Jyske Bank private economist Bettina Brask advises against striving to be completely debt-free upon retirement, suggesting that strategically managing mortgage debt alongside investments can be a more financially sound approach. Brask challenges the conventional wisdom of eliminating all mortgage debt before retirement, arguing that tying up all your money in your home may limit future financial flexibility. She suggests that funds could potentially grow more effectively in pension or investment accounts.

Brask emphasizes the importance of reducing mortgage debt to between 40 to 60 percent of the home’s value before retirement. This range is crucial because it often unlocks more favorable loan terms, such as lower contribution rates and access to interest-only loans. This approach allows homeowners to access equity if needed without having to take out an entirely new loan on a debt-free property.

When considering where to allocate funds instead of paying off the mortgage, Brask points to the benefits of pension schemes due to favorable tax treatment. She highlights that returns within pension schemes are taxed at a lower rate, allowing the money to grow more substantially over time. However, she cautions that pension income can affect eligibility for the national pension supplement, potentially offsetting some of the gains.

For shorter time horizons until retirement, Brask recommends maximizing contributions to an age savings plan, which is not subject to offset and offers tax advantages. She also underscores the importance of maintaining savings in “free funds” for flexibility and immediate access to capital, recommending an equity savings account as the most lucrative option due to its lower capital gains tax.

In summary, Brask advocates for diversifying savings across pensions, housing, and free funds to achieve optimal financial flexibility and growth, while cautioning that her advice serves as a general guide and does not encompass private circumstances which always recommends individual advice. She proposes a sequence for optimizing wealth, beginning with reducing mortgage debt to the 40-60 percent range, followed by maximizing contributions to pensions, equity savings accounts, and finally, free accounts. Housing economist Lise Nytoft Bergmann echoes this sentiment, stressing the need for personalized financial advice and highlighting the multitude of ways to structure one’s personal finances.