Friday, February 24, 2017

LVCI's Retirement Savings Advice

Philadelphia pension fund lost $149 million in 2016
Claudia Vargas | Philly.com (February 23, 2017)
"The 2016 loss was due to market investments that went south, losing 3.17 percent of the fund’s value, and a reduction in the assumed rate of return from 7.8 percent ..."

Here's What I Did
When I was working I had the choice to stash a bunch of loot in my employer's 401k. Instead I paid far larger amounts into my mortgage payments. I doubled the payments. In the last half I even made triple payments, This enabled me to payoff a 30 year mortgage in just 13 years saving me over $68,500 in interest.

My Reasoning Behind It
I thought it made little sense to have an oodle of money which would end up going towards another 15 years worth of mortgage payments after I retired. My 401k suffered nearly the same fate as Philadelphia's pensions fund. It came no where close to earning the $68,500 I saved by paying ahead on my mortgage. So this strategy panned out very well for me.

This worked out extremely well on taxes as well. Owning a home--rather then renting--allowed me to take large deductions while I was working. After retirement--since 401k savings are taxable--it allowed me to take out much less then what I'd be taxed otherwise.

This allowed me to own my home free a clear years ahead of time. This 2,117 Square foot home I'm living in costs me 1/5th in taxes what a small apartment rents for these days.

Here's the bottom line. When it comes to financial wheeler dealers they always have your money. As long as your money is tied up some where whether it be in debt or in a financial cloud it's never really yours. These gauys have lots of skin in the game--usually it comes at your expense. There's no sense in having a bucket of money stashed away still owing a large amount of debt come retirement.

Gambling on the market with these sharks like Philly did likely will end up the same way. Anyone who believes they can make a boatload of money without working for it or without paying down debt thinking they are smarter are fooling themselves. The game is rigged against them

My alternate advice is--if someone doesn't want to follow what I did--put money aside which is FDIC insured. It may not pay out the kind of money these so-called investment advisors made with their false promises but by doing it so in this way one can be assured it will actually still be there at retirement.

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