Very short note today as we do our best to stay strong amidst the Coronavirus crisis.
In talking to clients, friends, neighbors, and “kids” of all ages, the questions come down to, “Is there anything financially proactive we can be doing at this time?”
Here are just two answers among many:
1) Increase your 401k (or IRA) contribution to the MAX today. If history is a guide, market downturns like the one we are currently experiencing come rarely, as in once every 10-30 years*. Regardless of history, the present state of affairs indicates that less debt and more savings is the way to go.
- Either 401k or IRA contributions can be tax deductible (or not) depending on your tax bracket; and both are a form of greater savings for later in life.
- Maxing out at today’s (down 25% from the highs) equity index values can increase long-term returns.
- You may “max out” by end of summer or early fall… meaning bigger paychecks toward year-end. Ask me about this.
2) Consider refinancing your mortgage. And ask for an illustration of both a 30-year and 15-year refinance. With rates as low as 3.75-4%** (or lower) on a 15-year, even though the monthly payment is higher, borrowers can reduce a sizable amount of interest paid over the course of a mortgage term.
- *Past performance is no guarantee of future results. Please see here.
- **https://www.nerdwallet.com/mortgages/refinance-rates/30-year-fixed
P.S. And if you were waiting for the “Warm-Up for Retirement” for all those stuck at home with spouses… you will understand why this topic takes longer to compose. Please see next week’s edition.