Save More or Pay Off Your Mortgage?

Save More or Pay Off Your Mortgage?

As you get closer to retirement, should you save more or pay off your mortgage?  This was a question we received from a listener.  Let’s look at the key factors of your decision.

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Today we have a question from Laura. She writes, “My husband and I will be 52 years old this year. Should we focus on saving more for retirement or paying off our mortgage?”

Why Pay Off Your Mortgage Before You Retire?

Your mortgage payments are typically one of your biggest expenses. Not having that expense frees up money for other things or reduces the stress on your savings. We like to see people not have a mortgage when they go into retirement.

An Example:

Laura and her husband need $2,000 per month from savings to cover their expenses—including their mortgage. Using the 4% rule as a basic guideline, they would need about $600,000 in savings.

save more or pay off mortgage

Their mortgage payment is $800 per month. If they pay off the note before retirement, they would only need about $1,200 per month from savings. Using the 4% rule, this means they only need about $360,000 in savings. It is a significant difference.

Save More Pay Off Mortgage

What Factors In Your Decision?

If you are trying to determine whether you should pay more on your mortgage or save more, ask these questions:

If you keep your mortgage payment the same, will your mortgage be paid off by the time you retire?

If the answer is yes, consider adding extra funds to your retirement savings. You may want to think about using a Roth IRA, Roth 401k, or other types of after-tax savings? If the answer is no, you may want to dig a little deeper.

Will paying more on your loan eliminate your mortgage by the time you retire?

If the answer is yes, consider paying extra on your note.

How much have you already saved and how much are you saving towards retirement?

If you have been a good saver and have a good foundation, it’s easier to favor paying extra on your loan. But if you have not been a good saver, you may want to place a higher priority on your savings.

Talk to a Certified Financial Planner™ Professional

There are a lot of moving parts to this and it is a great thing to discuss with a financial planner. They can help you build a strategy that makes sense for you and helps you achieve the best possible outcome.


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About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors.    He specializes in helping hard working, middle class families plan for retirement.

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What is Tax-Loss Harvesting?

What Is Tax-Loss Harvesting?

A listener asks a question about year end tax planning.  Can tax-loss harvesting help your tax situation?  Today we look at this strategy and how it works.

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What is Tax Loss harvesting

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What is tax-Loss harvesting

Today we answer a question from Joanne. She writes, “Last week I heard about something called tax-loss harvesting. What is it, and how can we benefit from it?” This is a strategy you can use to reduce your tax liability.

Understanding Capital Losses

From time to time, investments will decrease in value. And they may decrease to a level that is below your cost basis. Your cost basis is what you paid for the investment, plus any dividends reinvested into that position.

If the market value drops below your cost basis, you have an unrealized capital loss. You realize that loss when you sell it, and that can help reduce your income tax liability.

How Capital Losses Affect Your Taxes

First, losses offset any capital gains. Capital gains happen in two ways. They happen when you sell something for a profit. If you own a mutual fund, the fund may pay a capital gain distribution. The fund creates gains when the fund buys and sells securities.

An investor sells shares of Amazon for a $10,000 profit. They also sell shares of Ford for an $8,000 loss. They would only pay capital gains taxes on $2,000.


If your losses exceed your gains, you can use those losses to reduce other income, up to certain limits. You can use $3,000 of capital losses to reduce your other income each year. Any excess gets carried forward to future years.

Our investor sold shares of Amazon for a $10,000 gain. They also sold shares of General Electric for a $15,000 loss. You would not incur any capital gains taxes this year. They can use $3,000 of the remaining loss against their other income. The investor would have to carry $2,000 forward to use against their taxes next year.

What is Tax-Loss harvesting

Planning Tip

This does not apply to any investments in an IRA, 401k, or other types of qualified plans. You are not paying capital gains taxes on anything you buy and sell in those accounts.

Wash Sales

If you are harvesting a capital loss, you can’t buy the same investment you sold for a loss within 30 days. Doing so creates a wash sale. The IRA will not allow the loss on your taxes. If the stock you sold has a sudden increase in price, you can miss out on the gains.

Keep Good Records

If you have a large capital loss, it could take a long time to carry it forward. You will need to keep very good records.

There is Still Time for 2020

You still have time to harvest capital losses for this year. Any sales made between now and December 31 count on this year’s taxes. But you should speak to your tax professional to see what kind of impact those will have on your situation.

Talk to a Certified Financial Planner™ Professional


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About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors.    He specializes in helping hard working, middle class families plan for retirement.

