Should You Pay Off Your Mortgage Before Retirement? Experts Weigh In

For many Americans approaching retirement, the dream of a mortgage-free life remains a powerful financial milestone. The idea of owning your home outright, free from monthly payments, seems like the ultimate way to reduce expenses and enjoy financial peace of mind.

But is rushing to pay off your mortgage before you retire always the smartest move?

This question doesn’t have a one-size-fits-all answer. Whether or not you should pay off your mortgage before retiring depends on a range of personal factors—from interest rates and investment returns to cash flow needs and emotional comfort.

We spoke with financial experts and analyzed the pros and cons to help you make the most informed decision for your golden years.

The Allure of a Paid-Off Home

There’s no denying the emotional and psychological appeal of retiring without a mortgage. According to a 2023 report from the Employee Benefit Research Institute, over 60% of retirees say owning their home outright provides a strong sense of financial security.

With the cost of living rising and healthcare expenses looming large in later life, the idea of eliminating one of your largest monthly bills is understandably attractive.

“Being debt-free in retirement can reduce stress significantly,” says Patricia Collins, a certified financial planner in Denver. “It also gives retirees more flexibility, which is especially valuable if unexpected expenses arise.”

And there’s a clear mathematical incentive, too. By eliminating your mortgage, you reduce your required income, which could potentially lower your tax burden and make your retirement savings stretch further.

But before you drain your savings or sell off investments to pay off that balance, take a closer look at what you might be giving up.

The Case for Keeping the Mortgage

Although it seems counterintuitive, financial advisors often urge caution when it comes to paying off a mortgage before retirement—especially if it requires dipping into tax-advantaged accounts or selling appreciated investments.

Opportunity Cost Matters

If your mortgage has a low interest rate—say, 3% or 4%—it might make more sense to invest extra funds rather than pay down the loan. Historically, diversified investment portfolios have yielded returns in the range of 6%–8% annually.

In that context, your money might work harder for you in the market than it would sitting in home equity.

Liquidity is Key in Retirement

Retirees often face unexpected costs, such as medical bills or home repairs. Having a large portion of your net worth tied up in a house can limit your financial flexibility.

“Real estate is illiquid,” explains Angela Grover, a CPA specializing in retirement income planning. “If you need $20,000 fast, you can’t just pull it out of your home without taking on debt or selling the property. That’s why it’s often better to keep liquid savings and manageable mortgage payments.”