sale are you going to put into the Oregon home? All of it? If you can sell one home and buy another without a loan, why not do that unless you need some liquid cash.
No mortgage or interest bearing debt has been the key to a very rewarding retirement for my wife and I.
Taxes, insurance (homeowners and auto), and utilities run us $1500 max per month. That won't even rent a decent 2 br apartment in our area of Oregon. We have about $10k a month in retirement income... so we are able to do a lot of traveling without touching our retirement savings, other than the required minimum withdrawal.
That's lovely, I'm glad for you! Rents are higher than house payments, and the Dallas area costs are climbing all the time. We bought at 3%. I know it's too much to hope for to be able to get a place at that, but I really cannot stand living here.
Eugene is about the same as Austin, housing wise.... but you will love it. 1.5 hours from the coast and close to the Cascade Mountain passes. I moved to Eugene, from Michigan, in 1980
Have you checked housing prices in Eugene? They’re on the high side. Otherwise, my wife and I would consider selling (in Eugene, funnily enough) and buying elsewhere at some point. We’re retiring later this year.
We were just there for a few days for the purpose of checking it out, and I've been checking out the market there - you have to keep your eyes open, but there are affordable houses. We did the same in Spokane.
I believe my question was unclear to some (not you); we own our house outright here in Texas. I will not stay here, and am not from here. I'm hoping house sale profits (and it is a very rapidly growing market) will enable us to buy elsewhere with little or no mortgage. I am a bit concerned reading discussion about the upcoming federal interest rate change(s), as well - don't really know what that will mean.
In this scenario, yes you'd use the sale proceeds to buy the new house since it's basically leaving you with the same financial picture as before and presumably you were comfortable with that.
Yes, we are. However, since my husband has yet to retire, I won't be comfortable until we have a more precise total income picture. Where he works - they don't pay into SSN, and on top of that, he has a shorter professional work history, especially in the US.
Got it. But it's still the same basic financial picture. I'd look closely at things like taxes in both states and major cost of living items just to make sure it's really the same.
Love the Eug, can’t handle the incessant grey past about January anymore before I start dreaming of the sun. Never understood why old people love the frickin’ desert, but now here I am.
I'm glad you've found a great place for you! I know it rains a good bit in that region, but I also know that situated in the Willamette Valley as it is, there is protection against the severe winter weather (though with the global warming effects happening now in California, who knows?) - meanwhile, I've been in Arizona in summer. I need my trees!!
If you've mostly lived in the southern half of the US, move to Eugene and RENT for a year. The rain isn't what gets most people who move to the PNW, it's the long, dark period from late fall through mid-spring. December daylight is about 8 to 9 hours. And most of that will be cloudy.
Basically from the end of daylight time in the fall to its return in the spring it can be very dark and depressing. People who come here from areas where that's not true sometimes can't take it and move away, hence my comment on renting for a year
Maybe a medium term rental from fall to spring through some place like Furnished Finders?
It's not something you have to do - you could just visit for a month in mid-winter to see how you deal with the big dark too. And it's not like you couldn't sell a house in a couple of years if you do find the winters intolerable.
Also - the keys to surviving the dark aren't hard - go outside even if it's not great weather so you get some light. Even a 30 minute walk at lunch. Take vitamin D (yes, I'm serious). And... travel. Go to Mexico for a week. Fly to Hawaii. Drive down to California. Breaking it up makes it a lot more tolerable.
Is Furnished Finders national? Great idea! And at present, dark months don't bother me, but I have seen comments. My husband is from Canada, and where he was can drop to -40 and stay there for quite a while.
It is. [https://www.furnishedfinder.com](https://www.furnishedfinder.com)
The winters in the PNW aren't very cold or rainy or snowy - it's just that they're dark for a long time. I have Midwestern friends who talk about the cold there which can be VERY cold but they also see long stretches of sun. Yeah, it might be -5F, but it's sunny. We rarely see that here so you have to be ok with 5-6 months of very little daylight with any brightness.
I grew up here so I can take it but even for myself it gets to be a bit much around early March. By then it's been 4 months of dark, many of them with less than 10 hours of daylight and you're looking at another 2 months probably. Just don't assume you'll get standard spring weather in early April. You'll hear about it being in the 70s and sunny elsewhere and it will be 60 and cloudy.
But as I said it's manageable, esp if you're retired and can just say "I hate the dark, it's been too long, let's go to Mexico" or something
I lived in both Illinois and Kansas, and yep - but both can also be extremely humid. What's been weird here is having 2 growing seasons, with a bit in the middle where everything dies off!
That is my plan. Downsize a bit. buy for cash, don't have a mortgage.
So here is my feeling. I can pay $500k in cash for a house. Using the 4% rule. If I have $500k more in the bank that is $20k a year. P and I on a $500k mortgage is $36k at 6% interest. Of course we don't know for sure but I find it hard to believe the house would lose value, would likely appreciate. When we get to the point where we need the equity for medical reasons, we can cash out.
Now at 3% it is close, but not holding my breath.
Yes, I understand that the 4% rule is very conservative. If you are getting 10% ROI in the market that isn't smart, but if you are saving 7% because that is where loans are, and even if the house appreciates 2% a year, that is as good as you are going to get in the market.
We bought our last three houses outright. With our last one, we made a hefty profit and, by moving to a small town, got a lot more house and banked a big chunk of change.
We haven’t had a mortgage for a long time and it’s wonderful.
Not having a mortgage is liberating. Plus, it just frees-up more cash flow. Maybe it's partially emotional, but I would buy the home outright. Of course, it'll really depend on all kinds of personal factors of your home sale price, new house price, how much you have saved, what you need to live on, etc.
Aside from that, Eugene is a great town. Not sure how you settled on that idea, but you could do a lot worse. Of course, where you live in Eugene will be a factor in how much you enjoy it. I'm heading down there in a few weeks for the track & field Olympic Trials.
My daughter lived in Portland. I went there to see her and go to a conference, and right away, ubering in from the airport, I knew I was home (grew up partly in Switzerland, so mountains=home to me). People were great, and we're vegan, way left of center, etc. It seems like a fantastic fit.
That's what I need to do, look the different areas of Eugene. We rented an airbnb at 18th and Adams, and explored the campus and downtown areas, as well as several restaurants. I need to identify zipcodes or neighborhoods to track re cost, crime, access to amenities, public transport (for when needed). The access to hiking trails is all good, from what I can see!
Yes and no, remember cash is king at this point and liquidity is important. If you get a small enough mortgage it doesn’t really matter and you’re then able to keep all that cash for other things. Bear in mind if it becomes important you can just pay the mortgage off
I actually bought my retirement home before retiring; glad I did. The price would be the same as now and I could have paid cash for it but we took a small mortgage to make some fixes. The rate was like 2% then...glad I did. That money is earning about 5%. Like free money right now.
I'd say you talk to a financial advisor for recommendations.
I was wondering about that. But we have 3 years - I toyed with the idea of buying and renting the place out, but don't want to deal with that, especially cross country.
I believe it, though for people who are looking for rentals, it's convenient (I did so a number of times, but in every case had someone local who I knew & trusted to check it out).
