Letter Of Last Instruction: A Helpful Factbook For Your Family

Contributed by: Josh Bitel, CFP®

A letter of last instruction is an often overlooked element of estate planning. While more popular documents, such as your Will, are critical in showing an overview of how your estate plan should be managed and distributed after you are gone, your letter of last instruction offers more detail on the specifics of your life. Among the important items in this letter are funeral preferences, login information for any electronic data your heirs may need access to, preferred care for pets and veterinarian contact information, and private messages to loved ones. These are just some of the items a letter of last instruction can provide that aren’t normally covered in other documents.

Here at The Center, we recently updated the letter of last instruction and personal record keeping templates we provide to clients. These can be intimidating at first glance, over 50 pages between the two, but committing just 20-30 minutes per week and chipping away at these documents until they are finished can go a long way in providing your family the information they will need to meet your wishes after death.

These documents are important to share with your financial planner as well, as part of your team, we can assist in working with your heirs to carry out your wishes when you are gone. Starting the conversation around these topics can be tricky, but they are important. Contact us at The Center if you like some assistance in this area.

Josh Bitel, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® He conducts financial planning analysis for clients and has a special interest in retirement income analysis.

9 Actionable Steps For The New Year To Help Your Finances

Contributed by: Josh Bitel, CFP®

Yes, it’s time to turn the page on 2020 and start anew!  There’s nothing like a fresh calendar to begin making plans for your envisioned future.  We previously provided you with some tips for year-end tax planning in our annual year-end tax letter. Here, we provide you with some very specific and actionable steps you can take now. Ultimately, while no strategy can guarantee your goals will be met, these steps are a great start on improving your financial health in the New Year:

1. Take score: review your net worth as compared to one year ago.

2. Review your cash flow: how much came in last year and how much went out (hint: it is better to have less go out than came in).

3. Be intentional with your 2021 spending: also known as the dreaded budget – so think “spending plan” instead.

4. Review and update beneficiaries on IRA’s, 401k’s and life insurance: raise your hand if you want your ex-spouse to receive your 401k.

5. Review the titling of your non retirement accounts: consider a “transfer on death” designation, living trust, or joint ownership to avoid probate.

6. Revisit your portfolio’s asset allocation:

7. Review your Social Security Statement: if not yet retired you will need to go online – everyone’s trying to save a buck on printing and mailing costs

8. Check to see if your retirement plan is on track: plan your income need in retirement, review your expected sources of income, and plan for any shortfall.

9. Set up a regular review schedule with your advisor: an objective third party is best – but at a minimum set aside time on your own, with your spouse, or trusted friend to plan on improving your financial health.

So, after you promise to exercise more and eat less, get started on tackling your financial checklist!

We wish you a wonderful New Year!

Josh Bitel, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® He conducts financial planning analysis for clients and has a special interest in retirement income analysis.

Top 3 Reasons Why You Need A Financial Planner

Contributed by: Josh Bitel, CFP®

1) Financial planning is complicated, but taking advice from a professional is easy.

In the age of technology, where a vast array of resources are at our immediate fingertips, “do-it-yourself” has become a much more popular strategy among Americans. For most projects, DIY is great for cost savings, but in the world of finance, this is not always practical. In financial planning, daily monitoring of your investments is sometimes required. Consider the current pandemic, with market volatility all over the map, investment opportunities can come and go in the blink of an eye. If you aren’t keeping a close eye on your finances, these opportunities can be missed. Most DIY investors already have a full-time job, so they simply do not have the time capacity that a financial planner has. Not to be overshadowed by the technical aspects of financial planning, behavioral finance is arguably just as important. As a third party, a financial planner can help mitigate the emotions that go into investing.  As my colleague eloquently wrote, investing is a lot like being a sports fan, and your financial planner can help you stay the course when the going gets rough.

2) No matter how simple or complex your financial issues may seem, an advisor can help.

Many people I’ve spoken to seem to think that financial planning is only required when you have a complex financial picture. However, this is a misguided belief, most people seek out financial help far too late in life. Financial advisors, especially CFP® professionals, are trained to evaluate both simple and complex issues and map out various routes for the best financial future. Another common belief is that financial advice is only needed when you are about to retire, however some of the most productive conversations I have had with clients have been centered around about getting on the right path early and setting your finances on cruise control.

