Straight To The Point:

Be careful of making assumptions about certain areas of your financial plan. Some of these assumptions could be correct, but they could just as likely be wrong.

First Things First:

  • 1:05 – In The News: A recent USA Today article explains carrying debt past the age of 75 is the new normal.
  • 5:06 – Mailbag: Hank asks whether he should invest all of his savings into a Roth IRA if his primary concern is taxes.

The Real Deal:

Bad Assumptions: Your Roth IRA Or Traditional IRA Will Save You Money.

  • 10:10 – To be clear, we believe a Roth IRA will save you money in the end, but we still want to address this assumption. Historically, we’re in a period of high deficit and low tax rates. This means, most likely, that taxes will rise in the future. Therefore, it’s better to pay the tax on your investments now than later on your gains. If you’re invested in a traditional IRA, your initial investments aren’t taxed. However, Uncle Sam will collect his cut of your gains. On the other hand, the government taxes your initial investments into a Roth IRA, but they allow you to keep your gains. It’s cheaper to pay the tax on your principal than it is your gains, especially when we’re expecting taxes to rise.

Bad Assumptions: Delaying Social Security Will Yield The Most Income.

  • 13:09 – Social Security is all about longevity. You see, the longer you wait to take your benefit, the larger the amount you’ll be able to take. However, that doesn’t necessarily mean waiting will yield you the most money. If your life expectancy is relatively short, it might be better for you to begin withdrawing your Social Security sooner rather than later. It all depends on your family history. Work with your advisor to determine when to withdraw your benefit.

Bad Assumptions: Putting Money Into Bonds Will Create A Safer Portfolio.

  • 16:09  – We’ve seen interest rates increasing lately, and the government plans to hike them again in the future. Although we’re in a period of relatively low interest rates, it’s safe to say we’re in a rising interest rate environment. The problem with bonds is their value tends to decrease in this environment. If you shift your portfolio into bonds, you could take a hit. After all, you don’t know when you’ll need that money, and you might not have time to wait on the bond market to cycle around.

Bad Assumptions: Taking A Lump Sum Is Always The Best Approach.

  • 19:39 – This has to do with pensions. When you retire, if you’re lucky enough to have a pension, you’ll probably have the choice to take a lump sum or withdraw your pension monthly. While you might assume taking the lump would yield the most income, you once again need to examine your life expectancy and work with your advisor to determine the best strategy.

Beyond The Zone:

The host: Chris Patterson – EmailWebsite – Tax Free Retirement Toolkit – Call: 904-285-4489

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