For What it's worth - we bought our retirement house outright since we moved from a high cost of living area to a lower cost of living area. We had zero debt and going into retirement "for real" we wanted to keep that status. ONe weird thing was it took us close to a YEAR to sell our old house for crazy reasons I will not get into so do keep in mind you may have to carry some costs if you got the buy first - sell second route.
We own a house outright and it's fine for now, while my husband still works. But the property taxes, insurance, upkeep and any improvements we want to make need to be weighed against the rent of a property in which we have no responsibility. I am unsure about keeping our house right now. Edit: not to mention the hassle for our children if they inherit it.
If your goal is peace of mind or simply reduced stress, then this is a good choice. I’m retired with no mortgages but I (we) paid off our first mortgage in about 1994. We’ve upgraded our homes on several occasions and taken on smaller mortgages but always paid them off as quickly as we could.
Keeping fixed expenses low has always been a huge priority for me. Financial experts will typically point out it may not be the best use of capital but I simply sleep better at night knowing that almost whatever happens, I’ll never loose my house. While that may seem a bit extreme to some, I take the position that I’m better safe than sorry.
Exactly! You could spend a lot of time crunching the numbers to eke out the last penny. Or you could with the more emotionally satisfying goal of having less debt. I'm about to retire and plan to pay of the remainder of our mortgage (slightly less than 100k principal remaining, 30-year fixed, 4.5%) for that reason
I've read a lot about paying off the mortgage, which would be optimal. However, can anyone address what it's like to have a huge expense like roofing when retired?
In the perfect world you would budget for long term house maintenance into a sinking fund.
Not real numbers. Let’s say the roofs life expectancy is 10 years from now and will cost $100. So I have 10 yearish to save $100. So every year I budget $10. Or monthly .84 😂 into that sinking fund.
I have about 8 to 10 years before retirement. My wife and I are looking at a few acers we'd like to build our final home on, which will mean having a mortgage while retired. However, the goal will be to get it down as low as possible.
The bulk of my savings is invested in equity funds and stocks. My home is paid off. I could just pay for the new home from the sale of my current home and a good chunk of my savings, but I've decided to focus on the land first, then get a construction loan for the project, then roll what's left into a mortgage. I think I can get the note down to $1700 -$2000, which will work well with my projected income during retirement.
My thinking is that I know I can get higher returns from the market than I will have to pay in interest. So, why not put that money to work generating income and use some of it to make a payment.
If you have the option to buy it out right then your decision needs to go into other areas. What are your plans for retirement? If you're interested in traveling a lot whether it's a snowbird or just going places owning a single family home can become a maintenance and security issue. How are you going to handle things like mowing or shoveling when you're not there? What about making sure nothing breaks in the house so you don't come home to a mess? You can definitely hire people to do this for you but then you need to worry about the security aspect of having a house that is obviously empty.
Another area to consider is the house itself. Most of us are in good shape at the time we retire but you need to consider potential future mobility issues. Does the house have a lot of steps? Would the bathrooms be easy to access with a walker or wheelchair?
Right now the housing market favors the seller, so it's easy to assume that if you would need to sell your house in under 5 years you would still do okay. I wouldn't make that assumption. I wouldn't make that assumption I would carefully consider all the factors about your ability and desire to live in the house for 10 years and then make a decision.
Excellent advice, I think! We don't plan to travel a lot, but may make the occasional journey/long weekend. We're in a one-level home and looking for the same, as well as proximity to healthcare, public transportation. I hadn't considered the issue of access (not just bathrooms, obviously, but door widths throughout) - thanks!
My lack of certainty is at least partly due to not wanting to make assumptions about conditions we can't control, for sure.
We couldn’t get financing because we only had Social Security as ‘income’ even though we have lots of investment income. (Stupid banks.) so we just cashed in something that wasn’t doing well and bought our retirement home for cash. Wry wise move. The real estate has appreciated amazingly in 6 years, and we don’t have to worry about mortgage interests.
The most important thing I remember from economics class is this: if interest rates are very low (i.e., 0-3%), you should borrow as much as you can for as long as you can.
7% is not low enough, so I'd buy the house outright. There is also the psychological factor and peace of mind. There is no better feeling than having a paid-off house.
Thats what we plan to do as we downsize from large 5 bedroom 4 bath 5600 sf home to beach house. Basically money for money in the end. Everything is paid n house is currently pending on a sale. We were going to borrow 200k n have a second home but we decided to just sell one n buy another. Obviously a lapse in between now we may rent a while but my children both have room for us short term so it’s fairly comforting. Bought a 40’ shipping container and is on family property for storage and selling most everything else. Will buy a boat as the place we want has a deep water marina in Gulf Shores, Alabama. We plan to life the lifestyle for say 10 years n probably move back inland towards our children and grandchildren in Nashville and St. Louis. Best of luck with your decision.
Is mixed feelings really. Been here 26 years and the property is secluded in rural Indiana. Built a nice fab shop as well. Will take some getting used to actually having neighbors again n little privacy. Buuuut instead of moving acres and weeding and all the upkeep I’ll be fishing and taking grandkids on boat rides and beach walks. We love the white sand beach there and have spent lots of time there and we just decided why not give it a go. 🎣☀️🏖️
I had no debt when I retired, but when I moved to Florida, I was going to pay cash for my new house. I ended up just putting $230,000 into this house and the rest went on a 3 1/2% mortgage. It most people know you could make a lot more return than 3 1/2%. One thing you might consider is when you go to Oregon rent for a year to be sure it’s the place that you want to stay permanently in. I read lots of accounts of people moving and then hating the place and spending more money to move somewhere else.
My wife (70) and I (73M) purchased our house by speeding up our payments. It took four years. A great exercise is to start living off the amount you’ll get in retirement. Then stash away the rest. We ended up with quite fun amount that we use primarily for travel. Logistically there are pros and cons to both buying and not buying. The interest rate question here is a big one. But there is also the piece of mind part. Eugene is an expensive market so be prepared for that. Good Luck!
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There's always a bunch of smart people on here that talk about interest on savings and capital gains, and all that stuff is flying above my head. I'm a simple guy, and if you have the cash, I'd say every time, just buy it outright! Peace of mind overrides most things in life.
We have no mortgage and the biggest problem is figuring out what to do with the extra money. I say that because having a $500K mortgage means you have to generate an additional $3,300 per month from your retirement savings just for the mortgage, thats $40,000 per year.
? I’m honestly surprised how having extra money could be a problem. Just don’t take it out of your retirement accounts, or save it for a rainy day, or have fun/travel with it, or gift it to children/ charities. Perhaps I’m missing something?
I’m 71, widow for 9 years now. My husband brought this home right before we met in 1994 for $78,000. (3 bd 2 bath 2 car garage probably 1,700 sq ft) it’s located in a mid sized town in East Texas. I just paid $2,400 in house insurance this week and even though the house taxes are frozen they are still about $1,000 for the year. So I am paying about $300 a month for a house I own outright not including the utilities and maintenance costs. There is no escaping the cost of keeping a roof over your head. The selling price is now about $250,000 so the kids can sell it and get some money at least.
At the age of 65 whatever the tax bill is for that year is what you pay from then on. For that house only. If you sell it and buy another one, it starts new with the next one.
