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In his continuing look at wealth for the dental professional, Dr. Doug Carlsen examines 20 steps to building wealth. Last week, Dr. Carlsen brought you Part 1. Today, he gives you Part 2.
11. When should your home mortgage be paid off? When it is paid off, what transpires? You have the opportunity to increase your savings level dramatically.
12. Diversify globally in stocks and bonds. The US dominated the world stock market scene for many years. Not anymore. Diversifying internationally lowers your overall risk. What percentage of your portfolio should be in international?
13. Be wary of “so called” inflation hedges. Real estate and gold are evaluated.
14. Consider tax-free municipal bonds in your after-tax accounts. These are federal tax-free and also state tax-free if purchase from your home state. Should one buy individual bonds or bond funds? Vanguard Intermediate Term Tax-Exempt Fund may be a good choice for many.
15. College debt for your children: it should total less than the first year’s salary. Carlsen provides a discussion of the “no-loan” universities available. These guarantee that students will have no debt upon graduating.
16. Protect your health. Those with at least one chronic health problem spend 19% more in retirement than those with no chronic health problems.
17. Consider buckets in retirement. Christine Benz, a financial writer Carlsen respects, has advocated “bucketizing” for years. Benz advocates keeping funds to be used in the next ten years in a total bond fund and TIPs. After that, a conservative mix of stocks and bonds is advocated. Carlsen’s funds are 20/80 stocks to bonds for seven years, and then he has a 70/30 stock to bond mix. This is more aggressive, yet within the guideline of other academically based advisers.
18. An immediate fixed annuity may make sense for a portion of your portfolio in retirement. It will have low fees and expenses. Other annuities are not appropriate. Why? The fees are onerous.
19. After age 50, contributions can be increased for IRAs, 401(K)s. Do it!
20. Avoid divorce like the plague. The plague is easier. Divorce will add 5-10 more working years to the career of both spouses.