Here are Sixtyandsingle posts from 2011 onward!!
BY JULIA ANDERSON
Retirees are told to pay off their mortgage before they leave their jobs or at least soon after. But should you? Does it make financial planning sense? Here’s my analysis of why or why not paying off your mortgage is a good move.
Pluses first. You eliminate a big monthly loan payment, which increases your monthly income. You don’t have to worry about rising interest rates, if you have a variable or adjustable-rate loan that could take a bigger bite out of your income, if the Fed raises interest rates. You increase your net worth by eliminating debt. It feels good to pay off the house loan and be debt-free as you head into retirement.
But where will the cash come from to make this move? Will it leave you “cash poor” in case you face a financial emergency such as an early retirement buyout, a major illness or accident or an unexpected need to buy a car or one for your grandchild?
Paying off a mortgage is more complicated that it might first appear. YOU WILL NEED A CALCULATOR AND POSSIBLY AT TAX ACCOUNTANT TO DECIDE WHAT’S BEST FOR YOU.
Why paying off a mortgage is NOT a good idea
With interest rates at historic lows, carrying a mortgage loan with a cheap 2.5 percent rate is not expensive. A 30-year fixed loan on $150,000 at less than 3 percent costs less than $1,000 in a monthly payment. On a $350,000 loan the monthly cost is $2,000 or less per month. It’s cheap money. You might want to put your cash to work elsewhere.
You get a deduction on your federal income tax for interest you pay annually on the loan. That reduces your taxable income. On the other hand, you no longer are making those interest payments, which will save you thousands over the life of the loan.
You might do better by investing the cash you would use to pay off the loan. Over the past 10 years, portfolios invested 60 percent in stocks and 40 percent in bonds have averaged roughly a 10 percent annualized return. With a $100,000 initial investment plus $1000 more a year invested over 10 years in stocks, your nest egg will grow to $276,905. BUT there are NO guarantees this track record will continue if interest rates go higher.
Once money is sunk into a house it is “illiquid.” In other words, you can NOT easily tap the equity in your house in an emergency. However, this could be a forced savings plan if you are not a saver.
But again, THERE ARE PLUSES: You are debt free. You eliminate a big monthly expense. You don’t have to worry about rising interest rates if you have a variable or adjustable loan. You are more financially secure without the debt. You lose the tax deduction but you gain way more income from NOT having a loan payment!!
Take These Steps Before You Decide
Understand the trade-offs between paying off the loan and eliminating your mortgage payment vs. the tax write-off benefit and/or investing your cash elsewhere for the long-term.
Run some scenarios comparing household income expense and savings, if you pay off the loan and the changes in your tax profile, if you pay off the loan. How much will you save in loan interest payments? Interest saved on a $350,000 loan even at 2.5 percent over 30 years will total nearly $148,000.
How will you use the “new” money if you eliminate the loan payment? Will you still have cash for unexpected emergencies? Get a tax professional to help you.
Look at how you would invest the cash that you might use to pay off the loan but instead invest it for the long haul. What kind of earnings can you expect over the next 10 or 15 years. Will you still have cash for emergencies? Build up an emergency fund (in cash) to cover household expenses for at least six months.
Do not tap your long-term tax advantages retirement funds – 401(k) or IRA to pay off your mortgage loan. You will need that tax-deferred nest egg for the long haul. Taking money out early undermines your compound reinvestment wealth-building strategy.
How about a compromise? Consider making “early” payments on your mortgage loan instead of an outright payoff. You can pay down the loan faster, reducing the time to pay off the loan. Invest the rest of your money a 60/40 stock-bond fund.
Don’t take an unexpected tax hit by selling investments to assemble the cash to pay off a mortgage. Those sales could bump you into a higher income tax bracket… 24 percent vs. 32 percent on taxable income (using current tax law).
Celebrate your decision!
If you pay off your mortgage, celebrate your decision. Your are debt-free, your net worth increases and your monthly income goes up. You will always wonder if you made the right call but stay focused on how good you will feel if there’s a stock market crash or interest rates go up.
