Curious About a Roth Conversion Strategy? When It Actually Makes Sense (Or Not)

April 17, 2025

“Should I convert my traditional IRA or 401(k) to a Roth?”


If you’ve asked yourself this question lately, you’re in good company. Perhaps you’re a high-earner who makes too much to contribute directly to a Roth IRA but wants access to tax-free growth. Or maybe you’re concerned about future tax rates and want to ensure more tax-free income in retirement.


With market volatility and changing tax laws on the horizon, many of our clients are wondering if a Roth conversion could be a smart money move to save on taxes and provide more flexibility down the road.


While we think Roth conversions are a great strategy, they don’t make sense for everyone. Let’s break down when Roth conversions actually make sense — and when they don’t — in plain English.


Back to Basics: What is a Roth IRA?


Before we dive into strategy, let’s recap the differences between a Roth retirement account and a traditional one.


Traditional retirement accounts, such as a traditional IRA or 401(k), provide you with a tax deduction when you contribute. You save on taxes now, but you’ll pay taxes on that money in the future when you withdraw it as income in retirement.


A Roth IRA allows you to contribute money that you’ve already paid income taxes on. You don’t enjoy savings this year, but the interest you earn on that money grows tax-free, and the withdrawals are 100% tax-free in retirement once you meet certain eligibility requirements. 


For many people, these lifetime tax savings are significantly greater, which is why a Roth conversion is such an intriguing strategy.


What Is a Roth Conversion?


Imagine you’ve been making retirement contributions to a traditional 401(k) for the past 25 years. You’ve enjoyed income tax deductions each year as you squirrel away money for your future.


But as you’re scrolling through your newsfeed one night after dinner, you come across an article about the unexpected tax bills many retirees are faced with in retirement, significantly eating into their retirement income. The article suggests making contributions to a Roth account instead, in order to avoid this scenario in the future.


But you’ve already been making contributions to a traditional account for 25 years. 


Have you missed out?


Not necessarily. With a Roth conversion, you can move money from another retirement account, such as a Traditional IRA or 401(k), into a Roth IRA. Essentially, a Roth conversion allows you to “pre-pay” taxes so your future self won’t have to. For many people, this can be a smart move.


But there are caveats: Convert too much at once, and you might push yourself into a higher tax bracket this year. Convert too little over time, and you might miss opportunities to lower your lifetime tax bill. The challenge lies in finding the right balance.


When Roth Conversions Make Sense


In general, Roth conversions can make sense for individuals in the following circumstances:


1. You’re a High Earner

For 2025, direct Roth IRA contributions are phased out for single filers with incomes between $150,000-$165,000 and for joint files with incomes between $236,00-$246,000. If your income exceeds these thresholds, you can’t contribute directly to a Roth IRA.


However, Roth conversions have no income limits. This creates a powerful opportunity for high-income earners to still enjoy tax-free growth in retirement. By making non-deductible contributions to a traditional IRA (which has no income limits) and then converting those funds to a Roth IRA — often called a “backdoor Roth” — you can effectively circumvent the income restrictions.


2. You’re in a “Tax Valley”

You may be in a “tax valley” if you’re currently experiencing a period where your income is lower than you expect in the future. For example, you may be early in your career, taking a sabbatical from work, or starting a business. These can all be opportune years to make a Roth conversion.


New retirees may also find themselves in a temporary “tax valley.” For example, if you’re recently retired but haven’t yet started collecting Social Security or required minimum distributions (RMDs), this window from your early 60s to 70s could be a golden opportunity to convert portions of your traditional retirement savings into a Roth.


By strategically moving money over a few years, you can fill up the lower tax brackets and reduce your future RMDs, which might otherwise push you into a higher bracket later. This can also help reduce the tax burden on your Social Security benefits once you begin collecting them.


3. You Have a Long Time Horizon 

Younger investors in their 30s and 40s may benefit from a Roth conversion if they have decades for that money to grow tax-free. 


For example, $100,000 converted to a Roth at age 35 could potentially grow to over $1 million by retirement age — all of which could be withdrawn tax-free. That same conversion done at age 60 might only have time to grow to $140,000-$150,000 before withdrawals begin.


4. You Want to Leave a Tax-Free Legacy

Roth IRAs are powerful estate planning tools. Your spouse can treat an inherited Roth IRA as their own, allowing the assets to continue growing tax-free without requiring distributions during their lifetime, creating the potential for decades of additional tax-free growth.


