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Retiring a mortgage before retirement

Retirement may be the time to payoff debt, such as a mortgage, that can deplete savings, income, and other assets. Ending these monthly mortgage payments during retirement can help prevent bankruptcy and assure that there is sufficient retirement savings and income.

In the past, only 10 percent of households with a person at least 70 years old had a mortgage. Now, that number is almost 40 percent. These households had total debt of $1.16 trillion, which was comprised of $820 billion in mortgage debt. Ten years ago, this mortgage debt was $570 billion. Today, households with a 60 to 69-year-old have debt of $2.16 trillion, three-quarter of which is mortgage debt.

Working past 65 can increase retirement savings and delay savings withdrawals. Waiting until 70 before collecting Social Security may be the best way to increase guaranteed retirement income. Working past 65 is not guaranteed, however, because of layoffs or the intent to engage in less demanding work. It is also rare for workers over 50 who are laid off to fully recover their income.

There are several ways to pay off a mortgage faster. First, set a deadline of age 60 or 65 for paying off the mortgage. But extra payments should go to the loan principal and not toward interest payments. Spending less on other expenses can also allow higher monthly mortgage payments. For example, drive a car longer before purchasing a new one to avoid car payments. Obtaining additional income may be a feasible option, too. Part-time work, such as consulting or tutoring, are options along with charging rent to any children still living at home.

Temporarily reducing contributions to retirement savings can also provide funds to accelerate monthly mortgage payments. However, this should occur only if a person is current with their savings. Contributions should also continue to employer plans that match contributions.

There may be times, however, when unexpected life changes or other problems increase the risk of foreclosure. An attorney can help provide options that may stop foreclosure.

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