Building Wealth as a Mayo Clinic Employee
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Introduction
As an employee of Mayo Clinic, you are part of a world-renowned institution celebrated for its unwavering commitment to patient care, pioneering research, and exceptional education. Alongside these professional rewards, Mayo Clinic offers a comprehensive range of financial benefits designed to support your long-term financial well-being. Effectively leveraging these benefits requires a proactive approach to financial management, especially during the early and middle stages of your career.
This guide is specifically tailored for Mayo Clinic employees who aspire to build a solid financial foundation. We'll walk you through essential financial planning topics—from maximizing your retirement contributions and understanding the nuances of debt to balancing your present needs with future goals. Whether you're just starting your career or are already on a growth trajectory, this guide provides actionable steps to help you make the most of your benefits, align your financial choices with your objectives, and set the stage for long-term financial success.
Not all debt is created equal. While some debts can serve as valuable tools for building wealth, others can become financial burdens that hinder your progress. Understanding the distinction between "good" and "bad" debt is crucial for making informed decisions that support your financial goals.
Good Debt
Good debt refers to borrowing that helps you acquire assets likely to appreciate in value or provide long-term benefits. This type of debt is typically associated with investments that can improve your financial health over time.
Examples of Good Debt
Home Mortgage: A mortgage is often considered good debt because real estate generally appreciates over time. Owning a home provides stability and can offer tax benefits through mortgage interest deductions.
Student Loans: Investing in education can lead to higher earning potential, making student loans a worthwhile investment in your future income. While it's important to borrow only what's necessary, the long-term returns on education often outweigh the initial costs.
Business Loans: Loans used to start or expand a business can create significant wealth if the business grows and generates strong income. This type of debt is an investment in your professional future and financial independence.
Bad Debt
Bad debt, on the other hand, involves borrowing for assets that depreciate in value or for expenses that do not generate future income. This type of debt often carries high interest rates, making it harder to pay off and more likely to erode your wealth over time.
Examples of Bad Debt
Credit Card Debt: High-interest credit card debt can quickly become unmanageable if balances aren't paid off each month. With interest rates that can exceed 20%, carrying a balance means paying significantly more than the original purchase price.
Auto Loans: Vehicles typically lose value rapidly, so borrowing for a new car—especially a high-end model that stretches your budget—can lead to financial strain. Since cars depreciate, auto loans generally do not contribute to future wealth and should be approached carefully.
Personal Loans for Non-Essential Purchases: Using loans to finance vacations, luxury items, or other discretionary expenses can create a cycle of debt that's hard to break. These items don't hold value or improve your financial situation, making the debt associated with them detrimental to your wealth-building efforts.
Developing an effective strategy to eliminate high-interest debt (Bad Debt) is essential for achieving financial stability.
Credit cards often carry interest rates of 20% or more. This means that carrying a balance results in paying significantly more than the original purchase cost. For example, with a $10,000 balance on a card at 20% interest, making a $200 monthly payment could take over nine years to pay off, with more than $11,000 spent solely on interest.
When used responsibly, credit cards can offer benefits that cash or debit cannot, such as reward points and purchase protection. The key is to always pay off your monthly statement balance in full to avoid interest charges and keep costs manageable.
Strategies for Eliminating High-Interest Debt
Two popular strategies for paying down high-interest debt are:
The Debt Avalanche Method: This approach focuses on paying off debts with the highest interest rates first. By tackling the most expensive debts upfront, you save the most money on interest over time.
The Debt Snowball Method: This strategy emphasizes paying off the smallest balances first to build momentum. While you may pay more in interest compared to the avalanche method, many find the psychological benefit of eliminating debts quickly to be highly motivating.
If debt repayment feels overwhelming, consider consolidating your high-interest debts into a lower-interest loan or working with a financial institution to create a manageable repayment plan. By taking control of your debt and developing a structured approach, you can reduce financial stress and free up more resources for savings and investments.
Key Takeaway
Borrowing to build wealth through appreciating assets—such as real estate, education, or a business—can be a productive financial strategy if managed carefully. However, taking on high-interest debt for depreciating assets or non-essential purchases can hinder financial progress. Focusing on good debt while minimizing or eliminating bad debt is a crucial step toward achieving long-term financial health.
