The Truth About Retiring With A Mortgage

Should you retire with a mortgage? There are benefits but also risks if you do. Having a mortgage maintains your current cash flow rather than taking a lump sum out of your RRSP and triggering a big tax bill, however as we see right now, a rising interest rate market can definitely bring stress to those with mortgages in retirement. If you do end up carrying a mortgage in retirement, make sure you have a very clear retirement and financial plan in place to give you piece of mind.
If you have any further questions about this video's topic or any financial planning questions in general, I encourage you to find a certified financial planner in your area or book a consultation with us to get your retirement plan on track.  You can learn more about our services at www.parallelwealth.com/planning
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OUTLINE
0:00 - Mortgage In Retirement
0:37 - Benefit 1: Cash Flow
1:26 - Benefit 2: Rate Spread
2:10 - Benefit 3: Property Value
3:50 - Risk 1: Rising Rates
4:33 - Risk 2: Limited Options
5:11 Risk 3: Market Risk
6:15 - My Thoughts
This presentation is intended for information purposes only and does not constitute an offer to buy or sell our products or services nor is it intended as investment and/or financial advice on any subject matter. Every effort has been made to ensure the accuracy of its contents. Certain of the statements made may contain forward-looking statements, which involve known and unknown risk, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Returns are not guaranteed and past performance may not be repeated.
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DISCLAIMER: The videos and opinions on this channel are for informational and educational purposes only and do not constitute investment advice. Adam Bornn is not registered to provide investment advice and as such does not provide recommendations - those looking for investment advice should seek out a registered professional. Adam is not responsible for investment actions taken by viewers and his content should not be used as a basis for investment trades.
#retirement

[@jovicrazed]

Although I didn't have a mortgage but had a HELOC, as of two weeks ago, I don't owe a single cent to anyone. It feels pretty darn good.

[@winniethepoohandeeyore2]

Bought my house in 21 using an SSDI income, overpay the principal every month ever since the first payment was due, knocked years off the life of the mortgage so far.

[@terrygelinas4593]

Agree - getting older and past 60, it's nice to simplify your life and pay off the remaining mortgage balance. Less stress, better mental health, and you check off a milestone checkbox.

[@edisonareis]

I leveraged 20% of our house (HELOC) 7 years ago to buy 3 rental properties so I am not worried about having a mortgage as the rental cash flow more than cover the house mortgage plus all 4 assets appreciated much more over the years instead having our house paid out. (and having the rental mortgages being paid out month by month is magical) Debt isn’t bad as long it is a “good debt”. Great video buddy

[@lauraw.704]

Thx Adam, another great vid! A few thoughts: some of us (single parents for ex) simply cannot pay off mortgage prior to retirement- I couldnt even purchase a home until much later in life … on the planning piece of carrying mortgage into retirement, I have included it in my DIY retirement plan (very detailed since I luv a good spreadsheet ! 😂) as an expense that I must have sufficient net monthly income to cover - other than possible borrowing rate revisions in years ahead (in the meantime, making double up payments regularly + net income has a built in ‘cushion’), is there a downside to this approach? Thx🎉 and happy Friday

[@philippelarocque4207]

Adam, I’m a CPA and I love your advice. The emphasis on cash flow is on point. I often see clients underestimating this element and the impact on their happiness. Great video!

[@ParallelWealth]

Thanks Philippe!

[@murraytown4]

I’m old school. Pay off the dang mortgage before retirement. I paid my mortgage off 6 years before retiring. Am retired at 58 and completely debt free. Out of control inflation and tanking investments are about as much stress as I care to deal with in retirement.

[@gruff4036]

Outstanding video Adam. The closer you can get to replacing your NET income in retirement, the easier it will be to carry a mortgage or other forms of debt. If you can only replace 40-50% of your net income in retirement, then having a mortgage is not advisable as you will be extremely tight with cash flow. If however, you can replace 80-100%+ of your net income in retirement then debt is largely irrelevant. If you can afford the payments working then you can afford the payments retired if income is the same. It just takes a plan. Also, retirement income can often be more secure then working income depending on the source.

