I’m Retiring Relatively Soon. Should I Pay Off My Mortgage or Invest Instead?

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Should you pay off your mortgage or invest the money instead?

It’s a common financial dilemma. And it’s one that money expert Clark Howard has addressed in various forms many times.

However, a recent listener put a slightly different twist on the big-money version of “this or that.” What if you’re getting close to retirement? Does that change the answer?

That’s what a listener of the Clark Howard Podcast recently asked.

Should I Pay Off My Mortgage Before I Retire or Invest the Money Instead?

I’m less than 10 years from retiring. Should I pay off my mortgage or invest my money instead?

That’s what a listener asked on the Aug. 9 podcast episode.

Asked William in Georgia: “Recently, I inherited enough money to pay off the remaining $170,000 balance on my home. My current loan rate is 3.75%.

“My question is should I leave the money in an IRA or pay my home off? I am 61 years old and looking to retire in seven to nine years. My wife and I are very conservative and have little to no debt.”

Normally, Clark views this question as a math equation. If you locked in a low-rate mortgage in the years prior to early 2022, potentially something below 4%, the answer is simple.

The S&P 500 has produced an average return of 10.7% since moving to the 500-company format in 1957.

There’s short-term volatility. But in the long term, there’s a clear advantage to stacking as much money as possible into a well-diversified investment portfolio instead of paying off a loan with less than 4% interest.

If you can stack those investments inside a tax-advantaged retirement fund such as a Roth IRA, even better.


However, is it even OK to carry a mortgage beyond retirement? Does that change Clark’s answer?

Invest the Money Even If You’re Close To Retirement, Clark Says

Based on William’s excellent mortgage rate and timeline, it’s still an easy call. Invest, invest, invest.

“Absolutely do not take the proceeds and pay off the mortgage,” Clark says. “Your mortgage is at a carry cost of 3.75%. That is by today’s standards a fantastic interest rate.

“You can earn more on the money in simple savings or CDs than what you’re paying in mortgage interest rate.”

Clark considers true investing to be a minimum of 10 years. Although when pushed, he concedes that a timeline of at least five years usually is OK.

William has at least seven years, possibly more, before he’ll need to draw down his retirement investments. Put the money into an IRA, Clark says. At least as much as you’re allowed to contribute in 2023 by law. You can invest the rest in a standard brokerage account at one of his favorite investment companies.

“Hopefully you have [the $170,000] well diversified and in stock funds, principally. Possibly some bond funds,” Clark says.

“You want to get that growth because over a longer period of time, you’re going to be able to do a nice job building up your nest egg and outrunning inflation having that money grow. And that is what I’d do.

“You already told me you basically have no debt other than this mortgage. You’ll have another seven to nine years paying off the balance toward the $170,000. By the time you retire, your balance could be very small.

“As long as you have built up enough nest egg, you could at that point in retirement choose to pay off whatever would remain of the $170,000. Call me in seven to nine years if I’m still kicking and I might tell you not to pay it off even then. It might still make more sense for you to continue to service the 3.75% mortgage rate.

“And I know psychologically how great it feels to be mortgage debt free. But from a financial standpoint right now, it’s not the best financial decision.”

Final Thoughts

If you’re one of those with an excellent mortgage rate that you secured prior to the major interest rate hikes of the last 17 months, take advantage of it.


Any mortgage rate under 4% doesn’t even require investing to outpace right now. Some of our best high-yield savings accounts are paying better than 4% on their own.

In the long term, you can expect a well-diversified investment portfolio to outshine 3.75%. So even if it feels unsettling to carry a mortgage into retirement, the math makes sense to do so.

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