Mortgage Loan: Paying Off Your Mortgage vs. Saving for Retirement

If you’re close to retirement, there are a lot of questions to ask and things to be sorted out. When thinking about the best way to financially prepare for retirement, there are some additional things to consider, such as paying off your mortgage early. If you’re considering paying down a mortgage as a way to save for retirement, there are a few ways to go about it: 

  1. Pay in advance. Paying off your mortgage early means you’ll have one less bill to pay each month and more money to put in your 401K. Also, with mortgage prepayment options, you may receive a lower interest rate for the remainder of your mortgage term if you refinance. A lower interest rate will save you money in the long run—money you can put towards your retirement investment.
  2. Emphasize retirement. If you decide to emphasize saving for your retirement rather than paying off your mortgage, it’s important to remember that mortgage loans will eventually go away in time as you pay it off. Plus, once your mortgage is paid off, you’ll have more discretionary spending leftover to devote to your retirement savings plan.
  3. Do double duty. If you can do both at the same time, even better. While it may take a little bit longer to get rid of your mortgage payment, you’ll have the benefit of a bigger 401K in the end. 

The pros and cons of paying off your mortgage

In a perfect world, paying off your mortgage early and actively saving for retirement would be effortless. For those of us who need help prioritizing the various options available to you, there are some issues to weigh.


  • Pro’s: If your employer matches, or even contributes, to your 401K, you’re adding “free money” to your retirement investment. The more you save, the more you get.
  • Con’s: While it’s good to have your retirement fund grow quickly, it’s risky—if the stock market does poorly, so does your 401K. Of course, the opposite it also true—if the stock market does exceedingly well, you can expect a higher return on your 401K.


  • Pro’s: Lowering your monthly bills will free up a lot of your financial restraint and make it easier to pay any additional expenses that might come up. It will also allow you to make a larger investment in other important things, like retirement.
  • Con’s: Keep in mind mortgage interest tax deduction, a government tax incentive for those paying interest on a home loan. Paying off your mortgage early may mean fewer tax deductions down the road. Be sure to consult your tax advisor regarding deductibility of interest.

Take the next step towards your financial future

The decision you ultimately make is dependent on many life factors that are unique to your situation, so it’s a good idea to evaluate the pros and cons and how they relate to your life. If you’re closer to retiring, it might be best to start aggressively saving for retirement. However, if retirement is still far off in the future, paying off your mortgage might make more financial sense. Regardless of your final decision, there are many mortgage and investment solutions available to fit your needs, whatever they may be. Learn more about the costs and fees to make sure you’re getting the most for your money. Or, if you’re thinking about investing, discover what 401Ks, IRAs and other investment packages can do for you.


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