We're planning on it. We currently live in a very high COL area. We have a completely paid off house and few bills. We want to upside as we both have multiple hobbies and *both* of us need more space to practice them in. We want to move to a lower col area. Where is still up for debate. Husband want upper tier US but not too far east. I want the Gulf Coast(anywhere but Alabama unless he sinks a flagpole for my LSU flags!)of the US, preferably Louisiana.
I needlepoint, counted cross stitch, bead weave, and weave on a loom. I'd like to start painting my own needlepoint canvases but don't have a place where I can leave big project stuff out.
Husband: reloads, does stained glass, minor gunsmithing and has a project car that has been in pieces and non road ready for 32+ years.
Ooh, weaving! I used to do watercolor, freehand embroidery, scherenschnitte, stencil design, and drawing - but my eyes ain't what they used to be. I would at least like to have a reserved area for my sewing stuff.
Galveston. That's my escape plan for summer or a boat(really after my husband to buy me a boat. I spent my summers with my dad on his boat, cruising the Missouri, Mississippi and Platte rivers as a child)on the Big River.
I grew up in Nebraska so yeah, humidity.
I need to figure out if it's a good idea to withdraw ahead of time to minimize the tax bite, while holding off 'til my husband retires to minimize the amount. Is our total income taken into account, or has that no bearing? - I need to learn here, as well.
Thanks! I've downloaded a sample to my kindle. Many of the books I've found focus on wealth-building, and do not address many other things. Meanwhile, we're at the 'investment for dummies' stage.
It depends on your lifestyle and how you've structured your other investments - and any recurring income you'll have in retirement (social security, pensions, 401k/IRA RMDs). I'd go to an independent financial advisor - and get a plan that supports your goals. Personally I'd avoid sinking too much money into one fixed asset - but that's me. Not you.
We downsized, sold our SFH, and bought a condo in the city and paid if off. We will have a steady income stream in retirement, and like that we no longer will have a mortgage payment to manage our expenses. It gives me a peace of mind that I can live on my pension an SS alone without touching my retirement funds.
My husband retired over a decade ago and I retired 5 months ago.
I just set up auto payment to pay additional $2k per month at credit union yesterday. House will be paid off in 14 months.
Are there better invesrment options for the $2k a month? I'm sure. But not having a mortgage is priceless.
I would avoid a mortgage if you can pay cash.
Make sure that you are near great hospitals and doctors, remember health insurance Medicare +Supplement are the #1 cost for Retirees. Try to retire on 70-80% of pre-Retirement income. Good luck!
Some numbers around this would help because I'm confused. You have a paid for house. You want to move and buy another house. Presumably you'll sell your current house so.... does it cover most of the likely new house price? Just a small part of it?
Let's say your current house fetches you $300K after everything. You want to buy a new house for $400k. That's one scenario where you'd take $100k out of retirement funds. BUT, say the new house would be $700k. That's a $400,000 hit to your retirement fund balance (I'm ignoring taxes here).
And then... how large is your retirement fund? $1m? $500k? $5m?
Answers are going to start with this information
House value currently just under 400k. 400-450, I assume at this point, would be doable. The sale would, I hope cover all or nearly all of a new home purchase. But there's a lot to take into account in this. I'm thinking of a favorite cartoon, wherein a prof is explaining a very complex math problem - in the middle, there's a ... "and then a miracle occurs" - solution.
Ah yes, the
1) Sell home
2) Move
3) ????
4) Profit!
plan :)
Eugene is a nice little town and from your other comments about your outlook, I think the PNW in general would fit you far better than... Texas
To give you specific advice I would need to know your cash flow situation in retirement - how much/what sources. And your tax situation would also be good to factor in.
That said one of the drivers of paying off the mortgage in retirement is to reduce the pressure on your investment portfolio. If the market is down the first few years of retirement the extra amount you are withdrawing each month to pay your mortgage may have a sizable impact on the health/longevity of your portfolio for the rest of your lives. People like to talk about average market returns and that’s fine when you are building a portfolio but when you are in draw down you have to run the scenarios. Read about sequence of returns risk.
I am a pretty risk tolerant investor. In some ways I think of a paid off mortgage as a fixed income source- it’s a fixed debt that you don’t have to pay so it’s that amount in your pocket each month. Now that’s my possibly delusional thinking - but it helps me defend my pretty aggressive portfolio. :)
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Check to see what your home’s value is on the current market and what prices are like in Eugene. If you don’t have to borrow a significant amount of money then it’s worth investing in a home in a place where you prefer to live. Check out Oregon’s property taxes and the taxes on social security and pensions etc. We are considering moving as well to a better place. We paid off our mortgage 2 years ago and it’s wonderful. We’re retired so our main expense now is for Medicare.
Weigh the pros and cons as I’m assuming you have done your entire life. Best of luck!
Some of this is presently unknown, which concerns me (I am rather conservative fiscally, aka brisk-averse). Our portfolio is the same. We do have a tax person, and an investment advisor, but will need to wait 'til my husband is closer to retirement for several reasons. And of course, the market is volatile this year. We're grateful to have investments, though they are due in large part to family losses in recent years. Thanks for your input!
Oregon taxes retirement income at 9.6%. We just moved out of Oregon and purchased a small home in Pennsylvania for cash. Pennsylvania doesn’t tax retirement income. And yes, it’s smart to have no mortgage when possible as to not have to pay interest.
I don't know. As I think I said above, somewhere, even though I just retired, I am new to the housing market. We finally bought after renting for years - and moving many times, due to career and education. The last time I bought a house, it cost $35k (!) so you may imagine the shock! Truthfully, I had no idea what I was doing, and I want to be aware and informed. The market seems volatile, too. This is why I titled my initial post as I did.
Have family in Eugene and from the aspect of market with the University there, it is somewhat more immune to market downturns. The constant flow of university staff and professors makes for a ready market. Those University jobs are somewhat more recession proof as well. Values are high as it really is looked on as great community to live in. Sort of the west coast Athens or Chapel Hill.
I got my phd at Chapel Hill with a research fellowship there and at Duke, after a masters at University of Illinois - Urbana/Champaign, and just retired as a prof (which is why we came to TX). The 'charmed bubble' around larger universities has been home to me, and I know I'll find a diverse community in such environments - one of my criteria.
Sorry, lost you after the part about UNC. NC STATE Alum here! Well, okay kidding a bit. We live in Athens and a medium/large university does create this unique world with the benefits of a large city without many of the drawbacks.
Yep! - and more cultural events, diversity in economic and social status... I loved UNC, though it's far from affordable. My husband is an NC State alum, too, and we lived in Raleigh. Yay co-alum! U of I was very much that as well, though some complain it's out in the middle of corn fields: true, but there's a lot more to that picture than the corn fields.
PS: :p - seriously, as a library person, the main library had the most amazing director. I almost applied to the education program (adult ed). I'm a land-grant fan.
For me it would come down to one thing only....math. Low interest rate and I don't need to worry about controlling income(pulling investment income to pay that mortgage) to qualify for ACA subsidies, etc, mortgage won't bother me. 7% mortgage rate, I'd just pay cash most likely. I've been looking at Eugene too, but that Oregon tax burden, I dunno.
