Jonathan Pond

Ponderings

Retire Your Debt Before You Retire

One of your most important financial goals should be to pay off your debt before or soon after you retire. Consider the example of someone who retires with mortgage and other debt requiring monthly payments of $2,500, and it will take ten years to pay off the loans. This person will need an additional $300,000 in retirement savings to be able to enjoy the same income as another retiree who is debt free. If you are still many years from retirement, you have two challenges. First, avoid going into more debt which is no doubt tempting, but serves primarily to add more impediments to reducing and eliminating the burden. Second, put pencil to paper to devise a plan to pay off all debt within a reasonable period.

Smart Money Tips

  • Join the “one percenters.” I refer to a “one percenter” not as a member of the vilified top 1% of the wealthiest Americans; rather my 1% savings program might help you or a younger generation family member end up in that lofty group. The program involves committing to saving 1% of your gross income each month for a year. For example, an individual or family with $75,000 in income would save 1% of that amount, or $750 per month. Each year thereafter, the monthly savings would increase by 0.1% of income, i.e., to $825 in the second year and $900 in the third year. If this program is followed for a decade, using a $75,000 income as a starting point, and the money earns 5% per year, there will be $185,000 in the kitty! Over the decades you could amass a massive amount of money with minimal pain since the amount of the annual increase is Lilliputian.
  • Name contingent beneficiaries for your retirement accounts. You’re required to name a primary beneficiary or beneficiaries for your retirement accounts. But that’s not enough. You should also name contingent beneficiaries in case the primary beneficiary is unable to receive the retirement money after your demise. Otherwise, all sorts of tax and other complications may arise. Naming contingent beneficiaries may also enable your primary beneficiaries, who may have less of a financial need, to pass some of the inherited IRA or other retirement account directly to a contingent beneficiary through what is known as a disclaimer. A beneficiary may disclaim all or part of their inherited assets.
Food for Thought

Formal education will make you a living; self-education will make you a fortune.
      -Jim Rohn

Money Can Be Funny

The trick is to stop thinking of it as “your money.”
     –
IRS Auditor

Word of the Week

lazaretto noun (laz-uh-RET-o) – A medical facility for people with infectious diseases; a building or ship used for quarantine.

Origin: Italian version of Lazarus, the name of a beggar covered in sores as described in the New Testament.

The Ebola crisis was causing fits for officials who were under pressure to designate lazarettos for the quarantine and treatment of patients.