For many seniors it’s essential to save money wherever they can after retiring, especially on a mortgage. Once you’ve decided to retire, you need to be certain that you have enough income and have reduced your expenses enough to live as comfortably as you wish. Now for most families, their mortgage is probably their biggest monthly expense.
When you actually retire, unless you have a side business that generates income, your income will come from your pension (if you have one, and it’s increasingly rare commodity these days), your Social Security check (that is if there’s any money left in the Social Security system when you retire, which is another unknown), and then of course, whatever savings and investments you have, including rental properties.
So, unless you have unlimited savings or a substantial income from your investments, it’s of paramount importance to lower your monthly expenses.
One way you can get your expenses down is by paying off your mortgage before you retire. If you can do that, you have lightened your monthly burden by hundreds, maybe even thousands of dollars every month. Depending upon how large your mortgage is, it may seem like an almost insurmountable task to pay it off early. But, there are a few tricks you can try to get your mortgage paid off before you retire.
For one thing, you can make at least one extra mortgage payment a year to pay down your principal. The lower the principal, the less interest you’ll have to pay on it.
Another way to lower your mortgage payment is to look at the rates you’re currently paying. If you got your mortgage a decade or more ago and you’ve been making your payments steadily ever since, then it’s probably a good idea to check out refinancing your mortgage now since mortgage rates are lower than they have been in a long, long time. Once you’ve gotten your monthly mortgage payment down lower you can look at either making an extra mortgage payment every year or making slightly larger mortgage payments every month to pay it off faster. Every little bit helps.
If you’re nearing retirement and it’s just you and your spouse living in a four bedroom house, think about how much house you really need. Perhaps you should sell your house, pay off your mortgage, and relocate to a smaller place that’s more in tune with your current housing needs, and perhaps still have some money left for a down payment. You may still have a mortgage to pay off, but housing prices have really dropped in the last three years, and mortgage rates are lower than ever. If you can lower your monthly outflow of cash, that’s more money in your pockets for investments, travel, or that big-screen TV you’ve been lusting after.
One thing you shouldn’t do, however, is to dip into your 401K account or IRA to pay off your mortgage early. It would be nice to get rid of your mortgage payment entirely, but you need to keep a balance between owning a home, having investments, and having enough cash on hand for emergencies.
The thing is, everyone’s situation is unique, so tailor your approach to your needs and your current situation. The longer you can put off retirement and dipping into your savings, the more money you’ll have in the future. The way the economy is going now, you should probably work as long as possible and work on paying off that mortgage while you still have a monthly paycheck to count on.
About the Author:
Vern is a student learning about all aspects of finance to pass his New York mortgage test this fall.