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Monday, October 28, 2013

Maximizing Your Employer Compensation Plan

I get asked on a regular basis how one can maximize their employer compensation plan.  One of the easiest ways, and often most overlooked, is to take advantage of the company sponsored retirement plan.  These plans come in many forms including SIMPLE IRAs, 403(b)s, and 401(k)s.  In general, it is a good idea for an employee to learn as much as possible about the retirement plan benefits their employer provides.  Once educated about the options, the employee can then decide what makes the most sense for their situation.  Here is an interesting Wall Street Journal article from the Sunday, October 6, 2013 issue of The Grand Rapids Press that offers 8 tips for getting the most out of a company retirement plan.

Monday, October 21, 2013

You Owe It to Yourself

There is a lot of attention being paid to debt and its impact on our financial situation.  Credit cards, mortgages, car loans, and student loans commonly consume our cash flow and create family stress.  We also have to read about the debt that our politicians have accumulated on our behalf but that is a whole new topic.

Your largest debt is probably one that we haven’t even talked about yet.  That is the debt that you owe yourself.  What do I mean by that?  You have a “future self” that is dependent on you making wise financial choices and preparing to cover the expenses associated with retirement needs.  Every year that we do not save and invest to cover these expenses, the debt grows.

Here is an example:

A 35 year old couple is planning to retire at age 65.  They calculate that they will need $1,000,000 in savings to accomplish their goal.  If they start today, the “monthly payment” necessary to pay down the debt to their future selves is $1,054.*

If they do not start until age 40, their “monthly payment” becomes $1,519.* Ouch!  Waiting has a cost!

I am finding that when we think of our retirement plan as a debt that we owe, we are more motivated to make it a priority. 

This is a hypothetical example and is not representative of any specific investment. Your results may vary.

*Using the savings goal calculator on our website:

Tuesday, October 8, 2013

Should I Pay off my Mortgage?

I get this question on a regular basis: Should I pay off my mortgage? The answer is a difficult one and can vary by situation, but here is a general pro/con list:

Reasons to pay off
  • Peace of mind
  •  Feeling of victory 
  •  Reduce monthly expenses
  • Less stressful retirement
 Reasons not to pay off
  • Very favorable interest rates (Remember when rates were double?)
  • The mortgage interest deduction may help your tax situation
  • Potential loss of liquidity if lump sum is used
  • Possible difficulty getting the money back out
  •  Potential to move again and take on another mortgage
  •  Higher mortgage payment can encourage less spending
There is a huge variance in opinions with this age old question.  The best advice would be to sit down with your financial advisor, review your whole financial situation, and compose a game plan that will include paying off debt, saving money for stated goals, and not spending more than is earned.