s/o Retirement & Mortgage/Renting

[K&Rs Mom]

Is having a paid off house going to be a huge help in being able to have a stable retirement? We could have our house paid off in less than 10 years, which puts us in our mid-40s. But we'd still owe taxes, insurance, and repair/maintenance, so it's not like we'd be living here for free. We're planning to move (if the place ever sells), and rent, at least for now. We debate back & forth whether it's worth it to ever buy again. I know having a fully paid house is part of the usual consideration of planning for retirement, but since you still don't have a *free* place to live, how important is it?

[LMA]

Is having a paid off house going to be a huge help in being able to have a stable retirement? We could have our house paid off in less than 10 years, which puts us in our mid-40s. But we'd still owe taxes, insurance, and repair/maintenance, so it's not like we'd be living here for free. We're planning to move (if the place ever sells), and rent, at least for now. We debate back & forth whether it's worth it to ever buy again. I know having a fully paid house is part of the usual consideration of planning for retirement, but since you still don't have a *free* place to live, how important is it?

 

Many retired folks downsize to a cheaper town or a cheaper place such as a condo. I find that after retirement, many people can't pay higher property taxes or maintain the house.

[kalanamak]

With the interest rates you can get now, I wouldn't be paying down a loan if I weren't already fully funding all retirement accounts (I'm talking about pre-tax donations or Roths).

[StephanieZ]

Yes, I think having a paid-for home is an important retirement goal if it is feasbile.

 

If you have $1,000,000+ per person in retirement savings (by the time of retirement) and have long term care insurance in place as well, then I think whether you have a paid-for home or not is less important. But, if you don't expect to be that flush, then I think it is pretty important to own your home outright before retirement.

 

We are refinancing our home right now to a 15 year mortgage with just that in mind (getting it paid off before dh is 60 instead of when he is in his 70s).

 

Yes, you will still have some home-related expenses, but you will also have the assurance that you won't be forced to move suddenly (as can happen in a rental), and you will be able to make modifications/ramps/etc to your home if you need to for medical reasons.

 

Note that homes have many special protections tax-wise, bankruptcy-wise, Medicaid-wise, etc. Also, seniors get big tax breaks in many states on property taxes, income taxes, etc.

 

If you were to downsize at some point, you'd have some extra cash (yay!), and that is all good.

 

You can also use a reverse mortgage as part of your retirement planning if your total assets are tight. For instance, you could plan for your cash savings to be spent-down by age 85, then use a reverse mortgage at age 85 to fund the remainder of your years if you are lucky enough to live that long.

 

So, really, I don't know that it matters if you get it paid off before a certain age, but I certainly think that it is a worthy goal as part of the rest of your retirement planning.

[*lifeoftheparty*]

Maybe it's because of where I live, but to me this is a no brainer.

 

My mortgage on my townhouse is just under $1900 a month, that includes property taxes (about $300) and insurance (less than $50).

 

The same townhouses in this neighborhood rent for $2000 a month.

 

So, assuming we stay in this house until retirement, and just using current #'s....

 

- If the house is paid off, we basically pay $350 plus maintenance

 

- To rent the same thing would be $2000 a month, plus renters insurance

 

So, yeah, it makes a lot more sense to pay off a house than to continue to rent. Right???

 

Are there locations where this doesn't make sense??? I don't understand.

 

My mom's house in Georgia, aka. the sticks, has a mortgage of $650 plus property taxes, which are at least half of what I pay.

 

To rent that same house would be at least $800. So again, paying, what, $150 plus maintenance, seems a lot cheaper than $800.

 

It seems that rent prices keep rising and rising... I don't know that I would want to do that with my retirement money.

[elegantlion]

Another consideration is if you continue to rent you are at the mercy of what the market is doing. If rents are high, you'll be paying more. I don't foresee rental prices decreasing.

 

If you own your home outright you can shift your expenses to covering property taxes, insurance, and maintenance and not be as subject to increases. It would be easier to stick to a budget that may not increase.

 

Another consideration is leaving something to your children. It may not be a lot of inheritance, but if planned well it can be something. This is appealing to me as someone who hasn't been able to save a lot over the years. This would take some foresight and speculation about how a neighborhood might evolve.

 

Our home should be paid off before retirement. It's a great house, I can see living here for many years. It's not in our ideal location. We typically get wanderlust every 5 years and move. That won't be an option now as I really want to live in a house that is really ours. All of this is strictly my opinion from thinking about the same issue.

[QueenCat]

With the interest rates you can get now, I wouldn't be paying down a loan if I weren't already fully funding all retirement accounts (I'm talking about pre-tax donations or Roths).

 

That's pretty much our approach.... fully fund the 401k and IRAs. Interest is so low on the mortgage... but we will not have a mortgage when we hit full retirement.