Kids or grandkids who inherit a Roth IRA will also enjoy a tax-free inheritance, at least for a time. In contrast, inheriting a traditional IRA means your beneficiaries would pay taxes on every dollar they withdraw — potentially during their peak earning years when they’re in a higher tax bracket.


When Roth Conversions Don’t Make Sense


Of course, just because you can convert doesn’t mean you should. Here are a few situations when a Roth conversion strategy might not work in your favor:


1. You’re Currently in a High Tax Bracket

If you’re currently in your peak earning years and already paying taxes in the 35% or 37% federal tax brackets, converting could mean handing over a substantial portion of your retirement savings to the IRS.


For example, a $100,000 conversion for someone in the 35% federal tax bracket could trigger an additional tax bill of $35,000 or more. If you expect to be in a lower bracket during retirement — say 22% or 24% — waiting to pay taxes then might be more advantageous.


2. You Don’t Have Cash to Pay the Taxes

The most efficient Roth conversion strategy requires having cash outside your retirement accounts to pay the resulting tax bill. Here’s why this matters:


If you have to withdraw extra money from your traditional IRA to cover the taxes on the conversion, you’re reducing your future growth potential. For instance, if you want to convert $50,000 and are in the 24% tax bracket, you may need an additional $12,000 for taxes. If you take that $12,000 from your IRA too, you’d pay taxes on that withdrawal as well, creating a compounding tax problem. 


Even worse, if you’re under age 59½, you could face a 10% early withdrawal penalty on any funds used to pay the taxes, further reducing the effectiveness of your conversion. 


3. You’ll Need the Money Soon

In general, Roth IRAs have a five-year rule that states you must wait five years from the beginning of the tax year of your first contribution to make a withdrawal of the earnings. (You can withdraw contributions, not earnings, tax-free and penalty-free at any time.)


For Roth conversions, however, a new five-year rule starts separately for each conversion. While there are exemptions to this penalty, such as disability and turning age 59½, it’s worth considering if you plan to use the converted funds in the near future.         


Enter: The Roth Conversion Ladder


One strategy we often recommend to clients who want to implement a Roth conversion is the Roth conversion ladder. This approach helps work around the five-year rule while building a tax-efficient income stream, especially for those planning an early retirement. 


Here’s how it works:


Year 1: You convert a portion of your traditional IRA to a Roth (let’s say $30,000).

Year 2: You convert another $30,000.

Year 3: You convert another $30,000.

Year 4: You convert another $30,000.

Year 5: You guessed it — you convert another $30,000.

Year 6: Now the Year 1 conversion is available for withdrawal without penalties.

Each following year: A new “rung” of the ladder becomes accessible while you continue adding new conversions at the top.


Over time, you build a steady stream of tax-free income in retirement that you can predictably access. This strategy is particularly valuable for early retirees who need income before the traditional retirement age or for anyone looking to minimize RMDs down the road.


For example, a couple retiring at 55 might build a conversion ladder to provide $30,000 of annual tax-free income starting at age 60, giving them a bridge until they begin taking Social Security benefits at age 67. Meanwhile, they can use other savings for the first five years of retirement while the initial conversions “season.”


The ladder approach also allows you greater flexibility to manage your tax bracket each year by controlling exactly how much you convert, rather than converting a large sum all at once and potentially pushing yourself into a higher tax bracket.


Making Your Roth Conversion Decision


As you’ve seen, Roth conversions are far from a one-size-fits-all strategy. The right approach depends on your unique financial situation, current and future tax bracket, retirement timeline, and long-term goals.


When considering a Roth conversion, remember that it’s not just about the math. Many of our clients initially hesitate at the thought of writing a big check to the IRS today, even when they know the long-term benefits. That emotional response is completely normal.


This is where thoughtful financial planning comes in. At Five Pine Wealth Management, we help you look beyond the immediate tax bill to see how today’s decisions impact your retirement income, Social Security strategy, and even your legacy plans. Sometimes, what feels uncomfortable at the moment creates the greatest long-term benefit for you and your family.


