Tag Archives: Investment advisor

The Longest Bull Market In History And What Happens Next

Tony’s Comments: What is often overlooked by those writing about the impending doom of the stock market is the age of the reader. What I mean by this is that if you are trying to accumulate money for your eventual retirement, and you have 20 or 30 years between now and then, much of what is going on now is irrelevant.

However, if you are likely to retire in the next few years, or are already retired, then it’s a very different story. Once you turn off the ‘working for money’ switch and turn on the ‘money is working for you’ switch, an end to the current bull market is very relevant.

Many people can expect to live 25 years or more in retirement. And for each of those years, one way or another you’ve going to have bills to pay. And that money needs to come from somewhere. No one is going to suddenly show up at your front door and hand you the keys to the kingdom.

August 18, 2018 by Lance Roberts

Depending on how you measure beginnings and endings, or what constitutes a bear market or the beginning of a bull market, makes the statement a bit subjective. However, there is little argument the current bull market has had an exceptionally long life-span.

But rather than a “siren’s song” luring investors into the market, maybe it should serve as a warning.

“Record levels” of anything are “records for a reason.”

It should be remembered that when records are broken that was the point where previous limits were reached. Also, just as in horse racing, sprinting or car races, the difference between an old record and a new one are often measured in fractions of a second.

Therefore, when a “record level” is reached, it is NOT THE BEGINNING, but rather an indication of the PEAK of a cycle. Records, while they are often broken, are often only breached by a small amount, rather than a great stretch. While the media has focused on record low unemployment, record stock market levels, and record confidence as signs of an ongoing economic recovery, history suggests caution. For investors, everything is always at its best at the end of a cycle rather than the beginning.

The chart below has been floating around the “web” in several forms as “evidence” that investors should just stay invested at all times and not worry about the downturns. When taken at “face value,” it certainly appears to be the case. (The chart is based up Shiller’s monthly data and is inflation-adjusted total returns.)


The problem is the entire chart is incredibly deceptive.

More importantly, for those saving and investing for their retirement, it’s dangerous.

Here is why.

The first problem is the most obvious, and a topic I have addressed many times in past missives, you must worry about corrections.

“Most investors don’t start seriously saving for retirement until they are in their mid-40s. This is because by the time they graduate college, land a job, get married, have kids and send them off to college, a real push toward saving for retirement is tough to do as incomes, while growing, haven’t reached their peak. This leaves most individuals with just 20 to 25 productive work years before retirement age to achieve investment goals.

This is where the problem is. There are periods in history, where returns over a 20-year period have been close to zero or even negative.”

Currently, we are in one of those periods.

CONTINUE READING HERE…

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Trump Is Losing His Trade War

My Comments: The article I share with you here appeared in Forbes, which no one thinks of as a liberal rag. The reality is that free markets evolve over time, with some markets proving resilient and profitable, and some going the way of the dodo bird. Putting limits on free trade makes little sense to me.

Free markets are compromised by tariffs, since they impose pressures that influence the laws of supply and demand. If you have something in demand, you can charge a higher price until the price itself causes the demand to slow and even drop. Tariffs add costs which lead to a higher price and you effectively shrink the demand.

Either alternatives are found or everybody gets pissed off which is what is happening now. And I for one, can find no valid reason to support the apparent arbitrary imposition of tariffs. You and I will see a decline in our standard of living. Are we winning yet?

John Brinkley, August 14, 2018

Casualties from the Trump Trade War of 2018 with China are piling up fast.

Farmers and small businesses across the United States are suffering under the weight of 25% tariffs on Chinese goods that they need and/or China’s retaliatory tariffs on products they export, but Trump shows no inclination to back down. His administration has compiled a list of $16 billion worth of Chinese products it will hit with a 25% tariff on August 23. Trump is considering a 25% tariff on all auto imports on national security grounds, and tariffs on all Chines imports.

Element Electronics plans to lay off almost all of its 126 workers and close its factory in Winnsboro, S.C., because of new U.S. tariffs on components it imports from China. This is particularly sad, because Element Electronics is one of the last remaining television assembly companies in the United States.

