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“I Still Have a Mortgage”: Why Retirement Costs Might Not Drop—and What You Can Do About It

For years, the story around retirement has been pretty straightforward: once you retire, your expenses go down. No more daily commute, more home-cooked meals, maybe even downsizing your place. That’s what those retirement calculators tell us, right? But in real life, especially if you’re still carrying a mortgage when you retire, things often look very different.

Turns out, a lot more retirees have mortgages than you might think. According to the Federal Reserve’s 2022 data, over 40% of homeowners between 65 and 74 still had a mortgage. That’s way up from previous decades. Why? Rising home prices, longer loan terms, and people buying homes later in life all play a part. The result? Many folks find their expenses barely budge—or even go up—after they stop working.

So, What Can You Do If You’re Facing Retirement With a Mortgage?

Rethink Your Retirement Budget

One big mistake is assuming your mortgage will magically disappear once you retire. That’s rarely the case. If you’ve refinanced, moved, or pulled money out of your home, chances are you’ll still be paying that bill long after your last paycheck.

The smarter move? Build your budget around your actual numbers—not some average or wishful thinking. That means listing out all your fixed costs, especially mortgage payments and property taxes. And remember, property taxes and home insurance often rise faster than inflation, so factor that in.

Also, don’t forget about home maintenance. After 20+ years, things like roofs and HVAC systems don’t just fix themselves. These costs sneak up on people all the time.

Four Ways to Handle a Mortgage in Retirement

1. Pay Down That Mortgage Aggressively Before You Retire

If you’ve got a few years to go, putting extra cash toward your mortgage might sound like a no-brainer. It can free up your monthly budget later on. But here’s the catch: if your mortgage rate is low (think under 4%), you might actually make more by investing that extra money elsewhere.

That said, if carrying debt keeps you up at night, paying it down for peace of mind is totally valid. Sometimes the mental relief is worth more than the math.

2. Refinance or Restructure Your Loan

Some retirees lower their monthly mortgage payments by refinancing into a longer term or a lower interest rate. This can free up hundreds each month but usually means you’ll pay more interest over the life of the loan.

Be aware, though: lenders can be picky when it comes to retirees on fixed incomes, and good credit is a must. Also, with interest rates higher now than in recent years, refinancing is usually only helpful if you have an older, higher-rate mortgage.

3. Downsize or Move to a Cheaper Area

In theory, selling your home and buying a smaller or cheaper place sounds like a great way to eliminate that mortgage. But moving isn’t cheap or easy. Between realtor fees, repairs, and possibly higher property taxes in a new spot, the savings might not be as big as you think.

Plus, moving can be emotionally tough, especially if you’re deeply rooted in your community or close to family.

4. Consider a Reverse Mortgage

A reverse mortgage lets you tap into your home’s equity for cash without needing monthly payments. Sounds tempting, right? But this option comes with high fees and can leave your heirs with little or no inheritance.

It works best if most of your wealth is tied up in your home, you don’t have heirs, or you plan to stay put and need extra cash flow. Just be sure to do your homework beforehand because the equity can vanish faster than you expect.

Don’t Forget Healthcare and Inflation

Even if you manage to pay off your mortgage, other costs tend to rise. Healthcare is a biggie. Fidelity estimates a retired couple needs over $315,000 just for out-of-pocket medical expenses during retirement—and that number keeps climbing. Medicare isn’t free, and long-term care usually isn’t covered at all.

Also, inflation can throw a wrench into your plans. While a fixed mortgage payment can act as a buffer, other expenses like utilities, groceries, and insurance tend to climb faster than Social Security’s cost-of-living adjustments. Property taxes can jump too, especially in neighborhoods going through changes.

Watch Out for These Pitfalls

Putting every spare dollar toward your mortgage before retiring sounds smart, but it can leave you cash-poor and house-rich. If an emergency comes up, it’s tough to tap into that home equity quickly.

Also, downsizing isn’t for everyone. If you love your community, have health concerns, or family nearby, moving might cost you more emotionally and financially. And in some places, rents can be so high that selling your home to rent doesn’t save you money.

Build Flexibility Into Your Retirement Plan

One of the best things you can do is plan for multiple “what if” scenarios—not just the ideal ones. What if your spouse needs expensive care? What if the housing market dips? What if your adult kids move back in for a while?

Retirees who stay flexible—whether it’s in where they live, how much they spend, or working part-time—tend to do better. Some pick up part-time gigs, consulting, or start small side businesses to help with expenses and stay active. Others keep a home equity line of credit handy as a safety net.

Wrapping It Up

Retirement planning isn’t one-size-fits-all. If you’re heading into retirement with a mortgage, you’re definitely not alone—and it doesn’t mean you’re doomed.

Take a good, honest look at your actual numbers and don’t just rely on averages or rules of thumb. Balance the financial facts with what feels right emotionally. And above all, stay flexible—because the future rarely goes exactly as planned. But with a clear, realistic approach, you can keep writing that mortgage check and still sleep soundly at night.

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