Same $567 from you each month. Very different result. Here is why, in plain terms.
Put it in the 401(k) first. It wins by a lot.
Every $567 you put in becomes $1,133 because your employer adds another $567. And the money already in the 401(k) — about $16,100 — moves into the growth fund too, so all of it can grow. After 5 years at a middle-of-the-road 5% growth, the account could be worth about $97,800. The extra mortgage payment has no match. It only saves a small amount of interest — about $5,400 total.
✓ Better deal
Choice A: 401(k)
You save for retirement. Your employer doubles it — and everything moves into the growth fund.
$97,800
Estimated total value after 5 years — at 5% growth*
1
You put in $567 a monthThat is 4% of pay. It comes out before tax.
2
Your employer adds $567 a monthFree money added on top. No extra work from you.
3
So $1,133 goes in every monthOver 5 years, that is $68,000 going in — half of it, $34,000, from your employer. At 5% growth it becomes about $77,100.
4
The $16,100 already in there moves tooIt switches into the more aggressive growth fund, so it grows alongside the new money — about $20,700 after 5 years at 5%.
5
The money stays flexibleIt moves with you and is there for retirement.
One catch: Growth is not promised. The market can go up and down — and a growth fund swings more than a safe one. Even with 0% growth, you would still have $84,100: the $68,000 that went in plus the $16,100 already there.
No match
Choice B: Extra on the mortgage
You pay the house loan off a bit faster.
~Jun 2031
Loan paid off — about 2 years early, within the same 5 years
1
You put in $567 a month extraThat is after-tax money, on top of the normal payment.
2
No one adds to itYour $567 stays $567. There is no match.
3
You pay about $31,200 extra in totalThat pays the loan off in about 56 months.
4
You save about $5,400 in interestThat is the whole saving. It is real, but it is small.
5
No relief until the very endYour monthly bill does not drop until the loan is fully gone. Then it frees about $2,264 a month.
One catch: Extra money put in the house is locked there. You cannot use it until you sell or borrow again.
What if investments grow slower — or faster?
Tap a growth rate. The 401(k) ending value changes — it covers the new money and the $16,100 already in there, all in the growth fund. The mortgage saving stays the same.
After 5 years, side by side
401(k) — total account value (at 5% growth)$97,800
Mortgage — interest you saved$5,400
Where the $97,800 comes from: about $77,100 is the new money — $1,133 a month plus growth — and about $20,700 is the $16,100 already in the account, grown at 5%. The match does the heavy lifting: without it, the new money alone would be only about $38,500.
401(k)
Extra mortgage
Your cost
$567 / month
$567 / month
Extra help
+$567 / month from employer
None
Total going in
$1,133 / month
$567 / month
After 5 years
Account worth about $97,800*
Loan gone ~Jun 2031; about $5,400 interest saved
When you feel it
Builds every month
Not until loan is gone
* Estimates for easy comparison, using the exact 4% of pay: about $567 a month from you and about $567 a month from your employer ($1,133 a month total). The 401(k) ending values include the current balance of about $16,100, moved into the plan's more aggressive growth fund and grown at the same rate as the new money. Mortgage estimate is based on a balance of about $112,600 at 4.85% with a normal payment of about $1,697 a month, due to end around July 2033 if left alone. Returns are not guaranteed. This page is for talking it through together — not financial advice. Worth a quick check with your advisor before you decide.