3 Reasons Refinancing Your Home Might Make Sense

Refinancing your mortgage loan can be affordable for many homeowners. Between the price of your utilities, your property taxes and the general upkeep of your home, cutting costs on your monthly mortgage payments could be a viable choice for saving some serious dough.

There are several things you should understand when considering options that will alter your home payments. If you’re questioning whether or not you should refinance your mortgage loan, take a look at the following scenarios where it may be helpful to consider a home refi.

How Does Refinancing Work?

You can refinance various types of loans including those for your home, car, student tuition or credit card balances. When you go through a refi, your current loan gets paid off and replaced with a new loan that has different terms. These terms are comprised of your interest rate, the length of your loan, the balance of your loan or even the type of loan you own.

When dealing with mortgages, your loan may be classified as either a rate/term refinance or a cash-out refinance. With a rate/term refinance, the goal is to lower your interest rate, the amount of each monthly payment or the length of the loan without changing your current mortgage balance.

A cash-out refinance is used to turn your existing home equity into cash. This differs from a rate/term refinance because a cash-out option is an entirely new mortgage with cash back — not a second mortgage.

Why Should I Refinance?

A home refi can create an ample amount of monthly savings. In turn, these savings allow you to increase your savings, add to a retirement or college fund, consolidate any debt you have accumulated or build equity in your home by using the extra funds for home improvement projects.

There are a number of circumstances in which refinancing would prove to be a profitable course of action. If you’re experiencing any situations similar to the following, be sure to consult with your loan provider about whether or not a refi would be a helpful approach to financial wellness.

Your Credit Score Has Improved

Let’s face it — people are more likely to make poor money decisions when they are young. It’s easy to lose track of spending when using credit cards for the first time and any substantial charges from your past could have potentially affected your credit score in a negative way. But as you grow and learn more about allocating funds appropriately, your credit score will gradually improve in time.

As your credit score improves, you will be eligible for different types of home loans. Many first-time buyers and those with low credit scores settle for FHA loans because they are backed by the federal government. This allows lenders to broaden their acceptance standards to include those with low credit or small down payments.

However, most FHA loans require private mortgage insurance (PMI) which adds a fee to your monthly mortgage payments. If you have built enough equity by owning a home over time, you can shift to a conventional loan that would help you ditch those pesky PMI payments. By changing your loan type, you could bypass paying for PMI altogether.

There is a Change in Finances

While it would be ideal if financial stability was always a possibility, sometimes life throws some unexpected twists and turns your way. Some scenarios that can cause a serious change in finances include divorce, the death of a spouse or even job loss. When unfortunate situations arise, you could use a boost to your bank account.

Saving money is of paramount importance during these times. When you refinance loans, money can be saved in several ways. Since interest rates comprise a hefty amount of your mortgage payments, getting a new loan with a lower rate can be an option to save you money in the long run. Then, you can use this extra money to help with bills or other necessary purchases.

You Have Substantial Debt

Debt can be a crippling factor when determining future financial decisions. With the average cost of living rising throughout the nation, many consumers are affected for years following large expenditures.

Two of the most common causes of debt involve medical expenses and college costs. The cost of medical care has increased especially within the last 10 years and is only expected to continue rising as time goes on. From emergency care to the price of elderly assistance, many people are financially in the red by these circumstances.

Not only that, but loans for medical expenses or college attendance also tend to have higher rates of interest. This is an instance when a cash-out refinance might be most applicable. Since the interest on mortgages are generally lower than other types, using a cash-out refinance to pay off other loans with higher interest loans can be a sensible strategy when consolidating debt.

However, keep in mind that debt consolidation can become a crutch for those that have a tendency to pile on debt. It may be tempting to start over by refinancing rather than actually paying it down, therefore it’s vital to assess all outstanding payments and make an educated decision on whether or not it’s the right choice for your unique situation. Every refinance is a chance to hit the reset button and while you do save money in terms of monthly cash-flow, you’re also extending the length of time before the debt is actually gone.

Blooom does not provide tax advice. Consult a tax expert for tax-specific questions.

While the data from third parties is believed to be reliable, we cannot ensure the accuracy or completeness of the information provided.



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The SECURE Act – Blooom’s take

On Dec 20, 2019 President Trump signed into law the Setting Every Community Up for Retirement Enhancement (SECURE) Act. Clearly, some of the act’s provisions are designed to raise tax revenue, but a few of the changes are taxpayer-friendly measures designed to boost retirement savings.