So, should you do a Roth conversion? The answer depends on:



  • Your current and projected future tax brackets
  • Whether you’re above income limits for direct Roth contributions
  • Your retirement timeline
  • Whether you have cash available to pay the conversion taxes
  • Your estate and legacy goals
  • Your comfort with paying taxes now versus later


A Roth conversion can be either a powerful wealth-building tool or an unnecessary tax expense. The difference comes down to proper planning and timing.


The Next Step


If you’re wondering whether a Roth conversion makes sense for your situation, let’s talk. Our fiduciary advisors will help you evaluate your options and develop a conversion strategy that aligns with your comprehensive financial plan.


We’ll walk through different scenarios, look at the numbers together, and help you feel confident in your decision  — whether that means converting, waiting, or taking a gradual approach with a conversion ladder.


Ready to explore whether a Roth conversion is right for you? Give us a call at 877.333.1015 or send us an email at info@fivepinewealth.com to schedule a conversation.

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Is Your PERSI Pension Enough? How to Fill the Retirement Income Gap

February 26, 2026
Key Takeaways PERSI provides guaranteed lifetime income, with most retirees recovering their entire contribution within 3.5 years of retirement. PERSI by itself usually isn't enough. The most secure retirement comes from combining your pension with Social Security, IRAs, and your own savings. Your distribution option choice is permanent and irrevocable — choosing the right survivor benefit can protect your spouse or maximize your monthly payment. If you’re a teacher, first responder, or public employee in Idaho, you’ve heard about PERSI, the Public Employee Retirement System of Idaho. You contribute to it with every paycheck, often before you even notice the money is gone. But do you actually understand how it works and what it means for your retirement? You're not alone if the answer is "not really." Most public employees know they have PERSI, but they're fuzzy on the details. How much will you actually get? When can you retire? What's this "Rule of 90" everyone mentions? And most importantly, how does your PERSI pension fit together with your 401(k), IRA, and Social Security? Let's break it down so you can make informed decisions about your retirement future. What is PERSI? PERSI is Idaho's defined benefit pension plan for public employees. If you work 20 hours or more per week for a qualifying public employer — school districts, fire departments, state agencies, and more — you're automatically enrolled in the PERSI Base Plan. What makes it different from your 401(k) or IRA is that it is a defined benefit plan (pension), not just a retirement savings account. This difference is important. With a 401(k) or IRA, you contribute money, it grows (or doesn't, depending on the market), and eventually you withdraw it. You bear all the investment risk, and you're responsible for making your money last through retirement. With PERSI, you're earning a guaranteed monthly payment for life once you retire. The state invests your contributions and your employer's contributions, manages the investment risk, and promises you a specific benefit based on a formula tied to your salary and years of service. You can think of it as a mix between the old pension plans your grandparents may have had and today’s 401(k) system. You contribute, unlike traditional pensions, where only the employer paid in, but you also get guaranteed lifetime income, unlike 401(k)s, where you might outlive your savings. PERSI Contribution Rates With every paycheck, a portion of your gross salary automatically goes to your PERSI Base Plan. You don't get a choice about this. It’s required if you qualify for PERSI. Your employer also adds a percentage of your salary. The current contribution rates are: Public Safety School Employee General Member Employee rate 10.83% 8.08% 7.18% Employer rate 14.65% 13.48% 11.96% Let's say you earn $60,000 a year as a teacher. You're contributing $4,848 annually to PERSI, and your district is adding another $8,088. That's $12,936 going into the system on your behalf every single year. Unlike a 401(k), where you choose your investments, PERSI puts these contributions into a professionally managed fund. You do not pick stocks or bonds. Investment professionals handle that to make sure the fund can meet its future promises to retirees. Using the PERSI Retirement Calculator The PERSI retirement