At a glance

• Once you pay off your mortgage, you’ll have more money spare each month.
• Rather than see this money ‘disappear’ into your day-to-day budget, consider how much it could be worth if you invested it.
• A financial adviser can help guide your through your different options to help bring that dream retirement a few steps closer.

We all recall those life-changing moments. Meeting your life partner for the first time. Taking your newborn baby home or collecting the keys to your first flat.

And that moment when you pay off your mortgage? That’s a moment you never forget.

Becoming mortgage-free feels fantastic. After all, a mortgage is often the biggest debt we ever take on – and it can take up to 25 years to pay it off, and own your home outright. That’s decades of putting money aside, comparing interest rates, or shopping for the right mortgage.

While paying off the mortgage isn’t as romantic as your silver wedding anniversary, it’s no less of a milestone.

Not only will you own what is probably your biggest asset, you’ll also have a comfortable sum each month back in your bank account. And while there’s no harm in rewarding yourself with an extra holiday this year, or changing your car, it’s also a golden opportunity to think about how this money can help your long-term financial wellbeing.

Your financial landscape is changing. Now’s the natural time to focus on what you want from life going forward – and fit your finances to achieve that.

Reviewing your financial future

Any change to your financial circumstances – especially a positive change – is an important moment to talk to your financial adviser for a review.

Paying off the mortgage often coincides with other important life stages. You may be approaching the peak of your earning power, enjoying bigger salaries or bonuses. Your day-to-day living expenses can start to go down, as children leave the nest. You might also come into a lump sum through an inheritance, or a savings account maturing.

Those few extra hundred pounds every month can seem quite a modest amount; certainly not like a life-changing lottery win. Which is why it can easily be ‘absorbed’ into the household budget or an extra lunch out.

But that extra money can be surprisingly powerful if saved or invested over a longer period. You won’t notice it if you’ve been paying the same amount into the mortgage anyway.

Planning for a comfortable retirement

Even if you’re not thinking of stopping work just yet, it’s never too early to start thinking about your retirement.

We’re all living longer – and that extra money could make a big difference to your quality of later life. If you are a 50-year-old man in reasonably good health, the Office for National Statistics life expectancy calculator suggests you will live until the age of 84, with a 1 in 10 chance of living to 97! If you’re a 50-year-old woman you may well live to 87.¹

Many of us are a lot fitter and more active than previous generations, and you might have all sorts of ambitions and dreams for when you stop work. That might be just taking life a little easier, starting a new business, exploring the world or helping loved ones out financially. In a recent SJP survey, 69% of SJP clients said they expected to help the family with school fees, buying a house or paying for a honeymoon.²

If, for example, you pay off your mortgage at 57 and work until you’re 67, you could invest the money you save on your mortgage repayments over that ten years. You’ll reap the benefit of compounding – essentially ‘growth on top of growth’, which means your investment could enjoy a bumper couple of years by the time you’re ready to retire.

The value of financial advice

We help advise many of our clients through this life stage, explaining choices and helping you feel confident in your financial future. Many SJP Partners are later-life planning specialists. Our first hand experience can be a big help if you’re not sure where to start.

An adviser will help you recalculate your short-and long-term savings and expenditure, and check whether your pensions, ISAs, investments and other assets are giving you good value for money. We can also look at the most tax-efficient ways to use that extra money to achieve your retirement goals. You might want to up your pension contributions to take advantage of tax relief, or your employer’s contributions for example. Or get the most out of your annual £20,000 ISA allowance by increasing the amount you invest each month.

Spreading your wealth

Money doesn’t make the world go round, but it’s a great enabler.

More and more of us want our money to help others as well as ourselves; helping our children, or our parents, and hopefully leaving a legacy that might mean your own children can pay off their mortgage early too.

With careful planning and personal financial advice, your money can make all of those goals a reality.

Get in touch

We can help you plan for the retirement you want. Contact us now for advice and support.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

Sources

¹Office of National Statistics, Life Expectancy calculator, accessed January 2024

²St. James’s Place, ‘Intergenerational wealth transfer’, June 2023 (From two online surveys by the Wisdom Council of 887 SJP clients and 211 Partners, May 2023)

SJP Approved 16/01/2024