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Life Without a Mortgage
CNBC.com | September 26, 2011 | 09:41 AM EDT

While most financial planners agree that owning your home free and clear during retirement is a worthy goal, Elaine Bedel, with Bedel Financial Consulting in Indianapolis, says there are times when it makes more financial sense to keep your money in the market and use the earnings to pay off your loan.

That’s particularly true, she says, if you need to invest (however conservatively) for growth.

“There are a few of my clients who feel like if they don’t take the risk to get the growth, they’re not going to be able to meet their retirement objectives and live the lifestyle they want,” says Bedel. “If you take a big chunk out of your nest egg and the income it was generating was being used to meet your mortgage payments, as well as additional living expenses, that may not be the right thing to do.”

CFP Fierstein agrees, noting most retirees are advised to withdraw no more than 4 percent from their nest egg each year to ensure they won’t outlive their income.

Thus, if you take $200,000 out of a $500,000 portfolio to pay off your house, your income based on that 4 percent drawdown rate would drop to $12,000 from $20,000 per year. (The $20,000, of course, would have had to help pay for your mortgage.)

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