This Act is quite comprehensive, so we’ll take a stab at distilling it down to the provisions that are most likely to impact those that we care most about – our clients. Here, we break down the good, bad and different changes to the SECURE Act. 

The Good

Part-time Workers Can Participate

Starting in 2021, the new retirement law guarantees that even part-time workers will be eligible to participate in their company 401k plan. It used to be that you had to work at least 1,000 hours during the year to be eligible. The new law reduces that to just 500 hours for at least 3 consecutive years.

Unfortunately, still today, almost half of all workers in America are not participating in a workplace retirement plan. Clearly some are eligible to but choose not to, but the vast majority of these folks are working for a company that has opted NOT to offer a retirement plan to their employees. 

Easier for Small Businesses to Offer a Plan

Fortunately, this new law makes it a bit easier for small businesses to offer a retirement plan for their employees. Employers can now get up to a $5,000 tax credit for starting a 401k plan (previous credit was capped at $500). The law also makes it easier for small businesses to “join together” to provide retirement plans for their employees. Multiple Employer Plans (MEPs) will allow smaller companies to pool their resources to leverage better, lower-cost plans – typically not available to small businesses. All of this should translate into a higher percentage of employees at small companies getting access to retirement plans.

In the past, contribution to retirement accounts could not exceed the amount of your compensation. So if you didn’t earn any work-related compensation you generally couldn’t make retirement fund contributions. Under the SECURE Act, students pursuing graduate or post-doctoral study or research that are receiving aid in the form of a fellowship, stipend or similar, are now eligible to contribute to IRA accounts.

The Bad

What It Means for Your Beneficiaries

Now for some bad news. Previously, when a retirement account owner passed away, they were able to leave that account to a non-spouse beneficiary who was able to take distributions from that account over the course of their lifetimes. This was often referred to as a “stretch IRA.” 

The upside of doing this was that by taking distributions over a long period of time, the funds in the account were still able to grow tax-deferred and only a small percentage was required to be withdrawn each year and thereby only a small percentage of taxes would be triggered each year. Starting January 1, 2020, this all changes. 

Going forward, anytime a retirement account is left to a non-spouse beneficiary – that account must be fully withdrawn over 10 years, likely a much shorter time frame. Exceptions to this are in cases where the beneficiary is a minor child, disabled, a chronically ill individual, or if the beneficiary is not more than 10 years younger than the deceased IRA owner.

The Different 

New Withdrawal Options

If you are expecting a child or planning to adopt a child, the new law will allow you to withdraw up to $5,000 from your IRA, 401k, or another retirement account without triggering the normal 10% early withdrawal penalty (you will, of course, still pay taxes on the withdrawal). If you are married, each spouse can withdraw up to $5,000 from their own retirement account for a total of $10,000 for a married couple. A word of caution though! Weigh this option carefully – a $10,000 combined withdrawal today could mean $76,000 less in retirement accounts down the road.*


New Required Minimum Distribution Age 

For our more “experienced” clients that are nearing the Required Minimum Distribution (RMD) of 70 1/2, the act now delays the required age to begin required distributions from IRA and 401ks to age 72. Note this only applies to folks that have not yet attained age 70 1/2 by 12/31/19.

In addition, for our clients still working into their 70s, the new law allows you to contribute to your IRA or Roth IRA regardless of age, as long as you have earned income.


How does The SECURE ACT impact YOU?

All in all, there are quite a few changes here and not all of them will have an immediate impact on your situation today. That said, we’re here to make sure you’re aware of these changes because they certainly could impact your plans in the future. And if there is anything for certain in financial planning, it’s that plans change. Being armed with this information will hopefully help you, or those close to you, navigate what can often seem like a pretty frustrating and complex set of rules and regulations. And remember, blooom clients, if you need help navigating, we’re always here for you! 


SECURE your 401k and IRA with blooom

The SECURE Act brings forward a lot of things to think about and consider, if you wish to know the health of your 401k or IRA, click here for our free analysis. This analysis will put the health of your retirement account into perspective and see where it could be optimized to better yourself and your financial future!



*Assumes a 7% average annual rate of return over 30 years, age 30 to age 60, hypothetically.


The information is provided for discussion purposes only and should not be considered as advice for your investments or tax advice. Blooom does not provide tax advice. Consult a tax expert for tax-specific questions.

