Actually, base on the finance coach Juliana Valverde, there is little doubt about what route is best for a young millennial looking to start investing for retirement. Know that She points out that the advantage of compound interest can’t be discounted and could very well outweigh any risks of carrying debt for the life of a mortgage.
Also She added “If you delay retirement investing until after you pay the mortgage, you’re losing valuable time that you won’t be able to make up, even with increased contributions to your retirement accounts”.
Of course most definitely, despite the fact that millennials have time, investing doesn’t bring a guaranteed rate of return. As Tank points out, the return you make on your investments will depend on market conditions, your risk tolerance, and your financial situation.
So however, a 30-year-old couple living in the country with a couple of kids will have different needs and different results than a 30-year-old professional in the city who plans to remain single.
Are all Your Other Ducks in a Row
Now before you do anything else, make sure you have all of your ducks in row, advises Julie Ford, a certified financial planner and CPA with Ford Financial Solutions in New York City. If you have extra cash, Ford advises you to first make sure that all of your financial needs are met and priorities accounted for.
Ford’s recommended order of priority includes:
- Now having an emergency fund of at least three months’ spending
- Eliminating credit card debt
- Tackling any other high-interest debt, like school loans
- Maxing out employer matches on retirement savings
- Contributing to your Roth IRA, if eligible, or maxing out other tax-deferred savings in 401(k), IRA, 529 college savings, etc.
From there, Ford notes that deciding on what to do with any excess cash flow depends on individual goals and tolerance for debt. “I often lean towards extra mortgage payments before saving into a joint brokerage account,” she says. “Even with a low-interest mortgage, paying down debt faster creates more opportunities and flexibility for clients. It’s a guaranteed return compared to unpredictable market returns.”
Possible to Split the Difference
Let’s take for instance when you’re still unsure, consider a compromise. Can you invest some of your cash flow and make a plan for extra payments on your loan? Can you use your savings to pad an emergency fund instead?
Though it all depends on the type of mortgage you get, you may not have to put as much money down as you thought, and it may make sense to invest that surplus cash instead of automatically putting it toward your mortgage. Talk with a financial advisor who can help you figure out what kind of return you can expect on an investment, compared to what you would save on interest.
And now therefore options of course are always good, and in this case, having more options at your fingertips may just end up being more money in your pocket in the long run, which sounds good
