---
title: "Pay Off Mortgage Before Retirement: How Much Extra It Takes"
description: "Should you pay off your mortgage before you retire? The extra it takes, where the money can come from, 401(k) and IRA tax traps, RMDs, and other options."
url: https://ownedoutright.com/us/guides/pay-off-mortgage-before-retirement/
---

[US](https://ownedoutright.com/us/) › [Guides](https://ownedoutright.com/us/guides/) › Pay off before retirement

# Should you pay off your mortgage before retirement?

Walking into retirement without a mortgage payment is a common goal, and a reasonable one. It's also a goal with a price tag: a set amount of extra each month, or a lump sum, starting now. Here is how to work out that number, where the money can come from, and the tax rules that catch people out.

By [Ashutosh Anand](https://ownedoutright.com/about/) · Updated September 23, 2026 · [How we calculate](https://ownedoutright.com/methodology/)

**The short version.** Paying off your mortgage before you retire lowers the income you'll need each month, and so the amount you'll have to withdraw from savings. On a $300,000 balance at 6.5% with 25 years left, being mortgage-free in 15 years takes about $588 a month extra. Pay for it from income if you can: taking the money out of a 401(k) or IRA is usually taxable and, before 59½, can cost an extra 10%. Keep enough cash that the house isn't your only safety net.

## Why a paid-off house matters in retirement

Once your paycheck stops, every monthly bill has to be covered by Social Security, a pension or withdrawals from savings. A mortgage is usually the biggest of those bills, and it doesn't shrink with inflation or with your income. In our example, the principal and interest payment is $2,025.62 a month, or $24,307 a year, before property taxes and insurance, which you'll keep paying either way.

Carrying a mortgage in retirement means that much more income needed every year. If the income would otherwise come from a traditional 401(k) or IRA, a paid-off house saves you even more than the payment, because each withdrawal is taxed: to spend $24,307 you'd have to take out more than that. Smaller withdrawals also leave more of your savings invested for longer, which helps the money last.

## How much extra it takes

Say you owe $300,000 at 6.5% with 25 years of payments left. Here's what it takes to be mortgage-free by the time you retire, either as a monthly extra or as one lump sum paid now:

| Retiring in | Extra each month | Total monthly payment | Paid off sooner by | Interest saved | Or one lump sum now | | --- | --- | --- | --- | --- | --- | | 10 years | $1,381 | $3,406 | 15 yrs | $198,915 | $122,265 | | 15 years | $588 | $2,613 | 10 yrs | $137,290 | $67,832 | | 20 years | $211 | $2,237 | 5 yrs | $70,875 | $28,467 |

Calculated with the same engine as our calculators. Principal and interest only; each extra starts with the first payment.

If you're 50 and hoping to be paying off your mortgage at 60, that's the 10-year row: $1,381 a month on top of a $2,026 payment, a big jump. Give yourself 20 years and it falls to $211. The earlier you start, the less it takes, because every extra dollar stops interest from building for longer. The lump sums show the same thing: $67,832 paid now does the work of $588 a month for 15 years.

For the general question of whether to prepay at all or invest the money instead, see [should you pay off your mortgage early?](https://ownedoutright.com/us/guides/should-i-pay-off-my-mortgage-early/) This guide assumes you've decided a paid-off house by retirement is the goal.

## How to pay off your mortgage before retirement: where the money comes from

**From your paycheck.** A monthly extra from income is the simplest route. It's money you've already paid tax on, it doesn't touch your retirement savings, and you can pause it if money gets tight. Set it up as additional principal with your servicer; our guide to [making extra principal payments](https://ownedoutright.com/us/guides/how-to-make-extra-mortgage-payments/) shows how to check it's applied correctly.

**From lump sums.** Bonuses, tax refunds, an inheritance or the sale of another property can close the gap faster. A yearly extra from a bonus works well alongside a smaller monthly amount; you can model both in the [extra payment calculator](https://ownedoutright.com/us/extra-payment-calculator/).

**From a 401(k) or IRA: be careful.** Money you take out of a traditional, pre-tax account is generally included in your income for the year. Taken before age 59½, it can also carry a 10% additional tax on top of regular income tax, unless an exception applies ([IRS Topic 558](https://www.irs.gov/taxtopics/tc558) for workplace plans, [Topic 557](https://www.irs.gov/taxtopics/tc557) for IRAs). After 59½ the 10% no longer applies, but the income tax does.

A large withdrawal in a single year to clear the balance can also push part of your income into a [higher tax bracket](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill). If you already get Social Security, it can make more of your benefits taxable: the IRS test adds half your benefits to your other income, and part of your benefits may be taxed once that passes $25,000 for single filers or $32,000 for joint filers ([IRS](https://www.irs.gov/newsroom/irs-reminds-taxpayers-their-social-security-benefits-may-be-taxable)). Spreading payoff over several years, from income, usually avoids both problems.

