The news is filled with celebrity passings this last week. Ed McMahon lived a long and good life. The other three Michael Jackson, Farrah Fawcett and Billy Mays had not reached conventional “old age”.  This demonstrates the importance of estate planning before a health crisis hits or something sudden happens. By estate planning I mean a short list of items:

  • Do you have a valid, updated will and/or trust for your estate that expresses your wishes? (Moving states, divorce, inheritance are reasons to update.)
  • Do you have sufficient life insurance for your family to continue your current lifestyle? (new baby or life change may call for more insurance)
  • Have you protected your estate financially with Long Term Care Insurance?

Without estate planning you are setting your family up for:

  • Leaving your family without the financial resources necessary to carry on without you.
  • Longer time to settle your estate.
  • More expense in settling estate and less money for your family.
  • Family conflict if your wishes were not in a will or trust. This destroys the family left behind.

Move estate planning to the top of your to-do list so you can live without regret. Also check-in with your parents and siblings to make sure they have taken care of the three questions above. Families are complex and if another member of your family hasn’t taken care of their affairs you may end up dealing with the aftermath.

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Last night at an event I was asked my opinion on the whether individuals should enter retirement with no mortgage.

I am in the camp that successful retirement plans have no mortgage. It is a function of cash flow. If you have no mortgage then you do not need to have your portfolio producing that extra income. Having no mortgage in retirement has a substantial impact on managing your monthly living expenses and projecting what you will need in nest egg.

A widely used reason to keep a mortgage is to keep the interest deduction. While I believe paying taxes is not our patriotic duty and like to minimize taxes, it has to be based on financially sound calculations. Keeping a mortgage to have a deduction just doesn’t work. If you keep a mortgage for a deduction you are going to keep paying thousands of dollars in interest to pay fewer taxes. I challenge you to execute the math.  

 Here is an example with some round numbers. You pay $10,000 in mortgage interest and you are in the 25% tax bracket, which gives you a tax savings of $2,500.

 The end result is you pay $10,000 in interest to have $2,500 refund. It is trading $1 for $0.25. The only one happy about this equation is the bank!

I want to stress that paying off a mortgage is only one part of a sound financial game plan for retirement. While I like no mortgage in a retirement plan, I also do not encourage you to put all your extra income into paying off your mortgage instead of investing. Each financial plan is specific to your goals, timeframe until retirement and investment tolerance. Don’t make this decision without looking at the entire picture and developing your game plan.

Advisory Services offered through Axiom Advisors, LLC. A registered Investment Advisor Securities offered through Cambridge Investment Research, Inc. a Broker/Dealer member FINRA/SIPC Axiom Advisors, LLC and Cambridge Investment Research, Inc. are not affiliated.