As Forrest Gump once said, “Life’s like a box of chocolates… you never know what you’re gonna get.” While Forrest was generally right, you DO know what you’re gonna get when you lock in a mortgage rate. And with rates at historic lows…(read more)

Rescue your 401k

Tell us if this sounds familiar. You’ve been contributing to your 401k (or 403b) for years now and have built up a nice nest egg. The only problem is you’re not sure if you’ve picked the right investments from those available, or if you have the proper allocation to each fund. Furthermore, you have no idea whether the investment options in the plan are any good…(read more)

P&A’s monthly contest

Congratulations to Ron for winning April’s contest and taking home a round of golf on P&A. Test your prediction skills in our monthly contest for your chance to win one of three great prizes.


Want help with and information about Medicare enrollment? P&A is hosting a 1-hour seminar on May 29th. Click here for details.


You should have received a brief online survey from us. If not, you can access it here. We appreciate your feedback.


This monthly email is intended for general information purposes only and should not be construed as advice suitable for every situation. Please consult with your professional advisors (accountant, attorney, investment advisor) before acting on any information presented here.

As Forrest Gump once said, “Life is like a box of chocolates… you never know what you’re gonna get.” While Forrest was generally right, you DO know what you’re gonna get when you lock in a mortgage rate. And with rates at historic lows, paying off your mortgage quickly isn’t as attractive as it once was. We’ll explain why.

Those of you who bought a house in the early 1980s no doubt remember your mortgage rate being north of 15%. The American Dream of home “ownership” meant exactly that…paying that sucker off ASAP. Five years ago, the housing crisis pushed prices down an average of 20% in the U.S. and rates are now at historical lows. With this in mind, it might be time to change your paradigm when it comes to paying off your mortgage.

First, determine if you’re “in the clear” by answering the following questions.

- Is the balance of your mortgage less than 70% of the assessed value of your home?

- Is your monthly mortgage payment less than 25% of your gross monthly income?

If you answered yes to both of the above, the following strategy might appeal to you. Refinance your existing mortgage into a 30-year loan and invest the difference in monthly payment in more liquid assets with higher growth potential. The reason why? Your home is an illiquid asset and real estate is an inefficient market. There are a limited number of buyers for your property and high transaction costs to unlock your equity.

Historic returns and mortgage rates

Since 1970, the average 30-year mortgage rate has been 7.5%. Currently, the 30-year rate is around 3.25%, while a 15-year mortgage will run you 2.75%. Over the same time period, the S&P 500 has averaged annual returns of 11.5%. The best 15-year period saw 19.66% annual returns, while the worst 15-year period still returned 4.34% annually.

To be conservative in our example, we’ll use a 7% annualized return for the S&P 500, a 15-year mortgage rate of 2.75%, and a 30-year rate of 3.75%. Assume you have $2,000 a month to allocate towards housing and investments, and that your current mortgage balance is $200,000. What follows is a comparison over the next 15 years of the difference between paying down your mortgage more aggressively (with a 15-year loan) and more leisurely (30-year loan).

What these tables show is a person has much more liquidity after 15 years by employing a 30-year loan and investing the difference. Essentially, you would exchange equity in your home (an illiquid asset) for the higher growth potential and liquidity of stocks, bonds, and other assets.

As they say in the financial world, “Past performance is no guarantee of future results.” Yes, there’s uncertainty in the stock market, but there’s also uncertainty associated with paying down your mortgage.

The strategy of delaying your mortgage payoff won’t appeal to everyone. If, however, you’re “in the clear” with your mortgage, and this strategy does appeal to you, feel empowered to move further out on the risk spectrum.

“Fear and faith do not run in the same mind at the same time.  You can’t stay on first base and run to second.” – Paul J Meyer

Tell us if this sounds familiar. You’ve been contributing to your 401k (or 403b) for years and have built up a nice nest egg. The only problem is you’re not sure if you’ve picked the right investments from those available, or if you have the proper allocation to each fund. Furthermore, you have no idea whether the investment options in the plan are any good in the first place. Maybe you’ve meant to research these things in your free time, but let’s be honest, that’s pretty far down the to-do list. How are we doing?

Several clients have expressed concern recently that their 401k account isn’t getting the attention it deserves. That’s easy to understand since for many people a company retirement plan is a significant chunk of their net worth. Since these plans are largely self-directed, employees must act as their own investment advisor. So you want in on a little secret? You might be able to rescue your 401k money. Here’s how.

We’re helping more and more clients do what’s called an in-service distribution from their 401k account. This is an easy process that allows you to withdraw your current account balance and transfer it to an IRA rollover, without any tax implications or affecting your eligibility to continue contributing to your 401k and earning your employer match. So why should you be interested?


