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© 2019 by Recker Financial LLC.

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The information on this site is provided “AS IS” and without warranties of any kind either express or implied. To the fullest extent permissible pursuant to applicable laws, Recker Financial LLC (referred to as "Recker Financial") disclaims all warranties, express or implied, including, but not limited to, implied warranties of merchantability, non-infringement and suitability for a particular purpose. Recker Financial does not warrant that the information will be free from error. None of the information provided on this website is intended as investment, tax, accounting or legal advice,  as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. The information should not be relied upon for purposes of transacting securities or other investments. Your use of the information is at your sole risk. Under no circumstances shall Recker Financial be liable for any direct, indirect, special or consequential damages that result from the use of, or the inability to use, the materials in this site, even if Recker Financial or a Recker Financial authorized representative has been advised of the possibility of such damages. In no event shall Recker Financial LLC have any liability to you for damages, losses and causes of action for accessing this site. Information on this website should not be considered a solicitation to buy, an offer to sell, or a recommendation of any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized.

Recker Financial LLC (“Recker Financial”) is a registered investment adviser offering advisory services in the State(s) of Michigan and in other jurisdictions where exempted.  Registration does not imply a certain level of skill or training. The presence of this website on the Internet shall not be directly or indirectly interpreted as a solicitation of investment advisory services to persons of another jurisdiction unless otherwise permitted by statute. Follow-up or individualized responses to consumers in a particular state by Recker Financial in the rendering of personalized investment advice for compensation shall not be made without our first complying with jurisdiction requirements or pursuant an applicable state exemption.

All written content on this site is for information purposes only. Opinions expressed herein are solely those of Recker Financial, unless otherwise specifically cited.  Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.

The 4 Financial Choices People Struggle With


1. Roth IRA vs. 401(k)


When it comes to saving for retirement, the first choice someone has to make is where they should save. The 401(k) is commonly the answer because it is usually the most convenient. Employers typically offer a pretty easy process to sign up and start saving right out of your paycheck. Other people have heard of starting a Roth IRA instead because a Roth IRA could get them tax-free income in retirement. When deciding between the two, here are the factors that you should consider:


Is there a match in my 401(k)?


If there is, you generally want to contribute up to at least the match in your 401(k). A match is free money.


Is my tax bracket going to be lower or higher in retirement?


If your tax bracket is going to be lower in retirement, a 401(k) is preferable. If your tax bracket could be higher, Roth IRA is preferable. It is often best to consult with a tax or financial planner to help project this.


What are the investment options within my 401(k)?


If you have limited investment options, it may make sense to look outside of the plan.


Would I ever need access to the funds short term or before age 59.5?


Roth IRA’s usually have more flexibility in accessing funds without taxes and penalties.


2. Pay down debt vs. saving more


No one likes having debt on their balance sheet. One choice everyone has to make is deciding what to do with extra cash flow. Should it be allocated towards savings for long term goals, or should it be used to pay down debt? Some advisers recommend always having a mortgage and invest as much as possible, where others recommend paying the debt off as fast as possible. Things to consider would be:


How high is the interest rate on my debt?


If your interest rate is very high, say 12%, you generally want to pay down debt as opposed to save and invest. If your interest rates are low or 0%, that generally favors saving and investing. The S&P 500 has averaged around 9% over the last 90 years. As a general rule of thumb, targeting the debt that is higher than the 9% rate should be done before investing long term.


Is your interest on debt tax-deductible?


If it is, this lowers your effective interest rate you pa, making it more advantageous to hold onto. However, if your interest rate is tax-deductible but still very high, you would still want to pay off that debt. You pay 100% of the interest you are charged while only being allowed to save taxes on a smaller percentage of your income.


How soon would you access the funds you would invest?


If your timeline for needing to access funds is short, that is more favorable to paying off debt. If you can wait a long time until you need to access the investments that favors investing. The longer you can wait, the more likely you are to achieve higher rates of return.


How much risk are you willing to take?


People that are at low risk should generally favor paying off debt. People that can take a market risk can lean more towards investing. When you pay off your debt, you have a guaranteed outcome. When you take funds and invest in the stock market, in most cases, you do not have a guaranteed outcome.


