Liz has just retired and wonders if she should use her investments to pay off her mortgage, despite her advisor’s advice to the contrary.

Q: I retired this year and my mortgage is coming due soon. My advisor said to keep the mortgage as rates are low and keep the money invested to keep making me money.

I’m not sure this is wise, and my advisor works for the bank who holds my mortgage.

What do you think?

– Liz

A: Ideally, retirees should strive to have their debts paid off by retirement. Practically, I can appreciate that doesn’t always happen due to a variety of factors.

In much the same way you should aim to debt-free by retirement, retirement is also a good time to evaluate the ways in which you can pay off any existing debts.

For some retirees, that may include a home downsize, which may or may not be a necessary or even a practical component of a retirement plan.

In your case, Liz, it sounds like you have investments with which you can pay off your mortgage. The question is: what are these investments?

If the investments in question are in a Registered Retirement Savings Plan (RRSP) or a similar tax-deferred account, you need to consider the tax implications of using these investments to pay off your mortgage. Taking a large, lump-sum withdrawal may result in significant tax payable and a much smaller after-tax amount that can be used to repay debt.

In this instance, you may in fact be better off taking withdrawals over several years to supplement your cash flow and debt repayment

If the investments in question are in a Tax Free Savings Account (TFSA), it may be that much more of a toss-up as to whether you should use the investments to pay off your mortgage. Paying off your mortgage results in a guaranteed return, like buying a Guaranteed Investment Certificate (GIC), compared to your TFSA, which may be a riskier investment in stocks and bonds.

The interest rate…