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Business and Estate
A Publication of Business & Estate Advisers, Inc.


Home Sweet…Savings?
By Sarah Kaelberer

Many of you know, Darvin and I are re-building our cabin in Backus, Minnesota. Anyone who has embarked on this knows it is quite a process! And in that process, often comes the common questions of cash flow and financing. In addition, on a regular basis I am asked by clients and 401(k) participants “if I have extra money should I invest it or pay down my mortgage?” Since this is such a common question, we thought we would highlight a few thoughts for this edition of The Adviser.

AVOID FORMAL MORTGAGE ACCELERATOR PROGRAMS: Folks often receive mailers about such programs. Under this program the mortgage company will accept payments on a bi-weekly basis rather than monthly. While that may seem to be the same, there are actually 26 2-week periods in a year. So in this program, on top of timing of payment, there is also one half of an additional payment made per year. This can help cut 5 – 7 years of a mortgage (depending on your terms) and save quite a bit of interest. Sounds like a great idea, right? Well, it is, except, that to “enroll” in their formal program, there is often a cost of $150 - $400! You can accelerate your mortgage without their costly program. If the mortgage company is not willing to help you through the details on how, we will! But is accelerating that payment the best use of your additional cash flow?

REDUCE OTHER DEBT FIRST: In my opinion, one of the surest ways to financial freedom is to not owe anyone. If you don’t owe anyone, income is only required to support your current lifestyle. And if you do have to have debt, have it for things that acquire something (i.e. real estate, vehicles, property, schooling, etc.). Debt for consumables (i.e. eating out, vacations, etc.) is debt for which you have nothing physical to show. If you have consumer debt (credit cards) those should be your first debt reduction strategy. And your goals should be to first eliminate those with the highest interest rate.

Sarah and her daughter Miranda

Sarah and her daughter Miranda helped to pack school supplies for Interfaith Outreach & Community Partners in Wayzata.

INVEST IN 401(K): Okay, so everything is in order and you have no consumer debt, just a mortgage. Now what should you do? Of course we have to start with some general assumptions. You are young, which is 40 or under. (Funny how each year my definition of “young” continues to be right around my age.) Let’s assume (1) you have an additional gross income of $500 per month to spare; (2) you have a 35% combined (state and federal) tax bracket; (3) you are 7 years into a mortgage with a balance of $200,000 fixed at a 7% rate; (4) to make things equal, your investment returns in your 401(k) is level at 7% per year. These assumptions are for illustration purposes only and do not represent any specific investment.

Now, in order to get money in your pocket to make an additional payment against your mortgage, it must go through the tax system. So your gross $500 after 35% tax ends up being only $325. In your 401(k), let’s assume you use Traditional 401(k), which provides for savings before tax calculation, rather than Roth 401(k), which is after tax savings. Now how does it look?

Had you taken the mortgage route and put the extra cash toward it, your mortgage would be fully paid by your age 57. You would have saved $126,800 in interest! Wow! But to keep all things equal, let’s say at 57 you now take that extra $500 per month and save it all in the 401(k). You would have almost an additional $62,000 in your 401(k). Of this amount about $15,400 is earnings on your additional deposits. So, from interest savings and earnings you are $142,200 ahead!

Had you taken the 401(k) route, at age 65 you would still have a mortgage balance of less than $60,000. You would have saved nothing in interest payments as no additional mortgage payments were made. Your 401(k) account however would have an additional $410,000. Of this $410,000, $150,000 is your additional deposits but $260,000 is additional earnings. So here, you are $260,000 ahead!

Given these circumstances, you can see the savings far exceed the mortgage repayment. The Roth 401(k) still comes out ahead too, it is just not as dramatic of a difference. And of course, everyone’s circumstances are unique. So if you find yourself in a position where you are wondering where to put your additional money to give you the best bang for your situation, feel free to give us a call!