A U.S. cargo ship carrying $20 million worth of soybeans for China tried to get there before China’s soybean tariff took effect on July 6, but arrived 30 minutes too late. The tariff raised the cost of the soybeans to $26 million. The ship drifted about off the Chinese coast for a month while the cargo’s owner, the Louis Dreyfus Co., tried to figure out what to do.
The ship, Peak Pegasus, finally docked in Dalian during the weekend and began unloading its cargo after the Chinese company Sinograin agreed to pay the 25% tariff. As of Tuesday, there were two other cargo ships loaded with American soybeans still waiting off the Chinese coast.

The farmers who grew those soybeans have already seen their prices drop by 20%, said Chris Gibbs, a soybean farmer in Ohio. Even if the tariff were eliminated, Gibbs said in an interview with CNBC that he and other farmers feared that the U.S. would be seen as an unreliable supplier and its foreign customers would go elsewhere for soybeans and other farm products.

For commercial fishermen in Alaska, life is hard and dangerous even in the best of times. China’s new 25% tariff on Pacific Northwest seafood may be more than some of them can bear. The state of Alaska has been working for years to attract Chinese buyers for its seafood. Given that there are plenty of other seafood-exporting countries, Chinese importers probably will just stop buying Alaskan seafood.

“We’d rather be left to our own challenges that we have. We don’t need any more,” Alan Noreide, a fisherman from Seward, Alaska, told Reuters.

The iconic American motorcycle company Harley-Davidson (NYSE:HOG) faces a boycott of its products, because it said it would move some production overseas to avoid a tariff imposed by the European Union in response to Trump’s tariffs on steel and aluminum imports. Trump supports the boycott.

“Many @harleydavidson owners plan to boycott the company if manufacturing moves overseas. Great! Most other companies are coming in our direction, including Harley competitors. A really bad move! U.S. will soon have a level playing field, or better,” Trump said on Twitter.

He said he would try to lure foreign motorcycle manufacturers to the United States to further tighten the screws on Harley-Davidson, which is based in Wisconsin.

In California, where wildfires have destroyed about 1,200 homes this year, U.S. tariffs will add as much as $20,000 to the cost of rebuilding a house, according to the National Association of Homebuilders. In addition to the 25% tariff on imported steel, the U.S. has imposed a 20% tariff on Canadian softwood lumber, which is heavily used in home-building.

Larry Kudlow, Trump’s chief economic adviser, said Trump wasn’t to blame for any of this.

“Don’t blame President Trump, he said in an August 3 interview with Marketplace. “He inherited a broken world trading system where tariffs and particularly non-tariff barriers have been rising for years. The WTO, which is supposed to be the adjudicator, has been broken. . . So, the president is trying to fix it.”

In reality, the world trading system was working pretty well until Trump came along, and tariffs and non-tariff barriers have not been rising to any appreciable degree. The United States and 11 other countries negotiated the Trans-Pacific Partnership, which would have reduced or eliminated hundreds of tariffs, including Canada’s dairy tariff that Trump often complains about. Trump pulled the U.S. out of the TPP, stopped negotiations on a free trade agreement with the European Union, stopped negotiations on a bilateral investment treaty with China, abandoned the Obama administration’s work toward modernizing the WTO.

But Trump prefers war over diplomacy: Stick it to China with tariffs and China will beg for mercy.

So far, the only people begging for mercy are farmers and small businesses that are seeing their profits reduced or wiped out and the workers who will lose their jobs as a result.

Source article: https://www.forbes.com/sites/johnbrinkley/2018/08/14/trump-is-losing-his-trade-war/#113f39fb12b8

3 Myths About Your Social Security Filing Age

My Comments: Social Security benefit payments are critical for millions of Americans. When you apply and the amount of money you are entitled to is a decision fraught with uncertainty.

Since none of know how our life is going to play out, all we can do is develop an understanding of our choices so that we can at least make an informed decision, even if life ultimately throws us a curve ball. Just know that you are going to get about the same amount of money regardless of when you apply.

That’s because payments will end when you die. In the meantime, you can opt for a smaller check for a longer period of time or wait and get a larger check for a shorter period of time.

Know too that if you are the higher earner of the two, and you die first, then you are providing your survivor with more money per month if you wait. There is no real way to know the best answer.

July 30, 2018 by Jim Blankenship, CFP, EA

Figuring out when to claim your Social Security benefits is a tricky question, and people wrestling with the decision often rely on several widely followed rules of thumb. Unfortunately, doing that can potentially lead you astray, because these are generalities, not rules, and they aren’t as clear-cut as you might think.

