March 23, 2007 Leave a comment
I was interviewed for the New York Times “Mortgage” column in a piece headlined, Is Paying Off a Loan a Good Idea? A gentleman from Ameriprise Financial in high-priced Manhattan questioned my counsel that mortgages be paid off as early as possible to free up earned income to accumulate it for retirement. The gentleman suggested that “prepayment is dangerous” if the homeowner’s equity is locked into his theoretical $2 million residence. In his example he asked how, if one depends solely on Social Security, one could maintain a $20,000-a-month (!) lifestyle (his number, not mine) if all your money were tied up in your house. Better get a credit line just in case, he suggested.
Let’s get real. The average American family loaded down with debt doesn’t live in $2 million condos in Manhattan spending $20,000 a month. Hardworking, industrious folks with combined income within a range of $80,000 to $120,000 today are struggling to make their regular mortgage, auto and college loan payments and barely have enough left to make the minimum payment on their high-interest credit cards. These folks should first pay off their credit obligations by relying on a proven Financial Liability Management program offered by their advisors, and then ply their savings into asset management services such as those offered by Ameriprise. In a disciplined approach to putting your financial house in order, your liability portfolio can be managed to predictably generate savings. Can the same be said for your asset portfolio? Done right, Liability Portfolio Management is the perfect complement to Asset Portfolio Management, producing the nest egg we all strive to achieve for our families.