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Decade PastCast: Sunshine and rainbows! But hindsight is always 2020

Given the fact that we just closed the door on a quarter, year, AND a decade, we have a special “Decade” edition of the PastCast for you this time around. Looking back on the last ten years and how far the market has come, it’s easy for the climate we’re experiencing today to cloud the reality that was anything but sunshine and rainbows at times throughout the 2010s. And as always, there are some great lessons to be learned through it all.

If you were one of the few that held strong through all the ups AND downs, the last ten years ended up being one of the best times ever to be an investor.

Here are some of the highlights from the last 10 years. (If you’re in a rush.)

Globally diversified 80/20 portfolio performance: +151%

US stock market performance: +248%


Number of times US stocks hit new All-Time Highs

2000-2009: 6

2010-2019: Over 250 (34 times in 2019 alone)

  • 2010: 0
  • 2011: 0
  • 2012: 0
  • 2013: 45
  • 2014: 56
  • 2015: 12
  • 2016: 22
  • 2017: 67
  • 2018: 21
  • 2019: 34


Number of Recessions

  • 2000-2009: 2 (including two stock market crashes of nearly 50% each)
  • 2010-2019: 0 (First time any decade has not had a single US recession since 1850)


Unemployment Rate

  • January 2010: 9.8% (Beginning of recovery from the 2008-09 financial crisis)
  • January 2020: 3.5% (lowest since 1969)


Gas Prices

  • December 2009: $2.60/gal
  • December 2019: $2.55/gal


And now for the long(er) version…

Year-End Review: 2019 Highlights

The year began and ended with quite a bang. After what seemed to many investors at the time to be the beginning of the next big prolonged downturn, crash, recession, or whatever panic-inducing buzzword could draw the most clicks, 2019 saw the quick and robust reversal of a nearly 20% pullback that ended the previous year (2018). 


Despite continued global concerns over international trade, Brexit, shifting geopolitical tensions, the longest US government shutdown in history, an inverted yield curve (huh?), and various political scandals, the beginning quarter of 2019 ended up as the best for stocks since 1998. And in case we haven’t reminded you enough already, that was immediately following what ended up being the worst December (Dec 2018) for stocks since the Great Depression. 


The middle of the second quarter saw another moment of panic that led to the worst May for stocks since 2010. This was mainly attributed to concerns with newly proposed tariffs in the trade war with China, a lack of progress in those same ongoing trade negotiations with China, and rumors (which did not play out) of potential tariffs on Mexican imports as well. And then in June, stocks reached new all-time highs, ending up as the best June for stocks in more than half a century.

Global markets chugged along and continued to absorb the impact of numerous multi-day sell-offs and their following recoveries, caused by continued predictions of an imminent US recession, mixed with largely positive economic news, little to no clarity on an end to trade tensions with China, and only the 3rd impeachment of a US President in American history. 

US stocks finished the year up around 30% broadly, making it the 5th best year for stocks since 1980. International stocks in developed regions largely kept pace with the US as well. And yet, the ride never felt like a smooth one, because it wasn’t. This was a great year for the stock market, but there is an important lesson to be taken from this year that no investor should lose sight of – Around HALF of the gains we saw in large US stocks in 2019 were only possible BECAUSE of the sell-off we experienced at the end of 2018. 

You see, it may seem obvious now in hindsight, but without that big drop to close out 2018, the 2019 starting point would have been much higher, meaning the gains to get us to the levels we’re at today would have been far less. This illustrates perfectly why investors that are in it for the long haul actually NEED the market to decline every now and then, and ultimately SHOULD benefit from those declines, if they stick it out. When money is regularly being invested in the market, dips in stock prices have historically always provided great buying opportunities. 


The 2010s: Let the good times roll!

It goes without saying at this point, that we’ve just closed out what really should have been an incredible decade for investors. US stocks saw returns of about 250% broadly from 2010 through 2019, reaching more than 250 new all-time highs in the process. 

For the first time since the 1850s, the US did not have a single recession. Unemployment saw a steady decline from nearly 10% in 2010 to the lowest in a half century, at 3.5% today. AND believe it or not, gas prices actually fell slightly from 2010 to today. Remember when they were over $4/gallon?!

With US stocks leading the way, a disciplined investor with a globally diversified long-term portfolio would likely have seen their returns in the triple digit percentages. But of course, this is only true for those that managed to avoid the numerous temptations to jump in and out of the market. While hindsight tends to paint a pretty rosy picture of the last ten years, here is a reminder of just some of the chaos the market (and patient investors) had to endure to get us here:


April 2010: Greek debt downgraded to “Junk” status, following IMF (International Monetary Fund) bailout of EU sovereign debt. Global markets crashed accordingly.


