Updated August 2, 2026. Quick answer: the argument for keeping a mortgage usually rests on the tax deduction, and for most retirees that deduction is worth nothing. A married couple both over 65 gets a standard deduction of $35,500 in 2026 — more than their mortgage interest and everything else combined. If you take the standard deduction, your mortgage rate is your mortgage rate. This works out whether that is true at your numbers, and what the payoff decision actually costs.
The calculator
The deduction reality check, and why it decides most of these
Nearly every argument for carrying a mortgage into retirement contains the phrase “after the tax deduction”. It is doing enormous work in that sentence, and for most retirees it is doing none in reality.
Mortgage interest is an itemised deduction. You only benefit to the extent your itemised total exceeds your standard deduction — and in 2026 a married couple both 65 or older has a standard deduction of $35,500. A $200,000 mortgage at 6.5% throws off around $12,822 of interest in a year. Add state and local taxes and charitable giving and most households are still well short. The deduction is worth zero, and the effective rate on the mortgage is the full rate.
The calculator applies this at your numbers rather than as a generality, because for a minority — large balance, high rate, high state taxes, significant giving — it genuinely does itemise, and then the after-tax rate really is lower.
Paying it off from an IRA is a different decision
If the money would come out of a traditional IRA or 401(k), the balance is not the price. The withdrawal is ordinary income, and a payoff-sized withdrawal in a single year climbs through the brackets — so clearing a mortgage can cost meaningfully more than the mortgage.
The calculator computes the gross withdrawal needed to net the balance, and that gap is the real number to weigh. Two consequences it flags: the tax is one-off and immediate while the interest saving is annual and slow, and the withdrawal raises the income that sets your Medicare premium two years later. If the payoff is going to happen anyway, spreading it across tax years is usually worth more than the extra year of interest — how much fits in your bracket sizes each slice.
The part the arithmetic cannot settle
The spread above is real, and it is not the whole decision. Three factors sit outside it, and they are stated here rather than dodged or decided for you:
- The returns are not certain and the interest is. A guaranteed rate saved is not the same asset as a hoped-for return. A spread of one or two points is well inside the range where reasonable people choose the certain side.
- Sequence of returns. A mortgage payment is a fixed obligation that must be met out of a portfolio whether or not markets cooperate. Removing it lowers the floor you have to clear in a bad year, which matters most in the first years of retirement.
- Liquidity runs the other way. Money in the house is hard to get back out — and the routes for getting it out later carry rules of their own. Paying off the mortgage and then being short of cash is a worse position than owing at a modest rate.
Peace of mind is a real return and not a foolish one. It just should not be bought without knowing the price, which is what the number above is for.
Where this sits
If the mortgage is staying, it is a spending line for the rest of its term — whether the plan supports it is the prior question. If the money would come from savings you are also counting on, which account you draw from changes the answer. And if you are still working, the same dollars have a competing use: what the catch-up stack is worth.
2026 standard deduction, the additional amounts for age 65 or older, and the rate schedules all come from the verified Rev. Proc. 2025-32 figures staged in this repository. Amortisation and the gross-up are deterministic arithmetic. General information, not tax or investment advice.
The arithmetic is one input; where the money comes from is often the bigger one — the decision framework around it.
The arithmetic is only half of it — the decision framing around it.
All the numbers, kept current. This page uses 7 figures from our claims register — every figure we track is on one page, each with the year it applies to and a plain statement of what makes it move.