It’s easy to find blanket advice that says: “Pay off your mortgage before you retire.” But as I learned watching my father retire with a mortgage still in place, reality doesn’t always follow the textbook.
The experience was eye-opening—not just because it defied a lot of the conventional wisdom, but because it forced me to see retirement through a more nuanced, real-world lens. Yes, there were pros. Yes, there were cons. And no, it didn’t look anything like the financial planning brochures with serene grey-haired couples walking barefoot on the beach.
Retiring with a mortgage may work well for some and not for others. What I want to share here isn’t just personal observation but a grounded look at what actually happens when you cross into retirement with a mortgage in tow—from the financial mechanics to the emotional realities that don’t get talked about nearly enough.
Why So Many Retirees Still Have Mortgages
More retirees are still paying off their homes, according to Investopedia. In 1998, just over a quarter of Americans aged 65–74 had mortgage debt. Fast forward to 2022, and that number jumped to 32.2%. Among those 75 and up, the share more than doubled—from 11.6% to 27.6%. Rising home prices, refinances, and longer mortgage terms have all contributed to this shift.
In my father’s case, the mortgage wasn’t the result of poor planning or overspending. It was the result of a thoughtful refinance in his early 60s to help cover major home repairs, avoid draining savings, and lock in a low interest rate. At the time, it made sense. But as retirement approached, that monthly payment became more than just a line item—it became a defining part of his lifestyle and financial strategy.
This brings us to the real question: What’s it actually like to retire with a mortgage—and what does it cost or gain you?
The Pros of Retiring With a Mortgage
1. Liquidity Can Be a Strategic Asset
Keeping a mortgage can preserve liquid cash. For my father, avoiding a lump-sum payoff meant he didn’t have to draw heavily from retirement accounts (and trigger potential tax implications). Instead, he preserved those funds for healthcare, travel, and emergencies.
If your mortgage interest rate is low—especially below the return rate of your investments—it might make more sense to let the mortgage ride and keep your money working elsewhere.
2. Fixed Housing Costs Provide Predictability
Assuming your mortgage is fixed-rate, you likely have a predictable monthly expense, unlike rent which can increase unexpectedly. That predictability helped my dad plan around a known number, which felt more manageable than the uncertainty of downsizing or renting in a fluctuating market.
It also allowed him to budget with more confidence, knowing that, short of property tax changes, his housing cost was locked in.
3. Access to Equity Without Selling the Home
In some cases, retirees use tools like a cash-out refinance or home equity line of credit (HELOC) to tap into their home’s value without selling it. While not risk-free, this option can be useful for those needing access to larger sums later in retirement.
It’s a flexibility that simply wouldn’t exist if the house were fully paid off but all cash reserves were depleted.
4. Tax Deductibility (Though Limited)
While this benefit has diminished post-2017 due to tax reform, some retirees may still be able to deduct mortgage interest—particularly if they itemize and have enough qualifying expenses. It’s worth noting this benefit depends heavily on your tax bracket, filing status, and how much interest you actually pay.
Still, it’s one more factor to consider in the broader equation.
The Cons of Retiring With a Mortgage
1. Increased Financial Pressure on a Fixed Income
This was the biggest challenge I watched my father face. Once the steady paycheck stopped, that mortgage bill didn’t. While he had retirement income from Social Security and a small pension, the psychological impact of watching fixed income go toward debt every month was significant.
Even if the numbers technically “work,” there’s a mindset shift in retirement that makes any recurring debt feel heavier.
2.Fewer Options in Financial Emergencies
When the unexpected hits—be it a medical bill, home repair, or market downturn—having a mortgage can reduce your financial flexibility. You can’t pause it. You can’t negotiate it down. And if most of your money is tied up in home equity, you might find yourself in a cash crunch just when you need liquidity most.
This became clear when my father had a surprise dental surgery. The procedure wasn’t covered, and because he didn’t want to touch his investments during a market dip, the mortgage payment limited how much buffer he had to pull from.
