Here's a simple formula to decide whether it's smarter to send extra money to your lender or save it for retirement.

Multiply your mortgage rate by 1 minus your tax rate. Compare that return to what you think you can earn with a conservative investment in your employer's 401(k) plan. Choose the higher one.

Example: If your mortgage interest rate is 6% and your tax rate is 25%, the math is 6 times the difference of 1 minus 0.25 (or 6 times 0.75). The result is 4.5%. That's your real mortgage rate when you consider the mortgage tax deduction. If government bonds are paying 5%, you should choose retirement investing over mortgage prepayment.

Economists from the Federal Reserve Bank of Chicago, University of Texas at Austin and University of Michigan recently reported that 38% of families putting extra money towards their mortgages are making the wrong choice.