What You Can Do:
Take Inventory of Your Loans: List all your debts in a spreadsheet or on paper. For each loan, record the monthly payment, balance owed, interest rate, and remaining term. While this task can be daunting, it's a critical first step toward addressing and eliminating bad debts.
One of the most powerful concepts in personal finance is the impact of starting early. By saving and investing consistently from a young age, you give your money more time to grow through the power of compounding. Compounding is essentially "earning interest on your interest," and over time, it can significantly increase the value of your investments.
How Compounding Works
When you invest money, it generates returns—whether through interest, dividends, or capital gains. Compounding occurs when those returns are reinvested, generating additional returns on top of the original investment. Over time, this creates a snowball effect, where your account balance grows at an accelerating pace.
For example:
Starting at Age 25: If you invest $5,000 per year at a 7% annual return starting at age 25, by age 65 your investment could grow to approximately $1.14 million.
Starting at Age 35: If you start investing the same amount at age 35, you would accumulate around $540,000 by age 65.
Waiting just 10 years to start investing results in having less than half the final amount, even though the annual contribution remains the same.
The Cost of Waiting
The longer you delay saving and investing, the more challenging it becomes to catch up. Each year of delay requires significantly higher contributions to reach the same end goal, as you're missing out on years of compounded growth.
For example:
Starting at Age 25: Investing $300 per month at a 7% return could grow to over $760,000 by age 65.
Starting at Age 35: To reach the same goal, you would need to contribute approximately $650 per month.
Starting at Age 45: Achieving $760,000 would require a contribution of about $1,500 per month.
Starting early reduces financial pressure later in life and allows for smaller, more manageable contributions over time.
Key Takeaway
Starting early is one of the most effective ways to build wealth. By giving your money more time to grow, you harness the full power of compounding, ultimately needing to save less in the long run to achieve the same goals. Even if you're only able to save small amounts initially, those early contributions will grow significantly over time, setting a strong foundation for financial security. A simple way to understand the value of compounding is the "Rule of 72." Divide 72 by your expected annual return to estimate how many years it will take for your money to double. For example, at a 7% annual return, your investment would double approximately every 10.3 years (72 ÷ 7 ≈ 10.3).
What You Can Do
Assess Your Investments: Take inventory of your current investments and apply the Rule of 72 to see how compounding can impact your financial future.
Mayo Clinic's 403(b) plan is one of your most powerful tools for building long-term wealth. Designed specifically for non-profit employees, this retirement plan allows you to allocate a portion of your salary into Traditional (pre-tax) or Roth (post-tax) accounts, providing flexibility in how you save for the future.
Per the Mayo Clinic 403(b) Summary Plan Description (2024), eligible employees are automatically enrolled at a 4% deferral rate 45 days after becoming benefit-eligible. This default enrollment, known as a "negative election," ensures you start saving for retirement automatically. However, you can adjust this rate at any time to align with your personal financial goals.
Employer Match Explained
One of the greatest advantages of the Mayo Clinic 403(b) plan is the employer match. Mayo Clinic matches your contributions based on your years of benefit service, providing a substantial incentive to contribute at least 4% of your salary to take full advantage of this benefit. Here's how the match works:
Less than 20 Years of Service: Mayo matches 50% of your contributions up to 4% of your salary.
20 to 30 Years of Service: Mayo matches 75% of your contributions up to 4% of your salary.
30 or More Years of Service: Mayo matches 100% of your contributions up to 4% of your salary.
For example, if you earn $100,000 and contribute 4% ($4,000), Mayo Clinic will add:
$2,000 if you have under 20 years of service.
$3,000 if you have 20–30 years of service.
$4,000 if you have 30 or more years of service.
This employer match represents additional retirement savings at no extra cost to you. Contributing less than 4% means missing out on a portion of this "free money."
Roth vs. Traditional Contributions
The Mayo Clinic 403(b) plan offers flexibility in how your contributions are taxed, allowing you to choose between Roth (post-tax) and Traditional (pre-tax) contributions—or a combination of both. This choice depends largely on your current tax rate and your expectations for retirement.
