Smart Money: Recession anxiety, retirement vs. mortgage payoff

The investing information provided on this page is for educational purposes only. NerdWallet does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.Welcome to NerdWallet's Smart Money podcast, where we answer your real-world money questions.This week's episode starts with a discussion about recession-proofing your finances.Then we pivot to this week's money question from Lauren, who called in with a question about saving for retirement versus paying off a mortgage. She said, "My husband and I are really in debt payoff mode. Well, the only debt that we currently hold is our mortgage, aside from those bits of student loans that I mentioned. So we're kind of wondering if it's better to focus on paying down our mortgage and being debt-free, which is very appealing to us, or also focusing on saving for retirement."Check out this episode on either of these platforms:Apple PodcastsSpotifyOur take on preparing for a recessionRecessions, while scary and potentially damaging for consumers, are not an uncommon feature of the American economy. If you're reading this, chances are you've already lived through more than one. Even though we can't predict when a recession will happen, we can prepare our finances for when the economy inevitably nosedives. Having an emergency fund with at least three months' worth of essential expenses is a good hedge against a recession. Reducing debt, especially high-interest debt, is another strategy to boost financial health. You might also make a mental checklist of resources that you could tap in the event of a financial emergency, such as family, friends, religious groups and 211.org.Our take on retirement savings vs. mortgage payoffTrying to reach one financial goal is stressful enough; having competing financial goals can be overwhelming. You can tackle one goal at a time, but it's also possible to work toward multiple goals at once.When it comes to paying off a mortgage or saving for retirement, consider that a seemingly small reduction in your retirement contributions could result in tens or hundreds of thousands of dollars less in your nest egg. The interest rate on your mortgage is another consideration. If it's a low interest rate, you'll likely get a higher return on your money by investing in the stock market, which has produced an average return of 10% a year for nearly the last century, as measured by the S&P 500.Of course, money decisions are rarely made based on raw numbers alone. Some choices may not produce the biggest returns, but if our decisions let us sleep at night, they are the right ones.Our tipsChoose what's right for you: A decision to focus more on saving for retirement rather than paying off a mortgage, or vice versa, will depend on you and your family's current financial situation and goals.Take advantage of compound interest: The longer you save for retirement, the longer you're benefiting from the magic of compound interest, which helps your money grow faster.Play with retirement calculators: These tools can help you see how much you'll have saved for retirement — and how any changes to your regular contributions could boost or diminish your nest egg.Have a money question? Text or call us at 901-730-6373. Or you can email us at [email protected]. To hear previous episodes, go to the podcast homepage.

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Jae Bratton writes for NerdWallet. Email: [email protected] Pyles writes for NerdWallet. Email: [email protected]. Twitter: @SeanPyles.Sara Rathner writes for NerdWallet. Email: [email protected]. Twitter: @sarakrathner.

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