Deva Panambur, CFA®, CFP® is the founder of Sarsi, LLC. Sarsi, LLC is an independent, fee only, Registered Investment Advisor, serving individuals and institutions. We primarily provide the following services: 1.Financial Planning: Overall financial situation of the client including cash flow, debt management, risk management/insurance, estate planning and tax planning. 2. Investment strategy 3. Asset allocation and risk management 4. Manager/Investment product selection 5. Investment monitoring and reporting.
Prior to founding Sarsi, LLC in 2010, Deva was a Senior Vice President/Partner at Executive Monetary Management (EMM), a wealth advisor with over $2Bn in assets that was a part of Neuberger Berman, before being spun off into an independent firm in 2009. At EMM, Deva led manager selection and due diligence and had joint responsibility for economic analysis, strategy analysis, portfolio management and risk management pertaining to investments of ultra high net worth clients and institutions.
Prior to joining EMM, he was a portfolio manager at the alternative strategies group of Merrill Lynch; a research analyst at Chesapeake Capital Corporation- a hedge fund; and a risk and business analyst at Deutsche Bank Asset Management where he supported various investment groups. He began his career at International Seaports Pte. Ltd. in international project finance in the Far East and the United States.
Deva earned a Bachelor of Technology from the Indian Institute of Technology, India, a Master in International Management from the Indian Institute of Foreign Trade, India, and an MBA from Thunderbird School of Global Management, Glendale, AZ. He has been awarded the Chartered Financial Analyst designation and is a CFP® professional.
He regularly provides expert advisory services to top consulting firms and asset management companies regarding the business and investment aspects of the investment industry. He is an Adjunct Professor of Personal Finance at Montclair State University in New Jersey and in his spare time trains candidates appearing for the CFA exam.
MBA, Finance, Thunderbird (Arizona State University)
BTech, Metallurgy, Indian Institute of Technology
Fee only. Asset based and/or fixed.
Sarsi LLC (“Sarsi”) is a Registered Investment Advisory Firm regulated by the State of New Jersey in accordance and compliance with applicable securities laws and regulations. Sarsi does not render or offer to render personalized investment advice through this newsletter. The information provided herein is for informational purposes only and does not constitute financial, investment or legal advice. Investment advice can only be rendered after delivery of the Firm’s disclosure statement (Form ADV Part II) and execution of an investment advisory agreement between the client and Sarsi.
Paying off a debt with 9-15% interest (Which incidentally is quite high) is like getting a guaranteed return of 9-15% on your money- therefore it is highly desirable that you pay it off. While, your 401K balance could earn you similar or higher returns depending on your asset allocation, there is no guarantee.
You can get a home equity loan at a lower rate depending on various factors- this has a tax advantage as you can possibly deduct the interest against your income while still participating in an appreciation of your home. You can pay off the loans instead of contributing to your (and possibly your husband's) 401K - while this is less than the value of your debt it is a better option than taking a 401K loan. You may also want to see if you can reduce other expenses at least temporarily until your debt is paid off.
That is a good question since it illustrates an extreme case of being misled by just looking at the dividends that a company is paying out without checking if it is sustainable.
A company can have a payout ratio (Defined as Dividend paid out as a percentage of Net Income) greater than 100% when either 1) Their cash flow is greater than their net income, which is possible in accrual based accounting, for eg. when companies take non-cash charges or 2) The company is paying dividends out of the cash on the balance sheet or in some cases taking on debt to pay out a dividend (Dividend recapitalization).
In the short term, a heathy company can have a payout more than 100% if for example, it writes down goodwill and takes a charge that reduces the net income temporarily- that in itself may not be a bad thing if the company can continue earning enough to pay the dividends. However, over the long term a dividend payout ratio much higher than 100% is not sustainable. If a company has a dividend ratio of 300% to 500% then very likely it is a temporary situation.
One other option is to make maximum contribution to a 401K or other any other retirement plan you may have at work or as a business owner and then use the proceeds from the sale of the stocks for your living expenses.
For 401K /403b plans you can also contribute after tax amounts in excess of the 18,000+ 6000 catch up pre tax amounts, as long as the total contributions by you and your employer is less than 60,000. When you retire or change jobs you can transfer the after tax contributions to a Roth IRA and the pre tax amounts and any earnings to a traditional IRA.
I can understand why you may feel that paying off your mortgage maybe a better option as it gives you the security of owning the house. However, if you think about it from an overall benefit perspective then paying off the debt with the higher interest rate is the better choice. Usually credit card balances have higher interest rates- and while you can move it around to take advantage of teaser rates- there is the risk that at some point you may not be able to find one and a higher rate kicks in. Also, keep in mind opening and closing many credit accounts can hurt your credit score. So will having a large credit balance as a percentage if your credit limit.
All the best and kudos for thinking about all these things!
A Roth IRA does not have RMD (Required Minimum Distributions) requirements except if it is an inherited Roth IRA, inherited by a non-spouse.
With a Roth 401K, if you are retired, you have to begin taking RMD at age 70.5. Distributions are not taxed.
If you want to avoid RMD on your Roth 401K, then you should roll it over to a Roth IRA. The rollover, if done properly will not incur any taxes and you don't need to take an RMD on the Roth IRA.
If you have both a regular 401K and a Roth 401K then the the regular 401K can only be rolled over to an IRA, if you want to avoid taxes on the rollover. You will have to take RMD on the regular IRA. The Roth 401K can be rolled over to a Roth IRA as disussed above.