The past 3 years have provided investors ample opportunity to fret, re-examine and re-jigger plans and priorities. Next to the discipline to stay invested for the long term, the most important component to financial well-being is proper management of debt. Debt that is reasonable and aligned with specific purposes or assets is one thing, but much of what we see doesn't fit that description. Take a look at this debt prioritization chart (linked here) that categorizes different types of debt.

For individuals nearing retirement or already retired we treat the regular portfolio withdrawals as a liability against the investment assets that generate the withdrawals. When viewed through that prism, the underlying reason and rationale for investment risk becomes clear.

Much has been written about U.S. investors paying down their debt at a faster pace than typical over the past couple years. In the aggregate, however, this does not appear to be true. Many, if not most, Americans are still too heavily laden with debt of all kinds. Twenty years ago, we rarely saw clients nearing retirement with mortgage debt (or any other debt for that matter). Today, it is rare to have these folks without significant mortgage debt. Attitude towards debt has shifted significantly over this timeframe. Debt that is not properly aligned creates inflexibility in an environment that places a premium on maintaining flexibility.

Everyone likes to focus on investment returns and that is indeed important. Sometimes, however, the most effective manner to improve overall financial health is found in the proper management of debt. Our purview as an unbiased holistic financial advisor allows us to provide honest and value added advice on debt to our clients at this critical juncture.