This past weekend, I celebrated my 50th birthday with family and friends. I have two (not much) younger sisters who love to ask “don’t you feel older” and my answer is typically “not really”. I’m actually pretty excited to be the big 5-0…beyond being able to join AARP!
The first thing I did on Monday, following my birthday celebration, was to contact my H.R. department to let them know that I want to increase my contribution to my 401(k) pronto. As a 50 year old, I can contribute an additional $6,000 to my 401(k) this year. Yee-haw! It’s my opinion that you cannot save enough… I also stash as much into my health savings account as possible.
In my profession, I am in the unique position to see a someone’s financial profile, including their retirement savings. I am always thrilled when I see that someone has been socking away for their golden years and I also see when people have not planned for retirement. I cannot stress enough how important it is to save and plan for our later years. I am not a financial planner…however, my personal opinion is that it’s more important to fund your retirement and pay off revolving debt than it is to pay off your mortgage or have a shorter term mortgage. This is why for a majority of the clients I see, a 30 year fixed rate mortgage seems to be the best option. A 30 year fixed mortgage will allow for a fixed, reduced payment during pre-retirement years so that you can stock funds that you would be paying towards a shorter term mortgage towards savings or debt reduction.
Another thing about being 50, is that retirement is within sight… it might be 5, 10 or 15 years away but it’s a reality. I actually hope to work as long as I can. If you are planning on retiring one day 😉 and possibly downsizing your home and/or mortgage, you need to plan for this.
There are a couple things to consider…lenders are looking for income to continue at least 3 years (we are literally talking 36 months at closing of the mortgage) when using it for qualifying for a mortgage. If you are planning on leaving your job or cutting back on hours, there may be issues with using your income. If you are leaving your job to retire, your past income will probably not be averaged or factored for qualifying. Retirement income may be used, with proper documentation, once you are receiving it.
Something else to think about, is that with getting older, we have higher odds of injury or illness. Either of these awful unexpected events may impact income and/or credit and therefore, impact what you may qualify for with a mortgage for buying the home you plan on retiring in. A reverse mortgage may be an option for retirees who have a challenge qualifying for a mortgage however you need to wait until all borrowers on the mortgage are 62 or older and there are other factors for qualifying.
Bottom line, being 50 is a reality check for me. I think it’s never too late to start planning for retirement and to work on getting finances in (better) order. Refinancing a mortgage may help achieve eliminating higher interest rate debt(s) which would help fund retirement.
I am happy to help you with your mortgage needs for home buying or refinancing your home located in Washington state! Please contact me.