Going forward: Take the “new” money in the amount of your former mortgage payment and stash it in a savings or investment account…. a PAINLESS MOVE that will build long-term wealth.
AARP - Paying off your mortgage. click here
AARP mortgage calculator. click here
WSJ “Should Retirees Pay Off Their Mortgage or Invest the Money?” click here.
Bankrate.com "Does it make sense to pay off your mortgage early? click here
Dave Ramsay: "Why Should I pay off the Mortgage?" click here
Bloomberg (For those 40 and under) “The Opportunity Costs of Paying Off Your Mortgage Early,” click here.
By Julia Anderson
Women interested in money management, long-term investing and building a retirement portfolio should see 2020’s pandemic stock market ups and downs as a great lesson. As one analyst put it recently in the Wall Street Journal, “it felt like something different, but it wasn’t.”
He meant that when Covid-19 infections swept the world, shutting down the global economy, killing the travel industry, closing restaurants, and most everything else, it felt like something new, something awful. Panic set in, investors felt the fear and stocks sold off in March 2020 by 34 percent. That’s a bear market.
But 2020 taught us that what feels new is mostly not.
Here are the lessons we RELEARNED!
Lesson No. 1 Seasoned Investors Stay the Course
Those who sold off stock investments in the 2020 panic were then faced with a tough decision – when to buy back in? Many didn’t. Several friends told me that they were bailing out of stocks. They were scared by what might happen next. As one said, “I want to be able to sleep at night.” Fear was in the air as we hunkered down, buttoned up and began hoarding toilet paper and hand sanitizer.
But what happened? This bear market sell-off was short-lived. Like other market selloffs. It ended sooner than later as the federal government cranked up the money printing press and began rescuing the economy.
While “all bear markets are inherently different, the common thread is that they always end,” said Peter Lazaroff in a WSJ report. “Investors must be willing to lose money on occasion – sometimes a lot of money – to earn the average long-term return that attracts most people to stocks in the first place…. if you can be a buyer in times of fear, your chances of earning above average returns improve,” he said.
Starting in late March 2020, the S&P 500 began a recovery that continued into 2021. By the end of the year, stocks were up 16.26 percent over 2019. That’s well above the annual average return of around 7 percent.
Hanging in there was among several lessons learned again by investors in 2020. In fact, buying when others are selling is almost guaranteed to reward the long-term investor.
Lesson No. 2 An Emergency Fund is a Great Idea
A survey of investment managers by the Wall Street Journal ranked putting cash into an emergency fund as a top priority money tip. An emergency fund means that the blow of an unexpected layoff can be modified.
Emergency money will save you from expensive credit card debt until unemployment checks kick in and you can figure out what to do next. At least six months of cash. Everyone tells us this.
Lesson No. 3 You Need a Will
At sixtyandsingle.com we have preached this forever. Since covid-19 began taking lives, it is even more clear that people need a will no matter what age they might be. A will spells out how you want your assets distributed. It makes sure your beneficiary designations are up to date on a 401(k)-retirement savings plan. A will can tell your heirs how you want your belongings distributed. This is a long-term but urgent item on your to-do list. Make a will!
Lesson No. 4 Stay Loose with a Retirement Plan
According to Maddy Dychtwald, co-founder of Age Wave in San Francisco, an estimated 81 million Americans will see their retirement timing affected by the pandemic. In other words, they won’t retire when they originally planned. People are putting off retirement for an average of about three years, an Age Wave survey said.
Working longer into your 60s is not a bad thing…more time to recover, save and invest, more time to put off taking Social Security and more time to enjoy the job. Many women I know are working because they love the action and see no reason to stop.
Lesson No. 5 Markets go up, and down. That's Okay
Surveys show that women can be more easily scared out of stock markets and are generally more conservative investors. They hate seeing the value of their investments decline when markets sell off. They tend to put more of their savings in low-earning money market funds at a time when they should be in equities. “A diversified portfolio that you can stick with regardless of the market environment should be the cornerstone of everyone’s investment strategy,” Jeff Mills, chief investment officer of Bryn Mawr Trust, told the WSJ.
