Retirees with $2.5 million want to pay off their $200K mortgage — but a hidden tax hit could cost them $60K
Retirees with a $2.5 million investment portfolio find themselves weighing the pros and cons of paying off a $200,000 mortgage with their assets. While doing so would eliminate the monthly mortgage payment, it also poses potential tax consequences and a loss of liquidity. Experts advise retirees to consider their current portfolio return, after-tax investment returns, and whether the mortgage interest is tax-deductible.
Additionally, they must evaluate the impact on their retirement income, tax bracket, and potential penalties for early withdrawal of funds. While some retirees prioritize mortgage payoff for the stress it alleviates, others prefer maintaining their investment portfolio for potential higher returns. A compromise could involve making a significant principal payment or adjusting monthly payments to create a buffer against future expenses.
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