Retirement, random thoughts and your mortgage

I read an interesting article about planning for retirement. This is a topic that I find very important. I’m not a financial planner, however as a Mortgage Professional I see a financial snapshot of what people have when applying for a mortgage. I concur with this article from CNBC, most people do not have enough money saved up for their golden years.

The article reports that most Americans will retire broke. There is a great divide between what is referred to as a “super saver” and those who do not have near enough funds for retirement.

My Dad taught me, as soon as I started to earn an income with my first job, to “pay myself first”. He wanted me to sock away 10% of my gross income with every paycheck and simply get into the habit of savings. Once I began my first “real job” that offered a retirement savings plan, I immediately enrolled to the amount the employer contributed to even though retirement back in 1986 seemed so far away. In my opinion, one of the biggest mistakes I see people make is NOT participating in their employer’s retirement plans. If your employer has a retirement plan and your not participating – please contact your HR person today to make plans to get enrolled. Make your contributions to your retirement automatic, or as my dad would say “set and forget it”. In 2018, you can contribute up to $18,500 to your employer 401k plan if you’re under 50. If you’re over 50, then you can sock away an additional $6,000. Sock it away and let this money work for you.

I often hear from clients that they want a shorter term mortgage or want to pay off their mortgage prior to retirement. I think this is a good goal IF they have no non-tax preferred debts, have an emergency savings account established and are on track with their retirement being funded. Opting for a 15 or 20 year mortgage or paying more towards principal instead of paying more towards other debt or funding retirement savings may not be the best option, in my opinion. Once you’re retired, if you have extra savings, you can always pay more towards (or pay off) your mortgage at that time. It’s very likely you might not be living in your current home when it comes for time to retire…which brings up my next subject.

If you are planning on retiring in another home, you may want to buy it sooner than later, if possible. There are a couple of reasons why I suggest this. For starters, you may have more income now than what a lender may be able to use when you retire should you need a mortgage. Of course, if you’re old enough to qualify, you could possibly use a reverse mortgage to purchase your home…reverse mortgages are not for everybody. Another reason is that you could use your future retirement home as a vacation or rental property and let it pay for itself and/or earn income for you. Last, we don’t know where home prices or interest rates will be in the future – odds are they (at least interest rates) will be higher. Home values will most likely be higher as well. Buying the home sooner than later may allow you to enjoy some of that appreciation in equity. If you’ve always dreamed of retiring in the San Juans, Walla Walla or Bellingham, why not buy that home now and use it as a rental? Once you retire, you can always sell your current primary home and pay off the retirement home or convert your former home to a rental for some extra income during retirement.

According to this article, which I highly recommend you read, I don’t have enough saved up for retirement…but I’m working on it! I know it can seem overwhelming but we have to start somewhere! Bottom line, I don’t want my kids to worry about me when I retire – unless it’s that we’re having too much fun.

DISCLOSURE: I am NOT a financial planner. I am a Licensed Mortgage Originator. For financial planning advice, please meet with your financial planner. If you need help with a mortgage for a home located anywhere in Washington state, I can help you! 🙂

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