HomePlan Ahead: How to Retire Mortgage Free
by Russell Kavanaugh
The late afternoon sun warms my bronzed face while my hand lazily cradlesa frozen margarita, the salt slithering it's way to the handle in a tributaryof condensation. A smiling gentleman approaches my wife and I to ensurethat our drinking vessels are replete with the local nectar and departswith a "no problem, Mon!" We are still in our mid-sixties, slightlygraying, but still looking youthful and vibrant.
This, dear friends, is my mental picture of retirement. Your utopianold age may differ, but they probably have one common requirement: the moneyto finance it. Living the good life of a beachcomber is contingent uponthe mental security of having one's house bought and paid for. The lastthing you want when deciding to sell your last 401(k) plan is a mortgagepayment hanging over your head.
Ah yes, the retirement years. Those days when you can wear green plaidshorts, a sky blue pork pie hat and bladk ankle socks with impunity. Kingof your castle, master of your own domain. As with many aspects of our lives,we use our own parents as the benchmark. Without knowing it, our lives somewhatmirror aspects of those who have gone before us. How many of us have alreadyfound ourselves sounding just like Mom or Dad, often to our horror! Thebad news is that the safety net that existed for our parents, namely SocialSecurity and company pensions, is fast unraveling.
It's easy to see why. Back when the Pilgrims first landed on PlymouthRock, a man of 39 would have been considered an elder statesman. Some maynot have survived the voyage, as people then died before reaching the ageof 40. How times have changed! If you had to guess the fastest growing agegroup in America today, you may be surprised to find that it's people over100 years of age! So, it is now quite possible to spend as many years inyour retirement as you did working.
How then do you avoid financial hardship in your golden years? Plan.Be realistic. Save. Most people put their personal savings second to theirother financial concerns. I regularly hear comments like, "I can'tafford to add to my savings this month because I have to (insert here: "goto a wedding," "go on vacation," "do my holiday shopping",etc. The reality is you MUST put savings aside and then allocate the remainingassets to your current priority, otherwise you will retire with nothingbut excuses. When choosing your house, buy within your means, with a mortgagepayment of no more than 30% of your annual salary. When possible, pay alittle extra on each monthly mortgage payment. You will be amazed at howquickly pre-payment can decrease the term of your mortgage. Clear up yourcredit card debt. Pay more than the minimum payment each month, otherwiseyou will be funding this debt for years to come. If you employer offersa retirement plan at work, take advantage of it. The compounding effectof investing pre-tax dollars in a tax deferred investment is phenomenal.Finally, the most important advice? Start NOW!
Russell Kavanaugh is a Retirement Plan Marketing Consultant with JohnHancock Mutual Funds. He is married to Bernadette Kavanaugh, an AssistantVice-President with Lawyers Title Insurance Company.