The year 2020 taught us AGAIN that nothing stays bad forever, that what might feel new and scary is really a variation on what we’ve seen before. Disciplined investors hang in there for the long haul by riding out the drops and benefitting from recoveries..
15 Personal-Finance Lessons We can All Learn from in the Year of Covid-19. Click here
Wills and Trusts: Needed Now More than Ever Click here.
Life and Money Lessons from the Pandemic Click here
BY JULIA ANDERSON
Grandparents, especially these days, are looking for ways to help their kids and grandkids get ahead financially.
A simple way to give them a long-term financial boost is with a Roth Individual Retirement Account -- grandchildren especially. You can do this before they turn 18.
As we know, time is money. Money going into a Roth IRA for a kid, grows federally TAX-FREE until their retirement. For my 16-year-old grandson that will be 2069. A Roth IRA (for a child under age 18) can be opened and managed by an adult…parents, grandparents, even a friend of the family with a maximum $6,000-a-year contribution.
There’s one BIG CATCH: The money going into a Roth IRA for a kid under age 18 MUST BE EARNED INCOME. In other words, the kid must have a part-time job or be self-employed doing something like babysitting, dog-walking, yardwork, snow-shoveling or window washing. Income from these activities is “earned income” and can be verifiable.
As the grandparent, you can match this amount of earned income with a Roth IRA contribution. For example, if she/he generates earned income from a summer job totaling $800, you can put $800 in her/his Roth IRA custodial account. IRA contributions can not exceed a minor’s earnings. So, the earnings come first, then the IRA contribution. There is no minimum investment.
Why bother with what will likely be small contributions? Maximum contribution: $6,000 a year. But like I said, time is money. For example:
A $1,000 one-time contribution with reinvested earnings that grow an estimated 7 percent a year for 20 years will result in $3,870 in savings.
A $1,000 contribution every year for 20 years with reinvested earnings of 7 percent a year will grow to nearly $50,000.
A $2,000-a year-contribution over 20 years with 7 percent earnings results in about $95,000 in the Roth account.
Now, let’s double the timeline to 40 years.
$2,000 a year contribution over 40 years at 7 percent will generate a future balance of nearly $450,000.
The lesson here is that the more money you invest and the earlier you invest it adds up to a whopping increase in the end result after 40 years of saving and investing. The more money that goes in early, the better.
And when the grandchild starts withdrawing money at retirement, it will be TAX-FREE. They will have you to thank.
FYI: The current federal Roth IRA contribution limit per year is $6,000. Also, there are fewer penalties for withdrawing the money early, if needed for a down-payment on a house.
Where to invest the money?
At this young age and on into their early 40s, the money should be invested in aggressive dividend-producing stock funds because there will be time to make up for any market downturns as they age into their 50s and 60s. More time means more reinvested growth of the investment inside the account.
Investing is better than saving since reinvested dividends in stock accounts outperform any savings account by 10 times over in today's low-interest rate environment.
Best Reasons for a Roth IRA for your Grandkid
A tax-free or tax-deferred investment demonstrates the miracle of compound interest over time. A Roth IRA can be set up online with no commissions or account fees.There’s no age restriction but the child must have earned income.
A Roth IRA is more flexible than any other retirement account because contributions can be withdrawn at any time with no penalty and can be used for more than retirement. But the ultimate goal should be retirement.
At age 18, in some states 21, the child becomes the owner of the Roth IRA account. You can still help them make contributions.
Nerdwallet, "Why your kid needs a Roth IRA," click here.
Fidelity, "Roth IRAs for Kids," click here.
U.S. News, “How to Set up a Roth IRA for Your Child.” Click here.
Motley Fool, “Can You Open a Roth IRA for Your kids?” Click here.
Dave Ramsey. "How Teens Can Become Millionaires." click here.
5 Tips for selling your (grandmother's) silver
1. Determine what you’ve got – sterling or plated. Sterling silver usually has STER or .925 (925 parts per 1000) stamped on the bottom. Plate may not have a mark, or you might find EPNS or EP (Electroplated).
