Choosing Between Retirement and Mortgage Payment

If you think that prioritizing your mortgage payments is a better idea than saving for your retirement, then think again. Financial planners believe that the low interest rates and tax breaks in mortgage payments are signals that saving for retirement should be on top of your priority and even above paying your mortgage.

For example, for a couple who will be able to pay off their loans eight years earlier, it may be a good idea to keep the mortgage and invest the cash since a mortgage refinancing could give them a low rate of 4.4 percent. So, if you are earning more and could very well afford to take out a refinancing scheme, it may be a better idea to put your cash in an investment where it could grow and give you more value for your money.

Maximizing your Roth could give you a higher return come retirement time. Withdrawals are generally tax-free and it could also boost your savings substantially to a maximum of $10,000 a year.

Beefing up the emergency fun and redirecting the cash to 401(k) could also add to a tax-deferred growth. By channeling these funds to 401(k) rather than putting them all to prepaying the mortgage, you could actually build a bulkier retirement fund.

Another solution is to rationalize your investments. Lower your investment costs by doing away with those investments that require high fees but generally do not yield substantial profit results. A Philadelphia area planner recommends getting a target-date fund which could allow you to retire sooner than you expect.

It is indeed hard to decide what you should do in the future, in terms of your finances. But the best thing you can do now is to be honest with yourself and plan accordingly. If not, you might lose both retirement and homeownership at the end of the day.