Mortgage vs. Retirement savings

[Lori63]

Hi! Let's just suppose that I have extra money every month( HA! Too Funny! I've got three growing boys!) Anyway, would I be better off putting it in a retirement acct., or applying it towards getting my mortgage paid off early? We think it would be really great to not have a mortgage payment when we retire (which I can't retire until I go back to work LOL), but let me know you're opinions. Thanks.

[terry1156]

Strictly financially speaking, it depends on what your mortgage rate is and what you think you can earn in interest in your retirement account. If you think you can earn more in the retirement account than you are currently paying in interest on your mortgage, then retirement is the way to go. If you don't think you can earn more investing, then paying off the mortgage is the smart thing to do.

[crosses]

I had a similar decision to make a few years back and I decided to pay off the mortgage first. Since we will pay it off about 7 years earlier than we thought when we got the 30 year loan, we will continue to make the mortgage payments even after the mortgage is paid off, but to our retirement savings account.

[Lori63]

Any other words of wisdom? I still can't decide what to do.

[DivaJen]

Do you have any sort of retirement account set up yet? If not, I'd do that with the extra money. If you do, and are already contributing something to it, then I'd consider Terry's advice and compare the interest on your mortgage versus the rate of return on your retirment.

[gakline]

I'm in the same situation with mortgage, retirement, and school loan. It's so tempting to pay off the studen loan because I can see an end date that's so much quicker than the other two. But what I've decided to do was do at least a Roth IRA every year. Right now that's $4,000 (after tax money contributions even made evenly every month). After I've maxed that out, I'll put most into my mortgage and then round up on SL. I figure that way I'm covering all three.

Just for the record with regards to interest rates.
The Roth: ~11% (it's nice to have a rising stock market again)
Mortgage: 5.75%
Student Loan: 3.38%

[Tree0164]

Lori
Having your mortgage paid off before you retire is part of good retirement planning. However... you do not want to be house rich and cash poor when retiring.


Are you or your husband contributing to your 401k? Do atleast the company match or as much as you can.

Also other items to consider...
If you do have extra money each month-first of all make sure your credit card debt, any car loans would be paid off before paying to the house. Much better in the long term to pay off the credit card first.

Make sure that you have an emergency fund of atleast 6 months. More if you are a one income family.

Short-term saving goals-a car replacement fund? Home improvement fund.

Good luck!

[34saving]

There are, of course, about a million variables here that should be accounted for and there is definitely wisdom in the prior posts. However, I will tell you that in 1997 our "financial advisor" implied that we were looney toons for putting extra money in our mortgage instead of hot tech stocks that were sure to pay off huge. Now my paid-off first house is renting for enough to pay the mortgage on my second house and I'm getting the appreciation off of both. As for the hot tech stocks . . . we all know how that worked out in the longer term. I will also tell you there is a huge emotional payoff to owning your home free and clear! Good luck with your decision making

[kashi]

I think I'd split the extra money between retirement and mortgage. either split evenly, or all to mortgage one month, all to retirement the next. that way, both bases are covered...you might not have the house fully paid off by retirement, but it will be close, and you'll have money waiting for you.

edited to add: this is, of course, assuming you have a hefty emergency fund already set up.

[Momof3grls]

I am focusing on paying our mortgage off. I am 28 & dh 30 I figure if we pay it off now we will have a little time to save for retirement without worrying about paying the mortgage. And we do have a high interest rate on the mortgage too so I would say if you have a low rate on the mortgage you may want to save for retirement but if You are like me & have a high interest rate!! I would concentrate on the mortgage first.

[Tree0164]

Momof3girls
Have you thought about refinancing to get a lower rate?

[Lori63]

Originally Posted by Tree0164

Momof3girls
Have you thought about refinancing to get a lower rate?

I agree.

[Momof3grls]

The mortgage is in my name only& I cannot get refinanced without putting my another name on it. Which I dont want to do.

[Lori63]

Thanks for all the advice. I LOVE math problems (my 16 year old thinks I'm sick), and I keep reworking this one in my head.