Less Common For Retirees to Pay off Mortgages (2024)

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Less Common For Retirees to Pay off Mortgages? ›

Today, the oldest baby boomers (born between 1946 and 1951) are less likely to have paid off their homes than previous generations. Another study revealed that 44% of 60- to 70-year-old homeowners are carrying mortgage into retirement, and 32% expect it will take them more than eight years to pay it off.

Additionally, if pulling money from a tax-advantaged retirement plan such as a 401(k), 403(b), or IRA during retirement will push you into the next tax bracket, you may want to forgo paying down your mortgage and instead put the money into savings.

Survey finds that 44 percent of Americans are still paying for their home when they retire. Some retirees living on a fixed income still face a monthly payment on their homes.

Key Takeaways. Paying off a mortgage can be smart for retirees or those who are just about to retire if they're in a lower income tax bracket, It can also benefit those who have a high-interest mortgage or who don't benefit from the mortgage interest tax deduction.

But with nearly two-thirds of retirement-age Americans having paid off their mortgages, it means that the average age they have gotten rid of that debt is likely in their early 60s. Stats from 538.com, for example, suggest the age is around 63.

Orman explained that if you have a 30-year mortgage and you've already made payments for 14 years, you should make it a point to get a refinanced mortgage paid off in 16 years. Otherwise, if you refinance for another 30 years, you'll end up paying for your mortgage with interest for 44 years in total.

Completing a mortgage payoff early could save you a bundle of money, not to mention years of not having a big payment hanging over your head each month, according to Dave Ramsey, financial guru, author and host of “The Dave Ramsey Show.”

“A life free from mortgage payments is psychologically liberating, but a well-funded retirement is essential for long-term financial security and peace of mind.”

Nationally, a little more than 15 million homeowners 55 to 74 years old don't have a mortgage compared to about 17.7 million who do. For comparison, about 9.6 million homeowners 65 and up have a mortgage, while more than 16 million (16,184,634) don't.

Mortgage debt remains uncommon among homeowners age 65-plus relative to their younger counterparts; in fact, the fraction of homeowners age 65-plus who had a mortgage in 2022 (34 percent) was less than half that of homeowners under age 65 (70 percent) ³.

Why does Dave Ramsey say pay off a mortgage? ›

As Ramsey pointed out, paying more than the minimum amount due each month can cut down on the total amount of interest paid. This is because more of your hard-earned money is going toward the principal balance rather than the interest. Paying early and often also can lower the overall loan term.

You may not want to pay off your mortgage early if you have other debts to manage. Credit cards, personal loans and other types of debt usually carry higher interest rates than your mortgage interest rate. Remember, the higher the interest rates, the faster your accounts accrue debt.

If you're retired, any pre-tax money taken out of your 401(k) or IRA is treated as income. So, the more you withdraw in order to pay off your mortgage, the more potential tax burden you may face.

Age doesn't matter. Counterintuitive as it may sound, your loan application for a mortgage to be repaid over 30 years looks the same to lenders whether you are 90 years old or 40.

Nearly 40% of homeowners in the country now own their homes outright, marking a record high in mortgage-free ownership as of 2022, Bloomberg reported Friday (Nov. 18). This trend is particularly prominent among baby boomers, who capitalized on low interest rates to refinance their mortgages, according to the report.

In 2022, researchers found that just over 40 percent of homeowners older than 64 had a mortgage, a jump from roughly 25 percent a generation ago. Ultralow mortgage rates were a big driver of the increase, said Jennifer Molinsky, project director of the center's housing and aging society program.

Choosing To Invest Your Money. While paying off a mortgage early can have many benefits to homeowners and lifts the burden of repaying a large debt, it might be wiser to invest extra cash into your future in the form of retirement funds or other investments such as stocks.

"By not having the mortgage, it really frees up a lot of cash flow for clients. And it just helps them have a better, more fulfilling retirement for a lot less stress because a mortgage is basically one of the major expenses that you have in retirement,” he adds.

First and foremost, homeownership means that you are tied to a specific living situation whereas renting affords more freedom in retirement. Instead of spending your time worrying about mortgage payments and repairs, renting allows you to spend your time exactly how you want to spend it.