Rapid fire answers to common financial questions

The email questions I get have been really backing up so I took a segment on this week’s The Pete the Planner Radio Show to rapid-fire answer four of them. Boom!

1) We built a house 9 yrs ago. We almost doubled our payments & should have it pd off in 2 years. We only have 1 RV payment. No other debt. Some people have told us we are stupid for paying it off. I am 52 & my spouse 55. Are we doing the right thing?

Genius! This is a general statement, but whatever the masses are doing your best bet is to do the opposite. Not only will paying off your home free up the amount of your mortgage per month, but since you have been paying double payments, you are now “saving” double mortgage payments each month. This is a great way to head into your retirement years.

2) My wife is starting a new job in a school. They only offer a 403(b); should we use this or an IRA?

A 403(b) is basically the same thing as a 401(k). Unless there are high fees or terrible investment options (which I don’t expect there to be), you should use this as a way to save for retirement. If it makes you feel better you can call it a 401(k) in your head.

3) I would like your opinion on protecting kids with their identities being stolen. Since they have no credit or any other activity tied to their social security number I’ve heard that their identity is easier to steal than adults.

This isn’t personally something I’m worried about, but if you are worried about it than it’s a valid concern. I believe that if it bothers you enough to impact your quality of life it’s okay to throw a reasonable amount of money at it to get some peace. Go out and buy identity protection for your kid and then sleep easy.

4) Age early 50’s. $900k 401k, $80k emergency funds, owe $300k on home. We make $250k. We contribute to our 401k-100% Roth and paying taxes now. 10% of our total is Roth? Is this the recommended contribution option?

To understand this question, reader, you’ll have to know that some companies are now offering two versions of 401(k)s. The first is the traditional 401(k), or the pre-tax version. The funds placed in this 401(k) aren’t taxed initially. Then there is a Roth 401(k) option which is funded with after tax money. The theory behind this is that you want to pay taxes on your money when you are in a lower tax bracket. So back to their question. $90,000 of their 401(k) is Roth, the rest is fully-taxable. They are in a high tax bracket currently, but it seems unlikely they’ll reach the peak of their bracket by retirement so… at this point it’s sort of a wash. If you think you’ll move up a bracket by then, go ahead and contribute more to the Roth. My only other nudge toward the Roth would be to help diversify your income from a tax perspective, unless for some reason you feel like your taxes will be less near retirement. Sort of a roundabout answer, but there it is.

Prefer to listen to my rapid fire answers to these four email questions? I’ve got you covered. Listen to this segment from The Pete the Planner Radio Show on WIBC below:

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