Money mistakes to avoid

When nearing or in retirement you may be tempted to take a portion of your savings and pay off a mortgage or other debt so you won’t have it in retirement. This may not the best way to handle your finances.

Think of it this way. The lump sum you take to pay off that debt could very well earn more than the debt costs. And it may cost you even less if it provides a tax deduction.

For example, the Dow Jones Industrial Average grew from 8,146 on July 10, 2009 to 26,112 on June 17, 2019, a difference of 12.35% per year. This was during a time when debt interest rates were very low. If you have high interest debt, consider refinancing it, if appropriate. A properly diversified investment portfolio has historically provided a higher return than low interest rate debt over time.

Also, if you take the lump sum today to pay off the debt, your money is gone forever. If you continue to make the debt payment, the loan will eventually be paid off and you will have that monthly amount and the invested funds available to provide you income for the rest of your life.