Ask the Fool: Mortgage or IRA?
Q. Does it make sense to pay off my mortgage with money from my traditional IRA? Should I? — M.B., Bixby, Oklahoma
A. Think the decision through carefully. If you’re younger than 59 1/2, withdrawals from a traditional IRA will be taxed at your ordinary income tax rate — and you may also face a 10% early withdrawal penalty. Also, the sum you withdraw will increase your taxable income, which might bump you into a higher tax bracket. Meanwhile, wiping out your mortgage debt means you’ll lose mortgage interest tax deductions you might have claimed.
Compare your mortgage interest rate to the growth rate you expect for your IRA holdings. Paying any of your mortgage off early saves you from paying interest on that sum for the remaining years. If your mortgage is charging you, say, 4% interest, and you’re hoping for a return of 6% or 8% or more on your IRA investments, you could lose ground. Cashing out your IRA also means that money won’t be able to grow for you over time. That’s a big deal, as most of us need to be saving for retirement.
You might consider keeping your IRA and making extra payments on your mortgage whenever you can. A few extra payments each year could shave years off of the loan and save you thousands of dollars in interest payments.
Q. Can I have my entire stock portfolio transferred from one brokerage to another without having to sell the stocks and avoiding generating any taxable gains? — P.C., Cheyenne, Wyoming
A. You sure can. Your new brokerage should be able to guide you through the process. If the stock is in a tax-advantaged account, read up on the tax rules first.
Fool’s School: Is Your Retirement Endangered?
If you’re doing only a little saving and investing for retirement while hoping for the best, you’re likely endangering your future financial security. See if you’re making any of these mistakes:
- Not saving enough. Some suggest saving 10% of your income, but that may be far from enough — especially if you haven’t been saving and investing all along. See if you can sock away 15% or even 20% — or more. Remember that your earliest invested dollars will have the most time in which to grow for you. They can be your most powerful investments.
- Not investing effectively. Bank accounts, money market accounts and government bonds may be safe, but until interest rates get much higher, your money won’t grow well in them. Look to the stock market for building long-term wealth. If you’re decades away from retiring, consider keeping most or all of your dollars in stocks. Give strong consideration to simple, low-fee index funds, too, such as funds that track the S&P 500.
- Borrowing from or cashing out retirement accounts such as 401(k)s and IRAs. If you’re changing jobs and your 401(k) doesn’t have much in it, consider rolling it into an IRA or into your new employer’s plan. Let that money keep growing for you.
- Not having a plan. Take some time to read up on investing and retirement issues (in books, at Fool.com and elsewhere), and come up with a plan. Figure out how much money you should amass before retiring — and how you’ll make it. Try to determine when you should retire; doing so too early can deplete your funds too quickly. Come up with a withdrawal plan to help your money last as long as it may need to. Fixed annuities are worth considering for the reliable income they can provide.
- Not seeking help. An online search for “retirement calculators” can turn up some handy tools. Also consider consulting a fee-only financial adviser; you can find some at NAPFA.org.
The Motley Fool Take: High Security
In recent years, cloud computing has made traditional network security solutions all but obsolete. Sensitive data and applications now live in the cloud, so it’s nonsensical to route traffic through a private data center for threat inspection, then forward that traffic on to the internet. Instead, it makes much more sense — and it’s more effective — to enforce security policies on the internet itself. That’s what Zscaler (Nasdaq: ZS) does.
Zscaler is the gold standard in network security, operating the largest security cloud platform in the world. Its platform, which delivers security service edge (SSE), leans on artificial intelligence to inspect network traffic, block threats and safely connect employees with corporate resources and the open internet. The company also offers cloud workload protection and digital experience monitoring.
Zscaler handles 240 billion requests and stops 150 million threats on a daily basis. Financially, the company is growing at a brisk pace. In its last quarter, revenue soared 63% year over year to $287 million, while calculated billings grew 54%.
The ongoing adoption of cloud services should be a continuous tailwind for Zscaler, helping it maintain or even accelerate its momentum. Long-term investors should take a closer look at Zscaler. (The Motley Fool owns shares of and has recommended Zscaler.)
– distributed by Andrews McMeel Syndication
