All investors, no matter what age, should pay attention to low mortgage rates, added Horgan.
She believes there are big savings to be had from refinancing a mortgage, that can be used to shore up personal finances.
CONWAY G. GITTENS: Wall Street appears to be taking a breather today after hitting record highs. We have Treasury yields still below 1%. So what does this mean for specifically investors in the 50 plus crowd? Well, joining me today to discuss that is Rhian Horgan. She is the founder and CEO of Silver, which is a retirement planning app. So thank you for joining us.
So I'm wondering, we are heading into the end of the year. We have the S&P 500 up, what, 13%, yielding a dividend of about 2%. But Treasury yields are still, what, below 1%? What does that mean for investors, especially those-- that 50 over crowd, which should be shifting money away from risky equities to fixed income?
RHIAN HORGAN: So Conway, I think, look, you're right on point. It's been a volatile year in the equity markets. So I think a lot of our customers at Silver who are in their 50s and 60s are feeling a sense of relief that markets are back where they were at the start of the year. And I think for many of our customers who experienced that volatility earlier in the year, they're thinking a lot about taking money off the table, right?
It was a really volatile ride when the markets were down 20% in March. It started to change a lot of people's potential plans for retirement. So I think what we're seeing today is this opportunity to really lock in your gains and really think about what that right level of market exposure is going forward.
CONWAY G. GITTENS: Locking in their gains, what are they going to do with the money? I just took a look right before I talked to you at the savings rate. The average savings account is yielding 0.05%. That's hardly anything to smile about for the nation's savers.
RHIAN HORGAN: Well, you're absolutely correct. I think the challenge, obviously, is that there isn't a lot of high yield investments to put your money in. And so what we actually see consumers doing is taking the other side of that trade, which is thinking about how can they save more, right? And so, you know, if you can generate returns in your portfolio by just having a bit more money invested, that is another way to take advantage of these markets.
And so, today what we're seeing is, our consumers, particularly with interest rates, really thinking about how they can either sell their home. Maybe they're thinking about downsizing. Particularly if you live in the tri-state area, there's a real bid for family homes right now. And so, for people in their 50s and 60s that are thinking about downsizing, taking advantage of rates being low, has actually been a really good way for them to be able to monetize that asset.
CONWAY G. GITTENS: And another way to monetize some of their assets has to do with healthcare, right? Saving money on healthcare. So what's the strategy there?
RHIAN HORGAN: So I think it's really important, as we go into this enrollment season, whether you're looking at ACA, so your pre-Medicare, or you're actually looking at enrolling in Medicare for the first time, is to really think about how insured you're going to be. There's a real push in the market right now towards some of these low premium plans.
The one thing I would just really encourage consumers to think about is low premium doesn't mean low cost. We did an analysis recently with Katie Couric where we looked at consumers who were picking low premium plans. And what we found was that if they, unfortunately, had a critical illness, that the cost of being uninsured reduced their retirement savings by almost four years. So really importantly, you know, I know everyone right now is focused on their budget. But be careful as you focus on your budget not to become underinsured.
CONWAY G. GITTENS: I know typically older people like utilities because they pay dividends. But utilities have been not doing that great as an investment, right? So what are some of the strategies you see for 2021?
RHIAN HORGAN: Yeah, so I think-- interestingly, I think it's actually about being really tech savvy, as you take money out of your accounts. So today, with return expectations being a lot lower than they've been in the past, I think consumers have to get ready for their balance portfolios to be generating 4% to 5% returns, not 8% to 10% returns.
And so, in that sort of lower interest rate environment, all of a sudden, fees matter. So how much are you paying your asset manager? And actually, taxes matters a lot. If you're a consumer that is starting to retire, you have a new set of taxes that you actually have to start thinking about. And these are the taxes that get charged as you take money out of your accounts.
So think about having money in a ROTH versus a traditional IRA versus a taxable account. There's a different tax consequence of taking $1,000 out of a ROTH versus an IRA versus a taxable account. And actually, that's where we can find a lot of savings for customers as they think about getting that money to compound over time. So I would say today, watch the fees, and also watch the taxes on the accounts.
CONWAY G. GITTENS: So before I let you go, I know you focus primarily on that 50 plus crowd, but there might be somebody who's in the 40 crowd or 40 ish like me, nearing that 50 crowd, and is starting to think about some of the things that you focus on. What are some of the things that maybe all investors should be looking at, at this time of year?
RHIAN HORGAN: Yeah, so, end of year, it's always thinking about the tax harvesting or tax loss harvesting if you have any losses in your account. The second thing I think a lot about is looking at that interest rate that you're paying on your mortgage. For a consumer that has a half million dollar mortgage, the difference between last year's interest rates and this year's interest rates is savings of $100,000 over the life of a 30-year mortgage. So check what interest rate you're paying.
And then finally, actually, check what rates you're paying on your home and auto insurance. We actually find that auto insurance rates are going down because we're driving a lot less. So call up your insurance agent and see if you can get a reduction in those rates.
CONWAY G. GITTENS: All right, thank you. That's Rhian Horgan. She's the CEO and founder of Silver. I'm Conway G Gittens, and this is Reuters.