My husband and I are wondering what is the best saving strategy now that we are in a home. We have a 401(k) account, a mutual fund, a Roth IRA and a whole life policy.
Do you recommend paying off a mortgage early, or contributing more to a retirement account? (401k, IRA, etc)?
I’m afraid that my answer will be slightly biased, so I welcome the other advisor’s comments…
During the 2008 financial crisis I drastically reduced my retirement contributions and concentrated more on my mortgage. I lost my job in 2015, and it was such a relief to be mortgage-free. Prepaying your mortgage can provide a sense of security. Your decision, however, should be based on your income, debts, age, and estimated retirement date. In addition, you must compare the amount of interest earned in your retirement versus your mortgage interests. Once you do these evaluations, your decision should be clearer. I hope that this helps!
Your interest on your mortgage is currently a tax deduction so I would side on keeping the mortgage and contributing more to your retirement funds.
If your 401(k) offers good investment options this is the best way to invest regularly through your pay check at different market cycles. This is known as dollar cost averaging. The concept is you purchase more shares when prices are low and fewer shares when prices are high and it averages out to benefit your savings in the long run.
I like that you are thinking about keeping debt low and saving for the future. At some point you may benefit from setting up a comprehensive fiancial plan. I would seek out the assitance of a Certified Financial Planner when you are ready.
Best of luck.
Susan L. Easthope, CFP
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