Is it better to put money towards retirement or put money towards mortgage to pay it off early?

Question

My husband and I debate this all the time. Who so right?!

Answer

Dave Ramsey says to pay off all of your debt and then start saving for retirement.

Answer

Interest on your mortgage: does not compound.
Interest on your retirement: does compound.

It's that simple.

Answer

What's the interest on your mortgage? If it's low, I would put the extra money towards retirement and invest it so it earns more than the interest on your mortgage..

Answer

To answer this question you really have to understand the power of compound interest over a long period of time. My husband and I plan on retiring in 40 years. Let's say we currently had $53,000.00 in our 401k and decided we're completely done contributing it. If we don't add a dime and don't touch it for 40 years and the interest rate stayed consistent, we would have 1.15 million dollars when we retire. If we bought a house today for $53,000 cash would it be worth even close to that in 40 years? No way. Even if you only had $1000 in the same scenario as above, it would be worth almost $23,000 in 40 years....and it only cost you $1000 out of pocket.

At the very least people should be putting what their employers match into the 401k. Otherwise you are just throwing away free money! And for those of you saying you don't plan on retiring anyways because you would be bored without working...I plan on investing my butt off early, letting my money work for me  and then I get to decide what I want to do when I'm old. Whether that is being a greeter at Wal-Mart or sitting on the beach drinking margaritas. Having choices isn't boring. It's called having freedom and power over your own life.

Answer

I think the general "rule" is that it's smarter to pay off debt first and then save. That said, my retirement savings are tied in with my life insurance so it gets paid regardless.  And even though we're paying off debt I still put a small amount into savings each month where it can grow so if we have an emergency we have at least some kind of pillow, albeit a flat one.

Answer

I can't stand debt and neither can my husband, so we'd pay of the mortgage first. Although to be honest, I don't see my husband retiring. He'd drive both of us crazy just sitting in the house not doing anything.

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Suze Orman would tell you to take care of debt first. And also, make sure you have your financial situation together before you start trying to put away money for children. How can you take care of your kids if can't take care of yourself?

Answer

I say mortgage , you might not even make it to retirement lol. Life is short, enjoy life while you can now to do things you love the most.

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We do both (pension funds and over pay our mortgage).  In the end I think they're both a way of saving because if you need to later in life you can sell or mortgage the house to get cash out of it. Paying down your mortgage early can mean significant savings in the long run because you pay a lot less interest so it's a very wise investment (unless you bought at the wrong time/place and your home is losing value).

Answer

Mortgage. If you don't pay it off, you will pay more for it because of interest. That same amount of money if you put it toward retirement would decrease in value so much over the period of time that you'd proportionally spend more trying to pay the house with the added interest than you'd save for yourself for later.

$50k extra in interest is like half a house now, but it'll buy  quarter of one later. What good can that do you.

Is it better to put money towards retirement or put money towards mortgage to pay it off early?

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