I am frequently asked whether you should pay off your mortgage prior to retiring. The calculus is a little trickier today than it was five or ten years ago because interest rates are so low now.

According to 2011 data from the Consumer Financial Protection Bureau, 81 percent of Americans age 65 and older own a home and 30 percent of those homeowners still carry a mortgage. Ten years earlier, the home ownership rate was basically the same at 80 percent, but the share of homes with a mortgage was 22 percent.

I doubt that this shift in consumer behavior can be primarily explained by lower rates, but among our clients, interest rate levels probably play a greater role than for the average American household.

Generally, we have advised clients to enter retirement without any mortgage debt and while there are always exceptions, our advice remains unchanged.

The primary reason to get rid of your mortgage by the time you retire is that your house payment is generally your biggest expense. Once you stop working and don’t have income, you want your expenses to be as low as possible without sacrificing your lifestyle.

Assuming that you can afford to pay off your mortgage, one of the primary reasons to maintain one is the tax deduction. While I like the deduction, it reminds me of buying something on sale – you may be saving, but you’re still spending.

Also, assume that you have a classic 60/40 stock/bond portfolio. If you still have a mortgage, you’re essentially short the bond market and exaggerating your stock (and real estate) allocation, probably without realizing it.

That’s another way of saying that mortgage is essentially leverage, and that’s what could make keeping your mortgage useful given the low rate environment – if you have the cash flow. If your mortgage costs four percent, for example, and you expect your portfolio or house to grow faster than your cost of funds, it may make sense.

As always, there are some useful caveats to consider. I said earlier that this all assumes that you can pay off your mortgage. I should qualify that further to say that if you pay off your mortgage, it should be with taxable money (or, said another way, not IRA or 401k money).

It wouldn’t be a good idea to pull a lot of money out of your tax-deferred account and trigger a higher tax rate.

At the end of the day, we still think it makes sense to enter retirement without a mortgage, mainly to keep cash flow low. The home equity also serves as an emergency backstop – if you really get into a jam, you can downsize your home or do a reverse mortgage.

As you might expect, even though we see how low rates might be a useful factor, we tend to take the conservative approach to financial planning.

After all, that stuff works well in a spreadsheet, but we don’t live in spread-sheets (except for Michael).