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How to Prioritize Retirement Savings

Christine Benz

As part of Morningstar's Guide to Saving for Retirement, our director of personal finance, Christine Benz, is walking through the key decision points to ensure your portfolio is poised to help you amass the wealth you will need for retirement. Check back all week for fresh content.

Christine Benz: Hi, I’m Christine Benz for

Before you start investing, it's helpful to think about all of the different options you have for your money. Assuming you have a fixed sum to invest each month or each year, are you steering it toward your highest-returning options?

Take a step back and think about your household's total balance sheet.

If you have high interest-rate debt on the books, it almost goes without saying that paying that debt down should be your top priority. You're very unlikely to earn a better return by investing in the market, and your return certainly won't be guaranteed. In addition to making high interest-rate debt your top priority, you'll want to simultaneously build up your emergency fund to ensure that you don't fall into debt again.

Next in the queue would be any investment wrappers where you're earning a tax break. That means 401(k)s, IRAs, and health-savings accounts. Further down in the queue would be aftertax 401(k) contributions and investing in a plain old taxable account.

Mortgage debt occupies a gray area. At today's low interest rates, it's not unreasonable to assume you might be able to out-earn your interest rate by investing in the market. But if you're getting close to retirement; you have a lot in lower-returning assets like cash and bonds; and plan to stay in your house; you could make a case for paying more on your mortgage than your lender requires.

No matter where you are in your retirement accumulation years, it pays to think like a business owner and find the best return on your investment.

Thanks for watching. I'm Christine Benz for