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The Festival of Light...and Freedom from Mortgages!

mortgages Dec 19, 2022

Hanukkah, also known as the Festival of Lights, is a holiday celebrated by Jews around the world. It commemorates the miracle of the oil that burned for eight days in the temple in Jerusalem when the Maccabees recaptured it from the Syrian-Greeks. It celebrates overcoming insurmountable odds and fighting for freedom.

In many ways it reminds me of why I do what I do. It reminds me that each of us have a responsibility to be a beacon of light in this dark world. It is why I write this blog, and host my podcast, and create TikTok videos. I am on a mission to help one million people retire with financial security and help people live the retirement of their dreams.

Today, I want to talk to you about the most important aspect of our lives, our home and the people we share it with. While it is truly amazing to deck the halls with lights, and god knows my quite little neighborhood turns into a living amusement park, complete with lights, animatronics, and music. As as a financial guy, I can't keep the thoughts of the monetary implications out of my head :-)

This year as we were admiring our neighbors ever growing north pole, complete with sleigh and reindeer, it got me thinking about mortgages and retirement. Santa, seems like a nice retired fellow, he does what he loves, and he's a jolly good fellow, but do you think he'd be so jolly if he had a mortgage? or a 401k that was down 20%?

I have yet to meet the homeowner who hasn't asked me the question, should I pay off my mortgage? So, let's dive in to the question.

Most of us would probably love to pay our mortgages as soon as possible. But as Yields4U readers, you know that emotions is not how we make sound financial decisions. When thinking about retirement, we need to evaluate every decision we make from the lens of our long term financial stability.

One reason why many people rush to pay off their mortgages is to use the money they would otherwise be spending on interest to fund their retirement accounts.

Turns out, that might not be the most effective strategy to accumulate wealth.

With interest rates rising, the math of paying off an old mortgage just got more complicated. In fact, for many people, their financial future might be best served by holding on to the cheap debt their 2% or 3% mortgage and using that money, instead, to pay off higher interest debt, or to compound in a sound investment strategy.

I often explain to my clients that I will never just tell them what they need to do; that would be too easy. I want to teach them the questions to ask and the issues they need to consider, so they can make sound financial decisions that are right for them. So, if you are thinking about paying off your mortgage early, here are a few things to consider as you weigh your options, so you, too, can be empowered to make the decision that is right for you and your family.

One of the first things you should do if you are contemplating paying off your mortgage, is to determine whether you are contributing the maximum allowable amount to your retirement accounts. A good advisor can help you figure this out. If you have not maxed out your contributions, you might want to take advantage of the chance to do so before you hit your retirement years.

On the other hand, if you have reached the limit on your contributions, and you don't have credit card debt, paying off your mortgage, might sound sound...

However, consider this. Your home is probably your single largest asset. For many people I meet, their home is easily 50% of their total net worth. Now, let me ask you a question, do you have a way of leveraging this asset? Do you have a way of tapping in to it's growth? Your investment accounts you can borrow against, you can sell, you can get dividends and earn interest. These are active benefits to you and your retirement. Putting more money in to your home only helps the bank and maybe your peace of mind.

So, before you start handing the bank all your money, ask yourself the question, is there something better I can be doing with my money? What if there was a low risk way of investing that allowed you to grow your money faster than your mortgage rate - and was fully liquid and had principal protection? Wouldn't that be a better use of your money than handing it over to the bank? Where it benefits the bank and not yourself?

In retirement, we need to be selfish. We need to consider every decision we make and think about how it impacts our financial security, today, tomorrow and long in to the future...and we need to do everything in our power to protect our hard earned money.

So as you admire the lights on your trim, your halls decked with holly, and rooms filled with the warmth of cheer this holiday, think about the mortgage debt hidden in the floorboards. It may or may not be the burden that you think it is. If you'd like

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