The low interest rates of the past several years helped fuel a boom in the home financing industry. Many home–owners took advantage of the attractive rates to refinance and take out second mortgages. This period also saw a rise in the popularity of creative home-financing options, such as interest – only mortgages.

The increased mortgage obligation carried by people into their retirement years may require that pre–retirees change their retirement savings strategies. And retirees may need to generate a greater income to support their mortgage debt.

As a general rule of thumb, retirement experts suggest that retirees will need 70% to 80% of their pre–retirement incomes to maintain their lifestyles. But this guideline assumes that retirees aren’t making mortgage payments. With the demographic shift toward carrying mortgages later in life, this figure may need to be much higher. In fact, in a recent survey, 55% of current retirees reported that they needed at least 95% of their pre–retirement incomes to maintain their lifestyles.³

Deciding whether to pay off your mortgage involves examining a number of variables, including your current portfolio, risk tolerance, and mortgage balance. Unfortunately, there is no easy, one-size-fits-all answer. It is important to consider your overall retirement savings and desired lifestyle.
As the trend of carrying mortgages into retirement continues, some of the old formulas for calculating retirement income may not be as applicable. Call today to discuss how mortgage debt could affect your retirement.

1–2) Journal of Financial Planning, September 2006
3) 2006 Retirement Confidence Survey, Employee Benefit Research Institute

For Region: Chicago

• Greg Farrall
• SVP Lakeside Wealth Management Group, LLC

Greg P. Farrall is a fully licensed financial advisor with Lakeside Financial Group, LLC. Greg has extensive experience in the equity derivatives markets after having served as partner with multi-million dollar investment firm, Rubicon Investments at the Chicago Board of Options Exchange. Prior to joining Lakeside, Greg spent thirteen years as a floor trader which helped him gain expertise in overall market investing. He has traded through such market events as the devaluation of the peso, healthcare bear market, the dot-com boom and the dot-com bust. He holds Series 7, 63, and 65 Licenses, as well as Life and Health Insurance Licenses.