This is a question received from a reader concerning whether or not she and her husband should max out their retirement accounts or pay off their home mortgage once credit cards are paid off and giving to the Lord’s work has been increased.
My husband and I are both state employees and are vested in a state-sponsored retirement program (which is well-run at this time in our state). We have about 18 years until we would like to retire. Our monthly retirement works out to be about 50% of our top 5 years. Our home mortgage has another 24 years left on it. I contribute to a 403b (not as much as I should), and he has a Roth IRA (which he has not contributed to regularly).
My husband and I have been blessed to be able to continually pay all of our bills, and the Lord has provided for us in times of need repeatedly. I am not sure why He does this because we have been terrible stewards of His money in that we splurge on restaurants and fun activities (now we have limited these activities greatly and budget for them). We now are making a conscious effort to better handle His provisions. My husband and I agree in debt-snowballing our credit card debt and we should be credit-card free in 3 years. Once we have attained that goal, we can increase our contributions even more to the church.
However, after that point, my husband and I are in a quandry.
Should we contribute to our retirement accounts to the maximum allowed and then contribute the left-over from what has been put to our credit cards to the mortgage?
Should we contribute much more to our mortgage and contribute a moderate amount to our retirement accounts?
He would like to have the maximum amount that we can in cash at retirement (who wouldn’t). I would like to have no house payment by the time we retire. I don’t want to be house rich and cash poor, but I also don’t want to have a mortgage. Any suggestions?
Thank you so much for reading this. I have searched the internet everywhere, but no one mentions being state employees within a state retirement system in their questions for retirement planning vs. mortgage pay off.
Here are my thoughts:
I’ve struggled in the past with trying to try to find the right priority for my financial goals. It’s often easy to try to juggle multiple goals at once, but it leads to little progress. Such questions are often difficult to answer as there are a world of emotions involved and everyone has a different situation.
But for such situations, I often turn to the Crown Money Map to help guide my way. Why? First, it’s based on Biblical principles and God’s truth. Second, it’s proven based on year’s of experience from Howard Dayton and Chuck Bentley from Crown Financial Ministries. So, I love the Money Map as my advisor in such situations.
If we look at the Money Map, we can see that the recommendation is to begin retirement saving before paying off the home mortgage (step 4). By the way, Dave Ramsey suggests the same if you look at his Baby Steps. Why would you want to do this? Well, you can spend a lot of time paying off the mortgage and end up with nothing left for retirement. Yes, being a Godly steward of your resources involves following God’s principles of getting and staying out of debt, but it also involves preparing for the future.
Obviously, this is a motivated reader who is trying to do the right thing. I have not doubt such energy and effort to be a good financial steward will one day lead them to paying off their mortgage too. I would max out those retirement contributions if I were debt free and then work on paying off the mortgage as I have the extra money.
Still…one final thought…make sure you have adequate emergency savings before fulling allocating all your extra money to retirement investing. Not having money set aside for emergencies will set you up for more credit card debt in the future.
Readers, what would you do in this situation once the credit card debt has been paid off and giving increased?