subject: Maxing Out Retirement Contributions Vs Extra Mortgage Payments [print this page] Modifying your financial plans as market conditions change can help ensure the stability of your finances. If you're a 401K account holder and a homeowner who still has a way to go before you complete your mortgage payments and own your house outright, today's market may have gotten you thinking about which expense to prioritize. Should you max out contributions to your 401K to get more benefits or make additional payments for your home's mortgage if you have the extra cash?
Consider a retirement home, and compare to the home you actually want to live out your retirement. Investing extra money or cash you've designated for retirement account contributions and placing it into your home's mortgage might leave you solely with your current home, whether you want to spend your golden years there or not. If you look at your mortgage as you would regular rent payments and put your savings into an investment portfolio or retirement plan, there's a better chance of you retiring in the home of your dreams.
The problem with many an investor's 401K is how aggressively it's invested, usually in stock funds. The volatility of the market and the losses it could bring may make further plan contributions unfavorable. Many employees should remember, in this case, that fund allocation in a retirement portfolio can be shuffled around or changed.
The plan your company provides may offer options for investing, such as guaranteed accounts or premium bond funds, conventionally thought of as conservative investment vehicles. As an account holder with the ability to re-allocate the funds in your plan, you can move some or most of the balance into products like these - which can help you balance out your retirement account investments. You can also adjust your account contributions.
When prioritizing expenses, such as your home's mortgage and 401K contributions, you should continue regular mortgage payments (and, on occasion, pay extra towards it) to shorten your payment duration. Maintain your contributions to help your accumulate retirement funds, and evaluate the allocation of your assets instead of making additional payments.
by: Carina Smith
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