Media Q&A:How to stop a mortgage eating into retirement income

Consumer Question:

I’m 45 and recently bought my first home – with the aid of a substantial mortgage. While I haven’t had to reduce my pension contributions since taking out the mortgage, given I’m only 20 years to retirement, what can I do to avoid this mortgage having an impact on my retirement income down the line?

Answer from Mark Reilly, Pension Proposition Lead at Royal London Ireland

It’s good that you have been able to maintain your pension savings since taking out your mortgage. We would encourage you to continue to do so, if you can afford to, as this is one of the best ways you can avoid your mortgage eating into your income during retirement.

Taking out a mortgage late in life could see that debt follow you into your retirement years and in turn eat into your retirement income, particularly since with the mainstream Irish banks[1], you have the option to repay your mortgage up until the age of 69 or 70.

To avoid your mortgage having an impact on your retirement income, ideally clear your mortgage before you reach the age of 65, or earlier if you can. This can reduce your need to continue working past the date you ideally want to retire.

Avoid topping up your mortgage close to retirement too. While you might consider a mortgage top-up to fund home improvements or to give a child a deposit towards their first home, a top-up mortgage at that stage could put you under unnecessary financial pressure in your retirement years. Be aware too that unforeseen circumstances, such as an illness or redundancy, could see you struggle to repay a top-up loan.

[1] Including AIB, Bank of Ireland and Permanent TSB.

ENDS

This question was submitted to and first published by The Irish Independent