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Debt Optimization Strategies

As part of improving your financial situation, you might consider reducing your debt load. A number of strategies can be used to pay off debt. However, before starting any debt payoff strategy (or combination of strategies), be sure you understand the terms of your debts, including interest rates, terms of payment, and any prepayment or other penalties.

Understand minimum payments (a starting point)

You are generally required to make minimum payments on your debts, based on factors set by the lender. Failure to make the minimum payments can result in penalties, increased interest rates, and default. If you make only the minimum payments, it may take a long time to pay off the debt, and you may have to pay large amounts of interest over the life of the loan. This is especially true of credit card debt.

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Projecting a Happy Retirement

A 2015 study found that 41% of households headed by someone aged 55 to 64 had no retirement savings, and only about a third of them had a traditional pension. Among households in this age group with savings, the median amount was just $104,000.1

Develop an obtainable savings goal

Your own savings may be more substantial, but in general Americans struggle to meet their savings goals. Even a healthy savings account may not provide as much income as you would like over a long retirement.

Despite the challenges, about 56% of current retirees say they are very satisfied with retirement, and 34% say they are moderately satisfied. Only 9% are dissatisfied.2

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Can I Make Charitable Contributions From My IRA in 2016?

Yes, if you qualify. The law authorizing qualified charitable distributions, or QCDs, has recently been made permanent by the Protecting Americans from Tax Hikes (PATH) Act of 2015.

You simply instruct your IRA trustee to make a distribution directly from your IRA (other than a SEP or SIMPLE) to a qualified charity. You must be 70½ or older, and the distribution must be one that would otherwise be taxable to you. You can exclude up to $100,000 of QCDs from your gross income in 2016. And if you file a joint return, your spouse (if 70½ or older) can exclude an additional $100,000 of QCDs. But you can’t also deduct these QCDs as a charitable contribution on your federal income tax return–that would be double dipping.

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How Long Will I Have to Pay for Private Mortgage Insurance?

It depends. There are generally two ways that private mortgage insurance (PMI) can be removed from your mortgage loan. The first is if you request PMI cancellation directly from your lender. The second is through termination by your lender.

You can request PMI cancellation directly from your lender once you have reached the date when the principal balance of your mortgage is scheduled to fall to 80% of the original value of your home. You can find this date on the PMI disclosure form that was given to you when you first obtained your mortgage. The cancellation request can be made earlier if you have made additional mortgage payments that have reduced your principal balance to 80% at an earlier date. Your lender may also require you to meet certain other criteria in order to cancel your PMI, such as certification that there are no subordinate liens on the home and evidence that the property has not declined below the original value.

Jack V. Butterfield Investment Company is a registered Broker-Dealer, member SIPC