Listener Questions: Should I Pay Off the Mortgage or Keep the Cash if Im About to Retire?

Published: June 23, 2021, 10 a.m.

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Welcome back to the Retirement Answer Man show. This month we have stepped away from our typical monthly themes, and instead, we are tackling your listener questions regarding retirement. Make sure to listen in July as we discuss retirement withdrawal strategies and join Tanya Nichols and me in August to discuss women in retirement.\\xa0

Check out this episode to hear how you can create your retirement lifestyle framework, how to source your retirement paycheck, and whether it is best to keep the cash or pay down the mortgage.\\xa0

Finding a retirement lifestyle framework

A big part of beginning your retirement planning is finding a retirement lifestyle framework that you agree with. Many are drawn to the simplicity of the 4% withdrawal rule, but it doesn\\u2019t take into account your retirement lifestyle.\\xa0

One member of the RRC explained that he was looking to maximize his lifestyle given his assets. This is what we are all looking to do, but it\\u2019s not as easy as you think. Many people think that you can simply come up with a base number that you can spend each year, but this is based on the assumption that your lifestyle will not change over time.\\xa0

How to design your retirement lifestyle framework

Without a framework in place, people tend to grab onto any random retirement planning strategy and that will drive all of their retirement decision-making.\\xa0

Instead of asking yourself, how much do I need? A better way to design your retirement framework is to ask yourself how much do I need for this\\xa0lifestyle?

To define this you\\u2019ll need to ask yourself more questions. Where do you want to live? Define the location where you will be the happiest. What activities do you want to do in retirement?

Asking yourself these questions will help you to create a plan of record. This is a more organized way of considering your life after work. You won\\u2019t get it perfect, but it will put you in a much better position to be able to iterate and change your course as needed.

How to source your retirement paycheck\\xa0

One listener wants to know how to source her retirement paycheck. Traditional retirement planning dictates that you drain your after-tax assets first, then move to Roth, and lastly, tax-deferred assets.\\xa0

I don\\u2019t think this is a very efficient way to source your paycheck. First, determine how much you need from your financial assets over the next 5-10 years. Then, estimate what your required minimum distributions will be. (Check out the 6-Shot Saturday newsletter for a handy RMD calculator. Next, look at your 5-year income estimate. What kind of income will you have each year? You\\u2019ll always want to consider multi-year tax planning in retirement.

Keep the cash or pay down the mortgage?

Another listener wonders whether he should keep the $100,000 in cash that he has or should he pay down his mortgage. It is common to think of these decisions by themselves, however, you should build your retirement framework first. This will help you create a feasible plan for retirement. After creating your retirement framework, then you can create a what-if scenario. Creating the process first will allow you to be able to see the question from a big picture perspective. Listen in to hear why you may not want to zap all of your liquidity.\\xa0

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

RANDOM THOUGHTS

  • [2:30] Find a retirement lifestyle framework that you agree with
  • [8:02] Questions to ask yourself

LISTENER QUESTIONS

  • [12:33] Sourcing your retirement paycheck
  • [16:27] Keep the cash or pay down the mortgage?
  • [21:22] Is 3% average return on investment a good conservative average?

TODAY\\u2019S SMART SPRINT SEGMENT

  • [23:45] Go take a purposeful walk to think about what you want out of life over the next 3-5 years

Resources Mentioned In This Episode

Cal Newport

Rock Retirement Club

Roger\\u2019s YouTube Channel -\\xa0Roger That

BOOK -\\xa0Rock Retirement\\xa0\\xa0by Roger Whitney

Work with Roger

Roger\\u2019s\\xa0Retirement Learning Center

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