Wealth Accumulation Strategies For Retirement Planning

Imagine buying a $400K home with a 2.85% mortgage… and potentially losing out on ~$800k in wealth because you wanted to be “debt-free.” That’s the tradeoff too few people calculate. Story: Wife and Husband are 30 ($300k/year household income). They bought their home in 2021 with a $320K, 30-year mortgage at 2.85% ($80k down). Like many people, they loved the idea of being debt-free and want to retire early. They also: - Spend $8K/month (excluding the mortgage). - Max out their 401(k)s (+3% employer match). - Have two young kids (1 & 3), with college savings still on the to-do list. - After tax and planned savings, they have ~$50K/year in excess cash to invest or pay down debt. So we ran the numbers. Here’s what we found when comparing three options for that $50K/year: Option 1: Pay off debt as fast as possible and then invest the rest after becoming debt-free (additional $16k/year after mortgage is paid off). Option 2: Keep mortgage and invest the $50k/year into a long-term brokerage account (estimated 8% per year return). Option 3: Keep the mortgage and invest the $50k/year into high-yield savings (CDs, HYSA, MMFs, T-Bills @ 4% per year). Being “debt-free” is a powerful emotional goal, but it can come at a steep financial cost if you’re giving up long-term compounding. It’s not just about killing all debt. It’s about building wealth with intention. Would love to hear how others are thinking about this tradeoff, especially fellow early retirement planners or parents juggling multiple financial goals. Footnote: All scenarios assume a 27-year time horizon Equities: 8% annual return | Bonds: 4% return Mortgage: $320K at 2.85% over 30 years (current balance ~$290k) Future values are not guaranteed and are for illustrative purposes only This post is for educational purposes only and is not a recommendation. #PersonalFinance #WealthBuilding #Investing #MortgageStrategy #EarlyRetirement #FinancialPlanning

Having the Home Mortgage Paid Off Before Retirement: A Very Risky Myth   Over 30 years ago, Pat signed notified his company of his retirement. An officer of a Fortune 500 company, a CPA, and my former boss, he hired me to perform a check-up of his financial plan as he and Joyce prepared for this milestone. My analysis was not what they expected.   During his 40 year-career, they had acquired beautiful homes in toney Rumson, NJ, and Florida. When he announced his retirement, he cashed in some company stock to pay off the mortgages—before meeting with me.   “I have bad news and good news,” I said at their planning meeting. “You don’t have enough wealth to retire.” Stunned, Pat said, “I just signed my retirement papers!”   “I have good news, though,” I told them. “Just take out those two mortgages again, and you’ll be fine.”   They did. They have been fine for over 30 years.   It pays to “run the numbers” or perform calculations when making financial decisions. Most don’t. Most must work longer or have less in retirement. This is why people run out of money in retirement.   Morey, a retired CEO and his wife Ann were turning 80. What should have been joyful years were now years dreading the future. They had used up a lot of their retirement accounts. They were in what I call “survival mode:” Cutting back on travel, gifts to grandkids, entertainment, and keeping up their beautiful NYC apartment.   They came to me.   They had no mortgage on their apartment. We got an interest-only mortgage and invested the proceeds.    They returned to their former lifestyle, for the rest of their lives.   Accelerating or paying off your home mortgage may not be a smart decision if you want to build retirement assets quickly and decrease cash-flow risk in your retirement years.   Instead of paying debt early, save that money in 401(k)s, pensions, IRAs, and investment accounts. Take advantage of compounding, save income taxes and wind up with more wealth.   And if this strategy builds wealth that well while you’re working, keep the mortgage—and keep building wealth in retirement!   But you can mortgage your house later or sell it—right? Or maybe get a reverse mortgage.   Banks will not lend to those with little cash flow. Reverse mortgages can be expensive. Having to sell is not a great option.   Having a mortgage during your working years and into retirement may help you: ·  Keep your “equity” working to build more wealth and cash flow. ·  Avoid being real estate rich but cash poor. ·  Pay less in income taxes.   I helped to start CakeClub™ to educate you to always make the best financial choices like these.   Be one of those that proudly state they still have a sizable mortgage in retirement. Your savvy friends will recognize a smart financial decision.   Follow me at Al@AlZdenek.com and CakeClub™ at www.CakeClubapp.com for my experiences and stories over my career. Help me help others achieve their dreams and live the life they want, now! Please repost. Thank you!

Chart of the week: RMDs tend to increase as you age, potentially exposing you to higher tax brackets   If you’re saving for retirement in a tax-deferred 401(k) and/or IRA, you’re required to start withdrawing money from those accounts (whether you need the money or not) at age 73 (or 75 if you were born in 1960 or later). Those required minimum distributions (RMDs) can push you into a higher tax bracket, especially if you’ve saved significant amounts in those tax-deferred accounts.   The chart illustrates this hypothetical example: Say you're 73 years old, single, and you had $6 million in tax-deferred retirement savings at the end of 2024. Your RMD would be more than $226,000 in 2025—and that amount could rise as the RMD distribution rate rises (as it does each year, based on your age) and if the investments in the account continue to grow after accounting for distributions. Combine that taxable RMD with other income like capital gains, dividends, interest, or Social Security benefits (of which up to 85% could be taxable), and you may land in a higher tax bracket. (Important notes: The chart assumes a 6% average annual portfolio return, and the tax brackets are based on federal tax rates as of 07/01/2025 and increase 2% annually to account for inflation.)   We provide ideas (see link in comments), At least three strategies, and likely more, can help remedy this. 1. Roth 401(k) contributions: If you're still working, you might consider switching from pretax 401(k) contributions to after-tax Roth 401(k) contributions, since Roths aren't subject to RMDs.   2. Roth IRA conversions: If Roth contributions aren't an option—or if you want to shift even more of your savings into a Roth—you could convert some of your tax-deferred 401(k) or IRA funds to a Roth account.   3. Early retirement withdrawals: Once you reach age 59½, you can make penalty-free withdrawals from your tax-deferred accounts. Doing so will result in ordinary income taxes on the withdrawals, but the money could then be invested in a taxable account for future potential growth. See more ideas in the article linked in the comments.   #TaxPlanning #RetirementPlanning #WealthManagement

Is your retirement plan inflation-proof? Without the right strategy, even modest inflation rates can drain your financial future. Here's how you can shield your savings with these 5 strategies: 1. Maximize contributions to retirement accounts, including catch-up contributions closer to retirement. Consistently build assets to offset inflation. 2. Invest savings in assets with a history of outpacing inflation, like stocks. Smart asset allocation is key to growth. 3. Delay Social Security benefits as long as possible. This guarantees larger inflation-adjusted income later. 4. Work longer to keep building savings and delay withdrawals. More growth time helps compounding overcome inflation. 5. Build flexibility into your retirement budget to adjust withdrawals based on how conditions unfold. Remember, inflation doesn't rest, and neither should your planning. Leverage compound growth and adaptability now... And secure the freedom your future deserves.