2. Decide how much effort you will put into selling your silver. Two options: Selling it for its antique/collectible value online or with a consignment dealer or selling it by the ounce (or gram) for the metal. Spend time online reading up on your options and prices. Don’t polish anything. Watch out for online scams or shady coin shops.
3. Get an appraisal in person for antique/collectible value but find a separate buyer. Consider selling online through eBay or another web site. Call around for the going local price for sterling and for silver plate if you want a quick sale. Know from the start that silver plate is near worthless. Giving it away is an option.
4. Check the current price of silver in ounces and in grams on the global spot market. Expect to be paid by the gram at less than market price for sterling silver --- likely 30 percent less.
5. Understand the offer. Get an invoice in writing. Your cash deal will be final.
Goodbye after 50 years
BY JULIA ANDERSON
When I married in the late 1960s, my mother’s friends gave me silver---serving trays, a fruit compote, and a set of silver plate goblets. Eventually, my grandmother’s silver tea and coffee service came my way
In my mother’s mid-20th Century life, silver was a middle-class status symbol. Women were not working outside the home but instead managed the house, took care of children, cooked, and attended women’s club meetings. Hostesses provided tea, coffee, and maybe a light lunch. Silver serving trays, silver candleholders and silver luncheon forks and spoons were de rigor.
Why it struck me 50 years on that I should sell most of this inherited silver is not clear. I just decided the trays, the candy dishes and pitchers had to go. Maybe the burden of associated memories of my mother, my grandmother were no longer tolerable. They were proud of what they and their spouses had accomplished and their possessions.
I told myself that when I go, all of this will end up with Goodwill or be “rehomed” in a yard sale. “Why not let go, now, on my own terms,” I thought.
On a Thursday, I found myself headed to town with a cardboard box full of silver stuff -- trays, dishes, and a silver candelabra that my mother had with reverence given to me years ago.
There was not much research involved. That day I had checked the price of silver on the global spot market … $24.78 a troy ounce. I did not know that silver plate is nearly worthless.
Silver-plate vs sterling
The coin and currency store people were nice. They explained that each piece would be evaluated for its silver content by the gram. That threw me off since I didn’t know how many grams were in a troy ounce of silver. (I learned that each troy ounce contains 31.1 grams of silver. That is slightly higher than the standard ounce, which has 28 grams).
The guy at the counter examined each item using a watchmaker’s eye piece. I later realized he was looking for tiny markings on the underside to help him determine if the item was silver plate or sterling silver.
There’s a big difference. Silver plate has a micro-thin layer of silver laid on over base metal such as copper, brass, or nickel. Sterling silver by definition is made with 92.5 percent silver and about 7.5 percent alloy.
Of the pieces I brought to the store, all but two were silver plate. Weighing a total of 14.82 pounds, I was offered $1 a pound for the lot, which came to a whopping $14.82.
Two Items --both candy-dish size bowls -- one weighing 940 grams, the other 291 grams, were sterling. I was paid 47 cents a gram for them, which totaled $580. I walked out of the store happy. A small burden was lifted. The money goes into a travel fund for the post-Covid day when I again can get on an airplane.
What I learned from selling my silver
I was immediately confused at the store by the grams vs ounces payout issue. I was offered 47 cents a gram versus the expected $24-something an ounce. I could have cleared that up with a phone call in advance of my store visit. “How do you pay for silver, grams or ounces,” I should have asked.
Secondly, I could easily have figured out what pieces were sterling and what were silver-plate. Knowing that silver plate is worthless, I might have sold these items -- trays, a pitcher, and the candelabra – to an antique store or jeweler or on eBay or to another online antique silver buyer. But that would have required a bigger time commitment but worth it in dollars.
But don’t be fooled by prices you see online for silver collectibles – dinnerware, trays etc. -- but instead expect to be offered half those prices for your items.
Silver-plate looks good, but the veneer is micro-thin. The guy at the coin store told me, it is shipped by railcar-load to a smelter in New Jersey to be processed for the underlying metal – brass or nickel or whatever.
Maybe I should have given the silver plate away to unsuspecting children, stepchildren, or former stepchildren. Maybe some would have liked a small silver dish or tray? But I doubt it.
