Should You Save for Retirement Or Pay Off Your Mortgage?
If you secure some extra cash, is it better to pay off your mortgage or put it toward your retirement fund? The answer to this question isn’t clear-cut. The best option really depends on your financial situation and money goals. Here’s an overview.
The benefits of saving for retirement
It’s no secret that the sooner you start saving for retirement, the more time your money has to grow. The best part about saving early is that you don’t have to invest a lot of money upfront to secure a comfortable nest egg for retirement. What’s more, by regularly contributing to a Registered Retirement Savings Plan (RRSP), you’ll reduce your taxable earnings and may be entitled to a tax refund. You can then use that refund to pay down any outstanding debt or pursue other financial goals.
The benefits of paying off your mortgage early
Once you pay off your mortgage, you’ll own your home and no longer have the burden of needing to make regular payments for it. In addition, you could potentially save tens of thousands of dollars in interest, especially if you had a mortgage loan with a high-interest rate. You could then use the money you would have paid on your mortgage for your retirement or anything else you’d like.
The best of both worlds
You don’t have to only pay off your mortgage or only invest in your retirement. In fact, most people benefit by doing a little of each. It’s perfectly feasible to fund your retirement savings while making small contributions toward paying down your mortgage. You can do this by setting aside a percentage of your income to reach your retirement goals and then using any extra income you have to pay off your mortgage.
Keep in mind, however, that since individual circumstances vary widely, there’s no one right answer as to whether it’s better to prioritize paying down a mortgage or saving for retirement. Nevertheless, in most cases you shouldn’t sacrifice your retirement savings goals by focusing too much on your mortgage.
Personal debt solutions
If you’re struggling to make your mortgage payments or are unable to save because debt is holding you back, the professionals at D. & A. MacLeod Company Ltd. can help. Our licensed insolvency trustees provide debt consolidation, personal bankruptcy and other services to assist you in achieving financial security. Contact us today to learn more or schedule a free consultation.