3) Financial planning is not “only for the rich”.

One response I frequently hear that makes me squirm in my seat is that “financial planning is only for the wealthy”. Financial planning can be useful in several life events, such as a change in marital status, a job change, a growing family, or even just simply feeling overwhelmed with your financial matters. The objective of financial planning is to set someone on a path to reach their financial goals. Regardless of where you start or how large your goals may be, accomplishing those goals is what matters. Whether it be saving for a home, understanding your retirement plan at work, or establishing a debt payoff plan, a financial planner can help you make sure all your bases are covered.

Josh Bitel, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® He conducts financial planning analysis for clients and has a special interest in retirement income analysis.

3 Types Of Practical Disability Coverage You Should Know

Contributed by: Josh Bitel, CFP®

According to the Social Security Administration, studies have shown that just over 25% of today’s 20 year-olds will become disabled at some point before reaching age 67. Wow! This is a pretty staggering statistic – these odds are far greater than a premature death, which is what life insurance is typically purchased to protect against. However, often when we discuss disability insurance with clients, we find that it’s an area of confusion. Many aren’t even sure if they have coverage or they may believe that Social Security will kick in and be enough. For most of us, especially if you’re in the early stages of the “accumulation mode” of your career, your earnings power is most likely your largest asset both now and into the foreseeable future. A disability can wreak havoc on this “asset” which is essentially why disability insurance is purchased. Let’s look at the basic types of coverage:

1. Short-Term Vs. Long-Term Disability

Long-term disability typically has what’s known as an “elimination period” of how many days must pass before benefits begin. This is often called the “time deductible” of the policy which in many cases is 90-120 days. Benefits can payout up until age 65, however, most policies have a stated period of time where benefits would be payable. To help bridge this gap of coverage, a short-term disability policy can come in handy because benefits will usually begin within a week or two of disability and continue for up to one year, although benefits typically last between three to six months. Short-term disability policies can be a great tool to preserve your emergency cash fund, typically at a somewhat reasonable cost. 

2. Group Coverage

As with life insurance, many employers offer a form of disability insurance to their employees as part of their benefits package. Sometimes the employer will pay for the premium in full and other times the employee will have the option to pay for premiums (fully or partially). You may be asking yourself, “Why would an employee want to pay for the group coverage instead of having the employer foot the bill?” Great question, with very important ramifications! If the employer pays your premiums in full, the entire amount of your benefit if needed (typically between 50% and 60% of your pay up to certain limits) would be taxable. If you as the employee were paying for the premiums in full and you needed the coverage, benefits paid out would NOT be taxable. If you were only paying a portion of the total premium, say 20%, only 20% of the benefits paid would be non-taxable to you as the employee. The tax treatment of benefits will have a large impact on the net amount of benefit that hits your bank account so it’s important to understand who’s paying for what if you have access to a group disability policy at work.

3. Individual Coverage

As the name implies, individual coverage is purchased by you through an insurance company – the policy is not offered through your employer. A major benefit of purchasing an individual policy is that the coverage is portable, meaning you can take it with you if you change jobs because it’s not tied to your company’s benefits package (most group policies are non-portable). Another advantage (or disadvantage depending on how you look at it), is that you are paying for the coverage in full so if benefits are needed, they will not be taxable to you. With an individual policy, you have control over selecting the definition of disability that your policy uses (any occupation, own occupation, etc.) and you’d also have the option to add any additional features to the policy, usually at an additional cost.

In this blog, we’ve merely scratched the surface on disability coverage. As I mentioned, it is often one of the most overlooked parts of a client’s financial plan and coverage types, despite its high probability and significant risk of long-term financial loss. At a minimum, check with your employer to see if group coverage is offered (both long-term and short-term) and consult with your financial planner on whether or not it is sufficient or if additional coverage would be recommended. 

Josh Bitel, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® He conducts financial planning analysis for clients and has a special interest in retirement income analysis.

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The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of the author and not necessarily those of Raymond James.

Do I Need Life Insurance? How Much?

Contributed by: Josh Bitel, CFP®

Given the pandemic among other unfortunate news around the world, there has been an increased interest about life insurance quite a bit recently. There are many different ways to determine if, and how much, is needed. 