calculator, available at persi.idaho.gov , lets you model different retirement scenarios based on your age, salary, and years of service. The calculator shows what your monthly benefit would be if you retire at different ages. It's worth spending 15 minutes playing with the numbers. You might be surprised at how much your monthly payment changes based on when you retire. Many public employees in their 50s are surprised when they use the calculator and see their pension might be smaller than expected, or sometimes better than they feared. Either way, it is better to find out now than just a few years before you want to retire. The Retirement Age Rules You Need to Know About PERSI has very specific rules on retirement age. You must understand these rules because they determine when you can retire. Option 1: Age 65 (Age 60 for Public Safety) You can retire with full PERSI benefits at age 65 (or age 60 for public safety employees), regardless of how long you've worked. Even if you have only 5 years of credited service, you're eligible at 65. Option 2: The Rule of 90/80 This is the rule most public employees bank on for early retirement. To qualify, you need to meet all three of these requirements: You're at least 55 years old (50 for public safety employees) You have at least 60 months (5 years) of credited service Your age plus years of service equals 90 or more (80 for public safety employees) If you retire before meeting the service age requirement or the Rule of 90/80, your retirement benefit will be reduced. Here are some examples: Jennifer is a teacher and is 58 years old. She has 32 years of service. 58 + 32 = 90 → full retirement Martin is a firefighter with 30 years of service. He is 50 years old. 50 + 30 = 80 → full retirement Both Jennifer and Martin are eligible for full retirement based on the Rule of 90/80. If you meet the Rule of 90/80, you may be able to retire earlier than age 65 or 60. This can have a big impact on: Your lifetime benefit Your bridge strategy to Social Security How much you need to draw from other accounts How Your PERSI Benefit Is Calculated Your monthly PERSI payment isn't a guess. It's based on a specific formula: Average Monthly Salary × 2% (2.3% for public safety) × Months of Credited Service Let's break down each piece: Average Monthly Salary: PERSI looks at your highest consecutive 42 months of salary (that's 3.5 years). This is usually your final years of work when you're earning the most. If your highest 42 months averaged $5,000 per month, that's the number used in the formula. The 2% (or 2.3%) Multiplier: This is fixed. For each month of service, you earn 2% (or 2.3%) of your average monthly salary. Months of Credited Service: Every month you work and contribute to PERSI counts. Thirty years equals 360 months. If you took a few years off and came back to public service, only the months you actually contributed count. Now let’s look at a real example: Let's say you're a teacher whose highest 42 months averaged $6,250 per month, and you have 30 years (360 months) of service: $6,250 × 0.02 × 360 = $45,000 per year, or $3,750 per month That's your guaranteed monthly payment for life, starting when you retire. It will also receive cost-of-living adjustments (COLAs) over time to help keep pace with inflation. Here's an interesting fact: based on historical data, most retirees make back every dollar they personally contributed to PERSI within approximately 3.5 years of receiving benefits. After that, all payments come from the investment returns on contributions and your employer's contributions. If you retire at 60 and live to 90, you will get 30 years of monthly payments. Even if you only contributed for 25 years, you would still receive benefits for more than 30 years. This shows the value of a defined benefit pension. PERSI Distribution Options: A Critical Decision When you retire, you'll need to choose how to receive your PERSI benefit. This decision is permanent and irrevocable, so you need to understand your options: Regular Retirement (Full Benefit) You receive the full monthly benefit under the formula discussed above, and payments continue for your lifetime. When you die, payments stop. Nothing goes to a spouse or beneficiary. This option gives you the highest monthly payment, but it offers no protection for your spouse if you die first. Option 1: 100% Survivor Benefit You receive a reduced monthly benefit, but when you die, your contingent annuitant (usually your spouse) continues receiving 100% of that same reduced benefit for the rest of their life. This option typically reduces your benefit by about 10-15% from