Should I Put More Toward My Mortgage or Into Investments?

Summary

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Episode Overview

Podcast: Ramsey Everyday Millionaires
Episode: Should I Put More Toward My Mortgage or Into Investments?
Date: October 8, 2025
Hosts: Ramsey Network
Main Theme:
This episode centers on a listener’s dilemma: given a substantial household income and being debt-free except for a mortgage, should they maximize retirement account contributions or put extra cash toward paying off their mortgage? The hosts break down the pros and cons of each approach, offering actionable advice within the context of Ramsey’s “Baby Steps” methodology.

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Key Discussion Points & Insights

1. Listener Profile and Question ([00:17]–[00:49])

• Caller Trace (Salt Lake City): Trace and his wife, both 21, have a combined annual income of $130,000, are in Baby Steps 4 and 6 (investing/investing + mortgage payoff), with no kids and a 15-year mortgage on their home.
• Primary Question: Should they prioritize maxing out Roth IRA contributions before April, even if it means temporarily putting less toward their mortgage, to take advantage of tax-free growth?
  • Notable consideration: “So then does that make sense so we can max out that Roth for both of us before April so we can do it again for that for the next year?” – Trace [00:38]

2. How Much to Allocate to Retirement ([01:04]–[01:49])

• Ramsey Advice:
  • Confirm the IRS max on Roth IRAs (either $7,000 or $7,500 each).
  • Calculate 15% of gross income for retirement: $19,500/year.
  • Maxing both Roth IRAs ($14,000 total) still leaves $5,500 to allocate.
  • Quote: “15% of that would be 19,500. That’s what you have for the year to put aside.” – Host [01:49]

3. Where to Invest the Surplus ([01:50]–[02:41])

• Remaining $5,500:
  • Options: Traditional IRA or taxable brokerage account?
  • Host Recommendation: Put extra in 401(k) for better tax advantages than a brokerage account.
  • Quote: “I’d love for you to put the remaining 5,500 into your 401k.” – Host [02:31]

4. Pension Consideration ([02:41]–[03:06])

• Trace’s Pension:
  • Trace will receive 60% of his pay after 35 years, but contributions are minimal.
  • Host’s Perspective: Don’t factor the pension into the 15% retirement contribution calculation, since no significant payroll deduction is happening.

5. Roth vs Traditional 401(k) ([03:06]–[03:30])

• Employer Plan Options: Trace can do either a Roth or traditional 401(k).
• Host’s Preference: “Definitely do the Roth 401k option. That way, you’re paying the taxes now instead of later.” – Host [03:23]

6. Remaining Cash Flow and Mortgage Strategy ([03:31]–[04:03])

• Any leftover funds (after 15% retirement savings) can be directed to extra mortgage payments.
• Flexible Approach:
  • No need to stick to a rigid extra payment every month; adjust based on financial "seasons."
  • Quote: “You don’t have to be as intense. So that’s up to you guys to discover, you know, what the rhythm of that looks like in your life.” – Host [03:44]

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Memorable Quotes

• "15% of that would be 19,500. That’s what you have for the year to put aside." – Host [01:49]
• "I’d love for you to put the remaining 5,500 into your 401k." – Host [02:31]
• "Definitely do the Roth 401k option. That way you’re paying the taxes now instead of later." – Host [03:23]
• "You don’t have to be as intense. So that’s up to you guys to discover, you know, what the rhythm of that looks like in your life. Very good. I like it." – Host [03:44]

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Timestamps for Key Segments

| Time | Segment Description | |-----------|---------------------------------------------| | 00:17 | Introduction to Trace and question | | 01:04 | Discussion of IRAs and 15% allocation | | 01:49 | Calculation of “excess” above IRA contribution | | 02:08 | Traditional IRA vs Brokerage account debate | | 02:31 | Suggestion to use the 401(k) for surplus | | 02:41 | Pension percentage discussion | | 03:18 | Roth 401(k) vs Traditional discussion | | 03:31 | Mortgage strategy and flexible approach |

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Conclusion

This episode provides a practical walk-through of how young, high-earning couples can prioritize financial goals using the Ramsey method. The advice centers on maxing out Roth IRAs, utilizing available 401(k) contributions (with a preference for Roth), and then directing any extra money to mortgage pre-payments—all while staying flexible and aligned with personal life “seasons.”

