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According to a recent Realtor Magazine column, which quoted data from American Financing’s Retirement and Mortgage Survey, 44 percent of 60- to 70-year-old retirees have a mortgage in retirement.

This data is consistent with my professional observations in my own practice, as I would estimate about 40 partners of our retired clients at Oak Partners go into retirement with a mortgage as well.

Which leads to perhaps the most common question we get from our pre-retirees during the planning phase leading into retirement, which is, “Should I pay down the mortgage?”

To answer this question it's important to understand the financial mechanics of a typical retirement. Which is a fancy way of saying, “You need to know the math.”

In my experience with a typically designed retirement, the highest risk period of the retirement tends to be the three to six years after the decision to retire occurs.

Logic tells us that without the benefit of a couple of additional decades to grow, this is when the asset base of the household tends to be smaller, and because new retirees are young, healthy and busy clicking off the project and travel bucket-list, the family is typically spending more money during these years as well.

Early retirement is a time when potential shocks due to financial markets need to be closely managed, and spending rates need to be mindfully observed as well. Cash flow is always king in retirement, and it's particularly important right out of the gate.

Which is why we typically don’t recommend clients “pay down the mortgage.”

Now, I need to make a clear distinction between paying down a mortgage and paying off a mortgage. When a mortgage is paid down, what is really occurring is that value is transferred from a hopefully growing portfolio of liquid assets, into an asset, the home, which is likely growing at a slower pace and is far less liquid.

While having a smaller mortgage balance may be comforting, unless the home loan is actually paid off, nothing really changes in the cash flow part of the family’s finances. A mortgage of, say, $150,000 which costs $1,000 a month to service, is no different from a cash flow point of view than a mortgage of $50,000 using the same original payment schedule or $1,000 a month.

The only day-to-day difference between these two scenarios is that in the second scenario, the homeowner took $100,000 from a portfolio which could be used to create retirement cash flow and paid it into the home, which does not create cash flow. So, while the process of doing so may have felt good, from a lifestyle perspective, paying down the mortgage may actually lead to less money available for living expenses.

Sure, after the loan is paid down the homeowner could go back to the bank and re-work or refinance the mortgage payment schedule, but after working with retirees for over two decades I can’t remember when someone actually did this second step. And with most modern mortgage financing, the process of re-working the loan after the paydown is actually a re-finance, which involves underwriting and fees.

Contrast this with the process of paying off a mortgage, which in many situations I will recommend. If the mortgage can be totally paid off, reducing monthly cash flow needs by some portion of the mortgage payment, this may actually be a great use of investment capital, by freeing up monthly cash flow for lifestyle expenses, or reducing the amount of income removed from the retirement portfolio.

Of course, issues such as taxes and actual interest savings have to be considered, but in most cases if a mortgage loan is less than $50,000, this is a discussion most retirees will want to consider.

Opinions are solely the writer's and are for general information only and are not intended to provide specific advice or recommendations for any individual.  Marc Ruiz is a wealth advisor and partner with Oak Partners and registered representative of LPL Financial.  Contact Marc at Securities offered through LPL Financial, member FINRA/SIPC.