Also in this playlist...
This transcript is automatically generated
Thanks so much -- food prices are going up gas prices are going up home prices are going down in people's budgets are getting tighter.
How do you know where to put your extra cash towards paying down your mortgage or building -- retirement nest egg.
Brad Levin is with legacy wealth advisors and Craig -- is with.
-- and company good morning gentlemen.
Good morning good morning Alexis all right so Brad we're gonna get started with you you are full alert keeping your mortgage in what retirement.
Give -- the reasons why.
Well first of -- You've got a big.
Need -- you've got to cover against in terms of protecting yourself for inflation of your lifetime as you were just discussing.
The issue with a rising energy costs and -- cost of course health care is a major concern for retirees as well.
In fact recent report from Fidelity Investments is projecting that.
A couple at age 65 needs to be able to put to cover between.
Dollars or more.
Between 865 Canadian medical care costs have their own pockets he got have reserves available to pay those expenses as they rise.
Your mortgage is likely to be the one -- -- have during your retirement lifetime that's not gonna go up.
So why take -- very important resources and pay off that one expense.
The -- you have to consider is well.
Is the after tax cost of your mortgage because you can deduct your mortgage interest expense.
You're likely to be paying a lot less net out of your pocket they knew could likely hear from your investment portfolio.
So for example if your mortgage is costing you six and a half percent that's pre tax after tax -- likely be -- up.
Under 5% and over time you can have your money invested in your portfolio and you quite a bit better -- than -- -- hand not with the cost of that mortgage.
All right Craig you are not.
This -- you say it down before you retired give me your reasons why that absolutely it's an emotional security thing.
When people retire given all the fluctuations that can go on out there at the stock market.
Perhaps even companies abrogating their retirement plans he want to have your home paid off home sweet home means a lot to a retiree.
And the only people who really advocate keeping the mortgage.
Are people who want to take that money and have you invested some place the best investment retiree can make.
It's that -- that so that -- they retire the mortgages paid off.
Emotional security is what retirements about not getting the best return.
Yet Brad I mean I think it makes a valid point there it's also one less thing to worry about and as you mentioned health care costs rise -- you want.
You know some your money sitting around in cash if in fact you -- maybe downsize your home.
You know look people make those decisions heading into retirement -- thank.
Absolutely and and we tell our clients that.
The emotional security is definitely a factor tends to consider.
But the bottom line is your financial security will have an impact on your emotional security as well.
And people complain about not having enough resources available to cover these expenses.
When you take that cash and invested in your home it's tying up more money that's just not available to use for other expenses.
So aside from the emotional aspects the financial issues really bear out -- -- -- -- -- -- -- -- -- -- -- -- -- Now I just don't buy that the emotional security is key you want to get the mortgage paid off.
Your expenses go down you don't have a mortgage payment if something goes wrong that's one more pain that you don't have.
Plus there's transitions here Alexis people who retire on their way to completing their life trip.
They want to be thinking about 1020 years down the road.
Maybe a reverse mortgage is an idea in later life.
You don't want any mortgage strangled -- like an albatross get rid of that mortgage -- you retire.
And don't listen to anybody who says take the money and invest it.
From a financial planning standpoint that's absolutely the wrong thing to do it you know Brad -- is a very important point though because some people say -- you continue it -- are created -- any -- borrow your -- -- and what I would do that right.
-- -- -- Well -- if they don't even get the idea if you're gonna look at the idea of doing a reverse mortgage why go and borrow money out of your home equity later on in life.
When instead you can keep that money available and get the benefit of the tax deduction now.
What you do have those costs.
Keep that -- -- cash available even if it's sitting in -- bank account even if it's sitting in the bank account.
You have that liquidity which is really important in terms of being able to cover the rising cost of medical care.
As are seeing right now energy expenses.
We deal with clients who are primarily retired or transitioning into retirement and they're very concerned about the rising cost of pregnant right now he is stretching it.
You're stretching it why would you put money in the bank that's not sensible cut it out simplify your life.
Focus on your retirement existence that's the thing to do get rid of that mortgage.
And be working with a fee only financial planner to make this 101520.
There's so many things going on when people retire.
Getting a mortgage and keeping it during your retirement years is a bad idea.
Pay it off.
That's one less thing to worry about and that goes to peace of mind and in retirement Alexis.
The only thing that counts is peace of mind and you -- if the market reverses.
If the company declares bankruptcy like some of the airlines are about to do if they -- -- their retirement plans who knows what's gonna happen with Social Security.
-- -- Get their house paid off.
Then when you downsize.
You can sell their house for -- action later years you don't have to worry about a mortgage you have.
I have to worry about property valuations.
He don't have to worry about interest rates.
-- -- senseless.
-- grading prank it was great having you on I think the kids -- -- green the kids and the parents they're probably going to pregnant category there but.
Are right guys we'll leave it there and I look forward to having you back on again -- debate in the future thanks so much.
Filter by section