Should You Keep Investing After You Hit Your Retirement Number?

Once you’ve saved enough money for retirement before your actual retirement date, does it make sense to keep saving and investing to grow your retirement portfolio? Or are you better off putting that money to use elsewhere?

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Reaching your retirement number — i.e., the amount of money you need to afford retirement — can look different from person to person, depending on factors like your lifestyle and location. A GOBankingRates analysis found that in Mississippi, for example, you need just over $500,000 in retirement savings to afford the annual cost of living there; in Hawaii, you need over $1.8 million, so there’s a lot of variability.

That said, if you’ve done the math for your situation and feel like you’ve already reached a place where you want to be financially when you retire, it’s hard to know whether to keep growing your nest egg or tackle goals like paying off a mortgage.

In a recent episode of The Money Show, hosts Brian Preston and Bo Hanson, who are both certified financial planners, shared their thoughts on what to do when faced with this dilemma:

In this situation, Preston generally suggested first paying off any debts, including mortgages, before retirement, though there’s some leeway in terms of whether you want to pay that off over time in the years leading up to retirement or just pay it off all at once now if you can.

Preston then suggested the approach of “acting like a bear going into hibernation,” where you want to “fatten up” as much as possible. That means not necessarily getting complacent with reaching your retirement number. Rather, he recommended exceeding that number by growing your portfolio more before retiring so that you can better manage the financial insecurity that can come with the first couple of years of actual retirement.

Hanson, however, took a little bit of a different approach to this question, and suggested that when you hit your retirement number, you’ve reached financial independence. That gives you some independence in terms of what you do with your money next. For some people, that might mean saving and investing more. Others might want to pay down debt, such as to become mortgage-free in retirement.

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However, noted Hanson, while he wants those who’ve reached financial independence to have the ability to become debt-free, that doesn’t necessarily mean that’s where you should put your money right away. This unique interest-rate environment could mean that some people with low mortgage rates, such as around 2.5%, might decide to keep their money growing in a savings account at around 5%. Perhaps you then wait until after your first year of retirement, once you’ve gotten used to that transition, to pay off your debt, he said.

In Preston’s view, though, staying wealthy can mean de-risking, and one way to do that could be to pay off your mortgage before retirement.

Ultimately, there’s not one universal answer concerning what to do once you’ve reached your retirement number. Accomplishing this goal does give you some flexibility, but you might be the type of person who’s more comfortable reducing risk, such as by paying off debt and exceeding your retirement number in case things don’t go as planned during retirement. Or, you might be more comfortable with where you’re at, in which case you might be more willing to take a little risk and try to get some arbitrage between your mortgage rate and cash savings rates.

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Another wrinkle is that some people who are hyper-focused on hitting their retirement number early do so at the expense of enjoying their wealth. It can take some time to relearn how to enjoy what you’ve built, in which case the answer might not be to invest more or pay off a mortgage, but rather to do something for yourself and your family, like take a nice vacation (assuming that does not derail your retirement goals).

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This article originally appeared on GOBankingRates.com: The Money Guy Show: Should You Keep Investing After You Hit Your Retirement Number?