The freedom of savings

Question: I am 32 years old, single and make ~$100k/year. I have been saving for retirement since I started working 9 years ago. At this point I have approximately $200k in 401k, Roth IRA, pension and other long term savings. I also have ~$30k in the bank for emergency fund and taxes (I've lived in 4 countries in the last 2 years, so it's complicated). It feels like I have too much money (which is an odd circumstance to be in, I know). I do have a mortgage with the current balance at about $126k, but no other debt. I did ask friends and family about this and their response has invariably been "You've worked really hard for it." Any thoughts? Also, with such a large savings base already in place, which is a better use of bonuses - save/invest more or further pay down the mortgage? Emily, Red Deer, AB

Answer: Obviously, you're a tremendous saver and you've laid down a good financial foundation. My main reaction after reading your question is to suggest that the answer might come from stepping back from the debt versus savings equation. Instead, spend some time asking yourself some bigger questions, such as "Where do you want to be in 5 years?", "Am I in the right career or should I explore another path?", and "Is it time to pursue that dream I've always had in the back of my mind or is it time to let it go?"

These may not be the right questions for you. But the point is to hit upon a plan. Of course, your goals and desires can and will change with time. Yet even a back-of-the-envelope plan wil help you decide where to put your money.

Fact is, you have a good margin of financial safety and that gives you freedom. I've always loved what Marc Freedman, head of San Francisco-based Civic Ventures, once said to me: "You save not to have freedom from work, but the freedom to do the kind of work you want." And, I would add, to lead the kind of life you want.

Now, to your specific question: While your thinking about the bigger picture I would do both. For instance, one easy way to accelerate your mortgage payments is to make 13 monthly payments in a 12-month year. You would still have enough left over to add to your savings till. While I would continue with your retirement savings plan, I would focus my savings efforts on taxable accounts, money you could tap if you decide to work less for awhile, to move to another city, change jobs, travel for a month around the U.S., or pay down the mortgage.

About the author

Chris Farrell is the economics editor of Marketplace Money.

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