“Is a Will Ever Useless?”
No, but – in some cases – not very useful.
Everyone knows you should have a will. Not everyone knows that relying on your will to control the distribution of your estate could result in some pretty surprising results.
You might be surprised to learn that your IRAs, your 401(k)s, your life insurance policies, your annuities, and (probably) your home will likely not pass through your will. With these assets you are required to name a beneficiary or perhaps a joint ownership. By law, these assets will pass to those beneficiaries and/or joint owners before the will is even considered.
Using beneficiary designations (even ToDs and PoDs on bank accounts) can provide some significant advantages to heirs of estate. Settlement of these assets is usually quicker, simpler, and less costly than the probate process of a will. These operations might, however, thwart your intentions as stated in your will.
So if you thought you had your estate neatly planned because you have a will – you might want to think again. Take the time to sit with a trusted advisor, review your wills, trusts, ownership and beneficiaries of all your assets. You – and your loved ones – will be very glad you did. Not sure where to start? Contact our More than Money office. We’ll be happy to provide you with organizational assistance at no charge.
“My husband and I met with our financial advisor this past week. One of our questions was about the best way to help out our sons with college. One is a junior the other a freshman in high school.
Before he answered that question he asked us about retirement – which is at least fifteen years away for us. He went into a lot of the details about our pensions and social security. He showed us that we are in very good shape.
Then, talking about college we told him we had very little saved – about $15,000 saved for each of the boys. His plan was for us to cut way back on our 401(k) investments while the boys were in school and use that money to pay for their colleges as we go. He said we could then pick it back up after they’ve graduated.
The numbers made sense, but I’m a little nervous about completely turning off our 401(k)s for 7 or 8 years.
I would like to hear what you think.”
I think you have a very good financial advisor.
Your advisor’s thought process is very sound. He insisted you examine the most important financial priority you should have – your financial independence in retirement – prior to looking at the college challenge. Moreover, he confirmed that your current retirement plans (pensions, social security, and 401(k) plans) will meet your retirement needs. With that as a foundation he knew that you could ‘take a break’ from contributing to your 401(k)s and still be financially independent when the time comes to retire.
Keep in mind three things. First, your current 401(k) assets will continue to ‘cook’ during the 7 or 8 year hiatus – hopefully gaining more ground. Second, you may find that you can fund college from your cash flow and still contribute to your 401(k)s – albeit at a lower dollar amount. Lastly, if your cash flow allows, you can begin to add some dollars to your college funds now to ‘lighten the load’ a bit later.
You have a good advisor, a good plan, and (I expect) will see a good result.
“I’m 67 years old and looking to retire in 3 years at age 70. I wanted your thoughts on refinancing our home.
Our current mortgage is $836 per month @ 7.8% and has 12 years out of 30 left. The refinancing proposal is $629 per month @ 3.5% for 15 years.
My social security income at retirement will be $3000 per month. My 401K balance is currently $235,000. This saves us $207 per month and reduces the total cost of the loan by $7000. The initial closing cost is $1100.”
Thank you so much for asking such a timely question with such a pleasant outcome.
Mortgage rates are at an incredibly low level right now. You may wish to shop around a bit. Your proposal cuts your interest rate down to 3.5%, but I have heard rumors that some mortgages are carrying even lower rates. You also might wish to ask about securing a new mortgage with the same twelve year term you currently have. Your savings won’t be quite as high, but you will be free and clear three (3) years sooner. You might even consider looking at a mortgage that keeps your current $836 payment and (with the lower interest rate) pays off your mortgage even faster.
One last point. If you were to accept the proposal as stated you would spend $1,100 to save $207 a month. In other words, you will get your up-front cost back in less than six (6) months. After that – gravy. Pretty sweet.
If you have questions or comments, please send them to Gene@AskMtM.com