[@ParallelWealth]

Thanks Gruff!

[@lauraw.704]

👍🏾

[@BD-fo7ps]

🇨🇦🇨🇦🇨🇦 hmmm never thought of holding on house Vs downsizing to condo👀👀 👍 info ℹ️ - will keep watching …

[@Wetcoaster1]

I have a home with a rental suite. I’m thinking of downsizing, but wondering if I pay capital gains on the sale of my current income generating home.

[@ll_distribution]

Nice Video. Thanks, You must have A Financial plan but finance economic changes ..who can say their life plan went 100%! Plan B and C today.

[@ParallelWealth]

Absolutely, but better to have a plan than nothing at all. It's like getting into your car and driving and have no plans on where to go. Have a route ans if there is a slow down, change course.

[@johnnyboyvan]

Get rid of all debt before you retire!! Free yourself from others owning a part of you still.

[@RetrieverTrainingAlone]

Why? We are retired debt free with the house paid off. This summer we are selling the house for $300k, moving to a more expensive location where houses are $400k. The choice is to take $100k from retirement or get a mortgage for $100k. Withdrawl from retirement means an increase in federal income tax bracket from 12% to 24% and retirement fund growth at least 4% per year. So would it be better to take out a $100k mortgage and pay off from retirement and stay in the 12% tax bracket.

[@caperboy1169]

I’ll owe a bit for a few years but it’s being included in my plan.

[@sheriewelsford]

I so love your videos...thanks for providing this service. I am looking at selling and then downsize, but right now I still have a small mortgage. I'm about 4 years' left until I retire at 65...hopefully fingers crossed.... 🤞 I have a detached house, with a small mortgage. When I look at what is available...I live on the Vancouver Island, Greater Victoria Area btw...there isn't much I can afford if I sell out, pay off the mortgage and buy with cash, even though I have over 60% equity in my home. The most affordable is small condos, but they have strata fees that are more way more expensive than my small mortgage payment. If I downsize, the only thing I can afford to buy outright has a strata fee more than my current mortgage. So is it worth selling and paying that strata fee or just staying put and just paying the mortgage into my retirement? And can people renew a mortgage when retired? Would they be approved? How do I win at this? Thanks...

[@ParallelWealth]

Talk to your mortgage broker on the mortgage stuff - it's more difficult, but definitely possible. If you can somehow avoid the strata I would, but it may be hard. Personally I would prefer the house with mortgage than condo with strata - all things being equal.

[@RetrieverTrainingAlone]

We are retired with the house paid off. This summer we are selling the house for $300k, moving to a more expensive location where houses are $400k. The choice is to take $100k from retirement or get a mortgage for $100k. It is a difficult choice to figure out. Withdrawl from retirement means an increase in federal income tax bracket from 12% to 24% and retirement fund growth at least 4% per year. So would it be better to take out a $100k mortgage and pay off from retirement and stay in the 12% tax bracket?

[@joldc5123]

What is the mortgage is on a rental property, would you also advise to pay it off quickly (we just retired) and have enough income even if tenants didn’t pay for a while) thank you

[@ParallelWealth]

Fine line...nice to carry the rental debt as you can deduct the interest. But definitely need to watch the cashflow in case you have it empty.

[@MrSteeJans]

Hi Adam, I just wanted to get clarification: you mentioned you don’t want to use your RRSP to pay down the mortgage, because of the big tax hit. Did you mean - cash in your RRSP to pay off the mortgage all at once ? My plan (hope) is to use my RRSP to pay my mortgage, but over a regular payment schedule, with the theory that the total amount paid per year will still keep me in the bottom tax bracket. The idea being my RRSP payments to the mortgage will be my only income. Our living expenses will be covered by my spouse’s pension. Does this sound viable ?

