The post can be viewed on Investopedia here.
Question Headline:
Should I borrow from my thrift savings plan (TSP) to pay off $45,000 of credit card debt?
Question Body:
I am 58 years old and would like to think about retiring in the near future. I have $45,000 worth of credit card debt that I am only able to make minimum payments on at this point. Should I borrow from my thrift savings plan (TSP) to pay off this debt? I also understand that at age 59.5 I can make a one time withdrawal of 50,000 which would pay it off. I have no money put away for emergencies.
Answer:
Yes! Yes you should. If you can knock out all your credit card debt in one move you should do it. It is so incredibly important that once the debt is gone you reform your habits and budget, budget, budget, and start saving and living within your means or you will simply rack up credit card debt again and be back in the same position down the road. Based on the little bit of detail you provided you should probably cut up all your credit cards after you pay them off, and certainly you should stop using them completely. You should budget out how much you will save and spend monthly and make the savings automatic. Example: say you bring home $5,000 per month and you have determined that you have $1,200 in fixed living expenses and have budgetted out that you will spend another $1,000 a month in additional expenditures, and $3,000 in savings/investment. Have the $3,000 in savings/investment immediately/automatically electronically go to the appropriate accounts so that you are forced to stay within your planned budget.
– Wyatt Swartz
– 9/7/2018
On July 2nd, 2018 I sent an email message to the members of the W. Swartz & Co. Private Client Group regarding the current market conditions and global macroeconomic environment. Below is that message.
Hi friends,
We are halfway through 2018 and I imagine that many investors are looking at capital markets with frustration and fear. When markets behave like they did these past two quarters investors start to get “the itch,” that feeling that says, “we need to change something.”
It’s human nature to crave a sense of control. One of the ways we typically gain that sense is through action, but when it comes to investing the best action is inaction.
In 2017, global markets returned ~+25% and had historically low volatility. With the combination of high returns and extremely low volatility last year investors should have pared back their 2018 market expectations. Over the next few weeks I will start to get more and more updated data on economic forecasts moving forward and how the numbers played out in 2Q. We can make a better assessment as this information comes out.
In the meantime, a few thoughts…
1. Markets have had a correction, which is normal, and a big uptick in volatility. This was expected.
2. Despite a lot of strong upward and downward moves, markets are basically flat for the year. This shouldn’t be a surprise.
3. 1Q & 2Q18 saw headlines & sentiment move markets, especially those coming from the White House. This is nothing new, even if the speed of reaction is faster than ever before.
4. Economic data looked good going into 1Q and 2Q, and the chance of recession looked low. Let’s see what the new numbers look like the next couple of weeks.
5. Lastly trade wars are bad, and nobody wins. Global trade wars could drastically change economic forecasts, & corporate earnings forecasts, and lead to a global recession. Hopefully the trade wars talk is all bark and no bite.
Adam Smith the father of classical economics believed that the ingredients for prosperity were:
1. Limited government that grows at a lower rate than the private sector
2. Low tax rates
3. Stable currency and property rights
4. Freedom… Free Market Capitalism
In the United States and abroad, we see conflicting forces. Will the good forces outweigh the bad?
2018 Year-to-date VT Chart:
Wyatt Swartz
Message sent to members of W. Swartz & Co. Private Client Group on July 2nd, 2018.
– Wyatt Swartz
– Blog Post 7/3/2018
This post can be viewed on Investopedia here.
Question Headline:
Should I change my asset allocation strategy?
Question Body:
I am approaching 50 years old, single, and have about $2,000,000 in total assets ($1,000,000 in a 401(k), $500,000 in cash, and $500,000 in stocks). I don’t own a home but plan on buying one within the next couple of years. My monthly expenses are about $10,000 but if needed I could cut down to about $7,000. I have no debt. I am employed in a good position. Given all of this information, how well-positioned am I for the future? Should I be doing anything different with my asset allocation strategy?
My Answer:
One: Based on the information provided, I believe you are very well positioned for the future.
Two: Given the information provided I could not recommend an asset allocation for you. To determine the proper asset allocation (mix of stocks, bonds, & cash) for a client, I factor in goals, time horizon, and cash flows. It is unclear how soon you will be purchasing a home, or what price range that home will be. It is also unclear based on the info provided how much longer you intend to continue working.
Missing Information:
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When do you plan to stop working?
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How much are you currently saving and planning to save each year until retirement? What types of accounts are you doing this in, 401k, IRAs, taxable brokerage account, etc.?
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How is your 401k currently allocated?
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When do you expect to purchase a home?
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What price range will your home price be?