Losing a job is stressful enough, but when you're in your mid-60s with a mortgage to pay, the stakes are even higher. Do you play it safe and keep cash on hand, or wipe out your debt for peace of mind?
That was the dilemma one listener brought to Suze Orman's "Women & Money" podcast recently. Karen, 66, and her 65-year-old husband had $335,000 in savings but still owed $80,000 on their mortgage. With government cutbacks threatening his job, she wondered: Should they pull from savings to pay off the house now, or wait?
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Karen's instinct was to eliminate the mortgage. Orman's podcast partner, KT, quickly backed her up.
"Why not? It's $80,000. Pay it off. Own your home outright," she said.
But Orman immediately shot the idea down.
Why Suze Orman Says ‘Not Yet'
Orman wasn't against the idea of paying off the mortgage—just not until they had more certainty.
"So, Karen, here's what I would do," Orman explained. "I would continue to do everything just like you are doing it. Once he loses his job, then I would go and take the $80,000 out of savings and pay off the mortgage at that point in time. But not now, because we don't know that he's going to definitely lose his job."
Her reasoning? Once you pull that $80,000 from savings, you can't get it back. If Karen's husband kept his job, they'd be down a huge chunk of savings for no reason. Keeping cash on hand gave them flexibility.
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Cash Is King—Especially in Uncertain Times
One of Orman's golden rules is to prioritize liquidity.
"Why not let the $335,000 grow and make a nice interest rate?" she pointed out. "Because your mortgage balance is just gonna continue to go down."
In other words, paying off the house may feel like financial security, but real security is having cash available for the unknown.
The Numbers: Keeping Savings vs. Paying Off the Mortgage
When deciding whether to keep cash in a high-yield savings account or pay off a mortgage, the real question is: Which option leaves you better off financially?
Orman didn't dive into the exact numbers, but here's a rough estimate based on typical rates:
- If Karen keeps the $80,000 in savings, assuming a 4.5% APY (compounded monthly), that money could grow to about $100,144 in five years.
- If she pays off the mortgage instead, she eliminates an $80,000 loan at a 5.5% interest rate, avoiding roughly $22,000 in interest payments over five years.
At first glance, it looks like paying off the mortgage saves more money. But here's the catch:
- The extra savings from interest earned would offset most of the mortgage interest paid, leaving just a $1,856 difference in favor of paying off the mortgage.
- More importantly, keeping the cash in savings means having access to $100,000 in five years, instead of being "house rich" but cash poor.
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The Smartest Move: Wait and See
Until Karen's husband actually loses his job, Orman's advice is to sit tight. If the layoff happens, then using savings to wipe out the mortgage makes sense. But pulling that money too soon could be a costly mistake.
"So until he loses his job, keep everything status quo. If he does lose his job, then take the $80,000 out of savings and pay it off."
Don't Solve a Problem That Hasn't Happened Yet
Karen's instinct was understandable—no mortgage means one less bill to worry about. But as Orman pointed out, being debt-free is only useful if you still have money to cover daily expenses.
Orman's advice is clear: Don't make financial decisions based on fear. If a job loss is confirmed, then it's time to act. Until then, keeping savings intact provides the flexibility to handle whatever happens next.
If you're facing a financial dilemma—wondering whether to pay off your home, invest in a CD or high-yield savings account, or take another route—a financial advisor can help you make sense of your options. They can break down the numbers, assess your unique situation, and guide you toward the smartest move to protect and grow your money.
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© 2025 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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