By Scott Burns

Q. My husband and I have income of about $110,000 a year. We also own a rental property that earns $1,200 per month in rent. Our only debt is a mortgage on our home: the balance is about $98,000 at 4 percent. The mortgage is a ten-year loan we took out last April, but we have been making double payments to repay it in 5 years or less.

We are both 61 years old and plan to retire at age 66. My current job has no benefits. My income is the higher income. My husband has over $300,000 in his 401(k). We took my retirement funds to purchase our house last year and paid the taxes on the funds in April, hence the mortgage on this house. The rental house is worth about $200,000. Our cars, boats, etc. are paid for. We pay off our credit card bills each month.

My question: Since my employer does not offer any type of retirement account how much can we put into a retirement IRA with my earnings? Should we focus on paying off the mortgage first and then putting money into an IRA? Also, based upon the Social Security benefit statements we receive annually, we should receive about $1,800 a month, each, from Social Security if we wait until full retirement age to retire. We plan to retire debt free. Are we making the right moves, or should we be doing something different? —V. B., Austin, TX

A. Yes, you are making the right moves, but don’t pay off debt at the expense of building financial assets that give you flexibility. Your best bet to increase your savings is to create a spousal IRA in addition to having one for yourself. This will allow you to contribute for your husband.

Paying off the mortgage is a good idea, but not at the expense of building your financial assets for retirement. So give those IRA contributions priority. The income from your rental property is low enough to make me question the benefit of owning the property. With a gross rent of $1,200 a month or $14,400 a year, your net proceeds have got to be pretty low relative to the value of the property. I suggest you take a close look at the annual expenses of the property and your expected net rent.

Q. How much spendable and taxable income is lost due to the Federal Reserve low-interest rate policy. As far as I can see, this policy primarily benefits big business and the banks. It sure isn't helping home sales. Can you address this in a column? —R. F., by email

A. No estimate would go unquestioned, but I believe we can come up with a reasonable benchmark for the lost yield American savers are experiencing due to current Federal Reserve policy and the slow economy.

Over the last 80 years Ibbotson Associates data indicate that short-term treasury bills have earned about 0.5 percent more than the rate of inflation. They have earned an average of 3.7 percent a year while inflation averaged 3.2 percent. The trailing rate of inflation, according to the Bureau of Labor Statistics, was 3.9 percent in September. That indicates our (rough) benchmark rate would be about 4.4 percent for all short-term deposits.

Our banks and other intermediaries have about $9 trillion in such deposits and the U.S. Treasury has about $8 trillion in T-bills and notes outstanding. That suggests a lost yield payday of as much as $748 billion in interest income American savers and institutions would have except for Federal Reserve Policy and our slow economy.

Of course, there is no law that savers must earn more on their savings than the rate of inflation. Savers earned less than the rate of inflation through the 1960s and 1970s. It was not until Paul Volcker became chairman of the Federal Reserve that savers were again paid a small premium over the inflation rate. But with inflation running at nearly 4 percent and deposits paying next to nothing, the best "investment" most people can make is to (1) pay down all forms of debt and (2) buy bulk supplies of everything they use in daily living. This is a good time to have a well-stocked garage and pantry.