the full amount, but provides maximum protection for your spouse. Example : Instead of $4,000 per month under Regular Retirement, you might receive $3,400 per month. If you die, your spouse continues receiving $3,400 per month for life. Option 2: 50% Survivor Benefit You receive a smaller reduction to your monthly benefit, and when you die, your contingent annuitant receives 50% of your reduced benefit for their lifetime. This is a middle option. It reduces your payment less than Option 1, but also gives your spouse less protection. Example : Instead of $4,000 per month, you might receive $3,640 per month. If you die, your spouse receives $1,832 per month for life. Lump Sum Distribution You can take all of your employee contributions plus interest as a lump sum and forgo the monthly pension entirely. This is almost always a bad idea. You would lose the employer contributions, which are usually 60% or more of the total, and the guaranteed lifetime income. Most financial advisors would tell you to avoid this option unless you have a very unusual situation. Which Option Is Right for You? This depends heavily on your personal situation: Are you married? If so, you should seriously consider Option 1 or Option 2 to protect your spouse. If you're single with no dependents, Regular Retirement makes sense. What's your spouse's financial situation? If they have their own substantial pension or retirement savings, they may not need 100% of your benefit. If they'll depend on your pension as their primary income source, Option 1 is crucial. What's your health status? If you have serious health issues and don't expect to live long in retirement, that changes the calculation. But be careful about betting against yourself living longer than expected. Do you have life insurance? Some retirees take the full benefit (Regular Retirement) and use a portion of it to pay for life insurance that would provide a death benefit to their spouse. This can work, but requires careful analysis. This decision is complex enough that it's worth sitting down with a financial advisor who understands pension planning. The right choice could mean tens or even hundreds of thousands of dollars difference over your combined lifetimes. How PERSI Fits Into Your Complete Retirement Picture PERSI alone probably won't fund the retirement you're dreaming about. According to retirement research , the average retiree's income comes from multiple sources: Social Security, pension income, and personal savings (401(k)s, IRAs, and other investments). Very few people retire comfortably on a single income source. Your Retirement Income Streams Think of retirement income as a three- or four-legged stool: Leg 1: PERSI Pension – Your guaranteed monthly payment for life based on your years of service and salary. Leg 2: Social Security – Another guaranteed monthly payment based on your lifetime earnings. Most teachers and public employees also earn Social Security credits unless they're in a position that doesn't pay into Social Security. Leg 3: Personal Savings – Your PERSI Choice 401(k), traditional IRA, Roth IRA, or other retirement accounts you've funded over the years. Leg 4: Other Assets – Rental properties, taxable brokerage accounts, a business you might sell, or other investments. The best retirement plans have at least three of these sources, and ideally all four. PERSI gives you a strong base, but it shouldn't be your only plan. Why You Still Need to Save Outside of PERSI Let's say your PERSI benefit will be $4,000 per month, and your Social Security will add another $2,500. That's $6,500 per month, or $78,000 per year. Is that enough? Maybe. But: What if you want to travel extensively in your early retirement years? What about healthcare costs before Medicare kicks in at 65? What if you need long-term care later in life? What about leaving something to your children or grandchildren? What if inflation erodes your purchasing power more than the COLAs can keep up with? This is why financial advisors suggest having personal savings in addition to your pension. Even if your PERSI benefit is generous, having $500,000 or $1 million in a 401(k) or IRA gives you more flexibility and security than a pension alone. The PERSI Choice 401(k): Should You Contribute? In addition to the mandatory PERSI Base Plan, you have access to the PERSI Choice 401(k) — a voluntary defined contribution plan where you can contribute additional money for retirement. For 2026, you can contribute up to $24,500 annually ($32,500 if you're 50 or older with catch-up contributions). These contributions are tax-deferred, meaning they