Does your employee
retirement education include information about carrying a mortgage into
It can have a big impact on retirement wealth, says a report
from the National Center for Policy Analysis (NCPA). Retirees have many reasons
for carrying mortgage debt. For example, if the mortgage payments are small, a
worker may not consider it an issue to pay them in their retirement years, or
some retirees may purchase a home to move to a less costly, low-tax state to
reduce their living expenses.
Retiring with mortgage debt is becoming much more common.
According to research
from LIMRA, for those ages 55 to 64, 37% of people were retiring with
mortgage debt in 1989, while 2010 saw that figure rise to 54%. For those ages
65 to 74, the figures over the same time frame increased from 22% to 41%. And
for those 75 or older, the figures over that period increased from 6% to 24%.
Mortgage interest may not concern some retirees,
as it is a tax deductible expense. But, the NCPA article points out, Social
Security benefits and retirement account income will likely put retirees in a
lower tax bracket than while they were working. Itemizing, therefore, may not
be the best way to reduce their overall tax liability. For tax year 2013, the
standard deduction is $6,100 for singles or marrieds filing separate, and
$12,200 for marrieds filing jointly, which could be more than if they itemized.
So paying interest on a mortgage gives the homeowner no tax advantage.