Jul

31

Retirement Savings Low to Nil at 40—Here Is What You Can Do

Posted In: Investing Tips

Are you reaching your forties, and you do not have a good savings that will enable you to stop working any time soon? Well, even if you have a poor prospect for retirement, there is good news. There are opportunities to quickly regain the years it looks like you have lost. And there are several options out there, but there is one that far outweighs them all.

It is important to get out of debt, in fact is it imperative. But, believe it or not, a mortgage debt can be your big opportunity! The first step, however, is to target your higher interest debts. After that, your mortgage can prove to be your best chance in life.

Think of this, if you are able to pay off your mortgage ten years early, that is ten years of saving mortgage payments that you can turn into retirement savings. It is one thing to have your house paid off when you retire, but it is another thing to take some of your mortgage payments and then turn and put them into an interest bearing savings account, such as your 401(k) plan or a IRA.

A lesser option is to make extra payments throughout your loan. And there are several ways you can do this. For instance, if you were to take your bonus every year and pay it towards your mortgage’s principle, this will bring your interest down dramatically.

If you do not get a bonus from your employer, you can pay an extra $50,00 or even a $100.00 a month and you will be able to pay off enough principle throughout the life of your loan that will decrease the amount of money you would have paid in interest.

Another possibility—which is still not the best one—is to take part in a mortgage acceleration program, such as the bi-weekly or bi-monthly programs. But you need to know the difference between these two plans.

Essentially, what the bi-weekly program does is it enables you to stealthily make two weeks extra worth of payments towards your mortgage each year. For instance, if you change from paying your mortgage from monthly to weekly, you can pay 26 (the number of weeks in a year) ÷ 2 (the number of checks per month) and make the equivalent of 13 monthly mortgage payments. And the value of this plan is that it enables you to spread out your extra payments throughout the year, and it becomes almost indiscernible to you.

The bi-monthly program, on the other hand, accelerates your mortgage payments without causing you to make extra payments each year. For example, if you make half your mortgage payment at the beginning of the month, before it is due, and the second half in the middle of the month, you can make your mortgage payments essentially a little earlier, and thus drop your interest some. In reality, however, it only drops about a month total from your 30 year mortgage.

The best possibility, however, it to use the equity of your home to leverage against your principle, and thus pay your mortgage down in about a third the time. That would enable you to put up to 20 years or more of your mortgage payments into your retirement program, such as your 401(k). If you are in your forties, that means you can have 10 years of saving your mortgage payments by the time you are in your mid 60s.

By the way, if you want to know a guaranteed way to succeed financially, get my free ebook, click here: Make $10,000s With Your Mortgage. Michael G. Murphy is the owner of Personancial™ Services, a company committed to helping individuals and families achieve financial freedom.

Article Source: Retirement Savings Low to Nil at 40—Here Is What You Can Do