The majority of baby boomers aspire to own a home when they retire. Whether they intend to stay in their current house or relocate to another country, they find the idea of owning their home “free and clear” to be reassuring.
It Seems Like Paying Off Your Mortgage Early Is a Good Idea
This makes sense from an emotional standpoint. Our houses, after all, are more than just places where we eat and sleep. They are the focal point of our existence. They are the fortresses from which we set out to travel the globe. In our otherwise hectic lives, they serve as emotional anchors.
Unfortunately, boomers’ feelings about their homes frequently cause them to make poor financial decisions. They focus on paying off their mortgage rather than paying off their high-interest credit cards. Rather of maxing out their 401Ks, many baby boomers invest in house improvements.
So, before you rush to pay off your mortgage as soon as possible, make sure you’ve addressed the following concerns.
Invest in your 401(k) and IRA
According to a Charles Schwab survey, almost 60% of Americans over the age of 55 had less than $100,000 in savings. They go on to explain that only 36% of us have more than $10,000 in savings.
To be sure, these aren’t insignificant figures. However, given that many of us will live into our 80s and 90s, we still have a long way to go before we achieve full financial independence.
Many employers match 401(k) contributions made by their employees. Even if this does not apply to you, there are other reasons to contribute as much as possible to your 401K and IRA. If you aren’t using these tools to their greatest potential, I strongly advise you to seek financial advice.
Clear Your Credit Card Debt
I know from personal experience that putting money in the bank feels better than paying off debt. Unfortunately, this impulse is one of the leading causes of people remaining in debt for longer than necessary.
Accelerating your mortgage payments makes little sense if you have credit card debt. The “stack approach” and the “snowball method,” for example, are two prominent debt-reduction strategies. Regardless of which option you pick, the first step is to cease taking on new debt so you can concentrate on paying off your credit cards.
Not Just Your Hearth, but Your Health
This may seem like a piece of odd advice to add in an essay about credit card debt and 401(k)s, but it’s critical. Unexpected medical bills will wreak havoc on your retirement savings faster than anything else. Our choices in our 50s and 60s have a significant impact on our health later in life.
People I know are striving to pay off their house faster while also stating they can’t afford to pay $40 per month for a gym membership. For the same reason, many consumers choose low-cost convenience foods.
I’m not suggesting that getting in shape requires a large financial investment. There are numerous strategies to increase your fitness without spending any money.
At any age, thinking of your health as an “asset” is a smart habit to develop.
Build Your Skills Before Your New Kitchen
Many baby boomers believe they are unable to afford to further their education. As a result, they put themselves at the mercy of their employers, who can fire them or put them on the shelf at any time.
Once again, there are a plethora of free resources available to help you improve your technical and business abilities. However, if you want to speed up the process, services like Lynda.com are a great place to start. Lynda.com offers 1000s of training videos on topics ranging from video editing to presenting for as little as $21 per month.
By the time you reach retirement age, the more marketable talents you have, the better your chances of obtaining financial independence through your own consulting firm.
Not Just a Roof to Keep the Rain Off, but a Rainy Day Fund
Life is unpredictable, as the baby boomers have learned the hard way. So it’s incredible that so few of us have put money aside for a rainy day. Having a little extra cash on hand allows you to deal with life’s little surprises without incurring further credit card debt.
If you’ve previously paid off your credit cards, made a rainy day fund, maxed out your 401K, and invested in yourself, then focus on paying off your mortgage as soon as possible. If not, I hope this post provides you with some discussion points to bring up with your financial advisor.