3. Term life insurance vs. whole life insurance


The choice of buying term life insurance versus a whole life policy has become confusing over the years. Some agents will push whole life policies on individuals in situations when they aren’t necessary. There are situations, however, in which a whole life or permanent policy does make sense. In order to make the best choice consider:


Will my need for life insurance last my whole life or only for a specific time?


This is something an insurance agent or financial planner should be able to help you figure out. If the need is for something like the loss of income while working or covering debt, usually a term policy is sufficient.


Do I need a tax-advantaged vehicle to save into?


If you are maxing out all your tax-advantaged savings vehicles like your 401(k) and IRAs, you may want to consider looking at a permanent policy. The cash value of life insurance grows tax-free. This should only be used when the alternative is saving in a non-tax-advantaged vehicle. If you are saving into a life insurance policy instead of something like a Roth IRA, this can set you back financially. Life insurance products charge considerably more in fees than a Roth IRA.


Do you have a pension or other fixed income?


If you have a pension or want to protect social security, most often this is best protected by a permanent policy like whole life, or a combination of whole life and term. If all your retirement income is generated from your retirement savings, term policies might be sufficient.


4. Social security at age 62 vs. full retirement age


Social security is a choice that many retirees struggle with. This is also one of the more personalized decisions someone has to make. There is usually a break even calculation done to figure out at what age would you have to live to in order to draw the most from social security. Every year after 62 that you wait, your monthly income you would receive from social security increases by 8%. In general, the crossover point between waiting until full retirement age versus taking it at 62 is around age 78/79. If you live longer than 79 it was better to wait, and if you pass away before then it was better to take it early. There are several factors you should consider:


What does family longevity look like?


Taking it at age 62 is more prudent when health is a concern or family history suggests living past 78 is not likely.


Do you have other sources of income in retirement?


If you are retired and need income but are unable to generate it from savings, taking your social security at 62 might be the only option.


Are you married?


If you are, what is your spouse's benefit? Often people look at the crossover point of age 78/79 and view themselves as the only factor. If you have a larger benefit than your spouse, know that your benefit will go to your spouse. Once your survivor benefit starts paying, your spouse loses theirs. The higher the benefit is the only one that continues. While some argue they will not live beyond 78, the math starts to change when you are talking about both lives in the marriage.


What are your thoughts on the social security program?


This is a personal choice. If you believe social security might be in financial trouble, taking it early might be better suited to you. If you feel that social security is a benefit not likely to be taken away or reduced, waiting might make more sense to you.


All these choices can be challenging to navigate. If you are looking for help in deciding what you specifically should do, please feel free to reach out to me at mark.recker@reckerfinancial.com or click here to contact me.


The information on this site is provided “AS IS” and without warranties of any kind either express or implied. To the fullest extent permissible pursuant to applicable laws, Recker Financial LLC (referred to as "Recker Financial") disclaims all warranties, express or implied, including, but not limited to, implied warranties of merchantability, non-infringement and suitability for a particular purpose. Recker Financial does not warrant that the information will be free from error. None of the information provided on this website is intended as investment, tax, accounting or legal advice,  as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. The information should not be relied upon for purposes of transacting securities or other investments. Your use of the information is at your sole risk. Under no circumstances shall Recker Financial be liable for any direct, indirect, special or consequential damages that result from the use of, or the inability to use, the materials in this site, even if Recker Financial or a Recker Financial authorized representative has been advised of the possibility of such damages. In no event shall Recker Financial LLC have any liability to you for damages, losses and causes of action for accessing this site. Information on this website should not be considered a solicitation to buy, an offer to sell, or a recommendation of any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized.

Recker Financial LLC (“Recker Financial”) is a registered investment adviser offering advisory services in the State(s) of Michigan and in other jurisdictions where exempted.  Registration does not imply a certain level of skill or training. The presence of this website on the Internet shall not be directly or indirectly interpreted as a solicitation of investment advisory services to persons of another jurisdiction unless otherwise permitted by statute. Follow-up or individualized responses to consumers in a particular state by Recker Financial in the rendering of personalized investment advice for compensation shall not be made without our first complying with jurisdiction requirements or pursuant an applicable state exemption.

All written content on this site is for information purposes only. Opinions expressed herein are solely those of Recker Financial, unless otherwise specifically cited.  Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.