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Q. My 53-year-old boyfriend has recently reduced the amount he's investing in his 401(k), though he still contributes enough to get his company's match and maxes out his IRA. He's started using the extra money to pay off his mortgage early. He lost $12,000 last quarter in his IRA and thinks reducing a mortgage is the safer bet in this market. He argues that I should do the same thing. I'm 55, at least a decade from retirement, and not sure I'll be in my home forever. Should I follow his advice?
Suze: This is great! I love, love, love that you and your boyfriend are talking openly about finances. No couple can have a truly healthy relationship if they're not discussing money matters. Your boyfriend's strategy makes a lot of sense for his situation, but that doesn't mean you should follow in lockstep. Let me explain.
If you told me your boyfriend had stopped contributing to any retirement accounts, I would be concerned. But in fact he is doing what I recommend: contributing enough at work to get the matching contribution and then funding an IRA. Once those commitments are taken care of, paying off a mortgage can be an incredibly smart retirement move. Think about it: Yes, your boyfriend will have less saved up in his retirement accounts, but he will also have much lower monthly expenses. The trick here is balance. You, on the other hand, seem to be in a different situation.
Given that you're not sure you'll stay in your home once you retire, I see no need to speed up your mortgage payments. Just keep saving as much as you can for your future. You have a long way to go until you stop working, and decades of life after that. Don't get too wound up in what the markets are doing this quarter or this year; stay focused on the need to save for the long term. If in the coming years you decide you do want to stay put in your current home, then you can accelerate your mortgage payments.
Suze Orman's latest book is The Money Class: How to Stand in Your Truth and Build the Future You Deserve (Spiegel and Grau). Ask her a question
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From the April 2012 issue of O, The Oprah Magazine