Roth (Post-Tax): Contributions are made with after-tax dollars, so qualified withdrawals in retirement are tax-free. This option may be beneficial if you anticipate being in a higher tax bracket later, as it allows you to lock in today's tax rate.
Traditional (Pre-Tax): Contributions are made with pre-tax dollars, reducing your taxable income for the current year. Withdrawals in retirement are taxed as regular income, which could be advantageous if you expect to be in a lower tax bracket after you stop working.
Choosing between Roth and Traditional contributions comes down to predicting future tax rates—a challenging but essential part of financial planning. If you're uncertain, diversifying your contributions between both options can provide flexibility in retirement by allowing you to manage your taxable income strategically.
Maximizing Your Contributions
To optimize the employer match, aim to contribute at least 4% of your salary. Additionally, consider gradually increasing this percentage each year to leverage tax advantages and the growth potential through compounding. In 2024, the IRS allows contributions up to $23,000 if you're under 50, and up to $30,500 with catch-up contributions if you're 50 or older. Consistently increasing your contributions as your salary grows is a strategic way to enhance your retirement security.
By making informed decisions about your 403(b) contributions and maximizing your employer match, you can establish a solid foundation for a comfortable retirement while fully utilizing the benefits Mayo Clinic offers.
What You Can Do
Review Your Contribution Rate: Log into your NetBenefits account and confirm your current contribution percentage to both Roth and Traditional accounts. Consider setting up automatic annual increases to your contribution rate.
Assess Your Investment Choices: Ensure your account is invested in assets that are intended to grow over time, rather than sitting in a money market (cash) account. A straightforward strategy is to allocate funds to a Lifecycle or Target Date fund that aligns with the year you plan to retire.
Stay Informed: Regularly review your retirement plan and make adjustments as needed to stay on track with your financial goals.
As you advance in your career and your income grows, it can be tempting to increase spending on housing, cars, travel, and other discretionary expenses—a phenomenon known as "lifestyle creep." While it's important to enjoy the rewards of your hard work, unchecked spending can hinder your ability to save and invest for the future.
What Is Lifestyle Creep?
Lifestyle creep occurs when rising income leads to proportionally higher spending on wants rather than needs. For example, after receiving a raise, you might feel inclined to upgrade your car, rent a larger apartment, or indulge in more frequent vacations instead of channeling that extra income toward savings or investments. Over time, these incremental spending increases can reduce your capacity to build a robust retirement nest egg and make it difficult to achieve your long-term financial goals.
Strategies to Avoid Lifestyle Creep
To guard against lifestyle creep, consider the following strategies:
Automate Your Savings: When you receive a raise or bonus, immediately allocate a portion of that extra income to your retirement accounts or investment portfolios. Automating this process ensures that you're consistently growing your wealth without relying on manual decisions each time.
Set Clear Financial Goals: Establish specific, measurable financial objectives for the short, medium, and long term. Having clear goals can help you resist unnecessary spending and keep you focused on what truly matters for your financial future.
Create a Budget: Regularly review and adjust your budget to reflect changes in your income and expenses. A well-planned budget can help you manage your spending habits and identify areas where you can cut back.
Practice Mindful Spending: Before making significant purchases, consider whether the expense aligns with your financial goals. Prioritize needs over wants and find satisfaction in non-material experiences.
By being mindful of lifestyle inflation and focusing on early, automated savings, you set yourself on a path to significant wealth-building and future financial security. Your future self—and your retirement fund—will thank you.
What You Can Do
Visualize Your Ideal Retirement: Take a moment to picture what your ideal retirement looks like and consider how much it will cost to achieve that lifestyle.
Strike a Balance: Find a balance between enjoying the fruits of your labor today and saving for tomorrow. While it's important to live life fully, it's equally crucial to set up your future self for success.
Prioritize Saving for the Future: Most people excel at enjoying the present but may neglect to prepare for the future. Make saving and investing a non-negotiable part of your financial plan to ensure long-term success.
A strong financial plan includes not only wealth-building strategies but also safety nets to protect your family in unexpected situations. Life and disability insurance are two foundational components that offer peace of mind, ensuring your loved ones are financially secure if you face illness, disability, or loss of life.
