After years of dutiful payments, you find yourself in the enviable position of having enough accumulated savings or discretionary income that you could aggressively pay down—or completely pay off—your mortgage. But should you? Are there better ways to ensure your financial security?
Making the best choice for you
Paying down your mortgage faster—or paying it off in a lump sum—seems like a no-brainer. For most Americans, a mortgage represents both the highest monthly expense and the largest liability on a net-worth statement. Intuition tells us that debt is bad, and being out of debt is akin to increased financial security.
While it's true that you can save thousands of dollars in interest by paying off the loan early, the interest rates for fixed-rate mortgages are historically low, and your mortgage interest is tax deductible. Depending on your circumstances, there may be better ways to use that extra money to boost your short- and long-term financial security.
With that in mind, here are some questions to consider before you aggressively pay down—or pay off—your mortgage:
While paying down—or paying off—your mortgage early is a worthy goal, it is important to align it strategically with other goals and within the bigger picture of your long-term financial security. If you have questions, we are happy to assist you in planning for these important decisions.
This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.
© 2017 Commonwealth Financial Network®
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Test Your Knowledge of Social Security Spousal Benefits
Social security spousal benefits are designed to provide retirement income to spouses who’ve earned significantly less than their spouses have during their working careers. So, if your social security income is less than half that of your spouse’s, you may be eligible to receive a social security spousal benefit to make up the difference.
For example, Jon, age 70, has been married to Patty for 40 years. Jon reached full retirement age at 66 years old, but he waited until age 70 to claim his social security retirement benefits, earning him delayed retirement credits. When Patty reached her full retirement age, she filed for spousal benefits based on Jon’s record.
True or false?
Patty’s social security spousal benefits will be 50 percent of Jon’s retirement benefits, including his delayed retirement credits.
We understand that it can be tricky navigating the world of personal finance. Everyone seems to have an opinion, and it can be hard to know what to believe. We created this series as a way to present and debunk some of the most common financial myths.
Fiction: If you’re on the threshold of a tax bracket, you should stay on the higher end and enjoy the higher-income status.
Fact: If you’re on the threshold of a tax bracket, deferring income or accelerating deductions may help you reduce your tax exposure. It might make sense to defer some of your income to the next year if doing so will put you in a lower tax bracket. Accelerating deductions, such as medical expenses or charitable contributions, into the current tax year may have the same effect.
Last Updated: 12/04/2017