Let’s take a long, hard look at three “facts” about Social Security filing age and the real math behind them. All three are only true to a point — and as you’re planning your Social Security filing age, you should understand the truth behind these three principles.

First, let’s look at the concept of delaying benefits.

1. You Should Always Delay Your Social Security Filing Age to 70

This one is the easiest to understand why it’s wrong — but the component of truth in it can be important, because it could work in your favor to delay. Of course, an absolute like this is going to be proven incorrect in some circumstances.

Most people know that if you start taking benefits early — as young as age 62 — your Social Security check will be lower than if you had waited until your full retirement age (FRA). And once you pass your FRA, your benefit grows each year beyond that until age 70, when it tops out. So, if you happen to be able to delay your Social Security filing age and you live a long time after age 70, over your lifetime you may receive more from Social Security than if you filed early. However, if you need the cash flow earlier due to lack of other sources of income or expect a shortened life span, filing early may be your only choice.

Filing earlier can provide income earlier, but depending on your circumstances you may be short-changing your family. When you file early, you are permanently reducing the amount of benefit that can be paid based on your earnings record. Your surviving spouse’s benefits will be tied to the amount that you receive when you file, and so if you delay to maximize your own benefit and your spouse survives you, you’re also maximizing the benefit available to him or her. This is assuming that your surviving spouse’s own benefit is something less than your own.

To see how this all works, consider this example. John, who is 62, will have a benefit of $1,500 available to him if he files for Social Security at age 66, his full retirement age. His wife, Sadie, will have a benefit of $500 available at her FRA. If John files at age 62, his benefit would be reduced permanently to $1,125 per month. When John dies, assuming Sadie is at least at FRA at the time, Sadie’s benefit would be stepped up to $1,237 (the minimum survivor benefit is 82.5% of the decedent’s FRA benefit amount).

On the other hand, if John could delay his benefit to age 68, he would receive $1,740 per month, because he would have accrued delayed retirement credits of 16%. Upon John’s death, Sadie would receive $1,740 in survivor benefits. By delaying his benefit six years, John would have improved his surviving spouse’s lot in life by over $500 per month. Of course, this would require him to come up with the funds to get by in life in the meantime, and so if he did have the funds available this would make a lot of sense. If he didn’t have other funds available, one thing that can help matters is if Sadie filed for her own benefit at age 62 — that would provide them with $375 per month while John delayed his benefits.

What to remember: The key here is that it’s often wise for the member of a couple who has the larger benefit to delay benefits for the longest period of time that they can afford, in order to increase the survivor benefit available to the surviving spouse. But it’s also often necessary to file earlier due to household cash flow shortages. As we’ll see a bit later, only the question of surviving benefits makes the idea of delaying benefits to age 70 a truism. Otherwise, it could be more beneficial to file earlier.

2. Increase Your Benefits by 8% Every Year You Delay Filing

This one again comes from a partial truth: For every year after FRA that you delay your Social Security filing, you will add 8% to your benefit. But the year-over-year benefit differences are not always 8%, and often the difference is much less.

It is true that if you compare the benefit you’d receive at age 66 to the benefit you’d receive at age 67, it will have increased by 8%. However, if you compare your age 67 benefit to your age 68 benefit, it will have increased by 7.41%. This age 68 benefit is 16% more than the age 66 benefit, but only 7.41% more than the age 67 benefit. This is because the benefit increase is based on your FRA benefit amount (age 66 in this example), not the amount you could have received at age 67.

What to remember: Don’t be distracted by the differing percentage changes over the years. The bottom line is, Social Security benefit amounts themselves do increase by approximately 8% per year overall every year you wait – but often the year-over-year percentage increase is less. An increase of 8% is an approximation, but in reality, your increase will often be less.

3. The Break-Even Point is 80 Years of Age

I’ve often quoted this as a generality — rarely pinning it down to a specific year but giving the range of around 80 years old. It’s not that simple, though, when you consider all the different ages that an individual can file. The break-even point is the age at which your lifetime payment amount would be equal, whether you claim Social Security early or late, and if you live beyond that, you would come out ahead by waiting. And if you don’t live to the break-even age, it’s better to claim earlier.

