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Over the years I have heard of various strategies to pay for later retirement or education.  I am going to pay off this mortgage quickly so I can borrow again to pay for college, or I am buying this rental property and will sell it to pay for school or it will become my income later in life.  There is nothing wrong with these ideas other than they burn today’s cash flow to pay for a later need and it may not the most efficient way to build the assets needed to pay for retirement or education.

  • Paying off a mortgage more rapidly to only borrow later makes little sense.  Understanding the cost of money and possible rates of return over time, are likely to lead to a plan to grow the money more efficiently and with a lower cost.
  • Buying and selling real estate carries with it significant costs and tax implications, there is nothing wrong with rental real estate, but the costs and taxes do not make it suitable to pay for education or even retirement (the only exception being owing rentals for cash flow in retirement)
  • Reduce your cash flow today and invest in college funding plans like 529’s etc.
  • Set up a Home Equity Line of Credit to have access to short term funding needs
  • Retirement income planning should include an integration of home equity, your mortgage, cash flow and other assets to create a sustainable lifestyle. Carrying a mortgage in retirement is not a sign of failure of earlier planning.  The cash flow related to the mortgage is simply part of the plan, whether that is a forward or reverse mortgage.  A reverse mortgage provides access to idle equity that can be used to achieve retirement goals and takes careful evaluation alongside your financial plan.