Would You Prioritize to Pay off Mortgage Early or Save More for Retirement

Mortgage and retirement savings may appear to be of financial as well as emotional importance at the same time. However, a practical focus will allow you to see where your priorities should lie. Average debt of home owners was $300,000 and average employee 401(k) balance was only $91,800 in 2015. Read on for learning how saving for retirement beats paying down your mortgage. A home indicates rite of passage towards well-rounded, secure adult complying with society’s unspoken rule. While taking on a mortgage payment is a given, owning a home outright does not guarantee a secure retirement life. Don't think too much, just start to apply for senior citizen reverse mortgage loans.

Some Practical Pros and Cons on Saving for Retirement v/s Paying off Mortgage Early

Planning for retirement is based upon the assumption that you are looking forward to a rosy future. No one knows what the future brings. Focus on practical pros and cons for prioritizing saving for retirement or paying off the mortgage. Paying off mortgage to own your home outright and saving on interest was great until the glow of retirement savings took over. Investing for a retirement nest egg yields better financial results over aggressive mortgage payments.

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Five Reasons for Debating over Why Save for Retirement or Pay Down Your Mortgage

The perpetual debate over saving for retirement or paying off mortgage early may never end. However, you are getting on in years and now is the time to make the right decision! Limited resources over trading off between the two makes financial sense dominate over emotional attachment. Here are five reasons to convince you why considering should i pay off my mortgage early or save for retirement has become so important.

is it better to pay off mortgage early or save for retirement

    1) Don’t Put All Your Eggs in One Basket

  • Investment Retirement Portfolio spreads out money, paying off mortgage early saves money only in one asset – your house. Save for retirement or pay off mortgage choice is yours.
  • Prioritize diversifying investment and savings. Other asset classes usually outperform a house asset over long term
  • Applying for new credit, however small, along with new mortgage waves a red flag to stop/delay mortgage application.
  • Home equity is not liquid enough to borrow emergency funds between now and retirement. Another loan defeats paying off mortgage.

  • 2) Maximize Time Value of Money through Retirement Savings

  • Primary power of retirement savings is application of rate of return over many years – the time value of money.
  • Average rate of return on the S&P 500 is 10%, you may consider 8% due to diversification inherent in a balanced retirement portfolio.
  • Investing mortgage money of $10,000 in Roth 401(k) over 15 years gets you additional $133,148 earnings, which cannot be made up with even larger contributions later on

  • 3) Take Advantage of Heavier Tax Benefits with Retirement Savings

  • Consider two important tax factors,
    1) Retaining tax deductibility of your mortgage payments
    2) Tax deferral on retirement contributions
  • No tax benefits for paying off mortgage earlier. A no-brainer for should i save for retirement or pay off my mortgage.
  • Mortgage interest tax deductions diminish and disappear over loan term.

  • 4) You Benefit Only If You are Planning to Live in Current Home Post Retirement

  • People want to pay off mortgage early to be free of them for retirement.
  • Paying off mortgage is unnecessary, built up equity not as significant as retirement investment savings.
  • Spousal credit problems affect mortgage application
  • Most people move and downsize their housing arrangement post retirement making debate over save more for retirement or pay off mortgage irrelevant.

  • 5) Mortgage Loan Has Fixed Loan Term Ending Your Debt Eventually – Time Is The Best Healer!

  • Stick to your regular and on time monthly payments without recasting.
  • Make mortgage loan go away at end of loan term.
  • Is it better to pay off mortgage early or save for retirement answers itself.
  • Saving for retirement takes priority over making additional mortgage repayments

If you go over the arguments both ways repeatedly, you will eventually see why saving for retirement should get priority over paying off your mortgage early.

save for retirement or pay off mortgage

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