The standard answer compares your mortgage rate with expected investment returns. That is necessary and incomplete. Retirement is not a spreadsheet with one interest-rate cell. It is a cash-flow system under stress.
The case for keeping it
A low fixed-rate mortgage preserves liquidity. Money left invested can grow, fund emergencies, and bridge the years before retirement accounts are accessible. Paying off the house can leave you wealthy in walls and poor in spendable assets.
The relevant comparison is after tax, after risk, and after considering what you would actually do with the money. “The market returns more” is not a guarantee. “I will invest the difference” is often a story people tell before spending it.
The case for killing it
Removing a large monthly payment lowers required withdrawals. That can reduce taxable income, make ACA subsidy planning easier, and allow a smaller cash buffer. It also simplifies the plan during a market decline. A paid-off home does not call during dinner to discuss volatility.
The psychological return matters, but name it honestly. If being debt-free lets you leave a job two years earlier because the plan finally feels believable, that utility is real. It is not captured by an expected-return calculation.
Run both lives
Create two complete scenarios. In the payoff version, reduce liquid assets and annual spending. In the keep-it version, retain the mortgage, the invested capital, and enough safe assets to service payments through a bad market. Include taxes and healthcare-income effects.
Then stress both with a 30% market decline in year one. The better answer is the plan you can still execute. Use Why $1M Is Both Too Much and Too Little and The Math of Walking Away as the broader frame. A mortgage is not moral failure or free leverage. It is a design choice.
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