As your life changes, so do your needs for life insurance. You may not need it when you are young and single. However, as you take on more responsibility and your family grows, your life insurance needs may grow as well. Below are a few rules of thumb I like to use to start the conversation.

Estimating Your Life Insurance Need

There are several methods that you can use to estimate your life insurance needs. While the actual calculation may be much more involved, these tricks can be used as somewhat of a starting point when having a conversation with an insurance professional.

Income Rule

My favorite rule of thumb is the income rule, which states that your insurance coverage should be equal to 7-10 times your gross annual income. (Other professionals may have other ranges, I like 7-10). For example, a person earning a gross annual income of $60,000 should have between $420,000 (7 x $60,000) and $600,000 (10 x $60,000) in life insurance coverage.

Income Plus Expenses

This rule considers your insurance needs to be equal to 5x your gross annual income plus the total of any mortgage, personal debt, final expenses, and special funding needs (college, charities, etc.). For example, assume that you earn a gross annual income of $60,000 and have expenses that total $250,000. Your insurance need would be equal to $550,000 ($60,000 x 5 + $250,000).

Family Needs Approach

The family needs approach asks you to purchase enough life insurance to allow your family to meet its various expenses in the event of your untimely death. Under the family needs approach, you divide your needs into three categories:

• Immediate needs at death (cash needed for funeral and other expenses) 

• Ongoing needs (income needed to maintain your family's lifestyle, such as a mortgage payment) 

• Special funding needs (college funding, bequests to charity and children, etc.) 

Once you determine the total amount of your family's needs, you purchase enough life insurance, also important is taking into consideration the possible accumulating of interest in your life insurance policy over a given time frame. 

These calculations will merely scratch the surface on determining your proper amount of coverage. Several other factors, such as your line of work, size of family, post-mortem desires, among other things, may trump any of the other rules listed above. For this reason, your best bet is to have a conversation with an insurance professional to understand your own unique needs.

Josh Bitel is an Associate Financial Planner at Center for Financial Planning, Inc.® He conducts financial planning analysis for clients and has a special interest in retirement income analysis.

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These policies have exclusions and/or limitations. The cost and availability of life insurance depend on factors such as age, health and the type and amount of insurance purchased. There are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition if a policy is surrendered prematurely, there may be surrender charges and income tax implications. Guarantees are based on the claims paying ability of the insurance company. The hypothetical examples presented are for illustration purposes only. Actual investor results will vary. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.

SECURE Act: Potential Trust Planning Pitfall

Contributed by: Josh Bitel, CFP®

Does the SECURE Act affect your retirement accounts?  If you’re not sure, let’s figure it out together.

Just about 2 months ago, the Senate passed the SECURE (Setting Every Community Up for Retirement Enhancement) Act.  The legislation has many layers to it, some of which may impact your financial plan.

One major change is the elimination of ‘stretch’ distributions for non-spouse beneficiaries of retirement accounts such as IRAs. This means that retirement accounts inherited by children or any other non-spousal individuals at least 10 years younger than the deceased account owner must deplete the entire account no later than 10 years after the date of death. Prior to the SECURE Act, beneficiaries were able to ‘stretch’ out distributions over their lifetime, as long as they withdraw the minimum required amount from the account each year based on their age. This allowed for greater flexibility and control over the tax implications of these distributions.

What if your beneficiary is a trust?

Prior to this new law, a see-through trust was a sensible planning tool for retirement account holders, as it gives owners post-mortem control over how their assets are distributed to beneficiaries.  These trusts often contained language that allowed heirs to only distribute the minimum required amount each year as the IRS dictated.  However, now that stretch IRAs are no longer permitted, ‘required distributions’ are no longer in place until the 10th year after death, in which case the IRS requires the entire account to be emptied.  This could potentially create a major tax implication for inherited account holders.  All trusts are not created equally, so 2020 is a great year to get back in touch with your estate planning attorney to make sure your plan is bullet proof.

It is important to note that if you already have an IRA from which you have been taking stretch distributions from, you are grandfathered into using this provision, so no changes are needed.  Other exemptions from this 10-year distribution rule are spouses, individual beneficiaries less than 10 years younger than the account holder, and disabled or chronically ill beneficiaries.  Also exempt are 501(c)(3) charitable organizations and minor children who inherit accounts prior to age 18 or 21 (depending on the state) – once they reach that specified age, the 10-year rule will apply from that point, however.