401k plans typically have several downfalls:

• a limited number of investment options which may or may not be any good

• often these are from the same fund family (all Fidelity funds, for example)

• you often can’t own individual stocks (outside of your company stock) or bonds in these plans

• employees must self-direct their 401k monies, often without the input of a professional


Here’s why you should consider an in-service distribution (if your 401k plan allows and you are eligible):

• gain professional management with a consistent review process and cohesive investment strategy

• access to a much wider range of investment options, including individual securities

• no tax consequences assuming the money is directly rolled over to an IRA

• allows you to keep contributing to your 401k and earn the employer match

• greater flexibility with an IRA in naming a beneficiary


Every 401k (or 403b) plan is unique. Roughly 75% of these plans allow for in-service distributions/withdrawals/rollovers for those who are 59.5 or older. A smaller percentage allow them for those under 59.5. If you or someone you know has a 401k account that isn’t getting the attention it deserves, ask us how to get the ball rolling on an in-service distribution. The process is simple and the peace of mind of having a professional looking after your money is worth it.

If you are approaching age 65 you should know that the Medicare Parts A & B enrollment period begins three months before your 65th birthday month and ends three months after it…a seven month period. Eligible members of a group may choose not to participate but should know about the higher premiums you pay for late enrollment. You should also know about the special enrollment periods as well as the advisability of enrolling in Medicare Parts C or D. Would you like some help in making these decisions?

P&A is hosting a Senior Health Insurance Information Program (SHIIP) seminar put on by the Nebraska Department of Insurance:

Date – Wednesday, May 29th from 4:00-5:00pm

Location – Pittenger & Anderson, 5533 South 27th Street, Suite 201, Lincoln, NE 68512

RSVP – Call or email to let us know you’ll be attending. 402-328-8800 or pitt@pittand.com

Feel free to call us with any questions.

Thank you to all who participated in our survey. If at any time, you have suggestions or feedback for us, please call us or email Trey (trey@pittand.com) to share. We are constantly striving to offer the best client service experience and know that you play a big role in helping us fine tune our offering.

During the early 14th century in northeastern Spain, cattle owners transported their product to market by jogging them through the streets. Always looking for a competitive advantage, several daring owners discovered that bulls run faster if they are…(read more)

Allocating cash & brushing your teeth

A question we have received a lot lately is, “what should I do with my excess cash that’s earning nothing at the bank?” The answer is no different than how we learned to brush our teeth…(read more)

P&A’s monthly contest

Test your prediction skills in our monthly email contest for your chance to win one of three prizes (and we aren’t talking jelly beans). We’re also looking for your feedback on how we can make these monthly emails more informative and valuable to you.


This monthly email is intended for general information purposes only and should not be construed as advice suitable for every situation. Please consult with your professional advisors (accountant, attorney, investment advisor) before acting on any information presented here.

In life, there are a number of daily activities that become second nature. Brushing your teeth, driving your car, reading, walking, adding 2 and 2…the list goes on and on. You learned how to do each a long time ago and through the process of constant repetition they have become second nature. A question we have received a lot lately is, “what should I do with my excess cash that is earning nothing at the bank?” The answer is no different than how we learned to brush our teeth: define the process, execute, and repeat over and over.

Step #1: Determine a base amount of cash (define the process)

In the minds of P&A, the summation of two parts should make up the entirety of your cash holdings.

1. Short-term needs – If you have a large expense coming in the next six months, that amount should be held in cash. Examples: Down payment on a house, taxes, college tuition, home improvement. Caution: If the expense isn’t defined or you are not sure if it will happen, don’t count it as a need.

2. Emergency fund – This amount depends on your personal risk capacity, risk tolerance and maturity of your investment account. (Ask us for a simple assessment of yours). The CFP Board of Standards defines it as 3-6 months of fixed expenses. For those who have a higher risk capacity we could see this number being as low as one month in some situations. The idea being that you have an emergency reserve in the event that you lose your primary source of income or are hit with a large, unexpected expense. A rainy day fund.

Step #2: Don’t be a market timer, be a saver (execute)

In the current low interest rate environment cash is actually losing purchasing power (interest earned minus inflation is negative). Once you have determined your base amount of cash needed, allocate the excess to your after-tax investment account. Don’t wait for the right time; every day you wait your excess cash becomes less valuable. Step #1 gives you the ability to do something. We like to say, if you do something you will have something. I am not sure that saying is eloquent enough to be painted above your front door, but it is simple, effective and true.

Step #3: Create a habit (repeat it over and over)

Assess your cash needs every three months, then move money accordingly. Keep in mind, one of the great benefits of an after-tax investment account (at least the way P&A manages them) is that the monies are liquid and accessible. Your money can and should flow both ways, from bank account to investment account and from investment account to bank account. When you have extra cash above your base amount, move it to your investment account. Conversely, when you are short then move cash from your investment account back.

By following this process, you will ensure that your monies are working hard for you at all times. Stock markets go through cycles, so there will be ups and downs. A full investment cycle is typically 5-7 years. If you plan to be on Earth 5-7 years from now, you can endure a full market cycle (both the ups and downs), and you should end up well ahead.

Define your base amount, move money accordingly, then do it again and again. Be sure to have plenty of fun along the way, be charitable, and enjoy the fruits of your labor. Soon the process of figuring out what to do with your cash will be second nature like brushing your teeth.