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Experts stress debt reduction before retirement

September 16, 2009 by  

Experts stress debt reduction before retirementAs the value of investment portfolios has shrunk during the financial crisis, many Americans who are nearing their retirement age may benefit from the tips provided by veteran financial advisors.

Scott Hanson and Pat McClain have more than 20 years of experience working with employees of telecommunications and utilities companies, and they say many people are reexamining their priorities these days.

"Some are intentionally choosing to simplify – to live in smaller homes, collect less stuff and drive smaller, more fuel-efficient cars," says Hanson.

"As a financial advisor, I’m pleased to see this trend," he adds.

They further stress the importance of trying to eliminate as much debt as possible, especially when approaching retirement age.

A competent advisor is also important, especially one that can offer a holistic approach to creating a sound financial and investment plan.

"Clients and their financial needs come in all shapes and sizes, and it’s essential that they receive customized advice," says McClain, adding, "one-size-fits-all may be okay for some things, but it’s a seriously flawed approach to financial planning."

The two experts add that the trend towards staying on the job past the retirement age is only partially motivated by financial reasons. Just as important is the growing desire to remain active, productive and contributing members of society.

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Spencer Cameron

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  • http://cabinwood.blogspot.com Marcus Boyd

    I got the same advice over 10 years ago. We took it.

    You really need to do this folks. I am now over 65 and on SS. My wife, younger than me, was laid off over a year ago and still has not found a job. There are no Training and Development Manager positions open.

    We are in pretty good shape, because we paid off all large debts years ago. Our home and land are paid for. We sold our first house (Paid off) a couple years ago which boosted our available cash greatly. It was at the top of the bubble too.

    Both of us have IRAs in addition. She can’t touch hers for a few years, but I can withdraw Annual amounts from mine and pay the taxes on smaller amounts rather than waiting for the mandatory withdrawals to hit.

    If you have a longer time horizon I strongly recommend that you pay additional Principle with each house payment. The goal is to pay off the principle remainder of your loan before it normally would be paid off. You save an astounding amount of interest that way.

    An additional 10% on the “payment principle” will shrink the time needed to pay off a loan. If you can afford to pay an additional 10% of the total loan principle/year, you are paid off in less than 10 years. It worked for us.

    • http://donthaveone Beberoni

      You did good and planned ahead, which is what we all should do. Unfortunately, so many choose to live beyond their means during their working years, and accumulate debt instead of wealth, and never pay for their house, and owe and owe. Others, just figure that it is the governments responsibility to take care of them, and many have spent their entire youth letting us tax payers and the government pay for them. I myself have a pension coming from a previous employer that closed, through the union I was in there. I am building a nice pension through the stock market with my current employer, and if social security wasnt compromised the way it is, Id be set really good for my retirement years. But Im not counting on social security being there when I retire, which is another 15 years away for me, so I have kicked up my contribution to my pension, which my employer matches. The thing that makes me sick about it, is that all those thousands of dollars Ive put into the social security program for the last 35 years, is not going to be there, and I think of how much I would have had if this were a personal savings account where I was drawing interest on this money all these years, and that it would still be there. But like anything else, when the government gets their hands on it, it goes to hell in and handbasket. And there are those now that want to put our health care in their hands. I dont get it.

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