Still uncertain if the SECURE Act impacts you?  Reach out to your financial advisor or contact us. We are happy to help.

Josh Bitel, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® He conducts financial planning analysis for clients and has a special interest in retirement income analysis.

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Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person's situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

What Is the Paycheck Protection Program?

Contributed by: Josh Bitel, CFP®

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020. One major component of the CARES Act is the Paycheck Protection Program, a program intended to provide support to small businesses as they ride out the difficult economic times and encourage retaining employees, or rehiring those who have been laid off.

The Paycheck Protection Program will provide up to $349 billion in forgivable loans to small businesses to help pay their employees during this time. The terms of the loan will be the same for everyone who applies. These loans will be forgiven as long as the following conditions are met:

• Loan proceeds are used to cover payroll costs, mortgage interest, rent, and utility costs over the 8 weeks for which the loan was made. (The term “payroll costs” are defined as compensation, capped at $100,000 on an annualized basis for any employee.)

• Employees are maintained with the same compensation levels.

Who is eligible?

Any business with 500 or fewer employees, including nonprofits, sole proprietors, and independent contractors. Some businesses with more than 500 employees may be eligible, contact the SBA for more information.

How much can a small business get?

Loans can be for up to two months of your average monthly payroll costs from the last year plus an additional 25% of that amount. That amount is subject to a $10 million cap. The government has allocated $349 billion toward this program, which may not be sufficient to satisfy every business in need. While they could elect to increase this amount, it is best to apply for the loan as soon as possible. This loan is available until June 30, 2020.

When can you file?

• Starting April 3rd, small businesses and sole proprietorships can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders.

• On April 10th, independent contractors and self-employed individuals may apply.

What are the loan terms?

Loans will have a fixed interest rate of 1%, and payments are deferred for 6 months. Interest will accrue over this 6 months period, however. The loan is due in 2 years, with the option to pay it back early, and does not require any form of collateral. The SBA has waived any additional fees typically associated with SBA loans.

Business owners may only apply for one loan. Proceeds may be used on payroll costs and benefits, interest on mortgage obligations that incurred prior to February 15th, 2020, rent under lease agreements incurred before February 15th, 2020, and utilities, for which service began before February 15th, 2020.

How will my loan be forgiven?

You will only owe money after two years when your loan is due if:

• You use the loan amount for anything other than payroll costs, mortgage interest, rent, and utility payments over the 8 weeks after getting the loan.

• Your loan forgiveness will be reduced if you decrease salaries or wages by more than 25% for any employee that made less than $100,000 in 2019.

• Your loan forgiveness will also be reduced if you decrease the number of full-time employees during this time. o If you do make staff changes, you may re-hire these employees by June 30th, 2020 and restore salary levels for any changes made between February 15th and April 26th, 2020.

Applicants may apply through existing SBA lenders or other regulated lenders. Go to www.SBA.gov to view a list of SBA lenders. To apply, you must complete the Paycheck Protection Program application by June 30th. Supply is limited so we recommend applying as soon as possible. You can access the application here.

The world may seem out of sorts lately, but we are here to help and answer any questions you may have. We will continue to stay on top of any changes that may impact your financial plan.

Josh Bitel is an Associate Financial Planner at Center for Financial Planning, Inc.® He conducts financial planning analysis for clients and has a special interest in retirement income analysis.

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While we are familiar with the tax provisions of the issues presented herein, as financial advisors of Raymond James, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

Are Your Medications Covered? How to Choose the Right Medicare Plan

Contributed by: Josh Bitel, CFP®

Let’s take a look at an important aspect of Medicare coverage: Part D, which covers prescription medications (think “D” for drugs). Each Medicare Prescription Drug Plan has a unique list of covered drugs which is called a formulary.

