LJPR Financial Advisors
After growing up in Hazel Park, Michigan, Leon LaBrecque graduated magna cum laude from University of Detroit with degrees in accounting and law. He grew his wealth management firm, LJPR Financial Advisors, from the ground up with a foundation in financial education.
Leon started his career in 1977 in the accounting profession. Leon worked in public accounting as a pension specialist, then became the Chairman of the Department of Finance and Economics at Walsh College.
Leon took his educational background to the outside world, where he wrote and delivered programs in personal finance and pre-retirement to Ford, AT&T, BellSouth, CalPERS, the states of Washington, Montana, Idaho, and many other entities. Leon has also been an author, co-authoring a personal finance textbook, “Practicing Financial Planning for Professionals,” and producing programs on IRAs and retirement, some very specific to groups, such as police officers and fire fighters (which we call 'Guns & Hoses').
Leon is also a director of the Michigan Association of CPAs (MICPA), where he leads a special task force on new tax changes. He is tasked to help get the best perspectives on any new tax law changes for 2017 and 2018 and communicate those changes to MICPA's membership. Leon is also involved in the nonprofit arena, helping organizations raise funds and build awareness, as well as invest their money.
Leon and his wife Anne, like to travel and spend time in northern Michigan, where they enjoy hiking, biking, kayaking and playing with their golden retrievers.
BS, Accounting, University of Detroit
JD, Law, University of Detroit School of Law
Assets Under Management:
LJPR Help From Oz
Without sounding flippant, in the Doomsday scenario you portray, what makes you think cash will be any good? Look at a bill in your wallet, and note the phrase ‘this note is legal tender’. It only works if everybody thinks it works. Money no good, you can roll cigarettes with it: refer to ‘Weimar Republic currency’ or ‘Zimbabwe currency’ on your search. I’ve had this question many times before, so some folks say ‘I’ll buy a gold ETF.’ And my response is, ‘When everything collapses, how will you get your gold?’ So let’s think it over: if the market completely collapses, financial assets will be at least temporarily worthless. That would leave you with a barter based system or chaos. In the barter-based system, metals like gold or silver may be worth something, although many barter economies have functioned on packs of cigarettes or stone disks. In chaos, the barter breaks down, and now you need a couple of Navy SEALS and a lot of ammunition. If it’s any consolation, we’ve had whole societies collapse and we’re still here, so I’d pose that having some hard assets makes sense. Krupp and the Sumitomo Copper company survived multiple wars, currency collapses and in Sumitomo’s case, a nuclear bomb. Both of those companies were established in the late 1500s, and Theisen Krupp is still here, and so is Mitsubishi (which was Sumitomo). Capitalism is resilient.
Leon LaBrecque, JD, CPA, CFP®, CFA
Managing Partner | LJPR Financial Advisors
Congratulations on paying down the debt. First and foremost, remember some rules of the road:
- Kill debts, don’t wound them. You want to pay one debt off, not chip away at many. So taking your three debts, you want to kill one and then another. The likely candidate is to knock off the truck loan first, since it’s the smallest and you can use your savings for that.
- Snowball it. So take $32,000 out of your checking account and leave $18,000 as your rainy day fund. Pay off the truck, since the interest is not deductible (unlike your student loan interest and probably your mortgage interest (if you itemize)). NOW, take the truck payment and add it to the student loan payment. You didn’t say if you had consolidated the student loans, but if you didn’t start at the highest rate student loan, kill it and add the payment to the next one.
- Save it. After you knock off the student loan debt and the truck loan, add that amount to your 401(k). This should be a significant number. You should save, by my calculations, about 15% of that contribution in taxes. Figure out that tax saving and add that to your mortgage.
Be a debt slayer, paying off debt is like making an investment.
Don’t count your chickens before they hatch. There is a lot more to creating a tax law than the president’s proposal. In fact, I think it’s fair to say that what may be passed will not look at all like this proposal. Plan now using the current rules, but be ready once we get a law. The key point will be once the Senate has amended and worked with the House on a final bill.
You didn’t answer how much you will have in retirement or how much you have saved for retirement. If you will be in a lower bracket when you retire, let’s say you have you and your wife’s Social Security and withdrawals from your 401(k), and your income is equal to or less than your current income, I’d go with the traditional 401(k). The reason is because of the extra cash flow from tax savings. You can (if your wife is age 50 or older) put $24,000 each in your respective 401(k) plans, for a total of $48,000. That saves you $13,440 of federal taxes (plus probably some state taxes). You could use that for additional savings, maybe in nondeductible IRAs that you convert to a Roth, or plain old boring index funds in a taxable account.
Traditional 401(k) is an excellent way to save taxes, and another way that a lot of folks ignore is an HSA, or Health Saving Account. This also allows to you deduct above the line. You can use an HSA for any deductible medical expense and you can accumulate the HSA for future medical expenses (in other words, it isn’t ‘use it or lose it’). I really like the 401(k) and HSA as tax benefits since you are deducting money for yourself. In the case of a 401(k), you’re deferring to later year, when you may be in a lower bracket. In the case of the HSA, withdrawals for medical expenses are tax-free.
The employer match is free money. Maximize it. There is nowhere you can get a 50% return on your money.