May 2010 Flash Crash: In a single trading session, the Dow shed 1,000 points for it’s worst intraday decline on record (at the time).


2011 “Bear Market”: Over a 5 month period, global stocks declined significantly, with US stock indexes falling over 20%, before recovering to end the year flat. This was caused by continued concerns over European sovereign debt, the first ever downgrade of the United States’ credit rating, and fears of yet another recession in the US, following the crash of ‘08-09.


Chinese stock market crash of 2015-16: Chinese stocks crashed and spread panic throughout Asian markets.


August 2015 market sell-off: The Dow dropped by a total of 1,300 points in just a few trading days, which prompted a steeper worldwide sell-off in the following week. What began as a Chinese market event earlier in the summer had managed to wipe out $10 Trillion of global wealth just months later.


2016 Brexit vote: British citizens voted to leave the European Union, sending global stocks into a downward spiral and wiping out another $2 Trillion of global wealth over several weeks. The results of this referendum are still pending a resolution today.


Q4 2018 stock sell-off: Confusion surrounding the lack of progress in trade negotiations with China, fears of a slowing economy, and the longest government shutdown in US history, sent the S&P 500 down 20% from September to the end of the year.

Source: https://www.macrotrends.net/2488/sp500-10-year-daily-chart


So, as you can clearly see, growth of 256% in ten years involved anything but a smooth ride along the way. In fact, anyone that was paying attention would have likely seen countless predictions of another 2008-style market crash or prolonged recession every single time the market experienced a correction. Hopefully you tuned out the noise.


Food for thought…

If you had invested $10k into an S&P 500 index fund on January 1, 2010 (this would not be appropriately diversified), it would now be worth over $35k. BUT, since that initial investment, you would have seen your balance in that fund drop as low as $9,150 along that ten year journey to today. Would you have stayed the course?

This is one of the best examples of investing and hindsight bias from the last decade. It seems completely obvious today, but of course in real time, no investor knows what is truly around the corner in the short-term, and every correction or market panic will tempt any human with a pulse to abandon their strategy. It’s the fight or flight instinct that lives within all of us. But as investors, it’s the flight instinct that tends to win out all too often. In investing, our brains are often hardwired to be our own worst enemy.

So, how did you react? Did you let your instincts get the best of you? Hopefully not. And that’s exactly what we’re here for.


An important note!

Given the example above, it’s pretty important for us to mention here that we did not and would not advise someone to invest all of their retirement account(s) in an S&P 500 Index fund or any single asset class, despite the (now obvious) historical performance of that index in recent years. Therefore, comparing your own globally diversified portfolio returns to that of an index, like the S&P 500, that tracks a single asset class, is never going to be an appropriate apples-to-apples comparison. 

Being invested in a diversified portfolio means you will certainly underperform any single asset class in any given year and outperform in others. Diversification simply helps an investor weather the storms that others, with all their eggs in one basket, would likely have found very challenging to stay the course through, over the last decade. 

And what good is any investment strategy if you can’t stick to it through the ups AND downs, over the long haul?


2020 vision…

While hindsight may be 20/20 (sorry, we can’t pass up the opportunity to use this pun), there is not a person living today that has a clear view of how the next decade will play out for investors. Market predictions are everywhere and it’s likely that all of them will be wrong

Since these things cannot be predicted, we continue to take a globally diversified approach, tailored to each client’s risk tolerance and retirement goals. This is an approach that has been proven time and again to benefit those that stick to it over time. Patience and discipline have always been the keys to success and we see no reason to believe this will change in the decade ahead. 

As always, a farsighted investor with a globally diversified strategy should continue to view their long-term goals with clarity and confidence, knowing that what happens today, tomorrow, or next month, whether up OR down, should have them on a proven path to reaching their goals. 


Happy New Year from all of us here at blooom. We appreciate every last one of you that make our mission so worth it. Here’s to being another year closer to reaching your goals!




The information is provided for discussion purposes only and should not be considered as advice for your investments. Past performance is no guarantee of future results. Just because an investment performed well in the past does not mean it will do well going forward. And vice versa. Investments will go up and down in value based on what happens in the markets. We do not make any guarantees your investments will grow.


