Save for Retirement or Pay Down Your Mortgage? It Depends


Planning for the future isn’t a straight line but often a series of important decisions that can sometimes conflict with each other. It’s not easy.

Take preparing for retirement, for example: Is it better to have paid off long-term debt or have investments squirreled away to maintain your plans? Each option is a worthy goal to achieve, but how do consumers balance the competing demands on their pre-retirement income? 

You want a straight answer, right? Well, there isn’t one. But let’s consider each option anyway to weigh the pros and cons.

Option 1: Paying down the mortgage

At the beginning of your mortgage journey, it may be wise to take reasonable steps to reduce the principal you’ll be paying interest on for years. Still, towards the end of your mortgage, when you are not paying as much interest, there may be other wise investments for the same amount of money you’d put into settling the loan entirely. 

It’s essential to keep in mind that mortgage debt is tax-deductible, and the real estate market varies from area to area. 

Option 2: Saving for retirement

It’s always best to start saving and investing in your retirement as soon as you can. Not only is it essential to get started, but the money you invest now is inherently more valuable than the money you invest into retirement a decade from now, thanks to the beauty of compound interest. 

That’s why, when you are younger, it can usually make more sense to kick off your retirement savings than to pay down a mortgage sooner. 

While investments can fluctuate with the market and fall at times, they also rise. Historically the stock market has consistently increased in the long term. 

Option 3: Compromise!

Fortunately there is a third option that threads the needle between the first two. And it’s as simple as paying down your mortgage *while* saving for retirement.

Individual circumstances will always vary, and there is no one-size-fits-all approach for balancing your retirement goals while reducing your mortgage debt. After all, paying off a mortgage doesn’t have to happen all at once. Just boosting your monthly payment a bit will help you get out of debt while maintaining the rest of your ongoing investing and savings plans.

It’s important to take a broad view when considering your options while being open with your financial advisors about your concerns and plans for the future.


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