Should we pay down the mortgage or save for retirement?

(MONEY Magazine) -- For more than a year, Kim Champney, 40, and Pat Minick, 41, have been kicking in an extra $650 to their $1,048 monthly mortgage payments. "We don't like carrying a lot of debt," says Minick, who stays home with their three kids, ages 7, 8 and 10.

At this pace, the couple will pay off the loan in 2018, eight years early. But with their mortgage rate a low 4.4% after a refi, they wonder if the house is the best place to stash their cash.

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"Definitely not," said Grand Rapids financial planner Ryan Sheffer, who adds that the low rate and the tax break on mortgage interest make paying off the loan a lower priority than saving for retirement -- which the couple are behind on.

They make $87,000 a year, mostly from Champney's job as a quality-assurance director; yet they've saved just $68,500. She puts 1.5% of her pay in her 401(k); they each stash $3,000 a year in Roth IRAs. "By not investing more while they're young," says Sheffer, "Kim and Pat are missing valuable compounding."

1. $68,500 in retirement plans

2. $15,000 in 529 college savings plans for the kids

3. $6,500 in cash earmarked for emergencies

1. Max out Roths. Champney and Minick are in the 15% tax bracket, and tax rates will likely be higher when they retire. So Sheffer says Roth IRAs make sense for them, as money going in is taxed upfront, while withdrawals are tax-free. (Also, Champney gets no 401(k) match.) They can boost savings to $833 a month, $10,000 a year, the max for two people their ages.

2. Then feed the 401(k). They will still have $317 a month to work with, of the $650 they'd been using to prepay the mortgage. They should first beef up their emergency fund by $1,000, and after that, redirect the cash to Champney's 401(k) for additional tax-deferred growth.

3. Cut investment costs. Their nest egg is in six funds, most with high fees and poor long-term returns. Philadelphia area planner John Sion suggests consolidating into a target-date fund. As conservative investors, they'll want one meant for those who'd retire sooner than they will: T. Rowe Price Retirement 2025 (TRRHX) is 77% in stocks.