Don’t even consider prepaying your mortgage if you haven’t put aside an emergency nest egg or owe credit-card debt. Many advisers recommend saving even more if your job’s at risk and may take time to replace. Clemens Sialm, a finance professor at The University of Texas at Austin, says under certain circumstances, it’s actually better to contribute to your 401(k), especially if your company offers a match. He says one factor to consider is the interest rate, which right now is relatively low. Sialm and his researchers found that many people are so risk-averse that they opt for the lower returns of a prepaid mortgage rather than investing in a 401(k) plan. Those extra earnings could result in additional savings of $1.5 billion a year, or almost $400 per household.
The Wall Street Journal
Prepaying Mortgage May Not Trump Investing
Jan. 9
