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Which is better : making extra payments on my mortgage or you own ? What is the long-term track record of your holdings , putting that additional money into savings ? and how have they compared to their indices ? Is your allocation The best debt is no debt , so eliminating your mortgage is a great appropriate for your goals ? Finally , remember that if you are in the thing . However , you shouldn ’ t rush to do so at the expense of accumulation phase of your investing life , you shouldn ’ t be rooting having a cash reserve and a robust savings plan for your future . A for the market to soar , for down and flat markets offer opportunities cash reserve that can cover your living expenses for 6-12 months is to buy investments at lower prices . From 1934 until the end of 2015 , essential . Suppose you lose your job – an emergency cash reserve the S & P 500 ** returned an average of 10.8 % per year with dividends can help carry you through the lean months as you search for a reinvested . You can ’ t predict how the markets will perform in the new one . Don ’ t count on tapping the equity in your home in an short term , but sticking to a disciplined savings strategy is smart for event like this ; it ’ s tough to qualify for a home equity loan without the long term . showing employment and income . Beyond your emergency reserve ,
My son is ready to go to college , and we haven ’ t saved enough to you should be systematically saving for your retirement . A financial cover the cost . What ’ s the best way to help him ? advisor or even an online calculator can help you determine how
Your financial security should take priority over paying for your much you need to save based on your goals . Once you ’ ve done these children ’ s education ; for while there are endless borrowing options for things , you can consider making extra payments toward the principal college , there are no loans for retirement . If you have earned income on your mortgage , which will help you pay off your house sooner . to spare – meaning you ’ re living comfortably AND contributing It doesn ’ t seem like my investments have made much money over regularly to your retirement accounts – you can use it to pay a portion the last couple of years . What should I do ? of your son ’ s tuition . Talk with your accountant and financial advisor Since the beginning of 2015 – nearly two years ago – the MSCI World about contributing the money you have to a 529 savings account ***. Index has returned under 4 % ( as of October 18 , 2016 ). The S & P Total Doing so can offer you a PA state income tax deduction , and you can U . S . Stock Market Index has returned 7.6 % during the same time put it in the money market of the 529 to avoid market fluctuations period and the MSCI Emerging Markets Index has lost 1.75 %*. So , and immediately withdraw it to pay tuition . To plan for the rest of markets haven ’ t been lighting the world on fire over the last couple of your son ’ s expenses , the first step is to complete the FAFSA ( Free years . Still , if you ’ re concerned about your returns , it ’ s worth looking Application for Federal Student Aid ) at fafsa . ed . gov to potentially into a few things . One , what are the expenses of the investments qualify for aid , including grants , scholarships and federal loans . These things almost never cover the full cost of college , so your son can consider applying for private loans , which should be in his name . Because most college-bound kids have no credit history , parents generally need to co-sign these loans . Finally , talk with your son about the cost of college and the financial implications of various schools . His heart may be set on an expensive choice , but it ’ s worth factoring cost into the decision-making process . Sometimes when students are shown the difference that cost makes in their future loan payments , they begin to see some advantages of choosing a less expensive school .
This Industry Insight was written by Sara Botkin .
Sara Botkin is a Certified Financial Planner™ professional and president of Botkin Family Wealth Management in Peters Township . Visit www . botkinfamilywealth . com or call 724.941.1737 for more information . Have a question for our next “ Money Matters ” column ? Email Sara at sara @ botkinwealth . com .
Securities offered through LPL Financial , member FINRA / SIPC . Investment advice offered through Private Advisor Group . Botkin Family Wealth Management and Private Advisor Group are separate entities from LPL Financial . The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual . No strategy assures success or protects against loss . Investing involves risk including loss of principal .
* The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets . The S & P Total Market Index is designed to track the broad equity market , including large- , mid- , small- and micro-cap stocks . The MSCI EM ( Emerging Markets ) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of the emerging market countries of the Americas , Europe , the Middle East , Africa and Asia . All indices are unmanaged and cannot be invested into directly . Past performance is no guarantee of results .
** The Standard & Poor ’ s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries .
*** Prior to investing in a 529 Plan , investors should consider whether the investor ’ s or designated beneficiary ’ s home state offers any state tax or other benefits that are only available for investments in such state ’ s qualified tuition program . Withdrawals used for qualified expenses are federally tax free . Tax treatment at the state level may vary . Non-qualified withdrawals may result in federal income tax and a 10 % federal tax penalty on earnings . Please consult with y our tax advisor before investing .
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