Reducing This Single Action Might Slash Your Yearly Retirement Costs by $13,800
Retiring without a mortgage weighting on your shoulders can make a substantial difference in your retirement income. This is clearly demonstrated by UMass Boston's Elder Index, which reveals that homeowners with a mortgage spend an average of $1,835 per month on housing, while those without one only pay around $685 monthly.
The hard truth is that housing costs can be a significant drain on your retirement savings. However, there are strategies to mitigate this expense, even if you can't pay off your mortgage before retiring.
Embrace the Mortgage-Free Life if You Can
If you have the means, eliminating your mortgage before retiring can save you a significant chunk of change each month. The average mortgage payment for older adults was $1,470 in 2022, according to a Harvard University study. Imagine having that extra cash in your pocket every month!
If Not, there are Options
But life isn't always as ideal as we'd like it to be. If you're not able to pay off your mortgage before retiring, there are still ways to reduce your housing costs.
Refinancing
If you're set on staying in your current home, consider refinancing your mortgage when interest rates are low. Refinancing can potentially reduce your monthly payment, but keep in mind that it may extend the loan's term and increase your total interest paid.
Downsize or Move
If you're willing to move, consider relocating to a more affordable area. Don't forget to factor in local costs of living and potential savings when making your decision. And remember, just because a place has a lower cost of living, it doesn't mean it's a good fit for you.
Keep the Mortgage
If you're happy with your current living situation and can comfortably afford your mortgage, keep it. Just be sure to factor it into your retirement budget.
No matter what you choose, the key is to plan ahead. Consider your financial situation, priorities, and lifestyle to make the best decision for you. Consult with a financial advisor for personalized advice tailored to your needs.
And remember, every penny saved is a penny earned. So whether you're mortgage-free or not, every step you take to reduce your housing expenses is a step towards a more secure and comfortable retirement.
Retiring without a mortgage can significantly boost your retirement income, as demonstrated by the UMass Boston's Elder Index showing a $1,150 difference in housing costs monthly between homeowners with and without mortgages. Housing costs can be a substantial drain on retirement savings, with the average mortgage payment for older adults being $1,470 in 2022. If you can't pay off your mortgage before retiring, you still have options to reduce housing expenses, such as refinancing when interest rates are low, downsizing to a more affordable neighborhood, or keeping the mortgage if you can comfortably afford it.
