When retirement age approaches, most people want to have everything under control. One of those big issues is their mortgage. People start to wonder whether or not to start paying off their outstanding mortgage balances before retirement. According to studies, this can be a bad idea, since every dollar used to pay off the mortgage early instead of putting it into retirement savings loses the opportunity to grow with interest and time.
The Federal Reserve Board has found that more than a third of current homeowners between the ages of 65 and 74 are still paying their mortgages
Starting from the beginning, mortgages are typically for 30-year terms, assuming that (especially years ago) people typically bought a home around age 30 and ended up paying off their mortgage at approximately age 60. The fact is that the Federal Reserve Board has found that more than a third of current homeowners between the ages of 65 and 74 are still paying their mortgages. Because of this, it may be normal for families to try to pay off their debt before retirement, but making that decision requires considering all available options.
As we mentioned before, you have to consider where you’re getting money to pay off other money. That is, if someone delays their contributions to their retirement fund, they’ll have to contribute much more money to reach their goal, or settle for less income in retirement, as there are limits on how much they can contribute each year. So, depending on the amount remaining on their mortgage and the interest rate, people could save a significant amount of money in the long run by paying off their debt early. On the other hand, if they’ve already paid off a significant portion of the principal, it may be better to simply save money and let it accrue interest while they pay off the rest of the mortgage.
In 2025 homebuyers face average rates of 6.27%
For these reasons, it’s important to assess each situation individually and always keep interest rates in mind. In 2025, for example, homebuyers face average rates of 6.27%, according to Bankrate. On the other hand, those who bought in previous years had the opportunity to get better interest rates. The Federal Reserve reports that in 2020, rates fell to a historic low of just 2.7%, having hovered near 3% for most of the 2010s. This is important data; when people say, “Now is a good time to buy a home,” they’re referring specifically to interest rates.
Finally, experts point to the importance of having robust savings and retirement accounts. The type of retirement account is also important. For example, those with savings in plans like the Roth plan will be able to receive that money tax-free when they retire. In addition, you should also review your mortgage interest rate, the type of savings you’re making for retirement, and any other debts you have. Taking all these perspectives into account can help you make better decisions about how to manage your mortgages.
A decision like this—paying off a mortgage—can destabilize a family’s financial balance, so the decision must be made taking all the situations into account. Sometimes it’s not so important to pay off a debt if there are other “problems” that may be more important, such as a Social Security debt, potential future problems with making ends meet, being able to buy food, or affording a trip to a restaurant. Life is one thing, and ideally, happiness should be the first priority.
In any case, the decision to pay off your mortgage early should not be taken lightly or made alone. If the person interested in paying off their debt has family or friends who can help them honestly make the best financial decision, that will be the path to choose.