Ask The Experts: Liquidate Investments to Pay Off Mortgage?

My wife and I will both be 61 in May. We are virtually debt free. Our home mortgage balance is about $42000.00 at 5%. Monthly payments are about $460/month.

Would I be better off liquidating (of course at a loss) some of our non-retirement investments and pay off our mortgage?

I hope to retire at 62 and work part time. My wife hopes to retire at 64. She carries our health insurance and at least under her present conditions her benefits will pay at least 85% of our medical if she retires at 62 and 90% if she waits until she is 64. -Ray C.

Hello Ray – It’s wonderful that you and your wife are so close to being debt free, however, I don’t think you should be in a rush to pay off that mortgage. Your mortgage is too small to probably qualify you for a tax break on the interest you’re paying, but a 5% interest rate is so low that it’s not actually costing you that much to maintain this loan. Especially considering that you can earn near 3% on a CD.

I’d rather you keep your investments intact as eventually they will earn you a good return and you say that liquidating them now would cost you. What would that cost be? Do the math and see if the initial cost of liquidating, plus any potential interest those investments can earn (when the market rebounds, they will!) is worth the 5% interest you’re paying. Odds are, the math will say keep the mortgage.


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Carmen Wong Ulrich is the host of On The Money