The ACA and Retirement Planning: Paying Off Your Mortgage

Navigating retirement finances can be a complex task, especially when it comes to managing your mortgage and healthcare costs. The Affordable Care Act (ACA) has played a significant role in shaping the healthcare landscape for retirees, making it essential to understand how your financial decisions can impact ACA benefits and overall financial strategy.

Mortgage Payoff and ACA Subsidies

One key consideration for retirees is whether to pay off their mortgage before retiring. This decision can have a substantial effect on your eligibility and premiums for ACA health insurance subsidies.

ACA subsidies are available to individuals and families who meet certain income criteria. For individuals, the subsidy cutoff is 400% of the federal poverty level (FPL). For families, it is 250% of the FPL.

Paying off your mortgage can reduce your monthly expenses, but it can also increase your adjusted gross income (AGI). AGI is used to determine ACA subsidy eligibility, so paying off your mortgage could increase your income above the cutoff amount, making you ineligible for subsidies.

Conversely, if your income is close to the subsidy cutoff, paying off your mortgage could actually lower your AGI and make you eligible for subsidies or increase the amount of subsidies you receive.

Mortgage Payoff and College Financial Aid

In addition to ACA subsidies, paying off your mortgage can also impact your eligibility for college financial aid. The Free Application for Federal Student Aid (FAFSA) considers the primary homeowner equity as an asset and counts a portion of it against your income. This can reduce the amount of financial aid your child may receive.

Advantages of Carrying a Mortgage in Retirement

While paying off your mortgage can have certain benefits, there are also some advantages to carrying a mortgage in retirement. These include:

– Liquidity: A mortgage can provide you with easy access to cash if needed through a home equity line of credit.

– Low-cost borrowing: Mortgages typically offer some of the lowest interest rates available, making them an attractive way to borrow money.

– Tax deductions: Mortgage interest is tax-deductible, which can reduce your overall tax bill.

– Inflation protection: Mortgage payments remain fixed over the life of the loan, while inflation gradually reduces their real cost.


Deciding whether or not to pay off your mortgage before retiring is a complex financial decision that requires careful consideration. Factors to consider include your income, ACA eligibility, college financial aid plans, and the potential advantages of carrying a mortgage in retirement.

By understanding the impact of mortgage payoff on ACA subsidies and college financial aid, you can make informed choices that align with your overall retirement goals. Consulting with a financial advisor who specializes in ACA and retirement planning can be an invaluable resource in navigating these decisions.

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