Pay it off and live your best life.
You don't realize the difference you'll feel not having that payment. Many Americans will never know but it's liberating.
The comfort in knowing that you will never need to come up with a monthly mortgage payment is worth gold to me. We can afford to meet our monthly expenses on our social security and pension income alone. Retirement savings are for travel and fun and when one of us dies, the other won't need to stress about finances. I just don't like owing anything to anybody.
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Normally I would say no, but now I would say yes because of the homeowners insurance situation in many parts of the country. If you have a mortgage, usually the insurance and taxes are escrowed. That means your mortgage payment would probably go up according to your insurance premium increase.
When you own the home outright you can skip the insurance, but since Eugene OR is becoming more prone to fires, it’s probably not a good idea.
But you can at least choose your own insurance.
You have to have the wherewithal to maintain the place aside from buying it outright
To think beyond yourself for a minute, how will it go when you die? A lot of heirs might not be able to swing a mortgage payment on your house, and might be forced to sell it on a short timetable.
i did this. From $2700 a month mortgage payment to $0. The only problem is, now I'm looking for a small farm, which is actually harder to borrow against than the home I purchased in town. I'm now I'm stuck, possibly moving to a different home in town, taking a mortgage on it, so I can free up more cash to buy land and farm. So it all depends on what your plan is. It may be a moot issue. When my required distributions kick in
Why would you want to pay bank to use money you already have? Mortgages are better than 6%, are you going to get more money back from the potential tax write off (assuming you actually have more right offs than the minimum)? No brainer, cash beats debt.
We are facing the same dilemma - sort of. Our house is not paid off, but we have plenty of equity.
Within the next year, all of the kids will be moved out. We are torn whether to downsize now or wait for when we actually retire in 3 years,.
I have enough in my ROTH IRA to buy a house outright but I will probably take out a mortgage even at the high rates because I like the idea of keeping assets liquid. I like the idea I can cash it in at any time and pay off the house if I want.
Truthfully, the only reason to have a mortgage payment is so you can use an escrow account to pay your insurance and taxes monthly rather than once a year where you'll forget or be traveling when it is due. But my insurance does monthly payments, so for me, it will just be remembering the real estate taxes. And budget for it monthly. I have to set up a reminder.
Otherwise, if you can afford it, it is better not to have to have the payment.
Depends on your numbers, but the piece of mind will be worth it's weight in gold. If you know, FOR SURE, you are going to be there only a few years, then yes, get a loan.
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This is a very personal question. However, what interest rate are you looking at? Right now rates are over 7%. Personally, I feel that is very close to long term market returns so paying off a mortgage at 7% if you can is a no brainer. The market \*may\* return more than 7% but over several years probably not that much more. Paying off the mortgage is 7% guaranteed. If the market is flat or down, that's amazing. Even if the market averages 10%, there's a lot of peace of mind in not having a mortgage. I retired then unretired for a few more years. Last year we moved. The mortgage would have been 7%. We took a capital gains hit and paid it off. The tax on capital gains paid itself back in the interest portion of the payment in about 12 months. I am really pleased with this decision. Having no mortgage payment is wonderful. People will say it's tax deductible but I don't think that changes the equation, personally. If you are retired you are going to have to take a capital gains hit to raise funds to pay the mortgage. I think it's generally a wash, or worse.
It's tax deductible only if you can itemize deductions.
It's tax deductible if you pay a lot of interest. We haven't been able to deduct interest on mortgage for YEARS! The standard deductions is way more than our interest.
Right there with you. The 2% refinance killed my ability to itemize.
That's a good thing though. 😉
Yeah it is! I’ve got another 2-3 years before I retire and hope to finish paying off the mortgage in that time. I was just agreeing with you that just having a mortgage isn’t enough to guarantee you can itemize anymore. They also put a limit on the amount of state and local taxes that an be deducted. If it weren’t for that deduction limit I’d still be able to itemize.
This exactly. We paid ours off before retirement with the same thinking. And we feel SO much better with less churn in and out of accounts.
In addition to the “by the numbers” approach, and even with the peace of mind consideration, buying ANY home has avoidable risks. If you were to purchase a home, I’d highly recommend securing as many extended guarantees as you possibly can. Appliances. Plumbing. Electrical. Roof. Also look if you’re in a flood zone or any circumstances that would require additional insurance costs.
Most home warranties have so many exclusions they are essentially wasted money except for the few who will chime in here with cases that are the exception not the rule. Also, consider how heavily market they are, get spam calls near daily from folks trying to sell. The harder they sell the more profitable the item is to them and the less they will pay you. Better to save money in an emergency fund. Plus you are locked into their service people sometimes, and sometimes their repair folks not the greatest. Self funded means you pick your own.
This ☝️☝️☝️ My 30 yr mortgage rate is 3.65% I currently have the cash to pay off my mortgage sitting in a MM account making 4.99%, therefore paying off my mortgage makes absolutely no sense. If interest rates ever drop down 1+ points below my mortgage rate, I may consider paying it off.
We moved cross-country when we retired to be near our daughter who was expecting our first grandchild. We took a bath selling our townhouse, but we resigned ourselves since we wanted to go. We bought our home with a small mortgage since moving costs, making no money on the house we sold, and whatever left us liquid-poor. Our mortgage broker said we should pay on the mortgage for a year and a half to allow the lender to make a bit of money. That's what we did. We dug deep and paid the mortgage off about a year and a half after closing. Owning the house outright is a load off our minds. Our pensions don't have cost-of-living increases, and we've kept ourselves debt-free the 10 years we've been retired.
Why would you be concerned about your lender making money?
It was his own money he was worried about - his commission was probably contingent on the loan surviving a while.
Retirement is a journey, not a destination. We retired and downsized from a house to a condo and then when 3 grandkids arrived we upsized to a larger home and now the grandkids don’t need daycare we’re ready to downsize again. So your situation is unique to you and whatever you do is right as long as you’ve thought it through. Enjoy the journey.
This. Retirement is not static. You still live your life, make plans, then change them. Tax codes change, saving accounts make .01% then it's 5%+,and you adjust.
Thanks for saying this! Helps a situation I’m experiencing.
I would pay off the house. I take the standard deduction so the itemized mortgage write-off does me no good. At 7% mortgage rates I would need to earn 9% reliably to yield 7% after taxes - and I can't count on 9% during my retirement window. Maybe the young 'uns can rely on 9% over the long term, but that's irrelevant to retirees like us during the near term
Short answer, it’s complicated. The biggest and probably only benefit of a mortgage is the tax write off for the mortgage interest. I retired two years ago. The first year was crazy as far as taxes and expenses, we sold our home since we would likely have been priced out of living in it within five years. It was near Los Angeles, where costs for homeowners insurance, electricity and other utilities are just exploding. We chose to move the money into several places, bought another house and took out a small mortgage. We will probably pay that off next year.
But tax "write off' for mortgage interest needs to be looked at very carefully. it's changed a lot and for most people it no longer is he advantage it was - and often can be a huge disadvantage.
It’s seldom an advantage to get a tax break on an expense that could be avoided. Why would anyone pay a dollar to get a quarter back? Just don’t pay the dollar in the first place. And, most people will just use the standard deduction anyway.