reduce your taxable income now and grow tax-free until withdrawal. Should You Use It? The PERSI Choice 401(k) can be valuable: Pros: Higher contribution limits than an IRA ($24,500 vs. $7,500 for 2026) Automatic payroll deduction makes saving easier Tax-deferred growth Loans may be available if you need emergency access Keeps your retirement savings in one place alongside your pension Cons: No employer match Limited investment options compared to an IRA Fees may be higher than low-cost IRA options Early withdrawal penalties before age 59½ Traditional IRA vs. Roth IRA: Which Is Better for PERSI Members? Beyond your PERSI plans, you should consider opening an IRA to supplement your retirement savings. The choice between traditional and Roth depends on your situation. Traditional IRA Contributions may be tax-deductible (depending on your income) Money grows tax-deferred Withdrawals in retirement are taxed as ordinary income 2026 contribution limit: $7,500 ($8,600 if 50+) Required Minimum Distributions (RMDs) start at age 73 Roth IRA Contributions are made with after-tax dollars (no deduction) Money grows tax-free Withdrawals in retirement are completely tax-free 2026 contribution limit: $7,500 ($8,600 if 50+) No RMDs during your lifetime Income limits apply (phase-out begins at $153,000 for single filers, $242,000 for married filing jointly in 2026) Which Makes Sense for You? Here's our thinking for PERSI members specifically: Consider a Roth IRA if: You're earlier in your career and currently in a lower tax bracket You expect your pension + Social Security to push you into a higher bracket in retirement You want tax-free income to supplement your taxable pension payments You want flexibility (Roth contributions can be withdrawn anytime without penalty) Consider a Traditional IRA if: You want the tax deduction now to reduce current taxes You expect to be in a lower tax bracket in retirement You're maxing out other retirement accounts and want additional tax-deferred space For many teachers and public employees, a Roth IRA is a smart choice because their PERSI pension already gives them a base of taxable income. Having tax-free money in a Roth IRA gives you more control over your taxes in retirement. Imagine being able to take $20,000 from your Roth IRA for a special trip without bumping yourself into a higher tax bracket or triggering taxation on more of your Social Security benefits. That's the power of tax diversification. How Five Pine Wealth Management Helps PERSI is a valuable benefit and is often one of the best parts of working in public service in Idaho. The guaranteed lifetime income it provides is becoming rare in today’s retirement world. But PERSI by itself is not a complete retirement plan. It is a critical foundation, but still just one part of the bigger picture. Understanding how PERSI works, when you can retire, how your benefit is calculated, and what distribution option makes sense for your family puts you in control of your retirement future. Combining your PERSI pension with smart use of Social Security, continued savings in IRAs and 401(k)s, and strategic planning around taxes and healthcare gives you the best chance of living the retirement you've earned. You've spent 20, 30, or more years serving your community as a teacher, first responder, or public employee. You've earned this retirement. Take the time now to understand your benefits, make informed decisions, and build a plan that works for you and your family. At Five Pine Wealth Management , we specialize in helping Idaho public employees navigate their retirement planning, including understanding how PERSI fits into your complete financial picture. You've put in the years. Now let's make sure your retirement plan reflects that. If you have questions about your PERSI options, want to run the numbers together, or just want a second set of eyes on your plan, we'd love to chat. Reach out at info@fivepinewealth.com or give us a call at 877.333.1015. Frequently Asked Questions (FAQs) Q: Can I rely on PERSI alone for retirement? A: PERSI provides a strong lifetime income, but most retirees still need other savings to cover taxes, inflation, and discretionary spending. Q: What’s the difference between the PERSI Base Plan and the PERSI Choice 401(k)? A: The Base Plan is a pension that pays income for life, while the Choice 401(k) is an optional account you control and invest yourself. Q: What happens to my PERSI if I change jobs within Idaho public service?  A: Nothing. Your service credit automatically carries over between PERSI employers as long as you don’t withdraw your funds.

