Podcast Summary: "Mortgage Payoff Dilemma" – Jill on Money with Jill Schlesinger

Podcast Information:

• Title: Jill on Money with Jill Schlesinger
• Host/Author: Audacy
• Description: Host Jill Schlesinger, CFP®, addresses challenging and sometimes controversial financial and investing topics without the jargon, making essential financial knowledge accessible to everyone. Each week, Jill interacts with listeners and guests to uncover valuable insights and provide actionable advice to help maximize financial well-being.
• Episode: Mortgage Payoff Dilemma
• Release Date: May 22, 2025

Introduction

In the episode titled "Mortgage Payoff Dilemma," Jill Schlesinger delves into a common yet complex financial question: Is it advisable to pay off a mortgage early, especially under constrained financial circumstances? The episode features a thoughtful discussion between Jill and a retired listener named Daniel from Arizona, exploring the intricacies of managing limited assets, low-interest mortgages, and retirement planning.

Listener's Financial Situation

Daniel reaches out with concerns about his financial stability in retirement. Here's a breakdown of his current situation:

• Age: 60 (turning 69 in July)
• Marital Status: Single
• Income Sources:
  • Social Security: Approximately $2,500 per month
  • Pension: A modest $72 per month
• Monthly Expenses: $2,700
• Savings and Investments:
  • Traditional IRA: $93,000
  • Roth IRA: $28,000
  • Checking Account: $37,000
  • Physical Gold: Valued at $50,000
  • High-Yield Savings Account: $9,600 (3.5% interest)
  • Cryptocurrency: $2,000
  • Emergency Cash: $3,000
• Real Estate:
  • Home Value: $450,000
  • Outstanding Mortgage: $155,000 at a low-interest rate of 2.75%, maturing in March 2051

Key Concern: Daniel is contemplating whether to use his limited savings to pay off his mortgage, hoping that eliminating this debt will make his Social Security income sufficiently cover his expenses.

Main Discussion: Should Daniel Pay Off His Mortgage?

Jill Schlesinger and co-host Mark meticulously analyze Daniel's predicament, weighing the pros and cons of paying off a low-interest mortgage versus maintaining liquidity in retirement.

1. Assessing the Mortgage:

   • Interest Rate Advantage: Jill highlights the attractiveness of Daniel's 2.75% mortgage rate, stating, "That is such a nice low mortgage interest rate" (05:54).
   • Long-Term Commitment: With the mortgage maturing in 2051, it presents a long-term financial obligation that needs careful consideration.

2. Evaluating Liquid Assets:

   • Limited Cash Reserves: Daniel has approximately $50,000 in readily accessible funds (checking, savings, crypto, and emergency cash).
   • Physical Gold Holdings: Valued at $50,000, but Jill points out the challenges in liquidating gold for unexpected expenses, mentioning, "You need money to do something... you just going to sell gold in the market" (11:58).

3. Traditional IRA Strategy:

   • Utilizing Retirement Funds: Jill proposes a strategic withdrawal from the Traditional IRA to bridge any financial gaps, suggesting, "What if instead of you burning the cash... you were just, like, very methodical about taking some of the money out of the traditional IRA?" (06:40).
   • Growth Potential vs. Mortgage Rate: By keeping the mortgage, Daniel can potentially grow his investments at a rate higher than the mortgage interest, effectively leveraging his assets for better returns.

4. Tax Implications:

   • Tax Bracket Consideration: Given Daniel's modest income, Jill estimates he's likely in the 12% tax bracket. Drawing from the Traditional IRA would incur manageable taxes, enhancing his financial flexibility without sacrificing asset growth.

5. Flexibility and Security:

   • Maintaining Liquidity: Jill emphasizes the importance of having accessible funds for unforeseen expenses, advocating against tying up assets in debt repayment.
   • Investment Growth: Allowing the Traditional IRA to continue growing offers greater security in the long run, especially with a conservative investment strategy.

Notable Quote:

"The biggest problem with paying off a mortgage is that you just don't have control over those funds anymore and you don't have access to those funds." – Jill Schlesinger (10:55)

Insights and Advice

Throughout the conversation, Jill imparts several key financial principles tailored to Daniel's situation:

• Leverage Low-Interest Debt: Maintaining a low-interest mortgage can be financially advantageous if investments yield returns exceeding the mortgage rate.

• Diversify and Protect Liquidity: Ensuring a balanced portfolio with accessible funds mitigates risks associated with unexpected financial needs.

• Avoid Overconcentration in Non-Liquid Assets: While physical gold can be a hedge against inflation, excessive reliance on it can impede financial flexibility.

• Strategic IRA Withdrawals: Utilizing Traditional IRA funds thoughtfully can bridge income gaps without prematurely depleting retirement savings.

Encouraging Adaptability: Jill encourages Daniel to retain his mortgage and utilize his IRA strategically, stating, "You're betting on 2.75% return until 2051. I think that's a lousy bet. You're going to do better than that." (08:07)

Conclusion

In "Mortgage Payoff Dilemma," Jill Schlesinger provides a nuanced perspective on mortgage repayment in retirement, especially under financial constraints. For Daniel, the recommendation leans towards maintaining the low-interest mortgage to preserve liquidity and allow his investments to grow, ensuring greater financial security and flexibility in his retirement years.

Jill wraps up the discussion by emphasizing the importance of access to funds and prudent financial planning:

"You need access to your funds because that's where you are in your life." (10:50)

Listeners grappling with similar financial decisions can benefit from evaluating their unique circumstances, considering the balance between debt management and maintaining financial flexibility.

Additional Resources:

• For personalized financial advice, listeners are encouraged to visit jillonmoney.com and use the "Contact Us" feature to join the conversation or seek assistance.
• Explore more episodes of "Jill on Money" via the Odyssey app or your preferred podcast platform for ongoing financial insights and guidance.

Notable Moments and Quotes:

• Introduction to Daniel's Situation:

  • Jill: "I'm here trying to help you make better, less bad, more considered financial decisions." (01:52)

• Assessing the Mortgage's Appeal:

  • Jill: "That is such a nice low mortgage interest rate." (05:54)

• On Maintaining Liquidity:

  • Jill: "The biggest problem with paying off a mortgage is that you just don't have control over those funds anymore." (10:55)

• Encouraging Strategic Planning:

  • Jill: "If you were just, like, very methodical about taking some of the money out of the traditional IRA." (06:40)

This episode of "Jill on Money" provides valuable insights for retirees and individuals facing similar financial dilemmas, highlighting the importance of strategic asset management, the benefits of maintaining low-interest debts, and the critical need for financial flexibility in ensuring long-term security.