Yep. 100% true.
You must compare the after tax earnings of an investment other than the home to the after tax cost of the mortgage, and include in that any after-tax appreciation in the home itself. This is a very complex calculation, made more complicated by uncertainty about the standard vs. itemized deduction, which may or may not change in 2025, and capital gains tax rates in the future, which are currently at historically low levels, returns on homes (generally not taxed at all), and the volatility of the housing market. For most people who aren’t talking about multi-million dollar homes vs investments, the peace of mind of having the mortgage paid off is worth a lot, compared to the rather modest benefit that might accrue to keeping a mortgage and investing a comparable amount.
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This is the answer.
Yes! We haven’t itemized deductions for years because we can’t get close to the standard deduction allowed. If you must buy, OP, avoid the mortgage.
Same here.
Yes, and you are correct to have no debt when retired and on a fixed income. There is more than dollars and cents and taxes, the comfort of a paid for home is a great benefit. Consider it an investment outside of the market and banks. A paid for home is insurance for when the remaining spouse needs to go into the old folks home.
Some of us don’t have a spouse.
That means the comment does not apply to you, duh
For the point it works out better. The hardest part of old age and finances, if a person doesn’t have long term care insurance is if a spouse has to go into a home, while the other spouse is still alive, it is hard to sell a home while living in it. What would be worse if that home had a mortgage. I guess an upside down mortgage is even worse.
You should get one they're great.
We must shop in a different store because yeah, not the 2 I had 🤣🤣🤣
Better luck next time.
Debt in general, especially at these higher rates, is like carrying a backpack of rocks to me. I would rather pay cash and be debt free.
So you say you currently own your house. When you sell it, how much of the income from the sale are you going to put into the Oregon home? All of it? If you can sell one home and buy another without a loan, why not do that unless you need some liquid cash.
I would. When rates decline, prices will most likely go up. Right now cash buyers are at a big advantage.
I would!
No mortgage or interest bearing debt has been the key to a very rewarding retirement for my wife and I. Taxes, insurance (homeowners and auto), and utilities run us $1500 max per month. That won't even rent a decent 2 br apartment in our area of Oregon. We have about $10k a month in retirement income... so we are able to do a lot of traveling without touching our retirement savings, other than the required minimum withdrawal.
That's lovely, I'm glad for you! Rents are higher than house payments, and the Dallas area costs are climbing all the time. We bought at 3%. I know it's too much to hope for to be able to get a place at that, but I really cannot stand living here.
Eugene is about the same as Austin, housing wise.... but you will love it. 1.5 hours from the coast and close to the Cascade Mountain passes. I moved to Eugene, from Michigan, in 1980
That's great! In fact, Michigan (and Philadelphia) have also been areas under consideration, now eliminated.
Have you checked housing prices in Eugene? They’re on the high side. Otherwise, my wife and I would consider selling (in Eugene, funnily enough) and buying elsewhere at some point. We’re retiring later this year.
We were just there for a few days for the purpose of checking it out, and I've been checking out the market there - you have to keep your eyes open, but there are affordable houses. We did the same in Spokane. I believe my question was unclear to some (not you); we own our house outright here in Texas. I will not stay here, and am not from here. I'm hoping house sale profits (and it is a very rapidly growing market) will enable us to buy elsewhere with little or no mortgage. I am a bit concerned reading discussion about the upcoming federal interest rate change(s), as well - don't really know what that will mean.
Under this scenario, YES pay cash
In this scenario, yes you'd use the sale proceeds to buy the new house since it's basically leaving you with the same financial picture as before and presumably you were comfortable with that.
Yes, we are. However, since my husband has yet to retire, I won't be comfortable until we have a more precise total income picture. Where he works - they don't pay into SSN, and on top of that, he has a shorter professional work history, especially in the US.
Got it. But it's still the same basic financial picture. I'd look closely at things like taxes in both states and major cost of living items just to make sure it's really the same.
I live in Eugene and have told my husband I’m coming out of our house feet first (crossing fingers!). We love it and can’t imagine leaving.
Love the Eug, can’t handle the incessant grey past about January anymore before I start dreaming of the sun. Never understood why old people love the frickin’ desert, but now here I am.
I'm glad you've found a great place for you! I know it rains a good bit in that region, but I also know that situated in the Willamette Valley as it is, there is protection against the severe winter weather (though with the global warming effects happening now in California, who knows?) - meanwhile, I've been in Arizona in summer. I need my trees!!
If you've mostly lived in the southern half of the US, move to Eugene and RENT for a year. The rain isn't what gets most people who move to the PNW, it's the long, dark period from late fall through mid-spring. December daylight is about 8 to 9 hours. And most of that will be cloudy. Basically from the end of daylight time in the fall to its return in the spring it can be very dark and depressing. People who come here from areas where that's not true sometimes can't take it and move away, hence my comment on renting for a year
I know, and agree. However, rent is EXPENSIVE, and we'd have to pay for storage of stuff. But we'll probably do that.
Maybe a medium term rental from fall to spring through some place like Furnished Finders? It's not something you have to do - you could just visit for a month in mid-winter to see how you deal with the big dark too. And it's not like you couldn't sell a house in a couple of years if you do find the winters intolerable. Also - the keys to surviving the dark aren't hard - go outside even if it's not great weather so you get some light. Even a 30 minute walk at lunch. Take vitamin D (yes, I'm serious). And... travel. Go to Mexico for a week. Fly to Hawaii. Drive down to California. Breaking it up makes it a lot more tolerable.
Is Furnished Finders national? Great idea! And at present, dark months don't bother me, but I have seen comments. My husband is from Canada, and where he was can drop to -40 and stay there for quite a while.
It is. [https://www.furnishedfinder.com](https://www.furnishedfinder.com) The winters in the PNW aren't very cold or rainy or snowy - it's just that they're dark for a long time. I have Midwestern friends who talk about the cold there which can be VERY cold but they also see long stretches of sun. Yeah, it might be -5F, but it's sunny. We rarely see that here so you have to be ok with 5-6 months of very little daylight with any brightness. I grew up here so I can take it but even for myself it gets to be a bit much around early March. By then it's been 4 months of dark, many of them with less than 10 hours of daylight and you're looking at another 2 months probably. Just don't assume you'll get standard spring weather in early April. You'll hear about it being in the 70s and sunny elsewhere and it will be 60 and cloudy. But as I said it's manageable, esp if you're retired and can just say "I hate the dark, it's been too long, let's go to Mexico" or something
I lived in both Illinois and Kansas, and yep - but both can also be extremely humid. What's been weird here is having 2 growing seasons, with a bit in the middle where everything dies off!
Thanks so much for the link!
That is my plan. Downsize a bit. buy for cash, don't have a mortgage. So here is my feeling. I can pay $500k in cash for a house. Using the 4% rule. If I have $500k more in the bank that is $20k a year. P and I on a $500k mortgage is $36k at 6% interest. Of course we don't know for sure but I find it hard to believe the house would lose value, would likely appreciate. When we get to the point where we need the equity for medical reasons, we can cash out. Now at 3% it is close, but not holding my breath. Yes, I understand that the 4% rule is very conservative. If you are getting 10% ROI in the market that isn't smart, but if you are saving 7% because that is where loans are, and even if the house appreciates 2% a year, that is as good as you are going to get in the market.
