Monday, October 1st, 2012
Reaching retirement age with a debt free home and a pile of money invested is the aim of most people who plan to enjoy a comfortable retirement. Each of these goals requires a significant amount of saving. The big question is: which should take priority? Having a long investment time frame can be advantageous when investing in volatile growth assets such as shares and property. Saving for your retirement from a young age is therefore a good idea. However, if you have a mortgage, your investment portfolio would need to produce a tax paid return higher than the rate of interest on your mortgage to make investing a better deal than debt reduction. From a strictly financial point of view then, it can make sense to pay off your mortgage as quickly as possible and then save for retirement. There are there are three main exceptions to this.
Ultimately, getting rid of all debt is good, even if the interest is tax deductible, and the sooner the better. It is just a question of priority.
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