Here are some important notes regarding Medicare Part D coverage:

• Drugs may be placed into different cost “tiers” within the specific formulary

• More common/generic drugs will often be in a lower tier costing you less

• You can choose your Part D plan based on your current list of medications to help you obtain the most appropriate plan for you

• Commercially available vaccines that are medically necessary to prevent illness must be covered by a Medicare drug plan (if not already covered under Medicare Part B)

• You should receive an “Evidence of Coverage” (EOC) each September from your plan which explains what your Medicare drug plan covers, how much you pay, etc.

  • You should review this notice each year to determine if your current plan will continue to meet your needs or if you need to consider another plan for the next calendar year

  • If you do not receive this important document, contact your plan representative

    • Your plan’s contact information should be available via “Personalized Search” on the Medicare website

    • You can also search by your plan name

Common Coverage Rules:

• Prior Authorization: Your prescriber may be required to show that the drug is medically necessary for the plan to authorize coverage

• Quantity Limits: Different medications may have limits on quantity fillable at one time (ex: 10 days, 14 days, 30 days, 60 days, etc.)

• Step Therapy: You must attempt treatment with one or more similar, lower cost drugs before the plan will cover the prescribed drug

If you or your prescriber believe one these coverage rules should be waived, you can contact your plan for an exception. Your plan’s contact information should be available via “Personalized Search” on the Medicare website.

• You can ask your prescriber or other health care provider if your plan has special coverage rules and if there are alternatives to an uncovered drug

  • It is not uncommon to be required to attempt treatment with other similar drugs (often less expensive, lower tier) on your formulary first

• You can obtain a written explanation from your plan which should include the following:

  • Whether a specific drug is covered

  • Whether you have met any requirements to be covered

  • How much you will be required to pay

  • If an exception to a plan rule may be made if requested

• You can request an exception if:

  • You or your prescriber believes you need a specific drug that is absent from your plan’s formulary

  • You or your prescriber believes a coverage rule should be waived

  • You believe you should pay less for a more expensive, higher tier drug since your prescriber believes you cannot take any of the less expensive, lower tier options for your condition

• If you disagree with your plan’s denial of coverage there are five additional levels in the appeals process

Additional Considerations:

• Your Medicare Part D plan is allowed to make changes to its formulary during the year

  • These changes must be made within existing Medicare guidelines

  • If a change is made to your formulary:

    • You must be provided written notice at least 60 days prior to the effective date of the formulary change

    • OR your plan will be required to provide the current drug for 60 days under the previous plan rules

• Many Medicare Advantage Plans (Part C) cover prescription medication coverage, and you cannot have concurrent coverage of prescriptions through both a Medicare Advantage Plan and a Medicare prescription drug plan. You’ll be unenrolled from your Advantage Plan and returned to Original Medicare if you have an Advantage plan with prescription coverage in addition to a Part D Prescription Drug Plan.

• Even if a desired medication is covered, it is important to note that some plans may require fulfillment via mail order services in lieu of local retail pharmacy pickup

• This may be very inconvenient for some (ex: people that travel often) and may be avoidable when comparing plans

If you have any questions, please contact your financial advisor at The Center. We are more than happy to help you or refer you to one of our professional resources.

Josh Bitel, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® He conducts financial planning analysis for clients and has a special interest in retirement income analysis.

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Sources: www.medicare.gov this information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.

Any opinions are those of the author and not necessarily those of Raymond James. Raymond James is not affiliated with Josh Bitel. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation.

Using the Bucket Strategy to Meet Retirement Cash Needs

Contributed by: Josh Bitel, CFP®

If you are in or close to retirement, you are probably concerned about the recent market uncertainty. You may be wondering how your investment portfolio can be structured to provide the income you need, without putting the portfolio in a vulnerable position. 

The Bucket Strategy (not to be confused with the “Bucket List”) describes a cash distribution method to provide you with income from your portfolio during any kind of market cycle. 

Consider that we have four buckets, and that every investment within your portfolio fits into one of these buckets. This strategy can provide cash needed in retirement, even if equity markets drop or stay low for extended periods of time. 

Bucket 1:

The first bucket is designated for cash needs of one year or less. This bucket contains cash and short-term securities that mature in less than one year to support your needs for the next 12 months. 

Bucket 2:

The second bucket starts generating cash flow in the 13-36 month range, or years two and three. This bucket contains short-term bonds and fixed-income type securities that have a small amount of volatility, but are primarily designed for preservation of capital. The holdings in this bucket will pass on interest income that ultimately flows into the first bucket. 

