Make Your Home Work for You in Retirement

Physician's Money Digest, June 2006, Volume 13, Issue 6

While most physician-investors have their retirement funds tied up in various savings and retirement accounts, they're likely living in their biggest asset. According to The Motley Fool (www.fool.com), the equity in most homeowner's domiciles far outweighs what they have saved. A profitable piece of property can be a gold mine in retirement, and may be your most lucrative asset. One big question you may have is whether you should put your money toward paying down the mortgage on your house or add it to your portfolio. A simple way to figure this out is to use the following equation: (1 -your tax bracket) x your mortgage rate = your after-tax interest rate. So, for example, if you're in the 25% tax bracket and your mortgage has a 6% interest rate, your after-tax rate will be 4.5%, which is a pretty good return. If you also have a successful portfolio, your best solution may be splitting your money between the market and your mortgage. If you want to have a less stressful retirement, paying off your mortgage is sure to bring you peace of mind and lower your expenses. If your retirement accounts dwindle more than you'd like during your twilight years, you'll still have a large sum in home equity.