[@stephenrasmussen8160]

No, don't cash in your RSP, just take enough to cover the payments, and maybe lock in your interest rate or keep an eye on inflation pressure if you're variable.

[@normdemmitt7087]

Hey Adam, In retirement, if you eat away at a HELOC on multiple properties, and the HELOC has life insurance or you personally have whole life insurance, will the HELOC be paid off when you die? Thanks

[@ParallelWealth]

If the insurance is tied to the debt then yes. Typically a WL policy wouldn't be. Mortgage insurance with the bak would be, hence why better to get an individual plan outside the bank - keep control of the proceeds

[@marcello7993]

What is better to have in your view a Equity home loan or a traditional mortgage for income properties? Thanks great video s

[@James_48]

Mortgage rate will almost always be lower than the HELOC RATE, but a mortgage usually comes with much less flexibility for paying it off. It’s a situational decision based on what opportunities you might have to pay the debt off.

[@ParallelWealth]

Well said James.

[@ll_distribution]

I'd have both actually should be in place at start as you may need a margin for unexpected repairs.

[@tstse5969]

@@James_48 One can often opt for a term portion of that HELOC, which would have similar (ie lower) rates and terms (ie less flexibility) as a conventional mortgage. Looking down the road, exempt from probate fees are outstanding mortgage balances on real estate.

[@fi_high]

Interesting video! Question - Is there ever a situation where owning a house as a primary residence (or any large asset) into retirement could increase the amount of clawback on any government-issued support like CPP/OAS/GIS, etc?

[@James_48]

Primary residence has no impact on GIS or OAS clawbacks. Potential capital gains from another large asset (real estate or otherwise) might.

[@Coyotehello]

Hi Adam, How about getting into retirement and looking at getting a mortgage? I am 61 and I am thinking of buying a piece of land on a BC island. Of course I will never pay the mortgage in full, I will die first. I like the idea of having a small piece of land to play with. I/we have little money invested for retirement but are coming into a little money from inheritance...

[@Todd.T]

I say do it. Who cares if you pay your mortgage off if you have the money or are have a secure income? I know people who will pay off their house and have no retirement money or secondary income. Guess what happens if they need a chunk of money or get sick? No wealthy person who knows how to make money would bother paying off their house unless the interest rate is higher than what they can make. I know people with multiple houses and fancy cars, all bought with leverage and owned through business. I leverage. I had a variable rate loan. Interest rates went up. I just put the money back. Simple. I just borrowed it all despite the new rates because I can still make more than what I am being charged and it's only a bridge loan to a new opportunity. I expect nothing significant from an inheritance. I live my life as if I have no pension coming to me and no CPP.

[@glockman9c]

Why not just pay 2 or 3 times your normal payment to pay it off faster without destroying your cash flow?

[@rogerwalker1266]

I haven’t even listened to this yet, (still listening to the commercials) but WHY would you retire with a mortgage. Just DON’T. Get rid of the mortgage, then retire. When you are younger pay off as much as you can, whenever you can. A mortgage costs you more money the longer you have it. Get rid of it early! Just a no brainer. Down size if you have too! No brainer.

[@dougdoty4718]

I personally would not recommend doing what I did. We put our kid in the house and planned to travel, when we came back the kids said that we had to find a new place. Hahaha they almost pay the mortgage on a new to us house. I just don't like owing money. And that's why I would not recommend buying a new to you house after retirement. ( I do plan to die with 3 homes for the kids to pay taxes on)

[@scrubs9998]

a mortgage at 3.5 % and investment return of 5 -7 % plus the mortgage is a write off

[@magimichel2598]

I retired 2018 with a mortgage of 200k fixed rate , I am now 72. If we payoff the mortgage, does this reduce the governments payment of OAS and GI.?

