A Texas software developer struggling to find work considered using more than half his retirement savings to pay off a mortgage.
But fellow Reddit users warned that eliminating the low-interest loan could leave him with too little money to cover everyday expenses.
Here's what to know
On Reddit, the original poster explained that he had worked in software for more than 35 years. At 59 years old, several recruiters agreed with his view that age was the main obstacle in his job search.
He said he had $700,000 in several individual retirement accounts and no debt beyond a Veterans Affairs mortgage, which had a $390,000 balance and a 3.2% interest rate. To limit his tax burden, he planned to spread the payoff over two years: half in 2027, followed by the balance in 2028 ahead of that year's elections.
The projected post-payoff budget was $1,000 to $1,500 a month for living expenses.
More background
He expected to need IRA withdrawals to keep up with mortgage payments. His concern about the loan included how each payment was divided: 51% went to interest.
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The proposed payoff would leave $310,000 in retirement savings before withdrawal taxes, according to one commenter. That calculation put the portion spent on the mortgage at about 56% of his savings.
The OP's stated budget exceeded the $775 a month the commenter projected from the remaining savings. Using a 3% annual withdrawal rate, the commenter arrived at $9,300 a year.
Health insurance before Medicare eligibility was another potential expense: the same commenter asked whether it was included in his monthly budget.
The thread did not establish that expense or provide a complete picture of his retirement income, leaving uncertainty about commenters' assessments of whether he had enough to retire.
What can be done?
Keeping savings available was the priority for several commenters, who advised sticking to scheduled payments on the 3.2% mortgage instead of paying it off early.
"I wouldn't be putting a dime extra towards a 3.2% mortgage," one commenter wrote. "The percent of your payment going towards interest, quite frankly, is irrelevant."
Others favored keeping the money invested, although the higher market returns they anticipated were not guaranteed.
Smaller annual withdrawals to make mortgage payments — not two large withdrawals from pretax savings — were the alternative proposed by the commenter who calculated the remaining retirement balance.
Where can I learn more?
Paying off a mortgage can lower monthly bills while leaving less savings for everyday expenses.
• A 73-year-old weighing a mortgage payoff faced warnings about leaving too little cash.
• A U.K. mother nearing 60 considered tapping her home equity, prompting warnings about depleted wealth.
• A U.K. family owing $218,000 considered downsizing to go mortgage-free before their mortgage rate reset.
• A retiree weighed selling a paid-off home to rent instead of buying somewhere smaller.
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