So many people fear carrying their mortgage into retirement, but is that a valid fear?
When you're living on a fixed income (or close to it), the idea of a monthly mortgage payment can feel like a threat to your financial security.
So is this a valid concern? Should you rush to pay off your mortgage?
The answer is complicated like always, and depends on your situation. In this blog we list the pros and cons of having your mortgage in retirement to help you make an informed decision.
Why This Conversation Matters More Now
More retirees are carrying mortgages than ever before, and the numbers back it up.
Between 1989 and 2022:
-Homeowners age 65–79 carrying a mortgage into retirement grew from 24% to 41%
-Homeowners over 80 carrying a mortgage grew from 3% to 30%
That's a massive shift. A decision that used to be rare is now common.
In my practice, I build individual models for clients facing this exact question. Sometimes paying off the mortgage is the right call. Sometimes keeping it is. There's no universal right or wrong answer — only what's right for your specific situation.
The Case for Keeping Your Mortgage
1. Opportunity cost. Money used to pay off a mortgage is money that isn't invested. If your investments can reasonably earn more than your mortgage rate, paying it off early may cost you growth.
2. Liquidity. Paying off the mortgage might feel good, but it also ties up cash. If a medical issue or family emergency comes up, you may wish you'd kept that money accessible.
3. Tax deductibility. This used to carry more weight before the standard deduction increased. It's a smaller factor today — and it shrinks further as your mortgage balance declines, since most of your interest is front-loaded early in the loan. While still a good reason, this isn't as good as it used to be.
4. Inflation hedge. If you locked in a low fixed rate, your mortgage payment stays flat while everything else gets more expensive. That's a real advantage worth weighing carefully.
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The Case Against Keeping Your Mortgage
1. Increased withdrawal needs. Carrying a mortgage means pulling more money from your nest egg early in retirement to cover the payment. For early retirees especially, that raises your withdrawal rate right when you can least afford a rough sequence of returns.
2. Sequence of returns risk. Taking more out in the early years leaves you more exposed if the market has a couple of bad years right out of the gate — a well-documented risk in retirement planning.
3. Peace of mind. This one's not on a spreadsheet, but it's real. If carrying a mortgage keeps you up at night, that subjective discomfort can outweigh the objective math. There's real psychological weight to debt in retirement, and that matters just as much as the numbers.
Ultimately, It's a Balance, Not a Formula
There's no good or bad mortgage — it's just a mortgage, and everyone's situation is different. The decision comes down to managing two things: your cash flow and your comfort level.
The best way I've found to work through it is building a financial model that shows you both paths clearly — for example, whether you're fully on track if you keep the mortgage, or whether paying it off leaves you exposed to sequence-of-returns risk in the first few years. Seeing the real numbers side by side takes a lot of the guesswork out of the decision.
If you're weighing this decision yourself, I'd love to talk it through with you. Schedule a get-acquainted meeting and let's figure out whether keeping a mortgage in retirement makes sense for your situation.
Thanks for reading.
Sources and recent readings:
Recent blog:
https://hamiltonfinancialplanning.com/blog/how-much-can-you-safely-withdraw-in-retirement/
If you have any questions head to HamiltonFinancialPlanning.com to find out more and schedule a free call with our fee only CFP fiduciary advisors who specialize in building financial plans and investment management for clients nearing retirement in Austin and Houston TX.
Scott Hamilton is founder and chief financial officer at Hamilton Financial Planning, a wealth management firm that specializes in providing comprehensive financial planning for retirees. With over 20 years of experience in the financial industry, and having completed over 250 financial plans for retirees across all industries, Scott is passionate about providing his clients with the tools and insight they need to achieve their financial goals. He has a Bachelor of Business Administration in finance from Texas State University and an MBA in international finance from Pepperdine University. Scott has also been happily married to his wife, Gayle, for over 25 years. To learn more about Scott, connect with him on LinkedIn.