If debt makes you anxious, you may be wondering: Should I try to pay off my mortgage — or not? Well, it depends — on your financial circumstances, your time to retirement and your emotions.

"For far-sighted people who have self-control (to save elsewhere), it probably makes sense not to repay their mortgage," says Anthony Webb, an economist at the Retirement Research Center. Consider:

Your mortgage interest rate.

If your mortgage rate is low, say 6% or less, you likely can earn more from other investments.

"If you could invest in a tax-deferred account such as an IRA or 401(k), the pretax rate of return would be equal to or greater than the post-tax cost of the mortgage," Webb says.

Your time to retirement.

The younger you are, the more time you have to make money on other investments. There's no reason why people in their 20s or 30s or even 40s should pay off their mortgage if they're not planning to retire before 65. If you have more than 10 years before retirement, there's time to make money in other investments and build up your savings, says Phillip Cook, a financial planner at Cook and Associates in Torrance, Calif.

The size of your mortgage and when you got it.

If you bought a home in the past few years, after the run-up in home prices, you may have a big mortgage.

You might want to pay down that loan — at least somewhat, Cook says. "I have a client who had a mortgage of $700,000 and just wasn't comfortable with it."

Cook recommended the client pay down some of the mortgage, to $500,000.

Your expected tax bracket after retirement.

Retirees typically live on less than they earned while working. That used to mean they'd fall into lower tax rates and didn't need a mortgage deduction as much.

But the lowering of tax brackets and widening of income levels that fall into those brackets have changed all that. Take the 25% rate for a married couple filing jointly. It covers incomes from $61,300 to $123,750.

"A couple who earned $123,000 and saved enough to replace 65% of their income in retirement (with Social Security and a pension), would have $80,000 a year," Cook says. "Their tax bracket wouldn't change."

They could afford their payments and still need the mortgage deduction.

How much longer your mortgage term is.

That equation changes if you're close to paying off your loan. If you have less than 10 years left to pay on a 30-year mortgage, you're getting less and less of an income tax deduction. That's because you've paid most of the interest by now and are paying mostly principal. You don't get a deduction for principal payments. So the tax factor is worth weighing.

How much longer you plan to live in the house.

If you're going to retire and live in your home, you might want to pay off the mortgage if the idea of having to pay that bill simply drives you crazy.

If you plan to sell your house and move to a smaller home or to a less-expensive area, there's no need to repay the mortgage. Once you sell, you can use the proceeds to buy your next home.

In fact, of "repeat buyers," 11% paid cash in 2004, according to Walter Molony, a research analyst at the National Association of Realtors.

How much you've saved for retirement.

Guidelines suggest you save enough for retirement, including Social Security and a pension, to replace 60% to 80% of your income. If you won't have that much, you might want to pay down your mortgage now.

But if you're flush with savings and can stomach still making that payment, keep it.

Do you consider yourself a "financial wimp"?

Some people lack the fortitude to stomach the market's ups and downs. Sound like you? You might sleep better knowing you're paying off your mortgage.

FOUR MORTGAGE SCENARIOS:

Scenario 1

A retired couple in their 70s, with assets of $500,000 and annual Social Security, pension and investment income of $12,500. They owe $36,000 on a 6.5% mortgage, with 10 years to pay. Monthly payment: about $400. Should they pay off the mortgage?

Cook's advice:

"Given the facts, it looks like this couple should pay off their mortgage. The mortgage payment is 38% of their annual income, leaving only $7,700 to live on. For most people, 70 years of age is a time to be enjoying the fruits of their labor. There's not much enjoyment to be had for whatever is left of the $7,700 after necessities. This couple will be left with $464,000 of other assets after paying off the mortgage. That should be sufficient reserves for whatever comes next in their lives.

"With annual income of only $12,500, they're not getting much, if any, current income (yield) from their $500,000 of other assets. In fact, these assets may even have a total return below 6.5%. So it would be to their advantage to pay off a high-cost (in relation to what their money is earning) mortgage obligation."

Scenario 2

A couple in their 60s who want to retire in five years have $1.5 million in assets. They owe $100,000 on their home on a 15-year mortgage that they refinanced this year at 5%. They earn $250,000 a year. Should they pay down their mortgage? Or will they need the tax deduction?

Cook's advice:

"There's no way the couple should pay off their mortgage or accelerate the pay-down of principal any faster than the loan's amortization rate. The deduction of mortgage interest will be helpful at tax time. Their annual income should allow for them to easily make their monthly payment. And they have sufficient other assets to enable them to weather any financial storms. So paying off their mortgage just to 'have the house free and clear just in case' seems unnecessary and inappropriate."

Scenario 3

A couple in their early 50s who want to retire in 15 years. They have $300,000 in assets. They owe $200,000 on their house, with a 30-year mortgage they refinanced this year at 5%. They earn $150,000 a year. Should they spend money to pay down that mortgage? Or keep the mortgage and seek a higher return from other investments?

Cook's advice:

"For a number of reasons, this couple should be in no hurry to pay off their mortgage.

"Reason No. 1: Over the next 15 years, they should be able to earn more than the mortgage is costing them. It's reasonable to assume they could earn 2% (to) 3% more than the 5% interest rate. This 'spread' will add noticeably to their net worth at retirement.

"No. 2: Usually, it's after 50 years of age that a person moves into his/her highest earning years. If this holds true in this case, their income is likely to go up, and the monthly payment should be easily affordable.

"No. 3: If they aggressively save and invest, over the next 15 years they should be able to accumulate a fair amount of money. With these accumulated assets, plus the $300,000 of assets they now have, they'll have more than enough to pay off the mortgage balance when they retire if they so desire."

Scenario 4

A couple in their early 40s who want to retire early, in 15 years. They have assets of $300,000. They owe $350,000 on a house with a 30-year mortgage they refinanced this year at 5%. They earn $100,000 a year.

Should they pay down their mortgage or put money into other investments?

Cook's advice:

"Retiring at 55 years of age and having enough assets accumulated so as to never have to worry about running out of money, no matter how long you live, is a pretty tall order. Realization of this goal, given their current financial position, will undoubtedly require them to use every financial advantage they can.

"The use of leverage (borrowing money for their mortgage and earning more with that money than it is costing you) is something they should embrace.

"The nature of most real estate to appreciate over time adds another financial advantage to the leverage.

"For example, if they owned this house free and clear, and the home's value goes up by $10,000 in one year, they would have earned 2.85% on their money ($10,000/$350,000).

"In their present situation, assuming a 20/80 loan-to-value ratio ($350,000 mortgage with a $437,500 market value), the same $10,000 of appreciation, they would earn 11.4% on their equity.

$437,500 current market value
-$350,000 loan
=$87,500 equity
$10,000/$87,500 = 11.4%

"This return would be reduced by the cost of the borrowed money — but then enhanced somewhat by the tax saving realized from the mortgage deduction. The net effect is they would get a greater return on their invested dollar via the use of leverage.

"It should be noted that real estate values can and have gone down during certain periods. During these times, leverage works as hard against building wealth as it does for building wealth during good real estate markets."