Interest money

Should you pay off your mortgage or invest?

COLUMBIA, SC (WIS) – To prepare for retirement, should you pay off your mortgage or invest?

Capital City Financial’s Josh Bradley says both would be the simple answer. However, most people cannot do both.

For people who are retired, about to retire, and even those many years away from retirement, paying off your mortgage and investing are two very important things.

Generally, if you are a conservative investor and have a lower mortgage balance and a higher interest rate, it is better to pay off your mortgage.

If you’re more of an aggressive investor and have a higher mortgage balance and lower interest rate, investing is usually the best bet.

What are the financial benefits of paying off your mortgage first?

The biggest benefit is that you get a guaranteed rate of return and when it’s paid off, that’s more income you have because you don’t have a mortgage payment to do so. This means more cash to spend on fun things.

Bradley says to be careful. Many people use their qualified accounts like IRAs and 401ks to pay it off. Then they’re surprised by a massive tax bill that they haven’t budgeted for.

Is there a best of both worlds scenario?

As interest rates rise, conservative investments become more attractive. If you have several years left before paying off your mortgage, we recommend that you put this extra money in a short-term savings account and once you have accumulated enough money, you pay it off. This allows you to have a cash cushion in case something happens between now and when you pay off your mortgage.

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