For example, when deciding between a Social Security filing age of 62 versus filing at age 63, your break-even point occurs at age 76 (when your FRA is age 66). But when deciding between age 63 and age 64 (with FRA at 66), the break-even occurs at age 78.

On the other end of the spectrum, when choosing between filing at age 69 versus filing at age 70 (FRA of 66), the break-even occurs at age 84 — considerably later than age 80. The break-even for the decision to file at age 68 versus age 69 occurs at age 82.

What to remember: The year-over-year break-even point varies, depending on which Social Security filing age you’re considering. If the two options are earlier (before FRA) the break-even point occurs before age 80. If they are both at or around FRA, then the break-even occurs right around age 80. But if the Social Security filing age you’re considering is near age 70, count on the break-even point being much later, as late as age 85.

Guess How Many Seniors Say Life Is Worse in Retirement

My Comments: After 40 plus years as a financial/retirement planner, I’ve lost count of the number of people who, as they approach retirement, ask whether they’ll have enough money. Or the corollary, when will they run out?

If you expect to have a successful retirement, ie one where you run out of life before you run out of money, you had better have your act together long before you reach retirement age. Here’s something to help you get your arms around this idea. https://goo.gl/b1fG39

Maurie Backman \ Feb 11, 2018

We all like to think of retirement as a carefree, fulfilling period of life. But those expectations may not actually jibe with reality. In fact, 28% of recent retirees say life is worse now that they’re stopped working, according to a new Nationwide survey. And the reasons for that dissatisfaction, not surprisingly, boil down to money — namely, inadequate income in the face of mounting bills.

Clearly, nobody wants a miserable retirement, so if you’re looking to avoid that fate, your best bet is to start ramping up your savings efforts now. Otherwise, you may come to miss your working years more than you’d think.

Retirement: It’s more expensive than we anticipate

Countless workers expect their living costs to shrink in retirement, particularly those who manage to pay off their homes before bringing their careers to a close. But while certain costs, like commuting, will go down or disappear in retirement, most will likely remain stagnant, and several will in fact go up. Take food, for example. We all need to eat, whether we’re working or not, and there’s no reason to think your grocery bills will magically go down just because you no longer have an office to report to. The same holds true for things like cable, cellphone service, and other such luxuries we’ve all come to enjoy.

Then there are those costs that are likely to climb in retirement, like healthcare. It’s estimated that the typical 65-year-old couple today with generally good health will spend $400,000 or more on medical costs in retirement, not including long-term care expenditures. Break that spending down over a 20-year period, and that’s a lot of money to shell out annually. But it also makes sense. Whereas folks with private insurance often get the bulk of their medical expenses covered during their working years, Medicare’s coverage is surprisingly limited. And since we tend to acquire new health issues as we age, it’s no wonder so many seniors wind up spending considerably more than expected on medical care, thus contributing to both their dissatisfaction and stress.

And speaking of aging, let’s not forget that homes age, too. Even if you manage to enter retirement mortgage-free, if you own property, you’ll still be responsible for its associated taxes, insurance, and maintenance, all of which are likely to increase year over year. The latter can be a true budget-buster, because sometimes, all it takes is one major age-related repair to put an undue strain on your limited finances.

All of this means one thing: If you want to be happy in retirement, then you’ll need to go into it with enough money to cover the bills, and then some. And that means saving as aggressively as possible while you have the opportunity.

Save now, enjoy later

The Economic Policy Institute reports that nearly half of U.S. households have no retirement savings to show for. If you’re behind on savings, or have yet to begin setting money aside for the future at all, then now’s the time to make up for it.

Now the good news is that the more working years you have left, the greater your opportunity to amass some wealth before you call it quits — and without putting too much of a strain on your current budget. Here’s the sort of savings level you stand to retire with, for example, if you begin setting aside just $400 a month at various ages:

You can retire with a decent sum of money if you consistently save $400 a month for 25 or 30 years. But if you’re in your 50s already, you’ll need to do better. This might involve maxing out a company 401(k), which, as per today’s limits, means setting aside $24,500 annually in savings. Will that wreak havoc on your present spending habits? Probably. But will it make a huge difference in retirement? Absolutely.

In fact, if you were to save $24,500 a year for just 10 years and invest that money at the aforementioned average annual 8% return, you’d be sitting on $355,000 to fund your golden years. And that, combined with a modest level of Social Security income, is most likely enough to help alleviate much of the financial anxiety and unhappiness so many of today’s seniors face.

