Robert Simmons is 58. Carol is 55.

Robert has a pension and plans to retire in two years. Carol has a 401(k) and plans to work until 65.

They had built a good life. $1.8M in combined assets, a home they were ready to sell, and a plan to downsize into something smaller and simpler. They came to us in the middle of choosing a mortgage on their new home and wanted a second opinion.

What they thought was a straightforward financial decision turned out to be one of the most consequential ones they would make before retirement.

Here is what we uncovered.

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🔍 WHAT ROBERT AND CAROL’S SITUATION ACTUALLY LOOKED LIKE

The new home was $850,000. After selling their current home, they expected to net $380,000 and needed a mortgage of roughly $470,000. That put them below the conforming loan limit. Conventional financing was on the table.

But here is where the complexity started.

Robert’s pension pays $4,200 per month starting at 60, guaranteed, for life. Carol’s income is $145,000 a year and continues until she retires at 65. When Robert stops working in two years, their household income drops by $112,000 overnight.

A standard 30-year fixed mortgage looked affordable today. But we modeled what the payment would look like against their projected income in year three, when Robert retires and the pension kicks in, while Carol was still working alone.

The math was tighter than they expected.

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🏦 THE MORTGAGE TYPES WE ACTUALLY CONSIDERED

📌 30-Year Fixed

The most common choice and the one they came in leaning toward. The rate is locked for life, and the payment never changes. The comfort is real. But for Robert and Carol, locking into a 30-year obligation at 58 meant they’d be carrying a mortgage payment well into their 70s on a fixed retirement income. The stability cut both ways.

Best for: Buyers with stable long-term income who prioritize payment predictability.

📌 15-Year Fixed

A higher monthly payment, but the mortgage is paid off by the time Robert is 73, and Carol is 70. The rate is also lower than a 30-year rate, typically by 0.5–0.75%. For buyers who can absorb the higher payment now, while income is still high, this accelerates the path to a debt-free retirement.

Best for: Late-career buyers who want to eliminate the mortgage before or shortly after retirement.

📌 Adjustable-Rate Mortgage (ARM)

A 7/1 or 10/1 ARM would have offered a lower initial rate for 7 or 10 years, then adjusted annually. For Robert and Carol, the adjustment window lands squarely in their retirement years, exactly when income is least flexible. We took this off the table quickly.

Best for: Buyers with a short, defined time horizon who will sell or refinance before the adjustment period.

📌 Larger Down Payment to Reduce the Loan

Not a loan type, but a lever worth pulling. We looked at whether applying more of the home sale proceeds, say $450,000 instead of $380,000, would bring their monthly payment down enough to change the retirement income picture. It did. A smaller loan at a 15-year term produced a payment that fit comfortably inside their projected retirement cash flow.

Best for: Buyers with available equity who want to right-size the obligation before income drops.

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💡 WHAT WE ACTUALLY RECOMMENDED

Robert and Carol went with a 15-year fixed mortgage and put $450,000 down instead of $380,000.

Here is the logic:

Robert’s pension is a guaranteed income. That changes the risk calculus. They didn’t need to preserve cash the way someone without a pension would; the income floor was already built in. Deploying more equity upfront reduced the loan size and eliminated payment risk during retirement.

The 15-year term meant their mortgage would be paid off at 73 and 70, well before their assets would need to fully carry them. And the lower rate on the 15-year saved them over $60,000 in interest compared to the 30-year option.

The ARM never made sense. You don’t introduce rate risk in retirement when a fixed solution is available.

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📐 THE FRAMEWORK (Apply This to Your Own Situation)

If you are within 5–10 years of retirement and considering a mortgage, these are the questions that actually matter:

1. What does your income look like in year 3, not year 1?

→ Model the payment against post-retirement cash flow, not current income.

2. Do you have a guaranteed income floor (pension, annuity, Social Security)?

→ If yes, you may be able to deploy more equity upfront without increasing risk.

3. How long do you actually want to carry this mortgage?

→ A 30-year loan taken at 58 is a payment at 80. Is that the plan?

4. What does the rate differential between 15 and 30 years actually cost you over time?

→ Run the math. The interest savings on a 15-year loan are often substantial.

5. Does the ARM adjustment period overlap with your retirement years?

→ If yes, the lower initial rate is not worth the risk.

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Robert and Carol didn’t make a bad decision on their own. They made the decision most people in their position make by defaulting to the most familiar option, without modeling what it would look like a few years out.

The mortgage you choose in the final chapter of your career is not just a financing decision; it’s a retirement income decision.

And those two things need to be evaluated together.

* Robert and Carol are a composite archetype, not real clients. This story is for educational purposes only and does not constitute financial, tax, or legal advice.