## Required minimum distributions

At some point the IRS makes you start taking money out of most retirement accounts, whether you need it or not. These required minimum distributions (RMDs) generally start at [age 73](https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds). Under the SECURE 2.0 Act, the age rises to 75 for people born in 1960 or later ([IRS proposed regulations](https://www.irs.gov/irb/2024-33_IRB)). If you're still working, you can generally delay RMDs from your current employer's plan until you retire, unless you own 5% or more of the business, and Roth IRAs have no RMDs during the owner's lifetime ([IRS RMD FAQs](https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs)).

RMDs are one reason a paid-off house helps: once they begin, you'll have taxable income whether or not you spend it. They are not a reason to rush a withdrawal before then; the money is taxed when it comes out either way.

## Don't become house-rich and cash-poor

Money you send to the lender is hard to get back. Prepaying doesn't lower your required payment on a standard fixed-rate loan, so until the last payment, a job loss or a big bill still means making the full payment. After that, the only ways to reach your equity are selling or borrowing against the house, and you have to qualify for a loan at the moment you need it, which can be harder on a retirement income.

So keep an emergency fund in cash while you prepay, and don't drain savings to make the final payment. A retiree with a paid-off house and nothing in the bank has traded one risk for another. Aiming to be mortgage-free a year or two after you retire, rather than on the day, is a fair compromise.

## The mortgage interest deduction

People sometimes keep a mortgage for the tax deduction. It only helps if you itemize. For 2026 the [standard deduction](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill) is $16,100 for single filers and $32,200 for married couples filing jointly, and taxpayers 65 or older get an [additional standard deduction](https://www.irs.gov/taxtopics/tc551) on top. In our example, the first year's interest is $19,354, and it falls every year as the balance drops. A married couple would need more than $12,846 of other deductions before that interest saved them anything, and the gap only widens as the loan shrinks. If you take the standard deduction, the mortgage interest deduction doesn't change the decision at all.

## Other ways to get there

- **Downsizing.** Selling and buying a smaller home, or renting, can clear the mortgage in one step. If you've owned and lived in the home for at least two of the last five years, you can generally exclude up to $250,000 of gain from income, or $500,000 on a joint return ([IRS Topic 701](https://www.irs.gov/taxtopics/tc701)). Moving costs and the next home's price decide whether it works.
- **A recast.** If you'll have a lump sum but want to keep some flexibility, a recast lowers your required payment after a large prepayment instead of only moving the end date. Try the [mortgage recast calculator](https://ownedoutright.com/us/mortgage-recast-calculator/), and see [mortgage recast vs refinance](https://ownedoutright.com/us/guides/mortgage-recast-vs-refinance/).
- **A reverse mortgage.** Homeowners 62 and older can borrow against their home with no monthly payment; interest and fees are added to the balance, which grows, and the loan is repaid when you no longer live there. You still pay property taxes and insurance. The [CFPB explains how they work](https://www.consumerfinance.gov/ask-cfpb/what-is-a-reverse-mortgage-en-224/).

## When paying off before retirement makes sense

- You're on track with retirement saving, including any employer match, and have an emergency fund.
- Your rate is fairly high, so every extra dollar earns a solid, guaranteed return.
- You can reach the goal from income or lump sums, without large withdrawals from retirement accounts.
- You plan to stay in the home, and a lower fixed cost matters more to you than a bigger investment balance.

## When it may not

- You'd have to cut retirement contributions or skip an employer match to afford the extra.
- Paying it off would mean a big taxable withdrawal, especially before 59½.
- It would leave you with little cash, or your rate is low enough that the savings are small.
- You expect to sell and downsize soon after retiring anyway.

## Related tools

- [Extra payment calculator](https://ownedoutright.com/us/extra-payment-calculator/): pick a "mortgage-free by" date and see the extra it takes, or try your own extra.
- [Pay extra vs invest calculator](https://ownedoutright.com/us/pay-extra-vs-invest-calculator/): prepaying against investing the same money.
- [Mortgage recast calculator](https://ownedoutright.com/us/mortgage-recast-calculator/): a lower payment after a lump sum.
- [Biweekly mortgage calculator](https://ownedoutright.com/us/biweekly-mortgage-calculator/): what half-payments every two weeks do.

For education only; not financial, tax or retirement advice. The examples are illustrations, not a plan for your situation. Tax rules and figures can change and have exceptions; check with a tax professional before taking money from a retirement account. Sources checked September 23, 2026.

Source: https://ownedoutright.com/us/guides/pay-off-mortgage-before-retirement/