Bucket 3:

The third bucket is structured to generate cash flow needs in years four and five, and primarily contains strategic income and higher yielding bonds (lower quality, longer maturing and international type bonds). However, they do pass on interest income that flows into the first bucket, much like bucket #2. 

Bucket 4:

The fourth, and last, bucket is made up of equities (stock investments) and other assets that have higher volatility like gold, real estate, commodities, etc. Many of these assets will produce dividends to help replenish the first bucket, if the dividends are set to pay in cash and not reinvest. Ideally, when the market is volatile, as we’ve been seeing lately, this bucket is left alone to ride out the market cycle and replenish as we recover.

The Bucket Strategy is designed to provide enough cash flow to get through roughly a 6- or 7-year period without needing to liquidate the stock portion of the portfolio. This should provide you with the confidence (and more importantly, cash) needed to enjoy your retirement and start working on your Bucket List! 

Talk to your financial planner to see how the Bucket Strategy might work for you.

Josh Bitel, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® He conducts financial planning analysis for clients and has a special interest in retirement income analysis.

Should I Accelerate My Mortgage Payments?

Contributed by: Josh Bitel, CFP®

Most homeowners make their regular mortgage payments every month for the duration of the loan term, and never think of doing otherwise. But prepaying your mortgage could reduce the amount of interest you'll pay over time.

How Prepayment Affects a Mortgage

Regardless of the type of mortgage, prepaying could reduce the amount of interest you'll pay over the life of the loan. Prepayment, however, affects fixed rate mortgages and adjustable rate mortgages in different ways.

If you prepay a fixed rate mortgage, you'll pay off your loan early. By reducing the term of your mortgage, you'll pay less interest over the life of the loan, and you'll own your home free and clear in less time.

If you prepay an adjustable rate mortgage, the term of your mortgage generally won't change. Your total loan balance will be reduced faster than scheduled, so you'll pay less interest over the life of the loan. Every time your interest rate is recalculated, your monthly payments may go down as well, since they'll be calculated against a smaller principal balance. If your interest rate goes up substantially, however, your monthly payments could increase, even though your principal balance has decreased.

Should I Prepay My Mortgage?

A common predicament is what to do with extra cash. Should you invest it or use it to prepay your mortgage? You'll need to consider many factors when making your decision. For instance, do you have an investment alternative that will give you a greater yield after taxes than prepaying your mortgage would offer in savings? Perhaps you'd be better off putting your money in a tax-deferred investment vehicle (particularly one in which your contributions are matched, as in some employer-sponsored 401(k) plans). Remember, though, that the interest savings from prepaying your mortgage is a certainty; by comparison, the return on an alternative investment may not be a sure thing.

Other factors may also influence your decision. The best time to consider making prepayments on your mortgage would be when:

• You can afford to contribute money on a regular basis.

• You have no better investment alternatives of comparable certainty.

• You cannot refinance your mortgage to obtain a lower interest rate.

• You have no outstanding consumer debts charging you high interest that isn't deductible for income tax purposes (e.g., credit card balances).

• You are in the early years of your mortgage when, given the amortization schedule, the interest charges are highest.

• You have sufficient liquid savings (three-to-six months' worth of living expenses) to cover your needs in the event of an emergency.

• You won't need the funds in the near future for some other purpose, such as paying for college or caring for an aging parent.

• You intend to remain in your home for at least the next few years.

Particularly against a fixed rate mortgage, regular contributions toward prepayment can dramatically shorten the life of the loan and result in savings on the total interest you're charged. As always, consult your financial planner before making any large financial moves. We’re here to look at the big picture and help you make the best decisions for your particular situation.

Josh Bitel, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® He conducts financial planning analysis for clients and has a special interest in retirement income analysis.

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UPDATED from original post on December 6, 2016 by Matt Trujillo.

Any opinions are those of the author and not necessarily those of RJFS or Raymond James. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Raymond James Financial Services, Inc. and your Raymond James Financial Advisor do not solicit or offer residential mortgage products and are unable to accept any residential mortgage loan applications or to offer or negotiate terms of any such loan. You will be referred to a qualified Raymond James Bank employee for your residential mortgage lending needs.