Appraisers Association of America
International Society of Appraisers
Kovels Antiques & Collectibles: Price guide and info.
6 Questions to ask your Tax Adviser before Dec. 31
1. Based on my age, work status and estimated taxable income in 2020 as well as my projected taxable income in 2021 what steps should I take before the end of this year to avoid a tax shock in 2021 or 2022?
2. Is it worth my time (and money) to itemize my tax 2020 deductions rather than just take a standard deduction? What can I deduct?
3. Are there work- or business-related expenses worth itemizing.
4. When it comes to estate planning, are there steps I should take now while interest rates are low, and estate (death) taxes are unchanged?
5. Should I make a deductible charitable contribution this year to lower my taxable income?
6. If I operate a business, should I file a tentative refund claim on my taxes before Dec. 31, 2020? Can I claim “disaster” losses attributable to a Covid-19 shutdown? How should I handle the deferred worker payroll taxes related to Social Security?
BY JULIA ANDERSON
If there ever was a year when consulting with a tax accountant is a good idea, this is the year!
With the Covid-19 crisis and resulting economic turmoil, taxpayers of all ages may need help in navigating 2020 tax strategies by Dec. 31. Seniors, especially, might benefit. The goal: Make sure you are paying just your fair share, no more, no less.
Remember, you will pay taxes in April 2021 on income you earned in 2020. While there are no major changes in tax law for 2020, there have been smaller adjustments. However, “emergency” provisions intended to stimulate the economy also may be a factor in your yearend planning.
Now is the time to figure out where you stand tax-wise and where you are going in 2021 and beyond with taxable income, deductions, retirement, and estate planning and (maybe) business losses.
Tax regulations worth mentioning:
In 2020, The federal CARES Act allows eligible individuals to withdraw up to $100,000 from qualified retirement plans during 2020 without incurring the 10 percent early distribution penalty. Income taxes on the distribution can be spread over three years.
Those who received stimulus checks do NOT have to pay income tax on the money.
Seniors, over 72 are NOT required to take taxable withdrawals (RMDs) from their Individual Retirement Accounts this year.
Seniors can sell their primary residence and avoid capital gains taxes on the net gain up to $500,000 for a married couple. (Check the details)
Income tax brackets changed this year with a higher standard deduction: $12,200 for singles, $24,400 for married couples filing jointly.
After age 50, people can contribute up to $26,000 a year to a qualified retirement account to catch-up on retirement savings. If you have a job and can make the contributions, do it.
What about tax credits (and refunds)? You may qualify for a child tax credit or credit for other dependents. You may qualify for an earned income tax credit or a retirement contribution savings credit, or a lifetime learning tax credit. Ask a tax expert about these options.
Should you itemize? This may be the year to itemize your tax deductions. That means NOT taking the standard deduction but instead adding up various deductibles and then subtracting them from your gross income. For instance:
Those working from a home office can deduct the related costs.
You can deduct the mortgage interest you have paid a lender.
You can deduct charitable donations made to qualified charities, just make sure you have the documentation.
If you own stock, dividends that certain stocks pay qualify for a lower tax rate. You also can deduct a loss on a stock sold at less than what you paid for it if you have owned it more than a year.
You can deduct your estimated state and local sales taxes you paid this year as well as property taxes.
Seniors can gift up to $15,000 without reporting or paying tax.
Do you have a will? Is this the year you write a will spelling out how you want your assets distributed at your death. With the threat of Covid-19 hanging over us, having a will seems essential.
Many of us don’t think about federal income taxes until about April 15 when we have to pay them, but now (before the end of December) is the best time to develop a “tax strategy” that could save you hundreds, if not thousands of dollars in taxes, over the next several years. There is plenty of tax information on the internet. Study up on tax basics, then get outside help. One hour with a tax consultant likely will pay for itself in the tax savings you will earn.
Famous Quote: "Congress can raise taxes because it can persuade a sizable fraction of the populace that somebody else will pay." - Milton Friedman (1912-2006) American Nobel Prize-winning economist.
I meet women all the time who face job and money transitions and who want to do them right. It’s about building confidence and taking charge of the future. This is your money. No one cares more than you do!
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