Alliance Wealth Management
CEO and Founder
Given Jeff's unique interest in the financial markets and his excited to meet new people, being a financial advisor was the perfect fit for his career. He started his career as a financial advisor with A.G. Edwards & Sons in 2001.
In January of 2005, 4 years into his career, he was called upon to support Operation Iraqi Freedom. Anticipating his return, he attained the Chartered Retirement Planning Counselor designation between mission and duties during his downtime in Iraq.
As soon as he returned from Iraq, he resumed his career as a financial advisor. His goal was to provide financial guidance to people in all areas including: investments, insurance, taxes, and estate planning. In November 2007, he became a CERTIFIED FINANCIAL PLANNER™ practitioner, and a month after that, he formed Alliance Investment Planning Group LLC. Since then, Jeff created his own registered investment adviser named Alliance Wealth Management LLC.
With the hope of helping people make sense of investing and their personal finances, Jeff launched his own personal financial blog called Good Financial Cents and life insurance site Life Insurance by Jeff. With so many different options out there, Jeff hopes to ease the fog and help others make clear and smart financial decisions. He currently writes for Forbes, US News & World Report, and CNBC. In addition, he has been featured in major sites such as Huffington Post, Wall Street Journal, Reuters, Kiplingers, and Fox Business.
Jeff resides in Carterville, IL with his wife, Mandy, and his three sons Parker, Bentley, and Sloane and daughter Janella.
BA, Finance, Southern Illinois University
Assets Under Management:
This Investor Didn’t Know He Was Paying $5,500 Per Year in Investment Fees
The personal loan interest rate of 17.8% is high, but it's a lot better than the 26% you're now paying on your credit cards. The best part of the arrangement is that you'll be free and clear in 36 months. That by itself is no small advantage. One of the fundamental problems of credit cards, especially those with high interest rates, is that they keep you locked into a permanent debt cycle. That's precisely why they're referred to as "revolving debt". Taking a term loan to pay them off is the best strategy.
You haven't explained why you're taking an additional $2500 on the personal loan, but it could result in the monthly payment being higher on the personal loan than it is on your assorted credit cards. You'll have to be ready for that.
As to the impact on your credit score, paying off the credit cards will definitely help. Just make sure you don't close them out. You want as much unused credit on your credit report as possible.
That said, they'll be a temporary negative hit to your credit score as a result of the new loan. After all, since it's brand-new, you won't have a credit history on it. The real question is whether the paid credit cards will offset or exceed the drop from the new loan. But eventually, as you begin making payments on the personal loan, your credit score will improve. But that assumes you keep all your credit lines open, and don't use them to borrow more money.
It's a good strategy, so good luck!
Assuming you qualify for the maximum benefit based on your pre-retirement income, how much you will receive will depend on your age at the time you begin collecting benefits. If you retire at 62, the highest you can receive is $2,153 per month. At 65 it can be as high as $2,542. At 66, $2,687. And if you wait until you turn 70, it can be as high as $3,538.
However, there's no advantage to delaying collecting benefits past 70, since the delay no longer results in a higher benefit.
Disposable income is basically after-tax income. That means your gross income, less the amount paid for federal and state income taxes, FICA taxes and local taxes. So if you earn $100,000 per year, and you pay $10,000 in federal income tax, $5,000 in state income tax, and $7,500 in FICA tax, your total taxes are $22,500. That will leave you with a disposable income of $77,500.
Discretionary income also subtracts out your taxes. But it also subtracts necessary living expenses, such as shelter, food, and clothing. So if your disposable income was $77,500, and you paid $20,000 for housing, $10,000 for food, and $2,500 for clothing, your discretionary income would be $45,000. That's the amount of money that you would have available for savings, investments, and luxury spending. The word "discretionary" applies since this is the income that you have greater control over. That is, it isn't committed to mandatory expenses.
Probably not. You get points for paying off the old credit line, but then you lose them for having a brand new (read: untested) account. They should roughly offset. It's hard to know specifically how much effect this will have on your credit score, since the credit bureaus use complex algorithms to do the calculation. Then they tweak them from time to time, so you can't know for sure. But it should roughly even out to have no material affect. Good strategy anyway, zapping the interest! To my thinking that would be worth giving up a few points on your credit score.
You're going to have to sit down with your accountant and crunch numbers before you do. I see the benefit you're pointing to, that you could payoff a 5% debt with money that's only earning 1%. That would make perfect sense if the money were held in a non-tax sheltered account, since income taxes wouldn't be a factor.
With a 401k you have to consider the tax implications. Any money you withdraw from the account will subject to ordinary income tax. If you have a $100,000 mortgage to pay off, and you're in the 28% tax bracket, withdrawing $100,000 from the 401k will produce a federal income tax liability of $28,000. If you have a state income tax, it will be even more than that.
In order to payoff the loan then, you'd have to pull out enough money to pay off the mortgage PLUS pay the tax liability.
I don't know enough about your full financial situation to make a specific recommendation, but those are the facts. Please discuss this with your accountant to see if it makes sense. My guess is that it won't.