The Cash Flow Clock: For Retirees - Book - Page 94
The Cash Flow Clock
asset that can and should significantly increase in
value.
Many feel compelled to pay off their mortgage before
they retire. If they have $150,000 in a checking
account earning zero interest and a mortgage of
$100,000 at 7%, then paying the mortgage off is
probably a good idea.
If they have $30,000 in the bank and $500,000 in a
traditional IRA with a $300,000 mortgage at 2.5%,
then it is probably not worth paying high taxes just to
save a little bit of interest, especially if we can get
higher rates of return on our assets and if we have
enough income to cover the payments.
In some cases, our mortgage is already paid off but
our income is not sufficient to cover our expenses. A
reverse mortgage is generally not a good idea. But it
is also not a good idea for older retirees (typically
widows) to deprive themselves just so that they can
leave a paid off house to their beneficiaries. As with
any financial decision, leveraging the equity in your
home should be carefully considered while taking
into account all of the pros and cons. It is not an
ideal option but it may be better than the alternative.
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