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This week on the Pete the Planner Show, Pete is back home in the office studio after a year of pandemic evasion!
Remember: In the first six months of 2021, we’re going to make over five families’ financial lives, LIVE on the air! WE’RE GIVING AWAY FIVE FREE HEY MONEY, MEMBERSHIPS to walk with them across six months telling their stories about their struggles in personal finances. Check us out!
No time to listen? Here’s a preview of what happened and when:
RADIO NEWS: [5:25]
- We have a new radio station affiliate! Thank you to WSHY in West Lafayette, IN!
MAILBAG QUESTION 1: [6:15]
- “I can’t believe it, but we survived the year without going into too much financial damage. We did spend through out emergency fund of $15k and added about $5k of debt, but being that I was jobless for 9 months, I’m okay with that. I have a job now, should I focus on paying off debt or building back up the emergency fund?“
- Pete: You did it! The plan worked!
- Damian: Great job building up that emergency fund! You used it for what it was designed to do. Now, rebuild it! Get that emergency fund set up, whatever you can amass quickly. Maintain a thin lifestyle to get rid of that debt. Then head back to toss more into the emergency fund.
- Pete: Whatever is coming next is still coming. Understand that you need to re-secure yourself.
MAILBAG QUESTION 2: [16:25]
- “I’m 52 and work full time. My wife is 53 and works part time. Combined income: $100k/year. Empty-nesters. Current status: $75k in cash, $760k in Roth and Traditional retirement accounts, and $80 in a high-yield corporate bond that pays monthly dividends at 5% annual return based on the bond price. These dividends are reinvested. Annual contribution to retirement accounts is $30k per year. In 2020, I received 4% 401K match and another 10% in ESOP. — Our only debt is mortgage balance of $127k on our home worth $350K. Principal and interest is only $965/month. If we don’t pay any additional amount towards the principal, our mortgage will be paid off September of 2034 when I’ll be 63 and my wife 64. HOWEVER, if we can figure out the health insurance puzzle, I would like to retire at age 60 and pay off the mortgage by then. We will be receiving an inheritance of about $300k (soon). My plan was to pay off the mortgage balance (now) and free up that $965/month, but here are the THREE financial scenarios I can think of and we want to know what could be the best option according to you two:
- Scenario 1: pay off the mortgage balance of $127k right now and invest some or all of the $965/month that’s been freed up
- Scenario 2: don’t pay off the mortgage, invest what is representative of $127k in equities, then pay off the mortgage at age 60. Without any extra principal payments, we will have a balance of $60k at age 60 and pay that off.
- Scenario 3: invest the $127k into the high-yield corporate bond fund and redeem $500/month in dividends and put that towards our mortgage principal. We can ride out any share price decrease before we cash it in, so I’m not concerned about the value at age 60. With this, the mortgage will be paid off in 2029.
- Pete: He includes a spreadsheet! Wow……it shows us various rates of return to show us his balance of when the mortgage will be paid off. His mortgage rate is 3.25%
FIND OUT HOW THEY ANSWER!! — click PLAY below for the full show.
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Peter Dunn a.k.a. Pete the Planner® is an award-winning financial mind and a former comedian. He’s a USA TODAY columnist, author of ten books, and is the host of the popular radio show and podcast, The Pete the Planner Show. Pete is considered one of the foremost experts on financial wellness in the world, but he’s just as likely to talk your ear off about bass fishing.