We see that you have javascript disabled. Please enable javascript and refresh the page to continue reading local news. If you feel you have received this message in error, please contact the customer support team at 1-833-248-7801.

ADVERTISEMENT

ADVERTISEMENT

Paying off a mortgage is tempting, but not with so little a nest egg

Columnist Dave Ramsey says for a retired couple with a small savings, liquidity is better than being debt-free.

Dave Says — Dave Ramsey column sig
We are part of The Trust Project.

Dear Dave,

My husband and I are retired. I receive a small pension, and we are both on Medicare and Social Security. We have about $25,000 left to pay on our mortgage, along with a second mortgage of $18,000. These are our only debts. We also have a nest egg of $30,000 set aside, and a small annuity that’s worth about $20,000. Would you recommend paying off our mortgages with our savings?

Also Read
Highland Prairie WELCA is hosting a harvest soup luncheon from 11 a.m. to 1 p.m. Sunday, Oct. 9.
Columnist Dave Ramsey says attacking similar debts isn't a hard choice when one makes you pay more for the privilege of that debt.

— Jane

Dear Jane,

If you know me at all, you understand how much I’d love to see everyone in control of their finances and living debt-free. But being broke, even in a house that’s paid for, isn’t a good idea. Believe me, I understand. The idea of paying off the house and everything is awfully tempting. But if you two did that, you’d be left with very little. To me, that’s a scary thought when your small pension – along with Social Insecurity and Medicare – are all you have coming in.

ADVERTISEMENT

No offense, but your nest egg is kind of small to begin with, so I don’t think I’d be raiding it right now. On the other hand, if you’d told me you had $400,000 or $500,000 saved up, I’d tell you pay off the house and second mortgage today.

If you’re not doing this already, I’d advise you two to start making and living on a regular monthly budget. Give every dollar a name on paper before the month begins, because if you don’t, your money will control you instead of you controlling it. Make sure you’re living on less than what’s coming in, and hopefully you can devise a plan to have the house and other debt paid off in a few years.

God bless you two.

— Dave

Dave Ramsey is a personal money-management expert, a bestselling author and host of the nationally syndicated radio program “The Dave Ramsey Show,” which is heard locally on KROC-AM. For more financial advice, visit daveramsey.com .

What to read next
In this week's Home with the Lost Italian, columnist Sarah Nasello answers a reader's questions about how to source and utilize fresh and dried herbs in cooking.
The Duellman family's 29-year collection of classic cars, motorcycles, pedal cars, bikes and tools were part of an auction on Sept. 14-17, 2022. The toy collection remains intact.
Mixing fiber and protein can stave off the hunger longer.
Columnist Lovina Eicher says carrying on with her mother's legacy keeps her close to her mother's memory.