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Which is better: To retire without a mortgage or keep the mortgage and retire with a bigger nest egg?

More Americans approaching retirement face what some describe as worrisome levels of debt.

Consider: More than half (55 percent) of the American population aged 55 to 64 carry a home mortgage, according to a paper presented at the 15th annual Joint Conference of the Retirement Research Consortium in August.

What’s more, that debt isn’t going away after retirement. Among people aged 65 to 74, almost half had mortgages or other loans on their primary residences.

So what’s the better tactic? To aggressively pay down one’s mortgage before retirement, and stop or perhaps reduce saving for retirement? To keep saving for retirement and retire with a mortgage.

Or should you save a bit less for retirement and pay down one’s mortgage a bit more aggressively?

The answer depends on your personal situation.

Variables include current income, savings, current tax rates, your Schedule A itemization before and during retirement, whether you have access to a Health Savings Account, your retirement-income needs with and without a mortgage, your mortgage balance, the number of years remaining on your mortgage, and interest rates and opportunities to refinance — among many other factors.

The tax consequences of pursuing one tactic or the other must be considered.

“There are tax advantages to pension contributions, and interest payments on mortgages are tax deductible, so one has to compare these advantages,” said Annamaria Lusardi, who, along with Olivia Mitchell, is the co-author of “Financial Literacy: Implications for Retirement Security and the Financial Marketplace.”

Kathleen Mealey, a financial counselor with Cabot Money Management, agreed, saying that contributing to a 401(k) and deducting interest payments from a mortgage could be beneficial, especially if it puts you in a lower tax bracket.

A word of warning: You are likely to lose much of the benefits of deducting mortgage-interest payments the closer you are to paying it off in full. Also, consider this fact: You do get a tax deduction with your 401(k) contribution. But the deduction only defers your taxes.

Mealey and others also suggest you pursue the tactic that offers the highest return on your investment. “ If the long-term rate of return on the 401(k) plan will be higher than the mortgage, and there is a comfort level with the risk involved, it may not be advantageous to pay off the mortgage.”

For some, this is a no-brainer. “With current low interest rates that are fixed for a number of years, a retiree can possibly have a better return on the money in a long-term objective portfolio than the 3 or 4 percent interest payment,” said Michael Callahan, president of Edu4Retirement.

On the other hand, if you aren’t earning much on your retirement investments, if you have low or negative returns, it might make sense to pay down your mortgage, Mitchell said.

Reasons not to pay down mortgage

There are some general rules to follow.

For instance, Mike Kenney, a consultant with Nationwide Financial, suggests that you not pay down your mortgage unless you already have ample assets to cover all retirement-income needs and/or are making the full allowable contribution to your 401(k).

“The likely outcome of paying off a mortgage early is increased taxation on earned income now, though this would not apply with a Roth 401(k), and increased taxation due to the loss of a potential deduction later,” Kenney said.

Mitchell suggested that one’s house is a nondiversified, and potentially quite risky, asset.

“In this light, hastening to pay off the mortgage may be the wrong thing to do,” she said.

Reasons to pay down

In some cases it might make sense to pay down your mortgage. For instance, if your mortgage rate is variable and you think interest rates are rising, that makes paying off more appealing, Mitchell said.

And some people believe that the “right thing to do” is to pay off the mortgage because it helps them sleep better at night, she said.

Besides, having your mortgage paid off also pays off in other ways. You’ll be able to qualify for a reverse mortgage, said Callahan.

Reasons to keep saving

There’s one big reason to keep saving for retirement, advisers said. If your employer matches your contribution to your 401(k) in some form or fashion, that’s “automatic return right away,” Mitchell said.

What’s more, since many employers take the contribution out of your paycheck, “if you don’t see it, you won’t spend it, making that relatively easy,” said Mitchell.

Others, however, prefer having cash in the bank or money in the stock market rather than a paid-off mortgage.

“To me, cash is king,” said Callahan. “If you can amortize the payment of the mortgage, you have options by having the retirement savings on hand. You can always pay off the mortgage if the cash is available.”

Plus, he said, it forces a better financial plan while working because past decisions need to be completed while future decisions need planning and commitments.

And, Callahan said, having a mortgage “may keep people working longer, so that they won’t overestimate the value of their retirement savings.”

Paying down the mortgage before retirement will help you lower your expenses in retirement. That’s especially important because housing represents more than 30 percent of the expenses for people 65 and older.

Lowering expenses is a critical issue in retirement. “With finite resources, keeping expenses low is essential,” said Callahan. “Owning a home is very expensive. Upkeep — is not cheap.”

According to Lusardi and Mitchell’s research, early boomers, as compared with previous generations at the same age, bought more-expensive homes and got close to retirement with higher mortgage debt than other generations. They also have higher credit-card debt.

“This means that, in addition to deciding how to de-cumulate their wealth, this generation will also have to manage their debt well into retirement, and these decisions are not that easy and do require some basic financial literacy,” Lusardi said.

The bottom line, at least for Mitchell, is this: “I’d say do both — and keep working longer.”