[@James_48]

I guess it depends how you pay it off. Eliminating debt does not affect OAS or GIS. But, if you incur capital gains or remove money from your RSP/RIF then that will affect your OAS/GIS

[@magimichel2598]

@@James_48 I started to cash my RIF . Is anyway I can avoid paying high taxes

[@James_48]

@@magimichel2598 it’s best to seek out a CFP like Adam to make a purposeful plan on how to best use your savings in retirement but generally, keeping your withdrawals “smooth” over the years and avoiding withdrawal “lumpiness” is best. Of course, utilizing your TFSA strategically can make this easier. For instance, to prepare for a large expense, such as replacing a roof or going on a world cruise, withdraw incrementally over multiple tax years so that you don’t experience a big tax bill by withdrawing a large sum from your RSP/RIF in a single calendar year. Maintaining an accessible emergency fund can also mitigate the need for “lumpy” withdrawals.

[@magimichel2598]

@@James_48 thank you james

[@ParallelWealth]

Thanks James. Great feedback.

[@Battleneter]

What do you mean have a plan "might be inheritance" , are you suggesting knock off your family?

[@ParallelWealth]

🤣🤣

[@seolfor4797]

I would never retire if I had any form of debt

[@Hyperpandas]

Why not?

[@my1thousand]

Debt is another expense to manage in a monthly budget. With no debt (house, car, etc) that is less outgoing money and thus savings can last longer. And there is no stress of interest on debt eating away as well.

[@Hyperpandas]

@@my1thousand Sure, but whether or not to have any debt should depend on what you get in exchange and your cash flow situation. For example, someone may opt to purchase a more valuable home with a mortgage (they can afford), providing themselves with a nicer lifestyle and a home that increases in value faster than a more modest home, all the while investing in a tax free asset for their estate. Someone else may want to live a different lifestyle or not have the cash flow stability to be confident about making that choice. But the notion of not retiring with any form of debt under any circumstances is a silly restriction for someone to put on themselves.

[@Grimenoughtomaketherobotcry]

@@Hyperpandas I agree. I live in the GTA, and my wife and I both had (and have) seperate vehicles to get to work. The second car made it impossible to pay off the mortgage before retirement.

[@Grimenoughtomaketherobotcry]

Also, you're paying off a mortgage in inflated dollars; the dollars you pay at the end of the mortgage are worth a lot less than those you pay with earlier due to inflation. And if you need a loan for a car or major house or car repairs, holding a (hopefully small) mortgage can make it easier to get that loan, rather than having to pillage savings that could trigger a big tax hit if in an RRSP, or that should be allowed to grow for as long as possible if in a TFSA. Debt is not bad if used intelligently.

[@ronlhubbard1353]

If you have a mortgage you can not afford to retire !

[@ParallelWealth]

Not true at all, but becomes more of a cashflow challenge

[@cafepablo]

You can, you just need a plan.

[@monicaambs]

@@ParallelWealth I retired December 2019 and I’m currently 68 and got divorced and got a mortgage at 52. I can afford it but it cramps my travel plans. So I started aggressively paying it ($99,554.00) down January 2021. Learned about Dave Ramsey on KZbin and I am currently at $45,940.00. Wish I had heard of Dave Ramsey and his plan when I was young. Planning on being done the mortgage January 1st, 2024. I also have 10 healthy sinking funds including car replacement, vacations. Could pay more on the mortgage but restricted by the BMO 10% rule. Keeping to it as I don’t intend on giving them a cent more.

[@itsmy2cents615]

I don't agree. because I can and will be carrying my mortgage into retirement for at least 4 years. My monthly expenses with the mortgage is 2700. My projected SS in 2024 is 3353 . I won't even have to touch my savings. and I have a pretty good lifestyle. All things can be accomplished with a good plan.

[@lk1869]

My mortgage is such a nominal amount, fixed rate, great interest rate, that moving anywhere would be a drain on my cash flow. Even with the upkeep and taxes, I am far better off staying then renting or paying it off. When I get my renewal, I will analyze again.