Retirement is supposed to be a rewarding time in your life, and you have the power to make it one. The key is to save as much as you can today, and reap the benefits when you’re older.

The Market Is Finally Getting the Joke

My Comments: I struggle, day to day, just like you, to figure out what the markets are going to do because so many of my friends and clients are exposed to market risk. Are you exposed to market risk? Does it worry you at all?

If not, you don’t need to read this. But if it does worry you, then perhaps a few minutes reading these comments from Scott Minerd will be good for you. And oh yes, there are ways to shift the risk of a downward correction to an insurance company and by so doing, preserve your principal and market gains from a crash.

Scott Minerd, February 21, 2018

The last two weeks have been pretty exciting, certainly a lot more interesting than anything we’ve been through over the last year. Given the recent market dislocation, there is a basis to rebalance portfolios and do trades to take advantage of relative repricing. At a macro level, it should not surprise anyone that rates have begun to rise—we have been talking about the Federal Reserve (Fed) tightening, we have been talking about how the Fed is behind the curve, how the market has not believed the Fed, and that someday this was going to have to get resolved, probably by the market having to adjust to the Fed’s statements. The market has now gotten the joke. I still don’t think the yield curve is accurately priced, but it is a lot closer today than where it was at the beginning of the year.

The concern, as I explained in A Time for Courage, is that now the market is moving from complacency—where it really did not believe the Fed was going to do what it said it was going to do—to a time when it has begun to realize that the Fed may be behind the curve. The market is now coming to believe that the Fed is not going to make three rate increases this year, it is going to make four. And so, rates start to rise and the whole proposition that the valuation of risk assets is based upon, which is faith in ultra-low rates and continued central bank liquidity, comes into question. As markets lose confidence in that view, investors have started to rearrange the deck chairs by repositioning portfolios.

Anytime we see strength in economic data, we are going to see upward pressure on rates. Upward pressure on rates is going to result in concern over the value of risk assets, and we are going to have a selloff in equity markets, or the junk bond market, or both. Credit spreads will widen. The reality of the situation, however, is that the amount of fiscal stimulus in the pipeline, the U.S. economy fast approaching full employment, the economic bounceback in Europe, and the pickup in momentum in Japan and in China are all real. Against this backdrop, even a harsh selloff in risk assets is not going to derail the expansion.

The Fed knows this, and for that reason the Fed is shrugging its shoulders and saying, “Okay, we don’t have a mandate around risk assets, but we do have a mandate about price stability and full employment. And it looks like we’re at full employment or beyond full employment, and the thing that seems to be at risk now is price stability. We’ve got to raise rates.”

What does that mean for investors? Markets are engaged in a tug of war between higher bond yields and the stock market. In the near term, the two markets will act as governors on each other: Higher bond yields will drive down stock prices, and lower stock prices will cause bond yields to stop rising and to fall.

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“The market is moving from complacency about the Fed to realizing that it may be behind the curve.”

Scott Minerd

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An analogue to today may be 1987. That year began against the backdrop of 1985/1986, which had seen a collapse in energy prices. In 1986 oil prices were very low, and concerns around inflation had diminished. The Federal Reserve had dragged its feet on raising rates. As we entered 1987, in the first few months of the year the stock market took off. By the time we got to March, stocks were up 20 percent. In April there was a hard correction of approximately 10 percent. As fear overtook greed, market participants became cautious on stocks. Going into that summer the stock market rallied another 21 percent from the April lows. By August we were at record highs; interest rates started to move up; the Federal Reserve was raising rates; the dollar was under pressure; and there were increasing concerns over inflation. The concern was the Fed was behind the curve as it accelerated rate increases. By October things were becoming unhinged. Bond yields had risen in the face of an extended bull market in stocks. The market reached a tipping point and began its infamous slide. By the time we got to the end of the year, the stock market for the year was up just 2 percent. That was the stock market crash of 1987, which wiped out about a third of the value of equities in the course of a few weeks.

