Should I Keep Investing in My IRA or Pay Off My Home?

“Dear Steve,

Bought a home a year ago after finishing paying off students loans (am currently 27). I started contributing to a Roth about 6 months before I purchased the home and am now wondering if I should continue to max out the Roth or pay off the house faster?

M”

Dear M,

I think the math gives us a pretty clear answer. The more you invest in your IRA at 27, the much more you will have in retirement when you will need it most.

Let’s say you put $300 a month into your Roth for the next ten years and you invest in some stock market index fund. At the end of ten years you stop investing and focus on paying off the house. That ten years of investing will then sit there and grow and grow.

If you retire at 70, that $300 a month for ten years now will be worth about $1,643,500.

If you do the same thing but don’t start till you are 37 it would only be worth $607,000.

Is paying off the house now worth losing a million in retirement later?

Please post your responses and follow-up messages to me on this in the comments section below.