Saving Money for Retirement Pays More Than Paying Off Your Mortgage

Saving Money for Retirement Pays More Than Paying Off Your Mortgage

The important reason to save is to make sure you have enough set aside for those rainy days, and unexpected financial events that happen in your life. It also helps to have money put away for retirement, a down payment for a house, for that dream getaway vacation, a new car, and even continuing your education.

It is really beneficial to set realistic goals and expectations, that way you are prepared as well not regretting it.

Saving Money for Retirement Pays More Than Paying Off Your Mortgage - Local Records Office

Emergency funds

An emergency fund is when you set money aside specifically to cover unexpected expenses that come up. For example, an emergency fund will cover car repairs, medical bills, or other emergency situations. Also, it is helpful to have to pay bills when you are unexpectedly unemployed. Initially,

“One to two thousand dollars is an ideal start-up as you can eventually build your emergency funds to cover three to six months of expenses” says, Local Records Office.

It is a sacrifice that will truly give you peace of mind and can help you through stressful situations. So focus on taking care of the problem now and not worrying about it during a time of crisis. It is important to establish a way to protect your savings for when you are saving a home, and you need to dip into your savings to cover costs.

Saving for retirement

The sooner you start means the less you will need to save for the future. Putting money aside each month will not only contribute to earning interest but also contributing to your employer’s match, to your 401(k) as well as your IRA. It is very important to start with the basics so that it is not over your head.

Dos and Don’ts for retirement planning


  1. Regular review the performance and investment strategies every 2-4 years
  2. Pay close attention to new funds added
  3. Set your investment allocations to correspond with the degree of risk that you are comfortable with
  4. Match current to future contribution percentages
  5. Educate yourself on how to invest for retirement


  1. Pour all of your money into funds that returned the most the previous year
  2. Act like a pro day-trader with your retirement savings
  3. Over-invest in company stock
  4. Avoid risk completely, after being in several years or decades from retirement
  5. Adopt a different strategy or hesitate to change your investments

Why saving for retirement gets priority over your mortgage

Relying on your home as your primary asset is denying yourself of other opportunities. And spanning your money out over numerous stocks, bonds and other funds maximizes the time value of money- gives you an application of return over the many years.

Take into account of let’s say an average rate of return of 8% on a 401(k) plan, as opposed to paying your mortgage off early with a 4% return of your money. Do the math; you are losing 4% with that strategy.

And when you pay off your mortgage early, you also lose the tax-deductibility of your mortgage interest. There is also no tax-deferral available when paying off your mortgage early. You gradually whittle down the mortgage interest deduction until it no longer will apply.

Many that plan to keep their homes after retirement eventually end up downsizing their housing arrangement and paying off that mortgage is not as significant today.

Yes, paying your mortgage does mean you have more equity, but since that new home will most likely be cheaper, paying off the mortgage completely proves to almost be unnecessary.

Most mortgages carry specific terms, 15 to 30 years, your mortgage will be eventually paid off even when you don’t make an effort to pay it off early, says, Local Records Office. Think about your retirement portfolio, and where you want to be in 15 years. Saving for retirement should really be the priority.

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