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I have a mortgage on my house. Am I better off paying the house off before retiring or putting more in my 401K sooner?

I would like to retire in the next 5 years, so am looking for the right combination of savings vs paying off debt sooner.

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  Answers  |  2

September 18, 2014

Answer these questions first: is this house my long-term retirement home? Would this house make a good rental property? If the answers are "no", then don't pay off the mortgage. Are you making the maximum contribution to your 401k AND to a Roth IRA? If not, why not? If you pay off the mortgage you may be house rich but cash poor because you didn't save enough. A mortgage payment is only one of the expenses of home ownership. Since I don't know everything about your finances I would conclude that you are better off maximizing your retirement savings opportunities. Keep in mind that the mortgage will be paid off by virtue of amortization, but with a specific goal in mind (time-wise) you could calculate how much additional principal you'd have to pay to retire the loan by a specific date. Good luck!

$commenter.renderDisplayableName() | 10.27.20 @ 01:29


October 15, 2014

Borrow money from your 401K and payoff your mortgage. You will still pay interest but it goes into your 401K. That means you save the interest you would be paying your mortgage company and paying yourself. That return in your 401K is better than any safe investment you can make in your 401K. This assumes you have maxed out any contribution level your company matches.

The big drawback is if you lose your job and must pay back your 401K loan. But that can be done by taking another mortgage. But it will be lower than it would have been by not doing this.

$commenter.renderDisplayableName() | 10.27.20 @ 01:29