MTM Mailbag: ⚡️Should I Invest My Money For Retirement or Pay Off My Mortgage First?

Every week during the More Than Money show on AM 750 WSB we open up the week's mailbag to answer your questions in the "Lightning Round." Today we’re joined by the head of our advisory team, Clif Hitt.

Clients come in and say, “I want to meet with Chris." I laugh and say, “I’m willing to meet with you, but you’re probably better off meeting with someone from my team because we only higher people that are better than me.” Clif is a stellar example of that and I’m excited for him to take the mic.

Today we’re discussing:

  1. how to best utilize the equity you’ve saved

  2. how to prioritize paying off loans vs. investing that money in savings and

  3. whether or not a severance package is right for you.

Let’s do this!

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Question One

My house closes on October 30. I’ll have about $200,00 in equity from the home. I’m about three years from retirement with a little over $1,000,000 in an IRA and 401K. I plan to use the equity to put down on my retirement home in two years. What would you recommend doing with this equity?

— Carl

Clif: The challenge we’re looking at with Carl is that there’s a finite amount of time.

If he does in fact need that full $200,000 to be used for the home, we need to make sure we have 100% of that money available in two years. Although it may not sound exciting, his best option is something on the safer side where he will know in two years he will have complete liquidity (like a C.D.).

There’s three facets to every investment:

  1. The growth potential.

  2. The liquidity.

  3. The safety of it.

Carl needs safety and he needs liquidity. He’s going to have to give up a little bit on the growth potential to make sure he can protect those two factors.

Question Two

Im 45 and I’ll be 47 when I get my house paid in full. Do I need to wait until then to start investing or do I need to start now? The way I see it, get everything paid for and then start saving for retirement. Is that right or wrong?

— Michael

Clif: Not many clients have paid off their house at 47. With it being two years out, I can see how enticing it is to get that accomplishment done. From what Chris and I have seen, the earlier someone decides to start saving for retirement, the more successful their picture looks. It’s the power of compound interest over time.

What we are battling here is the emotional victory of paying off our debt vs. the long term success of saving earlier.

It may be very difficult to take the focus off paying off the house, I think if he tried putting more towards a long-term savings (even if it delayed when he paid his house off), in the long run he might be in a much healthier situation.


Chris: A lot of people think the number one priority is to pay off their debt. The problem is that everyone’s situation is different.

Let’s say Michael’s only paying 4 or 5% for his mortgage and he’s delayed putting money into the market. The market’s up over 300% in the last ten years and if you’ve not participated in any of that 300% growth so that you could pay off your 4.5% debt, there’s a problem here. That’s going to come back to bite you.

Clif: One thing you’ll hear about in our industry is healthy debt.

Debt isn’t universal. There are certain debts out there that we need to put a bullseye on and pay them off as quickly as possible. For example, high interest credit card debt might supersede putting money into a retirement savings, but when you talk about healthy debt (your home loan) there are some advantages to riding it out.

We’re in historically the lowest interest rate market we’ve seen for home loans. You’re trading off a very low interest rate mortgage for the potential growth you could get in the market. There’s nothing wrong with paying off mortgage. But in terms of putting you in a good place for retirement, it might be worth it to wait a little.

This may not be the time to aggressively pay off a home loan, it might be the time to invest in long-term retirement if possible.


Question Three

My company is offering a voluntary severance package and I’m tempted to take it, but I wasn’t planning on retiring for 2-3 years. What’s the most important factor I should be looking for to make sure we’ll be ok financially?

— Robert

Clif: When we’re sitting down with any of our clients, our goal is to put a projected retirement goal on the board and look at how solid our plan is in accomplishing it. If we could expedite that time frame by two or three years, it throws a whole lot of variables in the equation.

The first question that comes to mind with Robert is would you truly be stepping out of the workforce completely, or would you take it as an opportunity where you have a transition job? That might be the gap that you need that allows you to retire in the same time frame, but not press the same burden on your retirement plan if you completely stopped working.

Chris: This is where income planning is crucial. The assumption with my clients is “I have to work until this specific year.” They have no idea why they choose that retirement age except for a hunch. When you go through an income planning process, suddenly you’re putting actual data behind that. Once we input all the data, you might realize you’re way better off than you think you are!

On the flipside, if you dreams require a lot of spending money, maybe you do need to continue working a few years. Regardless, having the data behind it for the income plan is CRUCIAL.


As always, I don’t know the full situation with these questions. If you want to dive deeper into any of these questions please don’t hesitate to set up a free consultation through the link below. I would love to help you figure out the most efficient way to save and utilize your money.


Our team answers questions every week on the air and responds to every email sent in.