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Is Bitcoin a Good Investment?

Is Bitcoin a Good Investment?

Is Bitcoin a good investment? It is the new frontier in the investment world.  Its gains over the past six years will catch your eye.  Today we will answer a listener question about the digital currency and its characteristics.

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Is bitcoin a good investment

Our question is from Chris. He writes, “A guy at work keeps talking about Bitcoin. I don’t understand it. What is it and should I consider investing in it?”

Bitcoin, along with a few others, is a digital currency. It is not backed by a country or a central bank. An encrypted public ledger verifies the ownership of the coins. This ledger uses blockchain technology and it is very difficult to change. There are people who use computers to verify the transactions using digital cryptographic keys.

Bitcoin and Gold

In many ways, Bitcoin is similar to an investment in gold.

  • You can buy in various currencies, just like gold.
  • Its price fluctuates with changes in demand, just like gold.
  • And it is used as a store of value, just like gold.

But it is also different. Most businesses do not accept gold as a form of payment. You can use Bitcoin and other digital currencies to buy and sell goods and services. You can use it on PayPal. Some online retailers will also accept it for payment.

Growing Popularity

Bitcoin has become very popular to investors for a couple of reasons. The first is its meteoric gains over the last several years. It started trading in mid-September 2014. The price then was about $460. Last week, it closed at over $18,800. The average annual return of the Bitcoin has been about 82% per year.

The other appealing aspect of Bitcoin is that it is not a government-controlled currency.

Caution: Proceed with Care

There are many concerns when investing in Bitcoin.


Bitcoin began trading in September 2014. Since then, we have seen

  • one price drop of more than 80%
  • another price drop of nearly 60%
  • three more drops of more than 30%
  • and three more drops of at least 20%.

This equates to eight bear markets in six years. It can be a very wild ride—more so than stocks and gold!


There are tax consequences to sell your coins. Those sales get taxed as capital gains and losses. You need to be aware of your holding periods to know whether it’s short term or long term.

Are Purchases Considered Redemptions?

If you are using your Bitcoins to buy something, is that considered a redemption? This is a vague area. In some cases, using your digital currency as payment is considered a redemption. This could create a taxable event you did not expect.


There are some transaction fees to buy and sell Bitcoin. You want to be aware of those.

Non-traditional Businesses

You cannot buy cryptocurrency through most traditional financial institutions. Major brokerage firms and banks won’t hold or execute the trades.

The “Wild West” of Finance

Many governments fear criminals use Bitcoin to launder money. The United States asks if you have a cryptocurrency account on your tax return. They ask to help them track potential criminal activity.

Security of your account is also a concern. It’s a new frontier with very little regulation. There are many concerns about the security of your digital key and avoiding hackers.

Your digital key is very important. Recently, a CEO from a cryptocurrency exchange died with his passwords. He had over $150 million tied up in cryptocurrency. His family cannot access those accounts without the digital keys.

How do You Buy It? (My Own Experience)

The first thing you need to have is a digital wallet. There are many well-known providers. I used Coinbase. I opened an account in less than 10 minutes. I had a little difficulty linking it to one of the banks I deal with, but I was able to fix the issue.

Coinbase charges a minimum transaction fee of $2.99. The costs are then about 1.5% of the amount you buy or sell.

Overall, the process was very easy.

If you want to use a brokerage firm, try Betterment or Robinhood.

Is Bitcoin a Good Investment?

It has been terrific if (and that is a big “IF“) you can withstand the volatility. But nobody knows how it will do in the future. Right now, it is near its all-time high. You could be buying high, hoping it goes higher. You may want to wait for a correction—it tends to correct frequently. And there are tax consequences when you sell your coins.

You need to be careful and make sure you have your strong passwords written down somewhere. If something happens to you, your loved ones can access that account. 


Blockchain technology has a lot of potential uses in many different industries.

  • you could use it to verify your title to real estate
  • governments could use it for online voting security
  • Stock exchanges can use it to verify ownership of stock certificates. This could speed up trade settlements
  • companies like FedEx and UPS can use it to verify their deliveries
  • the Certified Financial Planner Board of Standards is already using blockchain to authenticate credentials

Bitcoin is a new frontier in the investing world. If you would like to learn more or get an objective opinion about how cryptocurrency could fit into your plan, check with a financial planner.

Talk to a Certified Financial Planner™ Professional


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About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors.    He specializes in helping hard working, middle class families plan for retirement.

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