Today, investors have the same sorts of concerns they had in 1987. For now, the market has gotten a reprieve. Soon, investors will start to have confidence in risk assets again. Risk assets like stocks will start to take off. Eventually, the perception will be that the Fed is falling behind the curve because inflation and economic pressures will continue to mount. Eventually the Fed will acknowledge that three rate hikes will not be enough, but it is going to raise rates four times in 2018, and market speculation will increase that there may be a need for five or six rate hikes. That will be the straw that breaks the camel’s back.

This is a highly plausible scenario for this year, but who knows how these things play out in the end. The reality today is that the economy is strong, interest rates are rising, and equities look fairly cheap. The Fed model right now would tell you the market multiple should be 34 times earnings. That is just fair value, not overvalued. And based on current earnings estimates for the S&P this year, the market multiple is closer to 17 times earnings. If stocks go down by 10 percent, the market multiple would drop to 15 times earnings. This would be getting into the realm of where value stocks trade. If there were a 20 percent selloff, you’re at a 14 times multiple. These market multiples don’t make sense. Markets do not price at 14 times earnings in an accelerating economic expansion with low inflation.

The Retirement Savings Mistake That 68% of Baby Boomers Regret

My Comments: I have a client, age 58 and single. I’m unsure just how much money she has set aside for her future. I have every reason to think she’s healthy and given statistical probabilities, will live another 30 years or more.

She lives a very busy professional life and finds it hard to focus on her financial future. The language, the concept, the details are outside her comfort zone, so she ignores them until I make a lot of noise in her ear.

My challenge, as a financial professional, is to somehow influence her thinking so that she doesn’t find herself 20 years from now with not enough money to pay her bills. If she does live to 88, she’s still going to have core expenses to pay.

Things like groceries, cable TV, a phone, food, insurance, new clothes from time to time. Even with no car to worry about, you still need to call Uber if you need to get to a doctor’s office. And they aren’t free. Who knows if Social Security will still be there.

These words from Wendy Commick should make you think hard about the possibilities.

Wendy Connick Jan 13, 2018

As the baby boomers retire in large numbers, they’re finally getting the chance to see how well their retirement planning (or lack thereof) has paid off. Unfortunately, many boomers aren’t happy with the results: 68% wish they’d saved more, and only 24% are confident that they have enough money to last throughout their retirement, according to a study by the Insured Retirement Institute.

The good news is that you can learn from the average boomer’s mistakes. Here are some ways to make sure your savings will see you through retirement.

Setting your retirement savings goal

The best way to set a retirement savings goal is to come up with a list of all the expenses you’ll face during retirement, add 10% for unexpected expenses and fun stuff, and use the total for the basis of your retirement planning. For example, if you add up all your expected retirement expenses and reach a total of $3,000 per month, then add 10% ($300) and multiply the sum by 12 to get your minimum annual retirement income goal: $39,600.

Assuming you’ll be able to take 4% of your entire retirement savings account balance as a distribution each year, (though the “4% rule” has its problems), then you can turn your retirement income goal into a savings goal by dividing it by 4%. For example, divide the above goal of $39,600 by 0.04 to get a savings goal of $990,000.

If you don’t want to go through this process, or you’re unsure what your expenses will be in retirement, then there are number of shorthand ways to find your retirement savings goal that, though less precise, will at least get you in the ballpark.

Planning your contributions

Once you have a savings goal in mind, you can work backwards to figure out how much you need to contribute to reach that goal. The good news is that you don’t actually have to save $990,000 in order to accumulate that much money in your retirement savings accounts: Wisely investing the money you contribute will help you grow those funds by a significant percentage each year. The sooner you start contributing, the more time that money will have to grow.

You can use a savings calculator to figure out how much you’ll need to contribute to your retirement accounts each month in order to hit your savings goal. For example, let’s say your goal is to have $990,000 by the time you retire, you plan to retire 30 years from now, and you have nothing saved so far. Assuming you can earn an average of 8% per year on your investments, a savings calculator will tell you that you need to save $8,092 per year — approximately $674 per month — to hit your goal.

I can’t save that much!

If the contributions you’d need to make to reach your goal are way too high, you have a few options. The simplest option is to delay retirement by a few years. Returning to the above example, let’s say you decide to retire in 33 years instead of 30 years. Delaying retirement by just three years would reduce your annual contribution goal from $8,092 to $6,281, which works out to $523 in contributions per month. You could hang on to $151 more each month while still ending up with the same amount of money when you retire.