1. Life Insurance Options
Employer-Paid Basic Life Insurance: Mayo Clinic provides all eligible employees with employer-paid term life insurance, covering three times your annual salary up to the plan's maximum benefit. This coverage offers significant protection at no additional cost, providing essential support to your beneficiaries if you pass away. (Mayo Benefits Plan)
Voluntary Life Insurance: In addition to the basic coverage, Mayo Clinic employees have the option to enroll in additional voluntary life insurance. This allows you to tailor financial support based on your personal needs, ensuring your family has extra resources during challenging times. (Mayo Benefits Plan)
Private Life Insurance: Before purchasing private life insurance, it's critical to reflect on the purpose of the coverage. Life insurance companies are generally for-profit institutions selling products to consumers. Insurance products are primarily designed to provide financial protection, not to build wealth.
2. Disability Insurance
Long-Term Disability Coverage: Mayo Clinic offers employer-paid long-term disability insurance, ensuring income replacement if illness or injury prevents you from working. This benefit is crucial for maintaining financial stability in case of an extended absence from work due to health reasons. (Mayo Benefits Plan)
Supplemental Coverage: Employees can also consider voluntary options to extend their disability coverage, enhancing protection based on individual needs and financial goals.
3. Considerations for Effective Coverage
Assess Your Needs: Calculate the financial needs of your dependents by assessing potential living costs, education expenses, and other future requirements. Matching your coverage to these needs will help create a robust safety net.
Regular Review: As your income and responsibilities grow, periodically review and adjust your coverage. Increasing coverage over time ensures your family's security aligns with your evolving financial circumstances.
Before purchasing additional insurance, take an inventory of the expenses your income covers for your loved ones. Common examples include a home mortgage, auto loans, college savings, and living expenses. If you are the sole provider for your family, there is generally a compelling argument for additional insurance. In a dual-income household with limited expenses, the coverage provided by Mayo Clinic may be sufficient.
When deciding to purchase additional insurance, consider consulting a fee-only, fiduciary advisor who is not compensated through the sale of products. This can alleviate conflicts of interest and help ensure you are selecting options that align with your financial goals without eroding your ability to grow your wealth.
These insurance options offered through Mayo Clinic provide essential safeguards that help secure your financial future, making them valuable components of a comprehensive wealth-building plan.
What You Can Do
Evaluate Your Coverage Needs: Reflect on your personal and family circumstances to determine the appropriate level of life and disability insurance coverage.
Consult a Professional: Consider seeking advice from a qualified financial advisor to help you make informed decisions about additional insurance options.
Review Your Benefits: Familiarize yourself with the insurance benefits provided by Mayo Clinic and how they fit into your overall financial plan.
While Mayo Clinic’s 403(b) plan is a valuable foundation for your retirement savings, diversifying your contributions across multiple account types can enhance tax flexibility and optimize both your current and future financial situations. Building a tax-diversified portfolio means having a range of accounts to draw from in retirement, allowing you to manage taxable income strategically and adapt to changes in tax rates.
1. Max Out Your 403(b) Contributions
As previously discussed, Mayo Clinic’s employer match makes the 403(b) plan a critical part of your retirement strategy. This plan allows you to contribute to either Traditional (pre-tax) or Roth (post-tax) accounts. By taking full advantage of the employer match and selecting the right contribution type based on your tax expectations, you can strengthen your retirement savings. Traditional contributions lower your taxable income now, while Roth contributions offer tax-free withdrawals in retirement.
2. Contribute to a Roth IRA or Traditional IRA
Individual Retirement Accounts (IRAs) offer unique tax benefits that complement your 403(b) plan:
Roth IRA: Contributions are made with after-tax dollars, providing tax-free withdrawals in retirement. This option is especially beneficial if you anticipate being in a higher tax bracket in the future.
Traditional IRA: Contributions may be tax-deductible, offering tax-deferred growth, with taxes applied upon withdrawal. This could be advantageous if you expect to be in a lower tax bracket during retirement.
