I have always thought that paying off the mortgage was a key step on the road to retirement. Yet more and more seniors are quitting the work force with their mortgage still outstanding.
In theory, if you have enough pension, Social Security and investment income to service your mortgage, there's nothing wrong with carrying that debt into retirement. In practice, making those mortgage payments will likely crimp your retirement lifestyle -- and leave you in a nasty tax trap.
What trap? To pay the mortgage company, you will probably have to make larger retirement-account withdrawals, which will be taxable. This extra income could, in turn, trigger taxes on your Social Security benefit.
To be sure, this double tax whammy will be partly offset by the mortgage-interest tax deduction. But if you are near the end of your mortgage, your monthly payment may include relatively little mortgage interest, so the tax benefit will be modest.
In fact, your itemized deductions may be barely above your standard deduction.
An Introduction
Hi. Welcome to BourGroup and my blog. Phil
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.