My Comments: Retirement is the third stage of our lives. #1 is childhood when our needs are provided for by adults; #2 is adulthood when our needs are met by our efforts; and #3, retirement when you quit working for money and money has to work for you.

If you’re lucky, you don’t need to learn a new skill set to retire successfully. Or you understood what had to happen before you retired. One of those things is not having to pay more than necessary for shelter.

In a perfect world, you are happy with where you live and like whatever it is you live in. And before you retired, you figured out how much extra you had to pay each month to make the mortgage disappear just when you quit working.

Wendy Connick, Sep 28, 2017

Housing is the single biggest monthly expense for many families, so if you don’t have a housing payment to worry about during your retirement years your savings will last you a lot longer. Paying off your mortgage by the time you retire isn’t complicated; it just requires a little preparation.

Your repayment plan

If you know how much you owe on your mortgage, your interest rate, and how long it will be before you retire, figuring out how to get rid of the mortgage in time isn’t difficult. You can even use a mortgage payoff calculator to see the effect of adding extra payments.

For example, let’s say that you owe $220,000 on your mortgage at 5% interest, and it’s scheduled to be paid off in 25 years. However, you plan to retire in 20 years. Making an extra principal payment of $170 per month would get you paid off in 19 years and 11 months, and incidentally save you just over $38,000 of interest over the life of the loan.

Sticking to the plan

Coming up with a repayment plan is the easy part — sticking to it is a lot harder. Scraping up an extra $170 every month for the next 20 years can be a daunting task to undertake. Fortunately, there are ways to make saving that extra payment a lot easier.

First, make sure that the extra payments you make are to the mortgage’s principal, not a combination of principal and interest like your regular payments. Putting the extra money into the principal means that the loan will be paid down much faster, and you’ll save a lot more money on interest during the life of the loan.

Next, find a way to automate your extra payment. Ideally, this would mean setting up an automatic extra principal payment with your mortgage company, to happen along with your regular monthly payment. If the mortgage company can’t or won’t set this up for you, the next best option is to do an automatic transfer from your checking account to a special, dedicated savings account.

The biggest benefit of the second approach is that rather than taking a single large sum each month, you can spread your transfer out into multiple tiny transfers, which will be less disruptive to your checking account balance. For example, instead of doing one $170 transfer each month, you could transfer $5.70 every day from your checking to the special savings account. When it’s time for you to make your mortgage payment, you just make the extra principal payment straight from the savings account.

The biweekly payment option

Switching to a biweekly (every other week) payment system, instead of a monthly one, is another way to pay off a mortgage faster — assuming that it will take care of your loan balance in time. Splitting your monthly payment into two biweekly payments works because there are 52 weeks in a year, so it comes out to the equivalent of 13 monthly payments per year instead of just 12.

The main argument against biweekly payment schedules is that the extra money goes to both principal and interest, just like your normal payments. That means that your extra payment won’t go as far toward paying off the loan quickly as if you’d made the same extra payment toward principal only. Also, many lenders charge to make the switch from monthly to biweekly payments. So unless you have a significant reason to do so, stick with making extra principal payments. It’s the simplest way to have a retirement free from monthly housing bills.