Issue 23.15
Part 2
4. Finally, we look at it, are we saving money for our retirement? For younger clients, it is vital that we are maximizing our IRA’s or 401K’s before looking at retiring our mortgage. Many clients again put every extra dollar towards their mortgage payment. There is a large argument for a 15 year fixed loan versus a 30 year fixed loan. I totally understand the logic in paying off the mortgage early. But, in reality, if you are not maximizing your IRA’s or 401k’s we are using after tax dollars to make extra payments on our mortgage at for example 4% when after taxes it is essentially borrowing at 3%. Thus, any investment strategy long term should do better than 3%, so please use all pre-taxed dollars to save and let grow and I believe that you grow wealth more quickly than looking at paying off the mortgage sooner.
To summarize, if you are a senior, cash flow is essential. If there is anything you can do to maximize cash flow monthly – then let’s look at the entire plan. One huge asset has been the home and utilizing the reverse loan simply as a safety cushion or a tool to eliminate our outside debt sooner and me more flexible on monthly basis with cash flow. Clients don’t understand that once the debt is paid off, you can certainly pay back the reverse line of credit or you don’t need to. The flexibility of coming in and out of the line with no required payments has been a life changer for hundreds of senior client’s here in Southern Utah.
As a younger person, we want to be disciplined with a correct plan of savings and or debt payoff and working with an investment advisor or your company’s advisor in order to set up the best plan possible even though sometimes the best of plans may not be fail safe. But, please contact your licensed financial planner and or senior mortgage planner in order to accomplish the best foot forward. Until next time,
Brandon.
Brandon Hansen can be contacted at 435-673-4773.