question - mtg vs retirement savings

[Wendy99]

Is it better to pay off your mortgage early or put that money towards retirement investing (I would invest safely - no risks, so the interest may not be as high as some) .. just curious what the thoughts were .. I'm sure this question has been asked before, but i'm fairly new here & haven't seen it myself (that I can remember)

[mombottoo]

I suppose it would depend on how far off retirement is...

We started saving for retirement through a 401(k) account when it first became available through where my hubby worked. We still had a mortage & we also paid extra on that...so we did both at the same time. I would probably still do it that way if we had to make that same choice today.

[suki]

Both at the same time was my approach. But, I'd also say it depends upon the interest on your loan vs. the interest on your investments. Which is going to have your money work harder for you? In most "safe-investment" cases, it's paying off the mortgage.

[Wendy99]

I'm 33yrs if that helps dh is 35.

[Jenna]

I don't have a mortgage, c/c debt, nor do I have a spouse, but if I did:

I would
1. fund the 401k to the company match.
2. save 6 months of expenses in an e-fund (or only $1k if paying down c/c debt) while maxing both my ROTH and my husband's each year (and paying down c/c debt if needed)
3. split extra between mortgage, and other savings goals, depending upon needs of the moment (college fund, vacay fund, new car fund.)



** That reminds me, I need to re-enroll in my 401k - I just recently stopped to save up for a big expense.

[Jenna]

EDIT: the past few years, I have made maxing my ROTH a priority every year. I barely invested while in my twenties.

I am almost 35.

[Telephus44]

I'd max out retirement savings before paying ahead on a mortgage, unless you have a high interest rate on the mortgage. But that's just me. If you're going really conservative on your retirement accounts, you may be better off paying ahead on the mortgage.

[Drgnfly423]

DH and I put 15% of our income towards retirement savings. The rest goes towards paying off our mortgage. When that is paid off we will put more towards our retirement, or just party!

[Greebo]

Balance them out. The more you pay early on into a mortgage, the more you save over the term of the mortgage. No matter how you work the math, paying more early pays off BIG time. A consistent 100/mo on a 15 yr, $165,000 mortgage at 7% will save you $12,000 in total interest. The difference between interest saved and extra payments on a 30 year mortgage is 32,000 in your favor. Paying extra on a mortgage never loses you money.

And the sooner you have the house paid off, the sooner that payment can go towards earning interest instead of losing it.

[lisettelovebug]

Max your 401K or Roth first. What you will be putting in there now will be building more money for you for 30+ years. And with being in your earyly 30s you need to be investing a little less conservatively. You need to invest where it will give you at least moderate growth. As you get closer to retiring that's when you will want to switch everything to conservative.

Also, you also get a tax write-off for interest on a house as long as you itemize. So take this into consideration too.

If you still have money after fully funding your retirement each year, then put that towards the house. Or use extra money that you find towards your house. They say that if you pay an extra one time payment of $3000 a year that it drastically reduces how much interest you pay. Any rebates or refunds you find you can also put towards it.

[Wendy99]

I wouldn't be able to afford $3000 on my mortgage and savings for retirement would be one or the other ... or a little on both? I wish I had started my retirement years ago .. we really were clueless ugh ... I should get into the bank and see what they say. I'm also a skeptical person and because the people at the banks have to sell sell sell I'm always skeptical of what they are telling me ... I want to get more info from my employer as well .. I think they have a share ownership thing .. need to find out more information on that.

[missmanny]

If it were me I would do a mortgage / retirement hybrid.

I would set a portion of my salary to go towards retirnment say 15 - 20% and all of my other surplus money would go towards the house.

Money in retirement grows better the longer it has been in there but if you don't pay your house off as well then all the money you save you retirment will have to go to pay off your house. So I would do both.

i think that you just draw a line in the sand and say from now on this much money is being put aside for retirement and then from then on until you retire it always is and you could treat it like petrol or any other bill payment

JMHO

[Dave'sGirl]

Actually, just one payment a year, as in 13 payments not 12 payments, will save you considerably. I'm not sure where the exact $3000 as stated came from. Just aim for one regular payment extra and you've saved. Checkout Bankrate.com. There are some great mtg calculators.

[suki]

I rounded my mortgage payments up. Say it was $560/month... I paid $600 and had $40 put on the principle. It adds up fast! This also allowed me to put 5% to my retirement savings in a 401K match situation. It wasn't a huge sacrifice but added up to several thousands of dollars.

[Grayce]

I sort of did a combination of both. I think it is important to save for retirement early because it will grow more because of compound interest. What I did was set my mortgage up to be paid with accelerated biweekly payments. Doing this has reduced the number of years it will take us to pay off our mortgage. Every month we pay into RRSPs and this is a tax deduction so it lowers the amount of taxes we pay.