When you should pay off a mortgage early
And more of the week's best financial advice
Here are three of the week's top pieces of financial advice, gathered from around the web:
Paying off a mortgage early"Choosing when to pay off your mortgage is rarely a clear-cut mathematical decision," said Susan Johnston Taylor at U.S. News and World Report. Many experts recommend against paying off a mortgage early, saying it's more efficient to take the tax deduction on mortgage interest and invest the extra money. But for homeowners who take the standard deduction instead of itemizing, that rationale may not apply. Others may also decide the peace of mind gained from paying off the house is worth losing a tax break. But those who are considering paying off the mortgage should tackle their high-interest debt first, like credit cards and student loans. "Paying off a mortgage carrying a rate of 4 percent while carrying a balance on credit cards at 20 percent wouldn't make sense, however tempting it might be to say your home is paid off."
Reminder: Child care is expensiveParents-to-be dramatically underestimate what they'll have to pay for child care, said Jonnelle Marte at The Washington Post. In a recent survey by personal finance website NerdWallet, 54 percent of people planning to have a baby sometime in the next three years said they expect to spend less than $5,000 a year on care, "barely enough to cover the cost of daycare in most states." Annual child care expenses can cost more than $20,000, depending on where you live. Parents in South Carolina, for example, pay an average of $6,480 for a year of full-time daycare for one infant, compared with an average of $22,660 in Washington, D.C. Would-be parents tend to be overly focused on other anticipated expenses, like car seats and cribs, the survey said. "Only 30 percent listed child care as a spending priority."
Injecting flexibility into 401(k)s"A big part of retirement planning is setting up monthly income for the years after you leave work," said Dan Kadlec at Money. But many 401(k) plans make this difficult for retirees by placing strict rules on how savers make withdrawals. "In some plans, if you want to withdraw anything at all you must take out every dime." Such rules may push retirees who want more flexibility into higher-fee investments with fewer options. The good news is that Congress is considering bipartisan legislation to ease the inflexible distribution rules for the Thrift Savings Plan used by federal employees. This could lead to momentum on changes in the private sector, where only 61 percent of plans at large companies allow people to take monthly distributions.