Another possibility is to reduce your savings goal by coming up with other sources of retirement income. For example, if you decide to get a part-time job during retirement and are sure you can make at least $1,000 per month at that job, then the amount of annual income you’ll need from your retirement savings accounts will drop from $39,600 to $27,600. That means your new retirement savings goal will be $690,000. If you’re retiring 30 years from today, you’ll need to contribute $5,640 per year — $470 per month — to hit your new goal.

Finally, you could boost your retirement savings contributions by finding more income today or reducing your current expenses. Increasing your income could mean getting a raise, lobbying for a promotion, switching to a higher-paid job, or supplementing your income with a part-time job or side gig. Reducing your expenses could mean making some short-term sacrifices, such as cutting back on entertainment expenses, to free up some more money.

One extremely helpful way to reduce expenses is to pay off any credit card debt you’re carrying. Getting rid of those monthly payments can save you a boatload in interest charges, freeing up that money for retirement savings.

Saving money is a huge challenge for the average American, but that means you can be above average just by spending a little time on retirement planning. And once you retire, unlike those unfortunate baby boomers, you’ll be confident that you have plenty of money to finance your retirement dreams.

How to Pay Off Your Mortgage Before You Retire

My Comments: Retirement is the third stage of our lives. #1 is childhood when our needs are provided for by adults; #2 is adulthood when our needs are met by our efforts; and #3, retirement when you quit working for money and money has to work for you.

If you’re lucky, you don’t need to learn a new skill set to retire successfully. Or you understood what had to happen before you retired. One of those things is not having to pay more than necessary for shelter.

In a perfect world, you are happy with where you live and like whatever it is you live in. And before you retired, you figured out how much extra you had to pay each month to make the mortgage disappear just when you quit working.

Wendy Connick, Sep 28, 2017

Housing is the single biggest monthly expense for many families, so if you don’t have a housing payment to worry about during your retirement years your savings will last you a lot longer. Paying off your mortgage by the time you retire isn’t complicated; it just requires a little preparation.

Your repayment plan

If you know how much you owe on your mortgage, your interest rate, and how long it will be before you retire, figuring out how to get rid of the mortgage in time isn’t difficult. You can even use a mortgage payoff calculator to see the effect of adding extra payments.

For example, let’s say that you owe $220,000 on your mortgage at 5% interest, and it’s scheduled to be paid off in 25 years. However, you plan to retire in 20 years. Making an extra principal payment of $170 per month would get you paid off in 19 years and 11 months, and incidentally save you just over $38,000 of interest over the life of the loan.

Sticking to the plan

Coming up with a repayment plan is the easy part — sticking to it is a lot harder. Scraping up an extra $170 every month for the next 20 years can be a daunting task to undertake. Fortunately, there are ways to make saving that extra payment a lot easier.

First, make sure that the extra payments you make are to the mortgage’s principal, not a combination of principal and interest like your regular payments. Putting the extra money into the principal means that the loan will be paid down much faster, and you’ll save a lot more money on interest during the life of the loan.

Next, find a way to automate your extra payment. Ideally, this would mean setting up an automatic extra principal payment with your mortgage company, to happen along with your regular monthly payment. If the mortgage company can’t or won’t set this up for you, the next best option is to do an automatic transfer from your checking account to a special, dedicated savings account.

The biggest benefit of the second approach is that rather than taking a single large sum each month, you can spread your transfer out into multiple tiny transfers, which will be less disruptive to your checking account balance. For example, instead of doing one $170 transfer each month, you could transfer $5.70 every day from your checking to the special savings account. When it’s time for you to make your mortgage payment, you just make the extra principal payment straight from the savings account.

The biweekly payment option

Switching to a biweekly (every other week) payment system, instead of a monthly one, is another way to pay off a mortgage faster — assuming that it will take care of your loan balance in time. Splitting your monthly payment into two biweekly payments works because there are 52 weeks in a year, so it comes out to the equivalent of 13 monthly payments per year instead of just 12.

The main argument against biweekly payment schedules is that the extra money goes to both principal and interest, just like your normal payments. That means that your extra payment won’t go as far toward paying off the loan quickly as if you’d made the same extra payment toward principal only. Also, many lenders charge to make the switch from monthly to biweekly payments. So unless you have a significant reason to do so, stick with making extra principal payments. It’s the simplest way to have a retirement free from monthly housing bills.