Retirement brings with it dreams of being debt-free. The mortgage is one of the largest debts you will incur in your life, and retiring without this obligation seems like a good move. However, in some cases, it may make sense to keep your mortgage into retirement.

The answer will be different for every person and will depend upon many factors: your investments and their returns, the balance on your mortgage, the interest you are paying on your mortgage, how long you have paid on the mortgage, and other factors.

Advantages of Paying off Your Mortgage before Retirement:

• Emotional peace of mind because you have the security of truly owning your home. You don’t need to worry about possible rising, variable interest rates.

-- A debt-free inheritance for your heirs (at least for the mortgage), as long as the home does not end up in probate.

-- More financial flexibility. Without a mortgage payment, you have more money to invest or to use for expenses or travel.

-- Increased property value. Historically, property values increase over time, making your home a sound financial investment.

Disadvantages of Paying off Your Mortgage before Retirement:

-- You are redirecting money that could be used for retirement investing. If you have a low mortgage rate, investing may give you a better return than what the mortgage is costing you. If you have more than 10 years to retirement, you might especially want to concentrate on building retirement wealth rather than paying off a mortgage.

-- You lose the tax savings of the mortgage interest deduction. This will be more of a disadvantage if you expect to be in a high tax bracket at retirement, or if you are in the early years of the mortgage loan, when monthly interest rate payments are higher.

Other Scenarios to Consider when Deciding Whether to Pay off Your Mortgage before Retirement:

-- Your Savings are Big and Your Mortgage is Small at Retirement

In this case, it may make sense to pay off the mortgage or consider downsizing to a less expensive home. You could also take a part-time job to help pay off the mortgage.

-- Your Mortgage is Costing More Than Your Investments Are Earning

If you have cash in a regular money market paying 5 percent, and you have a mortgage with an interest rate of 6 percent, you might pay down the mortgage with funds from the money market account; in this scenario you are paying more money in mortgage interest than you are earning in the money market.

-- You Plan to Tap an IRA or 401(k) to Pay the Mortgage

While it may be tempting to take a big chunk from your retirement accounts to pay your mortgage, you may incur big tax liability. Drawing from your retirement account is almost never suggested for any reason other than a first home purchase.

A better idea might be to roll over a sum of money from your retirement account into a fixed annuity. Set the annuity up to pay out over the time that remains on the mortgage – if the mortgage has 10 years remaining, set up the annuity as a 10 year annuity. Make sure that you roll the retirement funds right into the annuity, to avoid a big tax bill all at once. Taxes will be taken, a little at a time, as you receive annuity payments. Annuity payments can be used to pay the monthly mortgage bill.

-- You Have a Large Mortgage Balance at Retirement

If you have a large mortgage at retirement, and it seems unlikely that you will outlive the mortgage, consider refinancing to get the monthly payment lowered. If you have a healthy retirement savings, this may help you qualify for refinancing, even when retired. Another solution is to downsize to a less expensive home.

Ultimately, there are many factors to consider regarding paying off your mortgage before retirement. If you have no debt, an expensive mortgage, and a large amount of savings remaining above and beyond your mortgage balance, consider paying your mortgage off before you retire.