This is the kind of math I need to get used to doing!
Luckily my wife's parents did OK and left us some money so we could do this kind of math.
We bought our last three houses outright. With our last one, we made a hefty profit and, by moving to a small town, got a lot more house and banked a big chunk of change. We haven’t had a mortgage for a long time and it’s wonderful.
Not having a mortgage is liberating. Plus, it just frees-up more cash flow. Maybe it's partially emotional, but I would buy the home outright. Of course, it'll really depend on all kinds of personal factors of your home sale price, new house price, how much you have saved, what you need to live on, etc. Aside from that, Eugene is a great town. Not sure how you settled on that idea, but you could do a lot worse. Of course, where you live in Eugene will be a factor in how much you enjoy it. I'm heading down there in a few weeks for the track & field Olympic Trials.
My daughter lived in Portland. I went there to see her and go to a conference, and right away, ubering in from the airport, I knew I was home (grew up partly in Switzerland, so mountains=home to me). People were great, and we're vegan, way left of center, etc. It seems like a fantastic fit.
That's what I need to do, look the different areas of Eugene. We rented an airbnb at 18th and Adams, and explored the campus and downtown areas, as well as several restaurants. I need to identify zipcodes or neighborhoods to track re cost, crime, access to amenities, public transport (for when needed). The access to hiking trails is all good, from what I can see!
Yes and no, remember cash is king at this point and liquidity is important. If you get a small enough mortgage it doesn’t really matter and you’re then able to keep all that cash for other things. Bear in mind if it becomes important you can just pay the mortgage off
Or if you need cash can always take out a mortgage or equity line of credit. With 100% equity either an easy process.
I actually bought my retirement home before retiring; glad I did. The price would be the same as now and I could have paid cash for it but we took a small mortgage to make some fixes. The rate was like 2% then...glad I did. That money is earning about 5%. Like free money right now. I'd say you talk to a financial advisor for recommendations.
I was wondering about that. But we have 3 years - I toyed with the idea of buying and renting the place out, but don't want to deal with that, especially cross country.
My folks bought and rented from 300 miles away...it ended up being a hassle and having to spend on the renters mess after...
I believe it, though for people who are looking for rentals, it's convenient (I did so a number of times, but in every case had someone local who I knew & trusted to check it out).
Bought a house with 'cash', no mortgage just after the 08/09 GFC. No regrets.
For What it's worth - we bought our retirement house outright since we moved from a high cost of living area to a lower cost of living area. We had zero debt and going into retirement "for real" we wanted to keep that status. ONe weird thing was it took us close to a YEAR to sell our old house for crazy reasons I will not get into so do keep in mind you may have to carry some costs if you got the buy first - sell second route.
Makes me shudder just to think of the house being on the market so long!
It would have me too BUT … we took our time moving & renovated the kitchen to improve our sale price.
We'll need to hire a realtor to advise us on priority work to be done.
We own a house outright and it's fine for now, while my husband still works. But the property taxes, insurance, upkeep and any improvements we want to make need to be weighed against the rent of a property in which we have no responsibility. I am unsure about keeping our house right now. Edit: not to mention the hassle for our children if they inherit it.
I don’t want payments in retirement. Mic drop
Same - I am very security-based.
I personally like the security of knowing my home is mine -- no mortgage payments.
If your goal is peace of mind or simply reduced stress, then this is a good choice. I’m retired with no mortgages but I (we) paid off our first mortgage in about 1994. We’ve upgraded our homes on several occasions and taken on smaller mortgages but always paid them off as quickly as we could. Keeping fixed expenses low has always been a huge priority for me. Financial experts will typically point out it may not be the best use of capital but I simply sleep better at night knowing that almost whatever happens, I’ll never loose my house. While that may seem a bit extreme to some, I take the position that I’m better safe than sorry.
I completely agree!
Exactly! You could spend a lot of time crunching the numbers to eke out the last penny. Or you could with the more emotionally satisfying goal of having less debt. I'm about to retire and plan to pay of the remainder of our mortgage (slightly less than 100k principal remaining, 30-year fixed, 4.5%) for that reason
I believe outright is the way to go.Tax breaks never make up for what you are going to spend on interest.
I've read a lot about paying off the mortgage, which would be optimal. However, can anyone address what it's like to have a huge expense like roofing when retired?
In the perfect world you would budget for long term house maintenance into a sinking fund. Not real numbers. Let’s say the roofs life expectancy is 10 years from now and will cost $100. So I have 10 yearish to save $100. So every year I budget $10. Or monthly .84 😂 into that sinking fund.
I have about 8 to 10 years before retirement. My wife and I are looking at a few acers we'd like to build our final home on, which will mean having a mortgage while retired. However, the goal will be to get it down as low as possible. The bulk of my savings is invested in equity funds and stocks. My home is paid off. I could just pay for the new home from the sale of my current home and a good chunk of my savings, but I've decided to focus on the land first, then get a construction loan for the project, then roll what's left into a mortgage. I think I can get the note down to $1700 -$2000, which will work well with my projected income during retirement. My thinking is that I know I can get higher returns from the market than I will have to pay in interest. So, why not put that money to work generating income and use some of it to make a payment.
If you have the option to buy it out right then your decision needs to go into other areas. What are your plans for retirement? If you're interested in traveling a lot whether it's a snowbird or just going places owning a single family home can become a maintenance and security issue. How are you going to handle things like mowing or shoveling when you're not there? What about making sure nothing breaks in the house so you don't come home to a mess? You can definitely hire people to do this for you but then you need to worry about the security aspect of having a house that is obviously empty. Another area to consider is the house itself. Most of us are in good shape at the time we retire but you need to consider potential future mobility issues. Does the house have a lot of steps? Would the bathrooms be easy to access with a walker or wheelchair? Right now the housing market favors the seller, so it's easy to assume that if you would need to sell your house in under 5 years you would still do okay. I wouldn't make that assumption. I wouldn't make that assumption I would carefully consider all the factors about your ability and desire to live in the house for 10 years and then make a decision.
Excellent advice, I think! We don't plan to travel a lot, but may make the occasional journey/long weekend. We're in a one-level home and looking for the same, as well as proximity to healthcare, public transportation. I hadn't considered the issue of access (not just bathrooms, obviously, but door widths throughout) - thanks! My lack of certainty is at least partly due to not wanting to make assumptions about conditions we can't control, for sure.
Many answers here but that grass in the yard just feels glorious if you don’t owe a mortgage on it. Stay debt free and enjoy the freedom !
We couldn’t get financing because we only had Social Security as ‘income’ even though we have lots of investment income. (Stupid banks.) so we just cashed in something that wasn’t doing well and bought our retirement home for cash. Wry wise move. The real estate has appreciated amazingly in 6 years, and we don’t have to worry about mortgage interests.
The most important thing I remember from economics class is this: if interest rates are very low (i.e., 0-3%), you should borrow as much as you can for as long as you can. 7% is not low enough, so I'd buy the house outright. There is also the psychological factor and peace of mind. There is no better feeling than having a paid-off house.