Is Paying Off Your Mortgage in Your Late 50s the Right Move?

February 19, 2026
Key Takeaways Paying off your mortgage before retirement reduces monthly expenses, lowers your income needs, and provides psychological peace of mind, but ties up money in an illiquid asset. Keeping your mortgage and investing instead may provide higher long-term returns, better liquidity, and tax advantages, but requires comfort with debt and market volatility. Your mortgage interest rate, risk tolerance, retirement timeline, and other income sources should all factor into your decision. A hybrid approach — paying down part of the mortgage while keeping some money invested — can provide a balance between security and growth potential. At 58, let's say your mortgage balance is $180,000. Your retirement accounts have grown to $850,000. So now you’re wondering: should I just pay off this mortgage and be done with it? We have this conversation regularly with clients in their late 50s and early 60s. Some choose to go ahead and pay off their mortgage. Others keep it and invest the difference. There’s nothing wrong with either choice, but what’s right for you depends on your specific situation. We’re here to walk you through how to think about this decision: The Case for Paying Off Your Mortgage Before Retirement There’s something undeniably satisfying about owning your home outright. Beyond the emotional relief, there are practical reasons that make sense: Reduced monthly expenses in retirement. Housing is typically your highest fixed cost. Eliminating that payment frees up cash flow for other priorities, like travel, healthcare, and helping the grandkids with college tuition. Lower income needs mean lower taxes. When you don’t have a mortgage payment, you don’t need to withdraw as much from retirement accounts. Smaller withdrawals often mean staying in lower tax brackets and (potentially) reducing Medicare premiums. Peace of mind during market downturns. If we hit a recession early in your retirement, having no mortgage means you won’t feel pressured to sell investments at depressed prices to cover housing costs. Guaranteed return on your money. Paying off a 4% mortgage is like earning a guaranteed 4% return (tax implications aside). We had a client who paid off her $220,000 mortgage at 59. Mathematically, she probably could have earned more by investing that money. But her reasoning made sense for her, “My parents stressed about money their whole retirement. I don’t want that. I want to know that my house is paid for, no matter what happens.” For her, the psychological benefit outweighed the potential investment returns. The Case for Keeping Your Mortgage and Investing Instead For others in their late 50s, keeping the mortgage and investing that money elsewhere makes more financial sense: Higher potential investment returns. If your mortgage rate is 3-4% and you can reasonably expect 6-8% average returns from your diversified investment portfolio over time, the math favors investing. Maintain liquidity and flexibility. Money tied up in home equity isn’t easily accessible. You’ll have more options if that money is in investment accounts rather than in illiquid home equity. Tax advantages of mortgage interest. If you itemize deductions, you might still benefit from the mortgage interest deduction, which reduces the effective cost of your mortgage. Inflation works in your favor. Your mortgage payment stays the same while everything else gets more expensive. In 10 years, your $2,000 payment will feel smaller relative to other expenses. We worked with a couple who were considering paying off their $300k mortgage at age 57. Their mortgage rate was 3.25%, they were in a high tax bracket, and they had at least twenty years of retirement ahead. They decided to keep the mortgage and invest instead. Five years later, their investment account had grown enough that they could pay off the mortgage if they chose to, while still having substantial assets left over. The Middle Ground: A Hybrid Approach You don't have to choose all-or-nothing. Some clients find that a combination works best: Pay down part of the mortgage . Reduce your balance and shave a few years off your repayment timeline while maintaining some liquidity. Recasting and refinancing options can also lower your monthly payment. Plan for a future payoff . Keep the mortgage while you're still working and in higher tax brackets. Then plan to pay it off in a few years when you retire and your income drops. Use bonus income strategically . Consider using windfalls, bonuses, inheritance, business sale proceeds, to pay down the mortgage while keeping your regular savings and investments intact. How to Think Through Your Decision Here's how to evaluate the mortgage payoff vs investing decision for your situation: What's your mortgage interest rate? Below 4%, the mathematical case for keeping it gets stronger. Above 5%, paying it off starts looking more attractive. How much liquid savings do you have? If paying off your mortgage would drain your emergency fund or leave you with little accessible cash, that's a red flag. What's your risk tolerance? Be honest. If having a mortgage payment keeps you up at night, no investment return will make up for that stress. What are your other retirement income sources? Social Security, pension, rental income — these reliable sources might make carrying a mortgage more manageable than you think. When Paying Off Makes Sense Based on our experience, paying off your mortgage before retirement tends to work best when: Your mortgage interest rate is relatively high (5%+) You'd still have 6-12 months of expenses in emergency savings after payoff You're naturally debt-averse, and the monthly payment creates genuine anxiety You have other sources of retirement income You plan to stay in this home for the foreseeable future When Keeping Your Mortgage Makes Sense Keeping your mortgage and investing instead usually works better when: Your interest rate is low (below 4%) You're in a high tax bracket where the mortgage interest deduction provides value You have a long time horizon (20+ years of retirement ahead) You're comfortable with investment volatility You want flexibility and liquidity in your financial plan Getting Help With Your Decision At Five Pine Wealth Management , we help clients work through these decisions regularly. We review your complete financial situation, run the numbers, and help you understand the trade-offs so you can make a confident decision. A good financial advisor can run projections showing both scenarios, factor in your complete financial picture, help you stress-test different economic scenarios, and integrate this decision with your broader retirement, tax, and estate planning strategies. Whether you decide to pay off your mortgage or keep it and invest, what matters most is that the choice aligns with your goals, risk tolerance, and peace of mind. If you're wrestling with the mortgage payoff vs. investing question and want to talk through your specific situation, we're here to help. Call us at 877.333.1015 or email info@fivepinewealth.com . Frequently Asked Questions (FAQs) Q: Should I use my 401(k) to pay off my mortgage? A: Generally, no. Withdrawing from retirement accounts before 59½ triggers penalties. Later, large withdrawals can push you into higher tax brackets. If you want to pay off your mortgage, it's usually better to use funds from taxable investment accounts or savings rather than tapping tax-advantaged retirement accounts. Q: What if I want to downsize in a few years anyway? A: If you plan to sell and move to a smaller home within 3-5 years, keeping your mortgage makes more sense. You'd be paying it off only to sell shortly after, and that money could work harder for you in investments until you make your move. Q: Can I change my mind later if I keep the mortgage?  A: Yes, you can always pay it off later if your circumstances or feelings change. Once you pay it off, however, accessing that equity again (without selling) typically requires a new loan or a home equity line of credit, which isn't always simple or cheap.