Mortgages in Retirement

Mortgages in Retirement

Anyone who has gone through the process of mapping out their retirement knows there can be a lot to keep in mind. Saving, investing, anticipating medical costs, and making sure you have enough tucked away for years to come is just the start. One question many people overlook is: “Should I pay off my mortgage before I retire?” The answer is more complicated than you may think.

Maintaining a Mortgage in Retirement

Opportunity Cost

Imagine you have $300,000 set aside to pay off your mortgage. But rather than using those funds to pay off your mortgage, you instead invest that money. Sure, it’s tempting to stop making a monthly payment, but what if that $300,000 earned a hypothetical 6% for the next five years? You would have a little more than $400,000. Yes, your house may appreciate in value over the same period of time, but you should consider all your choices for that lump-sum of money.¹

Eradicate (Other) Debt

Before you pay down your mortgage, any extra cash might be better suited to paying off other kinds of debt that carry higher interest rates, especially non-deductible debt, such as credit card balances.²

Make Your Mortgage Work

Some homeowners benefit from a mortgage interest deduction on their taxes. Here’s how it works: the amount you pay in mortgage interest is deducted from your gross income, which reduces your federal income tax burden. But remember, the further along you are toward paying off your mortgage, the less interest you’re paying. If you’re unsure if you’ll be able to take advantage of this mortgage benefit, it’s best to consult your financial professional.³

Retire Your Mortgage

Don’t Throw Your Money Away

Your monthly mortgage payment may be a large part of your available capital, especially in retirement. Eliminating unnecessary subsidies can significantly reduce the amount of cash you need to meet monthly expenses.

Uninteresting Interest

Depending on the length of your mortgage term and the size of your debt, you may be paying a substantial amount in interest.

“Paying off your mortgage early can free up money for other uses.”

True, you may lose the mortgage interest tax deduction, but remember, as you get closer to paying off your loan, more of each monthly payment goes to principal and less to interest. In other words, the amount you can deduct from taxes decreases.⁴

Home Is Where the Heart Is

There’s a value to your home beyond money. It’s where you raised your children, made fond memories, and you may want it to remain in the family. Paying off the mortgage may help make your home part of your legacy. After all, some things you just can’t put a price on.

1. This is a hypothetical example used for illustrative purposes only. It is not representative of any specific investment or combination of investments. Investments seeking to achieve a higher rate of return also involve higher risks. You should consider your risk tolerance before committing to any investment strategy.
   2. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.
   3. IRS.gov, 2025. The mortgage interest deductibility is limited to mortgages up to $750,000 ($375,000 if married filing separately) in principal value. This article is for informational purposes only, and is not a replacement for real-life advice. Please consult a tax, legal and accounting professional before modifying your tax strategy.
   4. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

The Sequence of Returns

What exactly is the “sequence of returns”? The phrase describes the yearly variation in an investment portfolio’s rate of return. But what kind of impact do these deviations from the average return have on a portfolio’s final value?

Let’s take a closer look at a few different investment scenarios. The first few scenarios focus on how market volatility affects a portfolio while assets are accumulating, and the last scenario focuses on how market volatility affects a portfolio from which distributions are being taken.

One study found the sequence of returns appears manageable during accumulation. An analysis from BlackRock compared three model investing scenarios: three investors start portfolios with lump sums of $1 million, and each of the three portfolios averages a 7% annual return across 25 years.

In two of these scenarios, annual returns ranged from a hypothetical -7% to +22%. In the third scenario, the return is simply 7% every year. In all three situations, each investor accumulates the same total of $5,434,372 after 25 years. This is because the average annual return is a hypothetical 7% in each of the three portfolios.¹

It’s important to remember that investing involves risks, and investment decisions should be based on your own goals, time horizon, and risk tolerance. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.

The BlackRock study assumes that the three hypothetical investors evaluated their financial ability to continue making purchases through periods of declining and rising prices.

When you shift from asset accumulation to asset distribution, the story can change. There is the risk that your distribution strategy could coincide with a period of declining prices, which may present a challenge.

Another model investing scenario by BlackRock compared two hypothetical portfolios starting with $1 million. Both portfolios took $60,000 in annual inflation-adjusted withdrawals.¹

One portfolio performed well in its early years, earning a 22% return in its first year and a 15% return in its second year. Though it suffered some losses in its later years, the portfolio actually increased in value to $1.1 million 35 years later.

The second portfolio had losses in its early years of -7% in its first year and -4% in its second year. The portfolio ran out of money before the 35-year mark.

Though both portfolios averaged a 7% annual rate of return over the course of 35 years, the early losses suffered by the second portfolio had long-term effects on the portfolio’s performance.

If you are preparing to retire, having an understanding of the sequence of returns may help you ask important questions about your overall investment strategy.

1. Blackrock.com, 2025

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

How to Make the Tax Code Work for You

By April 11, 2025, over 117 million taxpayers had dutifully filed their federal income tax returns. And they all made decisions about deductions and credits – whether or not they realized it.¹

When you take the time to learn more about how it works, you may be able to put the tax code to work for you. A good place to start is with two important tax concepts: credits and deductions.

Keep in mind that the information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties.

Please consult legal or tax professionals for specific information regarding your individual situation.

Credits

As tax credits are usually subtracted, dollar for dollar, from the actual tax liability, they potentially have greater leverage in reducing your tax burden than deductions. Tax credits typically have phase-out limits, so consider consulting a legal or tax professional for specific information regarding your individual situation.

Here are a few tax credits that you may be eligible for:

• The Child Tax Credit is a federal tax credit for families with dependent children under age 17. The maximum credit is $2,200 per qualifying child, depending on your income level.²
• The American Opportunity Credit provides a tax credit of up to $2,500 per eligible student for tuition costs for four years of post-high-school education.³
• Those who have to pay someone to care for a child (under 13) or other dependent may be able to claim a tax credit for those qualifying expenses. The Child and Dependent Care Credit provides up to $4,000 for one qualifying individual or up to $8,000 for two or more qualifying individuals.⁴

Deductions

Deductions are subtracted from your income before your taxes are calculated, and thus, may reduce the amount of money on which you are taxed, and by extension, your eventual tax liability. Like tax credits, deductions typically have phase-out limits, so consider consulting a legal or tax professional for specific information regarding your individual situation.

Here are a few examples of deductions.

• Under certain limitations, contributions made to qualifying charitable organizations are deductible. In addition to cash contributions, you can potentially deduct the fair market value of any property you donate. And you may be able to write off out-of-pocket costs incurred while doing work for a charity.⁵
• If certain qualifications are met, you may be able to deduct the mortgage interest you pay on a loan secured for your primary or secondary residence.⁶
• Amounts set aside for retirement through a qualified retirement plan, such as an Individual Retirement Account, may be deducted. The contribution limit is $7,000, and if you are age 50 or older, the limit is $8,000.⁷
• In most circumstances, once you reach age 73, you must begin taking required minimum distributions from a Traditional Individual Retirement Account (IRA) or qualified retirement plan. Withdrawals are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.
• You may be able to deduct the amount of your medical and dental expenses that exceed 7.5% percent of your adjusted gross income.⁸

Understanding credits and deductions is a critical building block to making the tax code work for you. But remember, the information in this article is not intended as tax or legal advice. And it may not be used for the purpose of avoiding any federal tax penalties.

1. IRS.gov, 2025
   2. IRS.gov, 2025
   3. IRS.gov, 2025
   4. IRS.gov, 2025
   5. Investopedia.com, December 15, 2024
   6. Investopedia.com, November 7, 2024
   7. Investopedia.com, March 25, 2025
   8. IRS.gov, 2025

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.