Diversifying between Roth and Traditional IRAs gives you more control over your taxable income during retirement. Additionally, IRAs often provide a wider range of investment choices than employer-sponsored plans. Consulting a financial advisor to ensure your investments align with your long-term goals may be beneficial.
3. Utilize a Health Savings Account (HSA)
For those enrolled in Mayo Clinic’s High-Deductible Health Plan, a Health Savings Account (HSA) offers triple tax advantages:
Pre-Tax Contributions: Lower your taxable income.
Tax-Free Growth: Your balance grows without being taxed on earnings.
Tax-Free Withdrawals: Funds used for qualified medical expenses, including retirement healthcare costs, are tax-free.
The HSA balance rolls over each year, making it an ideal vehicle to save for both current and future medical expenses while reducing your taxable income. With contribution limits of $4,150 for individuals and $8,300 for families in 2024 (plus a $1,000 catch-up contribution for those over 55), the HSA can be a key part of a diversified, tax-efficient portfolio.
4. Invest in a Brokerage Account
A non-qualified brokerage account allows you to invest in a wide range of assets outside of retirement-specific accounts. Although contributions are not tax-deferred, brokerage accounts offer flexibility, as funds can be accessed without penalties. Additionally, long-term capital gains are taxed at lower rates than ordinary income, adding tax efficiency to your broader portfolio.
By diversifying across these account types, you create a flexible, tax-efficient portfolio that allows you to manage taxable income effectively in retirement. Each account type offers distinct tax advantages, and using them together strengthens your financial strategy, enabling more strategic withdrawals. This balanced approach provides tax resilience, preserves your investments, and helps you adapt to various financial needs as they arise.
What You Can Do
Maximize Your 403(b) Contributions: Focus on contributing at least enough to receive the full employer match.
Consider IRAs: If you have discretionary income after maximizing your 403(b) contributions, consider contributing to a Roth or Traditional IRA to further diversify your retirement savings.
Leverage HSAs if Eligible: If enrolled in a High-Deductible Health Plan, contribute to an HSA to take advantage of its triple tax benefits.
Explore Brokerage Accounts: For additional investment flexibility, consider opening a brokerage account to invest in a wider range of assets.
Remember, before making significant investment decisions, it may be beneficial to consult with a fee-only, fiduciary financial advisor who can provide guidance tailored to your individual circumstances.
The Mayo Pension Plan offers eligible employees a structured way to save for retirement, with benefits that grow based on your salary and years of service. Understanding how this pension plan works can help you see its value as a cornerstone of your financial security.
Who Can Join?
You are eligible to participate in the Mayo Pension Plan if:
You are 21 years or older.
You work in a regular full-time or part-time position.
Note: Temporary or on-call employees, as well as residents and fellows, are not eligible.
How Benefits Are Calculated
The calculation of your pension benefits depends on your employment start date:
Hired Before January 1, 2015:
Your pension combines a "Final Average Pay" formula for service before 2015 with an "Annual Accumulation" formula for service after 2015.
Hired Between January 1, 2015, and January 1, 2023:
The "Annual Accumulation" formula applies, adding a percentage of your salary to your pension annually.
Hired After January 1, 2023:
The plan uses a "Stable Lump Sum" formula, which builds your benefit over time and allows for a one-time payment or conversion to monthly payments at retirement.
What Does "Vested" Mean?
Vesting means you have earned the right to keep your pension benefits if you leave Mayo Clinic before reaching retirement age. You become vested after three years of service, guaranteeing that your accrued pension benefits will be available when you retire.
Estimating Your Benefits
Use the "Your Pension Estimator" tool on the Mayo employee portal to calculate your expected benefits based on your current salary and years of service. This tool allows you to adjust retirement age and salary projections to help you plan for your future.
Early Retirement Options
You can choose to retire before the standard age of 65, but early retirement reduces your monthly benefit to account for the longer payout period. The specific reduction depends on your age and years of service at the time of retirement.
Payment Options
At retirement, you can select from two primary payment methods:
Monthly Payments:
Provides lifetime payments.
Offers a joint option that allows a spouse or beneficiary to continue receiving benefits if you pass away first.
Lump Sum:
Allows you to take a one-time payment instead of monthly income.
