Pay off mortgage quicker or invest or rrsp's

[rJ_]

I am married, both my wife and I are 27 and teachers. So we have a pretty good pension. Should we focus on just paying off our house and then getting into rrsp's/investments. Or should we be doing all 3 at the same time. Why?

Thank you and sorry if this is a basic question that I should know the answer to.

rJ_

[Akolades]

i believe theres an equation to it.

If you can make a higher percentage return on your investments then the one you'd be paying your mortgage with, you invest. If you can't you pay your mortgage.

Most people who know how to invest can make a higher percentage, so it then comes down to your emotional feeling of satisfaction. Does having your mortgage paid off feel so good that you would prefer to do that first? Some people seem to prefer the stress-free feeling of knowing that they dont have any debt to pay.

This is what i've gathered from past post like yours. I'm sure someone else will have more details.

[SossMan]

That's about right assuming your house is sufficiently insured.

[goodgrief]

Another data point: If you have paid off your house, and it is severely damaged or destroyed in a natural disaster, you get the money faster and directly into your hands compared to people who have to go through their mortgage company to get the insurance money released so they can repair their homes. Some people have never gotten the money released. And God help you if you have a second mortgage and you're in a natural disaster. I have never been sorry that I paid off my home first, and it made everything much easier for me in the aftermath of the storm. --"A Katrina survivor"

[mpfree]

There are some decent articles on the benefits and disadvantages of RRSPs out there.

It also depends on what our income level is currently on whether or not you should go hard core on your RRSPs.

If each of you are making 30-40k/year, the benefit of RRSPs may not be that great since you maybe in a higher tax bracket during your retirement if you have a large nest egg built up.

I think more info on your financial situation would have to be disclosed before you can get a useful answer [img]/images/graemlins/smile.gif[/img].

You can PM me and I can find the articles for you if you want.

[Girchuck]

[ QUOTE ]
i believe theres an equation to it.

If you can make a higher percentage return on your investments then the one you'd be paying your mortgage with, you invest. If you can't you pay your mortgage.

Most people who know how to invest can make a higher percentage, so it then comes down to your emotional feeling of satisfaction. Does having your mortgage paid off feel so good that you would prefer to do that first? Some people seem to prefer the stress-free feeling of knowing that they dont have any debt to pay.

This is what i've gathered from past post like yours. I'm sure someone else will have more details.

[/ QUOTE ]

I don't think its just as simple as getting higher return.
Higher returns usually come with higher risks.
There is near zero risk to paying down the mortgage which beats returns on other near zero risk investments, so the higher returns will have to be high enough to balance risk and the tax difference. Usually, they are not, because risks and returns are highly tuned.