|Mara Lee; Mara Lee The Hartford Courant|
Conventional wisdom says you need 70 percent of pre-retirement income to keep the same lifestyle after you stop working.
That makes sense if you've been putting away more than 20 percent of your income in your final working years. With those savings, and no more work-related expenses for commuting and dry cleaning, you'd probably get away with a lower income.
But if you weren't saving heavily to the end, it's hard to see how you'll reduce expenses 30 percent instantly at retirement unless you've paid off the mortgage.
In 2010, the most recent data available from the
"It really started to uptick around '95, and it's gone pretty much consistently upward since then," said
Why, then, don't more people make paying off the mortgage before retirement a priority?
Copeland said a lot of things changed. Housing values went up and credit loosened at a time when many Baby Boomers were in their 50s. Many families did cash-out refinancings to help pay for kids' college tuitions, or renovations.
"You see a lot of people in their 50s buying bigger houses, new houses, as their incomes went up," he said.
"My parents, they had a house in
But, as the mortgage numbers show, a majority of people own their houses free and clear by 65 – people like
Jim, 63, and Sallie, 60, paid off their
"From the very first mortgage payment, we paid an extra
In 1986, they sold the first house for
Sallie stayed home with their kids for eight years, but later, after she started working full time as a real estate agent, she and her husband started putting
Then, in 2003, her husband lost his manufacturing job, when they had two kids in college. He had covered the family with benefits, so they had to pay
"Believe me, it wasn't easy when he was laid off," she said. Before he lost his job, their annual earnings were roughly equal. He was out of work for several years.
The kids borrowed some of the money it cost to go to
The last years of the mortgage, when it was
Over the years, they have done a kitchen remodeling and other interior upgrades, but when asked if they paid for the projects with a home equity loan, she replied, "Oh, no, no, no. It's always been: If you don't have the money, then don't spend it. It's the same thing with credit cards."
Copeland said it's possible someone in his 50s could build assets faster in his 401(k) if he made the right investments than he would putting money toward mortgage principal. But, he said, "Even if you think you're investing properly, it's impossible to predict [the outcome]."
He said anyone who has a 401(k) employer match should be putting enough in to get that match.
But once that's done, he says the wisest thing for a person who's 55, who has just
"It's easier to work two years longer than five years longer," Copeland said.
Whether the value of the house drops or not, owning a house free and clear has the same value.
"If you can get rid of something that's 20 percent of your budget, that is enormously beneficial," he said. "To be able to get rid of that expense is … a key choice they can make that will allow them to have an easier retirement."
Because her family paid off the mortgage well before retirement,
Copeland said not just because of the recession, but generally in the last decade, one in three people who retire do so before they planned to, either because they were laid off and couldn't find another job again, or because their health prevents them from continuing to work.
"If you can get your debt paid off before you retire, that certainly makes life easier if things don't quite work out like you thought," he said.
For the moment, Clemens is putting more money into stocks. But he says he plans to have the house free and clear when he and his wife, an attorney, stop working.
"It's basic financial planning. When you retire, typically your income drops," he said. "Typically your single largest payment is your mortgage."
He says he's astonished by the number of people in his generation who have not saved much for retirement.
"There's a lot of people that are going to be in for a rude awakening," he said. "You can't survive on
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