The logic behind this question seems straightforward. If you could pay off your house, your biggest bill would be out of the way and then you could commit much more money to investing for your retirement years. Better yet, when you hit retirement age, your home would be paid off and your living expenses could, in turn, be less. You could have more room in your budget for travel and hobbies.
However, when it comes to planning for retirement, it’s important to remember that time is uniquely on your side. With a consistent, diligent approach from a trusted investment advisor, you have a strong chance to see your success grow over time.
Meanwhile, the money you put toward your mortgage payments is static. While it might save you from paying some interest, the interest rate you pay on your mortgage is likely lower than the average return you’ll see from a thoughtfully invested portfolio.
Take a look at this example:
Jill pays her mortgage payment each month, but she also invests $500 for her retirement each month. By the time she reaches retirement age, she could have up to $2 million saved.
Contrast this with Jack, who decides it will serve him well to make double house payments and then focus on retirement planning later. He manages to do so in 15 years, but he will need to save $2,600 each month to catch up with Jill.
In order to reach $2 million in retirement savings, Jack will save a total of $468,000, while Jill only had to set aside $180,000 into her retirement accounts.
This is just one example, and each person’s story is different – yet there is a common theme to remember: Planning for retirement isn’t just about the numbers; it’s also about visualizing the kind of life you want and making plans to support that vision. Well-considered and focused plans can be the most powerful element in your personal success story.
If you have questions about retirement planning, such as determining how much you may need for retirement and how to reach your goals, contact us at Lawson Kroeker. Our professional team will remain true to focused, long-term investing solutions that help you make your money last.