Money Secret #3: The Happiest Retirees Have Their Mortgage Paid Off

Enjoy Budgetary Freedom When Your Mortgage Payments Are Gone!

In our previous articles, we covered the first two money secrets of the happiest retirees:

Now that we’ve taken a look at what you want your money for and how much money you’ll need to retire, it’s time to move on to secret #3 of the happiest retirees. 

Money Secret #3: Pay Off Your Mortgage In As Little As Five Years 

You might be thinking that I can’t be serious. But I am! If you are anywhere near retirement and can afford to pay off your mortgage, you should. My study revealed that as mortgages vanish, happiness levels rise! In fact, all the successful retirees I know who are living out their dreams are those who have eliminated or drastically reduced their mortgage payments before retirement. 

What are the biggest benefits to paying off your mortgage? 

*You are no longer paying interest to the bank! This is an obvious one, but now you can save that money you were spending on the mortgage.

*Paying off your mortgage gives you the budgetary freedom to spend more money on finding purpose and happiness in life.  


Four Steps To Paying Off Your Mortgage

Paying off your mortgage may sound intimidating or even like an unattainable dream, but it can be easier than you think if you follow these four steps:

1. Keep your mortgage payment below 15 percent of your gross monthly income.

2. Visit the early mortgage pay off calculator.

This can be a really fun tool- give yourself half an hour and plug in a bunch of different numbers. Try increasing your monthly payments by $50, then $100, then, $200, then $500. Experiment with different combinations. Plug in your own numbers and see how many years (and dollars) can be shaved off by paying an extra couple hundred dollars per month. It’s surprising how much you can really move the meter.

3. Make bi-weekly mortgage payments (that’s 50 percent of the note every two weeks instead of 100 percent in one month). 

This is an easy trick that’s surprisingly effective. Making bi-weekly mortgage payments will force you to make an entire extra monthly payment per year. 

For example: If your mortgage payment amounts to $2,000 a month and you opt for the two-week payment schedule, you’ll pay an extra $2,000 that year due to the way that the calendar falls. You don’t even realize that you are paying extra. It’s a great trick to sneak in an extra payment without the pain!

4. The One-Third Rule. 

If you are in a position to pay off your mortgage using no more than one-third of your non-retirement savings, consider paying off your mortgage today. As a reminder, your retirement savings include your 401(k) and/or RIA funds. 

For example: If you owe $40,000 on your home and have $150,000 in savings, you are within the one- third rule. You can safely pay off your mortgage, and still have a sizable cushion left over, which is the optimal situation. 

Following these four steps will put you that much closer to paying off your mortgage before retirement, in turn giving you peace of mind and allowing you to sleep better at night. Financially, you will be better positioned to enjoy all of the activities in life that you have worked so hard to enjoy.

Disclosure: This information is provided to you as a resource for informational purposes only. It is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.