Takeaway:
Maximize tax-advantaged retirement accounts first (15% of income), then focus on mortgage payoff with remaining cash flow, and choose the right investment vehicles for surplus retirement savings.

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For more guidance or to connect with certified investing pros, visit Ramsey Solutions’ Smartvestor portal.

Transcript

[A]

Foreign.

[B]

This episode is brought to you by Smartvestor. Connect with an investing pro near you at ramseysolutions.com Smartvestor Trace is in Salt Lake City, Utah.

[A]

What's up, Trace? How can we help?

[C]

Hey, how are you?

[A]

We're doing good. What's up with you?

[C]

Good. So me and my wife, we're 21 years old. We have a combined income of $130,000 a year. We're in baby steps four and six with no kid yet. We, we started investing into our retirement in July and wanted to know if we can put more into each one of our Roth IRAs to get it up to the 7,000 for each one of us instead of putting more on the mortgage until April. So then does that make sense so we can max out that Roth for both of us before April so we can do it again for that for the next year?

[A]

Yeah, maxing out the Roth. So putting the 7,000 or 7,500, I can't remember what it is this year, does that put you over the 15% of your income?

[C]

So yes, but we'll max out my Roth at 7000 or 500 and then we want to also max out my wife's. I think we could do another 7,000. Right?

[A]

Yeah, I understand that, but I'm saying that 14,000 together, is that more than the 15% of your take home pay? It would be.

[C]

And we are still paying the house off like the 15 year mortgage. We still have on the 15 year. So just for the six months, I don't know, like I said, just to take advantage of.

[A]

Okay.

[C]

Of the tax free growth.

[A]

So you told me, you told me you make $130,000 a year. So 15% of that would be 19,500. That's what you have for the year to put aside. So you're wanting to put 7,000 in hers, 7,000 in yours, that's 14. So technically you still have another 5,500. What are you going to do with that?

[C]

And that, that's another question too. Do I, do I do the traditional or do I just put it into a brokerage account? We had just recently started making 130,000 a year.

[A]

Are you selling or do you have 401ks through your job?

[C]

We work for the state, so I have a pension and a 401k. Oh, she doesn't. And so we just do the individual Roth IRAs for each one.

[A]

Okay, so I love that you're doing the individual Roth IRAs. I'd love for you to put the remaining 5,500 into your 401k.

[C]

Okay.

[A]

Yeah, that's what I would do because it's tax advantaged in a better way than just a typical brokerage account. Um, so I would do that. Now. What percentage? Your pension, do you know what percentage that is? What does that look like? Because that's part of this equation as well.

[C]

Yeah, I, I get 60% of it when I retire at 35, but they don't take anything out of my pay.

[A]

Oh, okay.

[C]

If it is, it's, it's not much at all.

[A]

Okay, then I wouldn't really add that in then. Okay, so yeah, do the two Roth IRAs and then put the rest into your 401k. Do you know that? I'm guessing the 401k is traditional or is it Roth? Just curious.

[C]

It's either. So I can do a Roth 401K or three.

[A]

Yeah, definitely do the Roth 401K option. Okay.

[C]

Okay.

[A]

That way you're paying the taxes now instead of later.

[C]

Okay, sounds good. Appreciate it.

[A]

All right. I love that. And then, yeah, beyond that, any money that you have extra, you're going to throw that on to. Since you're in baby steps four or five and six, you're going to put extra payments or extra money, I should say, towards your house and you and your wife can decide what that looks like. It can change throughout the seasons. It doesn't have to be double payments every time. Right. You're in a season of intentionality. You don't have to be as intense. So that's up to you guys to discover, you know, what the rhythm of that looks like in your life. Very good. I like it.

[B]

Thanks for tuning in to Ramsey. Everyday millionaires need help with your investments? Connect with a smartvestor [e-mail] smartvestor or or click the link in the show notes. Ramsey Solutions is a paid non client promoter of participating pros. Learn [e-mail] SmartVestor.