Means forgoing lifetime income in exchange for immediate access to funds.
Disability and Death Benefits
Disability: If you become disabled while working, your pension continues to grow based on your salary before the disability, starting at age 65.
Death Benefits: If you pass away before retirement, your spouse or designated beneficiary may receive benefits, depending on the options you have chosen.
Taxation and Other Considerations
Taxes:
Pension payments are subject to federal, state, and local taxes.
A lump sum payment will have 20% federal tax withheld unless you roll it over into another retirement account, such as an IRA.
Plan Modifications: Mayo Clinic reserves the right to modify or end the plan, but any changes apply only to future accruals, not to vested benefits.
This structured pension plan can be a cornerstone of your retirement, offering a dependable income stream alongside other retirement accounts like the 403(b) and Health Savings Account (HSA).
What You Can Do
Use the Pension Estimator: Leverage the internal Mayo resource to calculate your expected pension benefit and understand how it fits into your overall retirement plan.
If you have children—or plan to—preparing for their education expenses is likely one of your top financial goals. A 529 plan is one of the most tax-efficient ways to save for education, enabling you to invest on a tax-advantaged basis while maintaining flexibility for future needs.
How a 529 Plan Works
Contributions to a 529 plan grow tax-deferred, and withdrawals are tax-free when used for qualified education expenses, such as:
Tuition
Room and board
Books and supplies
Each state offers its own 529 plan options, and some—like Minnesota—provide state tax deductions or credits for contributions. These incentives can help you save more effectively while reducing your current tax burden.
529 plans also offer significant flexibility. If your child decides not to attend college, funds can:
Be transferred to another beneficiary (e.g., a sibling or relative).
Be used for other qualifying educational expenses, such as K-12 tuition, apprenticeships, or certain vocational programs.
Start Early, Save More
Starting contributions to a 529 plan early allows you to harness the power of compound growth. For example:
If you contribute $300 per month starting at your child’s birth and earn an average annual return of 6%, you could accumulate approximately $111,260 by the time they’re ready for college.
Here's the breakdown:
Contributions: $64,800
Tax-Free Gains: $46,460
The tax-free growth potential of a 529 plan allows your contributions to work harder by reinvesting earnings over time. By starting early, you maximize these benefits, building a robust fund to support your child’s education without compromising your broader financial goals.
Exploring Your Options
Each state’s 529 plan has unique features, such as investment options, fees, and tax benefits. While you can open a plan in any state, exploring your home state’s options—such as Minnesota’s plan—can provide additional savings through tax advantages. If your state’s plan doesn’t meet your needs, third-party providers like Fidelity, Vanguard, and Charles Schwab also offer competitive 529 plans with diverse investment options.
What You Can Do
Evaluate Your Education Savings Goals: If you have children or anticipate education expenses, calculate how much you might need to save and the timeline for achieving your goal.
Open a 529 Plan: Explore opening a plan through your state or a third-party provider. Compare fees, investment options, and tax benefits to find the best fit for your family’s needs.
Start Contributions Early: Even small, consistent contributions can grow significantly over time thanks to compound growth. Starting early ensures you maximize the tax-free growth potential of the 529 plan.
By integrating a 529 plan into your financial strategy, you can build a tax-efficient, flexible savings vehicle that aligns with both your education and long-term financial goals.
While it's essential to save and invest for the future, it's equally important to create a financial plan that allows you to enjoy life today. Financial planning goes beyond just retirement savings—it's about ensuring you have the resources to lead a fulfilling life now and in the years ahead.
Creating a Balanced Financial Plan
A well-rounded financial plan includes both long-term savings for retirement and shorter-term savings for goals like travel, hobbies, or homeownership. Setting up dedicated accounts for each goal can help you manage these priorities effectively:
Emergency Fund: Aim to cover three to six months of living expenses to protect yourself against job loss or unexpected expenses.
Vacation Fund: Set aside money for vacations and experiences so you can enjoy life now without dipping into long-term savings.
Investment Accounts: In addition to your 403(b) and IRAs, consider opening a brokerage account for non-retirement investing.
