As a new homeowner, you're to be congratulated.
You're on the road to living the American Dream.
If you're like most people, your idea of financial security is most likely a rewarding job, a home, and a seven figure retirement account.
Possibly you read Dave Ramsey and believe in his guidance.
Well, if you're just starting off and you've purchased a home, you probably also have a good job.
At this point, you want to begin saving for retirement.
There's certainly no lack of investment guidance.
Along with Dave Ramsey, there's no shortage of information about how to invest your money and with which brokerage firm.
Wherever you look, TV, web, and print, pundits talk about money and how to make it grow.
What's your preference: equities, municipal bonds, cd's? How about futures; you know, pork bellies, gold, frozen concentrated orange juice? You may even have seen ads that tout "the excitement of Forex trading", where you are invited to trade in foreign currencies.
Brokerage firms are not the only places to invest your money.
Many banks that sell mortgages also offer investment accounts.
It's likely that the bank where you got your mortgage is among them.
Remember, we're talking about saving for the future - as in retirement.
Retirement accounts have the benefit of being tax deferred.
In other words, there's no tax due on the money you deposit into the account, and no tax on profits earned in the account.
The only time tax is paid is when you withdraw funds.
Most people think this is wonderful because they won't be taking money from the account until they retire, and at that time they will be in a lower tax bracket.
This certainly is appealing, and it fits in with most people's idea of the American Dream.
There's no surprise that you've bought into this judgment.
The hitch is, it's false! In spite of the ads telling you to invest for the future, it can be a very big mistake.
Moreover, it may prevent you from ever being able to retire.
If you follow Dave Ramsey, you know that he advises the importance of reducing your debts.
You probably realize first and foremost that those who sell investment "products" are doing so for their interest, not yours.
Second, they are trying to persuade you that you should start saving for the future and to start early.
Undisclosed is that if you're a homeowner with a high mortgage, you're mortgage interest cost will be much higher than any earnings that will accrue from a retirement account.
For illustration, a homeowner with a 6%, $250,000 mortgage will pay $15,000 in interest the first year alone.
What will your IRA earn? If you contribute $2,000, and your account earns 8% (the historical earnings of stocks) your first year earnings will be a whopping $120.
But what if you decide not to listen to the pundits who tell you to invest, and listen to what Dave Ramsey and others advise.
That money is used to pay down your mortgage instead.
After four years, your IRA will have earned $1,730.
But if you pay the tax on the $2,000 each year and use that money (about $1,600) to accelerate your mortgage, you will have reduced the principal by $6,400.
It's actually more, because reducing the principal each year causes more of your monthly check to reduce it further.
Here's the result: after 4 years, the accerated reduced balance will save you $30,000 of interest payments.
$30,000! Compare that to the $1,730 your IRA will earn.
The results aren't even close.
And because interest saved = interest earned, you will have earned yourself $30,000 tax free! You'll also have cut the time to pay off your mortgage by years.
That's why Dave Ramsey has so many people following his advice.
Mortgage acceleration earns more for homeowners than any investment, especially in the early years of the mortgage.
Learn more about mortgage acceleration and debt reduction at IOU No More.
You're on the road to living the American Dream.
If you're like most people, your idea of financial security is most likely a rewarding job, a home, and a seven figure retirement account.
Possibly you read Dave Ramsey and believe in his guidance.
Well, if you're just starting off and you've purchased a home, you probably also have a good job.
At this point, you want to begin saving for retirement.
There's certainly no lack of investment guidance.
Along with Dave Ramsey, there's no shortage of information about how to invest your money and with which brokerage firm.
Wherever you look, TV, web, and print, pundits talk about money and how to make it grow.
What's your preference: equities, municipal bonds, cd's? How about futures; you know, pork bellies, gold, frozen concentrated orange juice? You may even have seen ads that tout "the excitement of Forex trading", where you are invited to trade in foreign currencies.
Brokerage firms are not the only places to invest your money.
Many banks that sell mortgages also offer investment accounts.
It's likely that the bank where you got your mortgage is among them.
Remember, we're talking about saving for the future - as in retirement.
Retirement accounts have the benefit of being tax deferred.
In other words, there's no tax due on the money you deposit into the account, and no tax on profits earned in the account.
The only time tax is paid is when you withdraw funds.
Most people think this is wonderful because they won't be taking money from the account until they retire, and at that time they will be in a lower tax bracket.
This certainly is appealing, and it fits in with most people's idea of the American Dream.
There's no surprise that you've bought into this judgment.
The hitch is, it's false! In spite of the ads telling you to invest for the future, it can be a very big mistake.
Moreover, it may prevent you from ever being able to retire.
If you follow Dave Ramsey, you know that he advises the importance of reducing your debts.
You probably realize first and foremost that those who sell investment "products" are doing so for their interest, not yours.
Second, they are trying to persuade you that you should start saving for the future and to start early.
Undisclosed is that if you're a homeowner with a high mortgage, you're mortgage interest cost will be much higher than any earnings that will accrue from a retirement account.
For illustration, a homeowner with a 6%, $250,000 mortgage will pay $15,000 in interest the first year alone.
What will your IRA earn? If you contribute $2,000, and your account earns 8% (the historical earnings of stocks) your first year earnings will be a whopping $120.
But what if you decide not to listen to the pundits who tell you to invest, and listen to what Dave Ramsey and others advise.
That money is used to pay down your mortgage instead.
After four years, your IRA will have earned $1,730.
But if you pay the tax on the $2,000 each year and use that money (about $1,600) to accelerate your mortgage, you will have reduced the principal by $6,400.
It's actually more, because reducing the principal each year causes more of your monthly check to reduce it further.
Here's the result: after 4 years, the accerated reduced balance will save you $30,000 of interest payments.
$30,000! Compare that to the $1,730 your IRA will earn.
The results aren't even close.
And because interest saved = interest earned, you will have earned yourself $30,000 tax free! You'll also have cut the time to pay off your mortgage by years.
That's why Dave Ramsey has so many people following his advice.
Mortgage acceleration earns more for homeowners than any investment, especially in the early years of the mortgage.
Learn more about mortgage acceleration and debt reduction at IOU No More.
Source...