Most homeowners look forward to the day when they can finally pay their final mortgage payment and actually receive their home. Most financial advisers advise clients to try to reach that day before they reach retirement age. Unfortunately, not everyone has the means to do this, and instead he will still feel in debt when his long-awaited last business day finally hits. Some may not even be able to keep track of their mortgage payments when they retire and lose their homes.
According to the Consumer Financial Protection Bureau, the number of people who have not yet paid their mortgages is growing at retirement age. In 2011, the percentage of homeowners who have reached the age of 65 and is still owed on their mortgage was 30%, an increase from 22% in 2001. And for those homeowners who are 75 and older, it is percentage increased from 8. 4% to 21% 2%. The median mortgage debt for seniors also increased by no less than 82% at that time, from around $ 43,000 to $ 79,000. (For related literature, see: Taxing your pension with a mortgage.
The increasing level of indebtedness of the American seniors could eventually become a major problem, which would affect the pension security of millions of seniors in the country. And although there are some advisers who say that holding on to a mortgage is a good way to lower a person’s income taxes – by writing off interest payments – most people agree that no debt is a good debt. Many seniors ultimately cannot enjoy their own retirement years in the way they had imagined because of their need to continue paying off their mortgages and other debts.
Do retirees still need mortgages?
To help prevent this scenario, some financial advisers suggest that their clients try to pay off their mortgages more quickly while they are working, so that they can be free and free during retirement. They propose designing a plan to see how much you can comfortably and for how long you can increase your monthly payments and then implement as quickly as possible. It is true that while this maneuver can reduce the amount that you have to invest each month in a savings or retirement plan, the relocation may even be more beneficial for your financial well-being in the long run. The stock market has seen an unparalleled rise in the last few years, but that will not last forever, and when it drops, your savings and investments will be. If you planned to use those savings to pay off your mortgage after you retired, you may be surprised that there is much less available when you need it. (For more information, see:
Do retirees have to pay their mortgage? ) Another possibility to pay off your mortgage faster is to make biweekly payments instead of monthly payments. If you do this over a period of one year, you will receive 13 payments instead of 12. So it is a way to reduce your debt faster without feeling the pressure. Or you can view the option to refinance your mortgage for a shorter period of time or at a better rate. Some people also choose to sell their homes, especially after the children have left, and move to a smaller home that is linked to a smaller mortgage (or a home without any mortgage). (For related literature, see:
Refinance your house after 50: does it make sense? Views on debts differ per generation
People’s perception of debt has changed from generation to generation. Those who lived through the depression often tried to avoid debt at all costs. And they would never have considered retiring if they still had debts in their portfolios. But the Baby Boomer generation does not seem to have the same views. Some Boomers have waited until after they have retired to build or buy their dream home, putting themselves in debt again. Doing this is a big gamble that can not only increase your stress level, but it can also deny you the financial freedom you have worked so hard for. The goal, advisers agree, should be to have fewer fixed payments at retirement, free money for all those other things you enjoy doing, but haven’t had the chance to work.
To achieve your goal of peace of mind after retirement, many advisers recommend that you set up a budget so that you can think about how you can reduce part of your expenses and pay off more debts. Start paying off a credit card debt and then transfer to your mortgage. Or maybe deduct part of the money that you put into your pension fund and use it to pay off your mortgage at a faster rate.
working longer is another option to ensure that a large mortgage does not affect your pension. Even an extra year of working can do a lot to help you reach your goal, namely paying off your debt. The purpose of retirement must not only be to stop working, but also to reach a financially secure place.
Work longer an attractive pension plan? The bottom line
One of the greatest joys of retirement is relaxing, knowing that one of your biggest expenses – your mortgage – is finally paid off. To do this, you must start planning now and reduce your debt while you are still working.