RETIREMENT
tighten the standard deduction limits). Smith says this can be crucially important for clients over age 73, since their tax brackets can be pushed up by required minimum distributions on their tax-advantaged retirement accounts.
On the other hand, a client without a mortgage in retirement could simplify their financial picture. By eliminating the monthly obligation, they can dramatically reduce their financial stress— and simultaneously feel more control over their lives and their spending.
“ There is an old saying—‘ You can survive a lot of things if you don’ t have a lot
“ There is an old saying—‘ You can survive a lot of things if you don’ t have a lot of debt.’”
— John Macielag
of debt,’” says John Macielag, president of All Seasons Capital & Advisory in Chestertown, Md.“ It sounds simplistic, but it’ s true. Various things can happen in life and in retirement, [ and having ] less or no debt gives you greater flexibility.”
That’ s important to keep in mind, because emotions often play a bigger role in retirement than a cold, mathematical analysis does. Retirees likely enjoy profound peace of mind knowing that their home is totally theirs and that lenders aren’ t going to come and repossess it.
Moreover, without the expense of making mortgage payments, clients may have less need to raid savings to make ends meet.“ A mortgage in retirement can be a smart financial tool— or a burden,” says Megan Slatter of Crewe Advisors in Salt Lake City.“ The key is knowing which is right” for your clients.
Other Consequences
Another thing to consider is that even when clients have removed the mortgage burden, they’ re still racking up expenses on homeownership.
“ One item that trips people up once they have paid off their mortgage is not adequately planning for paying their homeowner’ s insurance and taxes,” says
Jamie Bosse of CGN Advisors in Manhattan, Kan. These costs are usually paid as part of each mortgage payment, but when the mortgage is gone, the other bills can sneak up on you.“ Clients should be sure to set aside funds each month for paying these costs,” she says.
If they haven’ t set enough money aside for these bills, homeowners can always borrow against the equity in the house, and if they’ ve paid off their mortgage 100 %, they may even get better terms on home equity loans and lines of credit.“ Having lower debt levels can improve their ability to qualify for other loans,” Bosse says.
Paying off a mortgage can also save you years of interest payments, which may be a substantial savings. And it can simplify estate planning because it ensures that your heirs inherit the full value of a property without debt obligations. In some cases, it can even mean more flexibility in the choice of homeowner insurance since you’ re no longer bound by lender requirements( though keep in mind that being mortgage-free doesn’ t necessarily reduce your premiums or improve coverage).
Clearly, there are both pros and cons to keeping the mortgage, so it may be hard for clients to decide.“ The acid test is cash flow,” says Steve Parrish, an adjunct professor of advanced planning at the American College of Financial Services.“ If the mortgage payment is inhibiting the client’ s ability to hit their target retirement income, consideration should be made to paying off the mortgage.”
Clients’ attitudes toward debt will play a role, too.“ I’ ve seen [ retired ] clients with substantial wealth still worry about mortgage payments,” says Kade Orsburn at Signature Estate & Investment Advisors in Southlake, Texas.
Not because they had any logical reason to worry, he explains. It was simply that they felt societal pressure to be debt-free. Some clients need the peace of mind that comes with owning their home outright or eliminating a major fixed expense.
Others view the mortgage as a strategic planning device and aren’ t affected by the emotional component.“ As advisors, our job is to help clients enter retirement with clarity and confidence,” Orsburn says, adding,“ The best plan is the one the client can stick with, both mathematically and emotionally.”
A mortgage is a tool, he continues. Like any tool, its value depends on how it’ s used.
“ Try to use a screwdriver as a hammer, and you end up with bent nails,” he says. Whether a mortgage is the right tool for the job depends on what the job is.“ That’ s why it’ s so important to understand both the client’ s financial situation and their mindset as they approach retirement. … Unfortunately, the answer isn’ t always black or white.”
50 | FINANCIAL ADVISOR MAGAZINE | JULY / AUGUST 2025 WWW. FA-MAG. COM