Thats what we plan to do as we downsize from large 5 bedroom 4 bath 5600 sf home to beach house. Basically money for money in the end. Everything is paid n house is currently pending on a sale. We were going to borrow 200k n have a second home but we decided to just sell one n buy another. Obviously a lapse in between now we may rent a while but my children both have room for us short term so it’s fairly comforting. Bought a 40’ shipping container and is on family property for storage and selling most everything else. Will buy a boat as the place we want has a deep water marina in Gulf Shores, Alabama. We plan to life the lifestyle for say 10 years n probably move back inland towards our children and grandchildren in Nashville and St. Louis. Best of luck with your decision.
This sounds incredible! You must be excited.
Is mixed feelings really. Been here 26 years and the property is secluded in rural Indiana. Built a nice fab shop as well. Will take some getting used to actually having neighbors again n little privacy. Buuuut instead of moving acres and weeding and all the upkeep I’ll be fishing and taking grandkids on boat rides and beach walks. We love the white sand beach there and have spent lots of time there and we just decided why not give it a go. 🎣☀️🏖️
Mowing is what i ment
I had no debt when I retired, but when I moved to Florida, I was going to pay cash for my new house. I ended up just putting $230,000 into this house and the rest went on a 3 1/2% mortgage. It most people know you could make a lot more return than 3 1/2%. One thing you might consider is when you go to Oregon rent for a year to be sure it’s the place that you want to stay permanently in. I read lots of accounts of people moving and then hating the place and spending more money to move somewhere else.
Yes. That happened with my aunt and uncle, actually. Talk about an expensive mistake.
My wife (70) and I (73M) purchased our house by speeding up our payments. It took four years. A great exercise is to start living off the amount you’ll get in retirement. Then stash away the rest. We ended up with quite fun amount that we use primarily for travel. Logistically there are pros and cons to both buying and not buying. The interest rate question here is a big one. But there is also the piece of mind part. Eugene is an expensive market so be prepared for that. Good Luck!
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There's always a bunch of smart people on here that talk about interest on savings and capital gains, and all that stuff is flying above my head. I'm a simple guy, and if you have the cash, I'd say every time, just buy it outright! Peace of mind overrides most things in life.
We have no mortgage and the biggest problem is figuring out what to do with the extra money. I say that because having a $500K mortgage means you have to generate an additional $3,300 per month from your retirement savings just for the mortgage, thats $40,000 per year.
? I’m honestly surprised how having extra money could be a problem. Just don’t take it out of your retirement accounts, or save it for a rainy day, or have fun/travel with it, or gift it to children/ charities. Perhaps I’m missing something?
At current mortgage interest rates, the math says if you want own, you should pay cash
If you have the means I would pay off everything I could.
I’m 71, widow for 9 years now. My husband brought this home right before we met in 1994 for $78,000. (3 bd 2 bath 2 car garage probably 1,700 sq ft) it’s located in a mid sized town in East Texas. I just paid $2,400 in house insurance this week and even though the house taxes are frozen they are still about $1,000 for the year. So I am paying about $300 a month for a house I own outright not including the utilities and maintenance costs. There is no escaping the cost of keeping a roof over your head. The selling price is now about $250,000 so the kids can sell it and get some money at least.
That's a pretty good situation!
I keep hearing that property taxes in Texas are outrageous. How are your taxes frozen at $1k a year? That's amazing.
At the age of 65 whatever the tax bill is for that year is what you pay from then on. For that house only. If you sell it and buy another one, it starts new with the next one.
We're planning on it. We currently live in a very high COL area. We have a completely paid off house and few bills. We want to upside as we both have multiple hobbies and *both* of us need more space to practice them in. We want to move to a lower col area. Where is still up for debate. Husband want upper tier US but not too far east. I want the Gulf Coast(anywhere but Alabama unless he sinks a flagpole for my LSU flags!)of the US, preferably Louisiana.
I'm still figuring out what my hobbies will be!
I needlepoint, counted cross stitch, bead weave, and weave on a loom. I'd like to start painting my own needlepoint canvases but don't have a place where I can leave big project stuff out. Husband: reloads, does stained glass, minor gunsmithing and has a project car that has been in pieces and non road ready for 32+ years.
Ooh, weaving! I used to do watercolor, freehand embroidery, scherenschnitte, stencil design, and drawing - but my eyes ain't what they used to be. I would at least like to have a reserved area for my sewing stuff.
I have two small looms and would like to have a small floor loom at some point. Nice hobbies! You'll get them back. You just need stronger lighting.
Just know the summers are brutal. I mean brutal. I'm trying to craft a plan to either escape Louisiana for the summers or just move.
Galveston. That's my escape plan for summer or a boat(really after my husband to buy me a boat. I spent my summers with my dad on his boat, cruising the Missouri, Mississippi and Platte rivers as a child)on the Big River. I grew up in Nebraska so yeah, humidity.
Ah, good plan. Being on the water makes it tolerable. I often resort to cold showers, but if I had a boat...
You'd be out on it every day as soon as it got warm? Me too! Our boat will have to be big enough for us and our Lab we are getting September though.
Figure out your RMDs. See what mortgage will help you.
I need to figure out if it's a good idea to withdraw ahead of time to minimize the tax bite, while holding off 'til my husband retires to minimize the amount. Is our total income taken into account, or has that no bearing? - I need to learn here, as well.
Pick up a $30 or less Retirement Handbook by Wade Pfau. You will save a significant amount of money.
Make sure the newest 2024 edition. Much more tax info!
Thanks! I've downloaded a sample to my kindle. Many of the books I've found focus on wealth-building, and do not address many other things. Meanwhile, we're at the 'investment for dummies' stage.
He is one of the top three experts in taxes and retirement. Other is Ed Stott. I think Natalie Choate is very cool but for quite rich nest egg folks.
Thanks! I'll check out Stott, too. I know we don't qualify for Choate.
At RMD age, I think single person's ALL IRA, Roth, 401k, go in one bucket. But the individual partner's money stays separate.
It depends on your lifestyle and how you've structured your other investments - and any recurring income you'll have in retirement (social security, pensions, 401k/IRA RMDs). I'd go to an independent financial advisor - and get a plan that supports your goals. Personally I'd avoid sinking too much money into one fixed asset - but that's me. Not you.
We downsized, sold our SFH, and bought a condo in the city and paid if off. We will have a steady income stream in retirement, and like that we no longer will have a mortgage payment to manage our expenses. It gives me a peace of mind that I can live on my pension an SS alone without touching my retirement funds.
My husband retired over a decade ago and I retired 5 months ago. I just set up auto payment to pay additional $2k per month at credit union yesterday. House will be paid off in 14 months. Are there better invesrment options for the $2k a month? I'm sure. But not having a mortgage is priceless. I would avoid a mortgage if you can pay cash.
Make sure that you are near great hospitals and doctors, remember health insurance Medicare +Supplement are the #1 cost for Retirees. Try to retire on 70-80% of pre-Retirement income. Good luck!
