More Than One Right Answer
Rarely does a week go by that we’re not challenged with a financial decision. Can I afford to buy a car? When should I buy a house? Am I saving enough for my kids’ education? How much do I need to retire? Every financial decision we make should raise a common question: Does this make sense for me and/or my family? When it comes to financial planning, there are the numbers and there’s everything else. While math is an important piece of making informed decisions, what’s more important is how you feel about the math.
We recently met with a married couple who retired and decided to pay off their mortgage with funds from a retirement account. Even though the mortgage had a low-interest rate and the withdrawal from the retirement account would generate a taxable event, their goal was to be debt-free in retirement. This decision gave them peace of mind and allowed them to accomplish a major milestone. That in itself was more important to them than the potential opportunity cost of paying off a low-rate mortgage with a qualified account.
As Morgan Housel revealed in The Psychology of Money, “ Smart, informed, and reasonable people can disagree in finance because people have vastly different goals and desires.” We strive to help our clients find the right balance between listening to the numbers and making decisions that will help them accomplish their goals. As the saying goes, “ Money is not math, there is no one right answer.”