E. Dennis Zahrbock, CFP


By E. Dennis Zahrbock, CFP

I took son-in-laws Todd, Steve and Greg on a Canadian Fishing Trip in late June. We caught lots of fish and had to shoot a bear…..my “wilderness son-in-laws” then prepared “bear shish ka bobs”

Black dirt is something hard to come by in Northwest Wisconsin. In Western Minnesota, where I grew up, when they said “black dirt” they meant “black dirt”. I inquired about trucking some in but in the end purchased 600 - 40# bags of black dirt from the local farm store. My goal was to have a better garden then ever…my goal hasn’t worked as the “insects” are now my problem. After ten years of trying to grow sweet corn in the shade, irrigation systems, cultivating equipment, fences to keep dear out and bagged black dirt I’m pleased to state that my yields have increased. I’m guessing rather than $100 an ear for corn I’ve reduced the price to $90! But it was good…even made my first dill pickles.
Darvin, Sarah and family along with friends spent 10 days at the cabin over July. Many long weekends were enjoyed there this summer before it was torn down just after Labor Day. The new basement is in and the structure should be up by the end of October. We look forward to seeing a finished place sometime late spring!
The Z-Family trip to Vermont this summer was a wonderful experience. When they call it the “Green Mountain State” they are right. What a beautiful place to spend a week and get the added treat of visiting the Ben and Jerry Ice Cream factory!
A Delaney Golf outing and sibling reunion outside of Detroit, MI started October for Sarah. It was the first time in 9 years that all siblings had been together. Her brother Mike was even back from Germany for the event.

Sue and I along with Steve and Lori and Sarah enjoyed a week during May in Quebec City, Quebec, Canada at the ValMark annual meeting.

Sue was elected Vice President of the NW Synod of the ELCA Church. This is the highest non-clergy position in the Synod. She’s already been to Chicago for a convention and will be going to Malawi, Africa next spring as part of her duties.
Who can forget Grandparents Camp II held at our Silver Lake home in August. All five grandkids, Addison (8), Sabrina (6), Parker (5), Quentin (4) and Kallahan (3) attended. I even got the “grandchildren’s cabin” (3/4 size) furnished with ¾ size log furniture. Grampa and the kids slept there each night.
Duck hunting in the Delta Marsh started in September….opening week was a success we bagged eight different species of ducks. See pictures at www.decoyinn.com. Our group has acquired a new 6 wheel amphibious vehicle that will transport our weary bodies from parking lot to the water’s edge.

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Dennis and Sue traveled to Seattle to visit with friends. While there they spent four days in the San Juan Islands on a private tug boat with good friends Roger and Rhonda Groves.


Steve and Sarah attended sessions for the Strategic Coach program. It continues to give them strength in developing what we do.

E. Dennis and Sue visited Washington, D.C. where E. Dennis spoke to the National Association of Insurance and Financial Advisers


E. Dennis and Sarah go to Phoenix for the annual Top of the Table meeting (top 1000 financial
professionals in America). E. Dennis is scheduled to address all attendees from the main platform.

Sarah, Steve and Dennis will travel to Orlando, FL to attend ValMark’s School of Life.

E. Dennis joins several friends for a Pheasant Hunt in South Dakota. This is the first event of the
ValMarksman Hunt and Fish Club.

Sarah will speak on the Nuts and Bolts of 401(k)s at the Central NAIFA meeting in St. Cloud, MN.


Sarah and Darvin head to South Dakota for their annual Deadwood R & R. You just might seem them playing poker on television one of these days!


Steve and Sarah attend their next Strategic Coach session in Chicago.

Sadly no one from Business & Estate is able to attend the annual ValMark Mission Jamaica Project. We wish them all the best.


E. Dennis, Sue and all the kids are scheduled to celebrate Christmas a week late at Lutsen Mountain on the North Shore of Lake Superior. Later in the month, the Rice Lake travel group’s “Lutsen Ski Weekend III” will take place.

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Meet our Advisory Board Members


Q. How did you first become acquainted with Business & Estate Advisers? I met Dennis in the spring of 1974, while at Hamline University in St. Paul, and bought a 10,000 “College Master” whole life plan from him. That was the start of a long and close friendship between my wife Mary and I and Dennis and Sue. That friendship even survived a brief stint where I worked for Dennis spring semester of his senior year. Since then, we have vacationed and traveled extensively together and remain in close and frequent contact. My wife and I have been BE&A clients since its inception.


Q. How did you first become acquainted with Business & Estate Advisers? Denny gave a presentation to the Men’s Club of which I’m a

Q. What, in your opinion, makes Business & Estate Advisers different from other financial services firms? Their advisory board is unique to a financial services firm and I’m impressed with their numerous charitable contributions to the community.

Business and Estate
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