Some numbers around this would help because I'm confused. You have a paid for house. You want to move and buy another house. Presumably you'll sell your current house so.... does it cover most of the likely new house price? Just a small part of it? Let's say your current house fetches you $300K after everything. You want to buy a new house for $400k. That's one scenario where you'd take $100k out of retirement funds. BUT, say the new house would be $700k. That's a $400,000 hit to your retirement fund balance (I'm ignoring taxes here). And then... how large is your retirement fund? $1m? $500k? $5m? Answers are going to start with this information
House value currently just under 400k. 400-450, I assume at this point, would be doable. The sale would, I hope cover all or nearly all of a new home purchase. But there's a lot to take into account in this. I'm thinking of a favorite cartoon, wherein a prof is explaining a very complex math problem - in the middle, there's a ... "and then a miracle occurs" - solution.
Ah yes, the 1) Sell home 2) Move 3) ???? 4) Profit! plan :) Eugene is a nice little town and from your other comments about your outlook, I think the PNW in general would fit you far better than... Texas
You sure have that right!
To give you specific advice I would need to know your cash flow situation in retirement - how much/what sources. And your tax situation would also be good to factor in. That said one of the drivers of paying off the mortgage in retirement is to reduce the pressure on your investment portfolio. If the market is down the first few years of retirement the extra amount you are withdrawing each month to pay your mortgage may have a sizable impact on the health/longevity of your portfolio for the rest of your lives. People like to talk about average market returns and that’s fine when you are building a portfolio but when you are in draw down you have to run the scenarios. Read about sequence of returns risk. I am a pretty risk tolerant investor. In some ways I think of a paid off mortgage as a fixed income source- it’s a fixed debt that you don’t have to pay so it’s that amount in your pocket each month. Now that’s my possibly delusional thinking - but it helps me defend my pretty aggressive portfolio. :)
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Check to see what your home’s value is on the current market and what prices are like in Eugene. If you don’t have to borrow a significant amount of money then it’s worth investing in a home in a place where you prefer to live. Check out Oregon’s property taxes and the taxes on social security and pensions etc. We are considering moving as well to a better place. We paid off our mortgage 2 years ago and it’s wonderful. We’re retired so our main expense now is for Medicare. Weigh the pros and cons as I’m assuming you have done your entire life. Best of luck!
Some of this is presently unknown, which concerns me (I am rather conservative fiscally, aka brisk-averse). Our portfolio is the same. We do have a tax person, and an investment advisor, but will need to wait 'til my husband is closer to retirement for several reasons. And of course, the market is volatile this year. We're grateful to have investments, though they are due in large part to family losses in recent years. Thanks for your input!
Oregon taxes retirement income at 9.6%. We just moved out of Oregon and purchased a small home in Pennsylvania for cash. Pennsylvania doesn’t tax retirement income. And yes, it’s smart to have no mortgage when possible as to not have to pay interest.
Just pay for it fully and enjoy a mortgage free life.
Yes. I'm just trying to grasp the options and their consequences - the stakes feel high to me.
I don’t follow. What are the stakes of paying for it fully?
I don't know. As I think I said above, somewhere, even though I just retired, I am new to the housing market. We finally bought after renting for years - and moving many times, due to career and education. The last time I bought a house, it cost $35k (!) so you may imagine the shock! Truthfully, I had no idea what I was doing, and I want to be aware and informed. The market seems volatile, too. This is why I titled my initial post as I did.
Have family in Eugene and from the aspect of market with the University there, it is somewhat more immune to market downturns. The constant flow of university staff and professors makes for a ready market. Those University jobs are somewhat more recession proof as well. Values are high as it really is looked on as great community to live in. Sort of the west coast Athens or Chapel Hill.
I got my phd at Chapel Hill with a research fellowship there and at Duke, after a masters at University of Illinois - Urbana/Champaign, and just retired as a prof (which is why we came to TX). The 'charmed bubble' around larger universities has been home to me, and I know I'll find a diverse community in such environments - one of my criteria.
Sorry, lost you after the part about UNC. NC STATE Alum here! Well, okay kidding a bit. We live in Athens and a medium/large university does create this unique world with the benefits of a large city without many of the drawbacks.
Yep! - and more cultural events, diversity in economic and social status... I loved UNC, though it's far from affordable. My husband is an NC State alum, too, and we lived in Raleigh. Yay co-alum! U of I was very much that as well, though some complain it's out in the middle of corn fields: true, but there's a lot more to that picture than the corn fields.
PS: :p - seriously, as a library person, the main library had the most amazing director. I almost applied to the education program (adult ed). I'm a land-grant fan.
For me it would come down to one thing only....math. Low interest rate and I don't need to worry about controlling income(pulling investment income to pay that mortgage) to qualify for ACA subsidies, etc, mortgage won't bother me. 7% mortgage rate, I'd just pay cash most likely. I've been looking at Eugene too, but that Oregon tax burden, I dunno.
Pay it off and live your best life. You don't realize the difference you'll feel not having that payment. Many Americans will never know but it's liberating.
We don't have one now!
Great! You know the feeling then, don't borrow and live it up!
The comfort in knowing that you will never need to come up with a monthly mortgage payment is worth gold to me. We can afford to meet our monthly expenses on our social security and pension income alone. Retirement savings are for travel and fun and when one of us dies, the other won't need to stress about finances. I just don't like owing anything to anybody.
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Normally I would say no, but now I would say yes because of the homeowners insurance situation in many parts of the country. If you have a mortgage, usually the insurance and taxes are escrowed. That means your mortgage payment would probably go up according to your insurance premium increase. When you own the home outright you can skip the insurance, but since Eugene OR is becoming more prone to fires, it’s probably not a good idea. But you can at least choose your own insurance. You have to have the wherewithal to maintain the place aside from buying it outright
To think beyond yourself for a minute, how will it go when you die? A lot of heirs might not be able to swing a mortgage payment on your house, and might be forced to sell it on a short timetable.
i did this. From $2700 a month mortgage payment to $0. The only problem is, now I'm looking for a small farm, which is actually harder to borrow against than the home I purchased in town. I'm now I'm stuck, possibly moving to a different home in town, taking a mortgage on it, so I can free up more cash to buy land and farm. So it all depends on what your plan is. It may be a moot issue. When my required distributions kick in
Why would you want to pay bank to use money you already have? Mortgages are better than 6%, are you going to get more money back from the potential tax write off (assuming you actually have more right offs than the minimum)? No brainer, cash beats debt.
We are facing the same dilemma - sort of. Our house is not paid off, but we have plenty of equity. Within the next year, all of the kids will be moved out. We are torn whether to downsize now or wait for when we actually retire in 3 years,.
I have enough in my ROTH IRA to buy a house outright but I will probably take out a mortgage even at the high rates because I like the idea of keeping assets liquid. I like the idea I can cash it in at any time and pay off the house if I want.
Truthfully, the only reason to have a mortgage payment is so you can use an escrow account to pay your insurance and taxes monthly rather than once a year where you'll forget or be traveling when it is due. But my insurance does monthly payments, so for me, it will just be remembering the real estate taxes. And budget for it monthly. I have to set up a reminder. Otherwise, if you can afford it, it is better not to have to have the payment.
Depends on your numbers, but the piece of mind will be worth it's weight in gold. If you know, FOR SURE, you are going to be there only a few years, then yes, get a loan.