Align your spending with your personal values, focusing on what truly matters to you—whether that's travel, education, or security. By thoughtfully balancing short- and long-term goals, you can build a financial plan that supports both present happiness and future security, allowing you to enjoy a well-rounded, fulfilling life.
What You Can Do
Make a Written Plan: For yourself and, if applicable, your family, write down your short-term, intermediate, and long-term goals. Without a plan, you are planning to fail.
By creating a written plan, you establish clear objectives and a roadmap to achieve them. Regularly review and adjust your plan as your circumstances and priorities change, ensuring that you stay on track toward both enjoying the present and preparing for the future.
Homeownership is a significant financial goal for many, offering the chance to build equity and enjoy potential tax advantages. However, purchasing a home is a substantial commitment that requires careful evaluation of both financial and lifestyle factors to determine if—and when—it's the right choice for you.
The Costs of Buying a Home
When evaluating whether to rent or buy, it's important to consider both the upfront and ongoing costs of homeownership. These include:
Down Payment: Typically 20% of the purchase price to avoid private mortgage insurance (PMI).
Closing Costs: Fees for appraisals, title insurance, loan origination, and more, which can range from 2% to 5% of the home's value.
Monthly Mortgage Payment: Includes principal and interest payments, which depend on the loan amount, term, and interest rate.
Property Taxes and Homeowners’ Insurance: Costs vary widely depending on the home's location. Searching the county assessor's website can provide valuable insights into expected property taxes.
Maintenance and Repairs: Homeownership comes with ongoing costs for repairs, maintenance, and improvements—such as furnace replacement, snow removal, lawn care, and more.
When to Rent Instead of Buy
Renting may be the wiser financial choice if you're:
In the early stages of your career.
Unsure of where you'll be long-term.
Anticipating relocating in the next few years.
Renting provides flexibility without the commitments and ongoing expenses of homeownership. In areas where property prices are high relative to rents, renting can also free up more income to save and invest, supporting other financial goals.
Making the Decision
Deciding whether to rent or buy should align with both your financial goals and personal lifestyle. Before committing to a home purchase, ensure that you have:
A stable income.
A healthy emergency fund.
A clear understanding of the costs of ownership.
As a general guideline, if you plan to stay in a location for fewer than five years, renting is often the more favorable option. Homeownership is best approached as a long-term investment. Making a well-informed decision can help you avoid financial strain while setting a strong foundation for your future.
What You Can Do
Calculate Affordable Housing Costs: Housing costs should generally be less than 28% of your gross (before-tax) income. Multiply your gross annual income by 0.28 and divide by 12 to determine how much you "should" spend on monthly housing.
Assess Your Financial Situation: Use online calculators or consult a financial advisor to identify how much home you can afford based on your income and financial obligations.
Consider Debt Obligations: If you have student loans, personal loans, or credit card debt, the 28% guideline may be unrealistic. Adjust your housing budget accordingly to avoid overextending yourself financially.
Conclusion
Building wealth as a Mayo Clinic employee involves more than just saving for retirement—it's about making informed financial choices that support both your current lifestyle and a secure future. By maximizing your 403(b) contributions, managing debt effectively, avoiding lifestyle creep, investing strategically, and planning for your children's education, you can create a robust foundation for long-term financial success.
Regularly reviewing your financial plan ensures it aligns with your evolving circumstances and goals. With thoughtful planning and periodic adjustments, you'll continue building a prosperous future that allows you to enjoy life now and well into retirement.
About Fortress Financial Group
Fortress Financial Group is an independent, fee-only registered investment advisor based in Rochester, Minnesota. We provide investment management, financial advice, and tax planning services nationwide. As fiduciaries, we are committed to making recommendations that serve our clients' best interests and take full responsibility for our advice. Our fee structure is designed to align our interests with yours, ensuring that our success is tied to yours.
Disclosures:
Fortress Financial Group, LLC (“Fortress”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Fortress and its representatives are properly licensed or exempt from licensure.
All information provided is from sources believed to be accurate and updated. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
References
Summary Plan Description Mayo Pension Plan — January 2024
Summary Plan Description Mayo 403(b) Plan — January 2024
Summary Plan Description Mayo Clinic Health & Welfare Benefits Plan — January 2024
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