Advice matters
Juggling mortgage payments and retirement goals

Life – it’s all about balance, and figuring out how to handle mortgage payments while also saving for retirement can feel like a tightrope walk. But with some thoughtful planning and a strategic mindset, you can work towards both financial goals without having to compromise one or the other.

Here are some key ways to find that ‘sweet spot’.

Here’s the challenge

When it comes to mortgage payments and retirement savings, they often fight for the same limited financial resources – and the rising cost of living can add to the headache. So, it’s essential to take a good look at your finances, as well as your short and long-term goals, and weigh the pros and cons of each option.

By paying off your mortgage faster, you can save a significant amount of money in interest costs over the life of the loan. Plus, when you own your home outright you’re giving yourself financial security, which means no more monthly mortgage payments. And once your mortgage is paid off, you’ll have more cash to spend on other financial goals, like retirement savings or home improvements.

Meanwhile, it’s also important to focus on investing in retirement savings. Generally speaking, you may want to start saving as soon as possible so that your money has more time to grow through the power of compounding returns. This will also help you diversify your assets beyond just your home, reducing your overall risk.

How to find the right balance

If you’d like to find balance between mortgage payments and retirement goals, there are some important steps you can take.

  • Figuring out your priorities is a good place to start. Identify which goal needs more attention right now, based on your circumstances. Consider things like your age and your financial situation (including current debts and assets): for example, if you’re nearing retirement and you’re not on track to retire mortgage-free, you may want to accelerate your repayment schedule.
  • Reassess non-essential expenses and discretionary spending: If money is tight, it’s worth looking for opportunities to free up some cash. Create a budget that focuses on covering essential expenses first – like housing, utility bills, food and insurance. You can then cut back on non-essential expenses and allocate the remaining funds towards your mortgage repayments and retirement savings.
  • Look at your mortgage structure: If it’s been a while since you last looked at your home loan, it may be worth reviewing your mortgage structure and check that’s still aligned with your ‘big financial picture’. Plus, a mortgage adviser can help you devise a strategy to pay off your mortgage faster without jeopardising other crucial goals.
  • Take advantage of all the help available: Compared to other investment tools, KiwiSaver offer some unique benefits. For example, with KiwiSaver, you’re not the only one contributing to your retirement savings: if you’re employed, your employer also contributes at least 3% (though some employers choose to contribute more). Plus, every year, for each dollar you put in, the Government also adds an extra 50 cents to your KiwiSaver account, up to a maximum of $521.43 per year.
  • Explore additional income streams: Look for ways to increase your income, such as taking on a part-time job, freelancing, or starting a side business. You can also consider downsizing your home, renting out a room, or leveraging other assets to generate extra income. Use the additional funds to boost your mortgage repayments and retirement savings, helping you achieve a balance between the two even with limited financial resources.
  • Check in on your financial plan: Make a habit of reassessing your financial plan to ensure you’re on track to achieve both your mortgage and retirement goals. And of course, be prepared to adjust your strategy based on changes in your financial situation or goals.

The bottom line

One size doesn’t fit all, but remember: when it comes to balancing different long-term goals, a good plan and the small steps you take consistently over time can make a big difference down the track.

Need help? Get in touch. We can help you stay focused on your objectives, reassess your financial plan from time to time, and create a comfortable financial future for yourself and your family.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.