# Should You Carry a Mortgage into Retirement?

I enjoyed the article Emily. Thanks!

In articles of this type, however, the authors rarely mention that there's really no tax advantage. For example, if your mortgage balance is \$100,000 and your mortgage interest rate is 6%, you'll pay roughly \$6,000 in interest this year. Since your taxable income is reduced by \$6,000 and if you are in the 28% tax bracket, you pay \$1,680 less tax (28% of \$6,000).

So to summarize you send the bank a check for \$6,000 to keep from sending the IRS a check \$1,680. Therefore keeping your mortgage around for the "tax break" isn't much of a break. It's more money out of your pocket, in this example \$4,320 more in a year's time. Ouch!

I have never seen a paid off debt free house foreclosed on by a bank. Pay if off and then you will just have utility and property tax payments. Use the "mortgage deduction" cash to pay those. Would you rather have \$800 or whatever your mortgage payment is going into your checking account or the banks executives bonus plan? Cash and debt free is the best way to be. Your money worries pretty much just disappear then...

Ms. Brandon, I hate to be the one to tell you, but there's a math error in this sentence:

"If you need \$100,000 from your 401(k) to pay off your mortgage and you are in the 28 percent tax bracket, you will have to take out \$128,000."

Do the math: if you take out \$128,000 and then you pay 28% tax on it, you pay \$35,840 in tax. That leaves you only \$92,160... NOT \$100,000.

What you need to do is solve the following equation for N:

N times .72 = \$100,000.

The answer is approximately \$138,888.89. If you need to take out money from your tax-deferred retirement account, and you're in the 28% tax bracket, you will need to take out this much in order to have \$100,000 left over.

savings for retirement will all be gone if i cash out thrift savings. ss is 1400 but note is 1017 for house. Could be paid in 9 years, but hard to keep working in my heath condition? Please advise John

You should not be dispensing tax advice on capital gains tax breaks on selling a home after 55. The current law is nothing like what you state.

If you are not informed, keep your mouth/keyboard quiet.

Another thought that I didn't see mentioned in the article: downsizing.

Homeowners have long been able to get a capital gains tax break on selling a home to buy a less expensive one after age 55.