Can I retire with a mortgage or other debt?

Debt does not stop you from retiring. It changes how much income you need. A $1,500 monthly mortgage payment is $18,000 a year of fixed spending, and if it comes from a traditional IRA, you have to withdraw more than $18,000 to cover the income tax too.

The CFPB notes that more older consumers carry debt into retirement, and that for most older homeowners, keeping up the home is the largest expense, especially with a mortgage. It also warns that taking a new 30-year mortgage near retirement can become a hardship later.

Compare rates. Paying off a loan earns you a return equal to its interest rate, with no risk. Roughly, paying off $100,000 at 6% saves close to $6,000 in interest in the first year. If the same money sits in savings earning 4%, keeping the loan costs you the difference. If your mortgage is at 3% and safe savings pay more, the math tilts the other way. The same test applies to credit cards and other high-rate debt, where the rate is usually the deciding number.

Then weigh liquidity. Money sent to the mortgage is locked in the house. Cash in an account can pay for a roof, a medical bill or a bad market year. A large lump-sum withdrawal to pay off a loan can also raise your taxable income for that year, which can affect taxes and Medicare premiums.

What the simple comparison misses: the peace of mind of no payment, how many years are left on the loan, and whether you plan to stay in the house. The CFPB also cautions that a home equity lender can foreclose if you miss payments, and that reverse mortgage ads may not mention the risks.