This the third part in the New Retirement series.

Should you pay off your mortgage before you retire? This is probably the most common question posed to me (along with “will we run out of money”) in the many years of my retirement counselling profession.

My answer is (and has been) a resounding “yes”! You should pay off your mortgage.

Why should you do this? Oh, there are many reasons, here are a few.

Let’s just have a think about a big basic. Stressful living. Do you want to have to worry about making mortgage payments five, ten, 15 years into retirement?

1. A mortgage is a debt, a big debt. You think you own your home, but you don’t. In case you have forgotten, remember the closing process when you originally purchased your home? You don’t have the deed, the bank does. Nor will you get it — clear title and the deed — until you clear what is owed.

2. You may not have full control of your home, since you and the bank are involved. For instance, if you do not keep up the home and your insurance policies, the bank mortgage directives may intercede by forcing you to implement certain renovations or purchasing additional property insurance.

3. Job restructuring, redundancy, inability to find another position. In Bermuda’s continuing difficult economic climate, every job is up for review. You are an older individual. Your company may choose to offer you an early retirement package, reduce the hours per week (and the salary of course), or simply eliminate your position, altogether. You may not be able to meet your mortgage payments if such a situation occurs to you. Jobs come and go overnight. Commerce and business wait for no man.

4. Death of a spouse, a partner, or other mortgage holder. Would you be able to swing those payments on your own, with your salary or a small pension? Even if you and your partner have planned carefully by insuring each other for catastrophic purposes, the insurance may not be enough to liquidate the entire debt. Hint here. Take the time to compare the remaining mortgage balance against your life policies, if you have them. Consider purchasing cheap term insurance if your current insurance plan is inadequate.

5. Disruption. Who wants to be beholden to some bank, their regulations, and additional penalty charges for late payments, if you suddenly find your budget and retirement planning disrupted.

6. Quality of life. The best and last really good reason. Retirement programmes spend lots of time emphasising investing, saving for the future, not running out of money (by investing), and quality of life.

Readers, from my experience working with many individuals retired, or the soon-to-be planning stages, you won’t have a quality of life if you lose your home to a forced sale. How demoralising would that be after making payments for years only to have to give up your greatest asset? If you own your home, you have shelter. You can get by. It may not be easy, but many have done it, so can you.

How can you pay your mortgage down faster?

Make reducing your mortgage to zero your top priority and your biggest financial goal, now. Put all else on hold: investing, vacations, treats, dining out, large family gifts, you know what to do, etc.

Scrimp and save everything. Put every single extra dollar left from your budget at the end of each month on your mortgage principal. Make sure that your bank recognises that this payment is not your regular monthly payment of principal and interest — but a pure mortgage principal reduction payment.

You must track these extra payments carefully.

I cannot tell you the number of incredibly unfortunate instances where the pure mortgage principal reduction payments were treated as regular monthly payments with most of the money applied to interest. The bank gets the interest, and interest does not reduce the mortgage principal owed.

Getting such a mistake sorted out retroactively is a tedious and exhausting resolution. See the amortisation chart linked here that will help with this process. Send me an e-mail if you need help.

Early mortgage pay-off calculator: http://tcalc.timevalue.com/all-financial-calculators/mortgage-calculators/early-mortgage-payoff-calculator.aspx

Apply for the Bermuda Pension Hardship withdrawal. if you have any sense of impending hardship, or have already experienced job failure you may meet the criteria. Process and application link here. Note there are strict guidelines. http://216.119.83.154/images/stories/docs/financial_hardship_instructions.pdf

http://216.119.83.154/images/stories/docs/financial_hardship_application_form.pdf

However, these suggested actions above may not be quite enough from a financial perspective to help a close-to-being a retiree achieve and maintain financial independence.

Bermuda National Pension Scheme (Occupational Pensions) Act 1998: there is another resource. The soon-to-be retired have accumulated contributory pensions — locked up assets — that could be accessed. Currently, this is not allowed except for certain small percentage hardship requests (as above).

Last week, The Royal Gazette reported the Pension Commission stated that $15 million in total hardship distributions had been released. The reader blog commentary that followed felt that young careerists should keep their pensions locked until retirement age.

Precious little was said about us oldsters, the ones who have, and will continue to have the greatest difficulty generating additional income, holding a secure job, retraining for new employment, and the like in our current economic situation.

My opinion is that this pension legislation needs to be flexibly amended to reflect the recessionary times that many of our older residents are still coping with. They should have access to most of, if not all of, their money.

If the newly retired and already retired islanders cannot maintain their independence, even though quite frankly, this is a fierce determination and a matter of pride on every older individual’s bucket list, then, these individuals will become additional drains on the government social assistance pocketbook.

No one wants that!

It is high time we helped our seniors out. By the way, since the Bermuda National Pension Scheme is composed of individual and employer contributions, there is no effect on the current government budget.

Readers, are you a close-to-retirement individual with a mortgage that you are worried about paying off?

Your thoughts, confidentially, of course? I welcome them.

More on this state of affairs and a retirement quiz next week.

Parts one and two of the New Retirement series can be read here:

http://www.royalgazette.com/article/20160312/COLUMN07/160319909

http://www.royalgazette.com/article/20160319/COLUMN07/160319670

Disclaimer: Martha Harris Myron does not have a Bermuda National Pension Scheme retirement account.

Martha Harris Myron CPA PFS JSM Masters of Law: International Tax and Financial Services. Appointed to the Professional Tax Advisory Council, American Citizens Abroad. Principal: The Pondstraddler Life™ Consultancy providing international financial planning for Bermuda residents, their multinational families and connections. Contact: martha@pondstraddler.com