Prepare Your Home For When You Retire

I have long recommended that anyone who plans to stay in their current home when they retire should aim to have the mortgage paid off before they stop working.

For most households, a mortgage payment is the single largest monthly cost. Removing that cost is a gift in retirement, as it means you need less monthly income to cover your bills.

And now comes a sobering research report pointing out another reason to pay off the mortgage if you intend to retire earlier than 65.

The Joint Center for Housing Studies at Harvard University found that both workers and retirees between the ages of 50 to 64 who had paid off a mortgage spent 50% more on prescription drugs than people who still had a mortgage.

That implies that people with a mortgage may be so cash-strapped that they find it harder to pay for prescription drugs. In a better world, we would not have a health care system that makes access such a financial burden that people are self-rationing their own care. But here we are.

At least the burden seems to lift a bit once people become eligible for Medicare at age 65.

For people at least 65 years old, there was no difference in prescription drug spending whether they had a mortgage or had paid it off.

This research is just one more reason to consider paying off your mortgage before you retire, especially if you think you may stop work before you can enroll in Medicare at age 65.

That said, I want to be clear that you must first determine that you can afford to stay put.

This is such a crucially important stand in your truth moment. I understand the emotional desire to stay in your current home, but I also know you will be miserable - and your adult children will be burdened - if you can't really afford to stay in this home.

Sure, having the mortgage paid off is a big plus. But let's remember you still have property tax and insurance to pay each year, as well as taking care of the home and property. And those costs tend to rise over the years. At a not-high annual inflation rate of 3%, something that costs $2,000 today will cost more than $3,600 in 20 years.

I also want you to make a clear-eyed call on whether your home that you love today is the right place for an older you. Lots of stairs can become a problem. A remote setting where public transportation or ride shares are not available, can lead to isolation, as you may find it harder to visit friends and they may find it just as hard to come see you.

If any of that gives you pause, I would seriously recommend considering moving sooner than later. Downsizing to something that will be a better financial and logistical fit is a major retirement planning win.

But if you've carefully run the numbers and know you can afford to stay put, please make paying off the mortgage a priority