Invest In 401 k Or Pay Down Mortgage? com
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I’m 57 and hope to retire in about nine years. I need help getting my finances in order, and I was looking for advice on what to do with any spare cash. Would it be better to pay off my mortgage early, or should I try to boost my 401(k)? I have about $175,000 in my 401(k) plan. Meanwhile, my mortgage has about 23 years left at 6 percent interest with a loan balance of about $120,000. My lender has appraised the house at $125,000 and isn’t interested in working with me on refinancing the mortgage. Thanks for your help,
— Bob Bifunctional
Try to do both. Paying off your house prior to retirement is a sound financial goal, but I’d like to see you have a higher balance in your retirement account, too. I suspect that your company is matching part of your contributions to the 401(k) plan. Companies usually contribute 50 cents for every $1 you contribute, and they’ll match that contribution for up to 6 percent of your salary. Check with your plan administrator to confirm whether you’re receiving a company match like this. If so, then at a minimum, you’ll want to contribute up to the matching limit. That’s free money, and you don’t want to leave it on the table. You also need to find a way to refinance your mortgage. A $120,000 mortgage at 6 percent is too expensive, given that average 15-year mortgage rates were at 2.89 percent at the time this article was written, according to Bankrate.
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— Bob Bifunctional
Try to do both. Paying off your house prior to retirement is a sound financial goal, but I’d like to see you have a higher balance in your retirement account, too. I suspect that your company is matching part of your contributions to the 401(k) plan. Companies usually contribute 50 cents for every $1 you contribute, and they’ll match that contribution for up to 6 percent of your salary. Check with your plan administrator to confirm whether you’re receiving a company match like this. If so, then at a minimum, you’ll want to contribute up to the matching limit. That’s free money, and you don’t want to leave it on the table. You also need to find a way to refinance your mortgage. A $120,000 mortgage at 6 percent is too expensive, given that average 15-year mortgage rates were at 2.89 percent at the time this article was written, according to Bankrate.