3. It Can Impact Eligibility for Certain Benefits
Depending on the size of the mortgage payment and your other expenses, carrying debt into retirement may make it harder to qualify for needs-based benefits, like Medicaid or some housing assistance programs.
While this doesn’t affect everyone, it’s worth considering if you expect to rely on public support or are managing high medical expenses.
4. Emotional and Psychological Weight
Even if your retirement math works, living with debt—especially in a phase of life often associated with “freedom”—can carry an emotional cost.
My father expressed this in subtle ways. He wasn’t in financial trouble, but he did carry an underlying concern about “what if I can’t keep up with this?” That worry can subtly shape decisions, from travel to gifting to the willingness to spend on hobbies or wellness.
In that sense, the mortgage wasn’t just a financial choice. It was an emotional variable.
Factors to Consider Before You Decide
There’s no one-size-fits-all answer here. Retiring with a mortgage might be perfectly manageable—or it might be the anchor that drags down your freedom. These key factors can help you weigh the decision wisely:
1. Your Retirement Income Sources
- Is your income predictable (pension, annuities, Social Security)?
- Do you have enough margin after fixed expenses, including your mortgage?
- Are you depending on market returns to pay the bills?
The more stable and diverse your income streams, the easier it may be to absorb mortgage payments without feeling restricted.
2. Size of the Mortgage Relative to Net Worth
Carrying a $700 monthly payment on a $500,000 nest egg is very different than carrying it on $100,000. It’s not just the size of the debt—it’s the proportion that matters.
If your mortgage is a small percentage of your net worth, the risk is lower. But if it's eating up a big chunk of your retirement income, that’s worth some serious reconsideration.
3. Interest Rate Environment
If you locked in a low rate—say, 3% or below—keeping the mortgage could work in your favor, especially if your investments are returning more. But if you're paying over 5–6% and rates have since dropped, refinancing or paying it off may offer peace of mind and long-term savings.
4. Personal Values and Peace of Mind
This might be the most underrated factor. Some people feel empowered and strategic keeping their mortgage. Others lose sleep over it, regardless of what the spreadsheet says.
Ask yourself: Will this mortgage feel like a weight or like a financial tool?
That answer alone may guide your decision more than the math ever could.
What I’d Do Differently—And What I’d Keep
Looking back at my father's journey, there were clear takeaways.
What worked:
- He refinanced at a low interest rate that didn’t overly strain his budget.
- He kept a strong emergency fund to handle bumps in the road.
- He had a clear payoff plan that aligned with his life expectancy and income.
What I would do differently (if in the same position):
- Run more scenarios on long-term cash flow stress tests, not just “can I afford this today?”
- Consider paying off the mortgage partially before retirement instead of keeping the full balance.
- Discuss the plan more openly within the family—there’s a benefit in aligning expectations.
The most powerful lesson? Decisions like this are rarely just about numbers. They’re about freedom, flexibility, and how you want to live out your retirement years.
Insider’s Edge
If you're within five years of retirement and still have a mortgage, consider setting up a “shadow payment account.” This is a separate savings bucket where you mirror your mortgage payment each month. It serves two purposes: it builds a safety net, and it gives you a live test-run of what retirement with a mortgage feels like. If you find yourself constantly dipping into other funds to make that payment, that’s a sign your retirement plan might need adjusting.
The Mortgage Is a Piece of the Puzzle—Not the Whole Picture
Retiring with a mortgage isn’t automatically right or wrong—it’s a lifestyle and financial choice that needs to fit into your larger plan. The key isn’t to follow someone else’s path, but to understand your own numbers, your comfort with risk, and your vision for retirement.
Watching my father navigate this terrain taught me that it’s not about eliminating all debt at any cost—it’s about managing it wisely and intentionally. A mortgage in retirement may limit some flexibility, but it can also provide financial advantages, especially in the right context.
The most empowered decisions come from a place of clarity, not fear. So whether you’re a few years from retirement or already on the doorstep, take time to run the numbers, consider your options, and—most importantly—understand how you want to feel in this next chapter of life.
Retirement should be about living on your own terms. And for some, that just might include a mortgage—and that’s okay.
