Pay Extra on Mortgage or Fully Fund Roth IRA

[LivingAlmostLarge]

retirement Roth because you can never get the years back on the Roth IRA. After the mortgage is done you can't say "oh I want to contribute $50k to roth IRA for previous years."

[greenskeeper]

My wife and I are trying to decide between paying extra on our mortgage going from $900 a month to $1,322 a month or fully funding a Roth IRA account. We both currently put 15% into our roth 401k's. We make about 72k-75k a year combined. Which do you guys think we should do? The difference on the mortgage is at $900 a month it will be paid off in just under 13 years and and at $1,322 just under 8 years.

Pay extra towards the mortgage. Guaranteed rate of return on your interest rate. Once the mortgage is gone you can ramp up retirement saving.

[LivingAlmostLarge]

I'd do maximum $5500 into Roth IRA then anything extra to mortgage. You might take 15 years to pay off mortgage, but you can't get the money from the 8 yeaers *5k back so $40k into a Roth IRA that will compound. Then the mortgage payment will max out the roth and no where to stash it. You will be house rich and cash poor. Which when you are working you probably want to be more cash rich in case of emergency. It's better to have bigger retirement and cash savings and target home repayment to end with retirement. So you've usually maximized investing and minimized risk (losing job but have years of savings to pay mortgage and monthly expenses while job hunting). Then when you plan to retire, pay off house right before and minimize monthly expenses when you no longer have income coming in.

[skives]

I have a couple questions on the Roth IRA.

1. How easy and fast is it to get contributions out if needed?

2. Does anyone here treat there Roth IRA like an emergency fund? Not their primary one but one for what I’ll call a super emergency.

We we already have a fully funded EF at an online savings account.

[disneysteve]

I can't answer #1 as I've never done it. I would imagine it is partly dependent on the company that holds the account and how responsive they are.

As for #2, no I do not (which is part of why I've never done #1). I feel that a retirement account is for retirement and nothing else short of a true catastrophe, like to save the life of a loved one sort of catastrophe). I would never consider that money as accessible other than in retirement.

[Jluke]

Take a look at this site
https://www.investopedia.com/article...gency-fund.asp

One other thought: the earlier you save for retirement the less you have to save per month. If you delay retirement savings you will need to save a lot more per month since your timeframe is shorter.

[greenskeeper]

I have a couple questions on the Roth IRA.

1. How easy and fast is it to get contributions out if needed?

2. Does anyone here treat there Roth IRA like an emergency fund? Not their primary one but one for what I’ll call a super emergency.

We we already have a fully funded EF at an online savings account.

A roth IRA is the ultimate "back-up" emergency fund. You can withdraw contributions (not earnings) at any time with no penalty. I would highly advise against doing that but in a really bad spot it is an option.

I personally contribute to a roth IRA and 401k (w/ company match) that aren't maxed out to be able to throw a lot of money at my mortgage, planning to pay off by age 45.

[Thrif-t]

I have a couple questions on the Roth IRA.

1. How easy and fast is it to get contributions out if needed?

2. Does anyone here treat there Roth IRA like an emergency fund? Not their primary one but one for what I’ll call a super emergency.

We we already have a fully funded EF at an online savings account.

Yep I do. Just keep a small amount in the bank, and have a Roth IRA at Capital One 360(Formerly ING) that is invested in a regular savings account, so no way to lose it. But honestly I've never taken any money out of the Roth. But that was my plan when I opened it; to keep my emergency money there.

I also have Retirement Roth's invested at Vanguard(would never think to use this $$), plus my Roth 401k and regular 401k.

I haven't added to the emergency Roth in a few years, will probably just let it sit and keep investing in my Vanguard Roth.