 1. As measured by the BlackRock 80/20 Target Allocation Index I Fund

 2. As measured by the Vanguard Total Stock Market Index

 3. As measured by the S&P 500 Index

4. Source: https://data.bls.gov/timeseries/LNS14000000

5. Source: https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=emm_epmr_pte_nus_dpg&f=m

6. Source: https://www.morningstar.com/etfs/arcx/spy/quote —> interactive performance

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Blooom – Why We Exist

Five years into our mission and we’ve accomplished quite a bit, but we’re just getting started. New decade. New look. And the same problem, still affecting far too many. We’re here to help solve it. This is our WHY:





Blooom – Financial Management for All!

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3 Reasons to Invest Now

During my first professional job at San Diego State University, I went to a meeting sponsored by the human resources department explaining the 403(b) retirement plan. It’s like a 401(k), except designed for educational institutions. The speaker explained that I could have a percent of my salary transferred into a retirement account and that I wouldn’t pay income tax on any money I diverted into the account.

I figured that it could save me $240 for every $1,000 I invested at my 24% tax rate.

Even better, there would be no tax on the money, the dividends or capital gains, as long as the money remained in the retirement account.

This was unbelievable!

And if that wasn’t enough of a draw, the speaker said that my employer would match my contribution up to 5% of my salary and I could invest that money as well. The beauty of this was that the money was mine to keep.

I thought I was dreaming!

The human resources representative explained that the law allowed a maximum savings of $15,500 per year in this account (in 2020 the maximum contribution amount is $19,500 per year) and it could grow and compound for years, without paying any taxes until the money was withdrawn in retirement.

I walked out of the meeting with my head swimming. There were charts and graphs of the potential wealth I could accrue over the years and the idea that a small – okay not really that small – sacrifice today could lead to spectacular wealth for my retirement.

This article will explain three reasons why you should consider investing now, and how small financial behaviors today can lead to extraordinary wealth for your later years. And the beauty is that you don’t need to earn a tremendous amount of money to start investing now.

1. You should consider investing now to enjoy compound returns.

Albert Einstein is quoted as saying that “Compound interest is the eighth wonder of the world. He who understands it, earns it and he who doesn’t pays it.”

Once you understand how compound returns can grow your investment dollars, it’s easier to choose saving and investing today, overspending.

The concept of compounding works like this:

Invest $5,000 in year one and earn 7% return and at year end, your account is worth $5,350.

In year two, your $5,350 investment grows to $5,724.50.

In year three, the $5,724.50 investment grows to $6,125.22

In year four the $6,125.22 investment grows to $6,554.00

By the end of year five your original $5,000 is worth $7,012.76

This example assumes that your investments earn 7% each year.

This is the beauty of compounding. Your money is making more money and each additional amount is added to the original balance and continues to grow.

Now, imagine that you begin saving in your workplace 401(k) retirement account or 403(b) at age 30 and your employer matches your contribution with free money. As your income grows, you decide to increase your contributions. The compounding of your investments is mind boggling.

This retirement account calculator shows that by contributing just 10% of your income each year, with a 5% employer match, at age 65 you’ll amass $1,529,583.

The analysis assumes:

  • Your current salary is $60,000
  • You contribute and invest 10% of your income
  • Your salary increases 3% per year
  • Your employer adds 5% of your salary annually
  • Your average annual rate of return is 7%
  • You invest for 35 years

Source: https://www.bankrate.com/calculators/retirement/401-k-retirement-calculator.aspx

2. You should consider investing now, because you need to invest less money to enjoy a greater payoff.

Imagine two investors start investing at different times. One invests less than the other and ends up with more money in retirement.

That’s the second reason to start investing now. If you start investing earlier it’s easier to amass more money through compounding.

Cathleen, age 30, has a great job and is motivated to invest for retirement immediately. She earns $85,000 per year and decides to invest $19,000 per year in her 401(k) account, the maximum amount the law allows. Cathleen’s employer also contributes 5% of Cathleen’s salary or $4,250 per year. This amounts to $23,250 invested every year. She earns an average 7% annually and invests in a 70% stock and 30% bond allocation.

At age 40, Cathleen’s retirement account is worth $337,308. Not bad for 10 years investing!

She stops investing at age 40 and leaves the balance in the account as it continues to grow at 7% annually. She doesn’t add any additional money to the account after age 40.

Cathleen invested a total of $232,500 for retirement, including her employer’s contributions.

When Cathleen turns 65 years old, the $232,500 that was invested is worth $1,830,700, without adding any additional funds after age 40.

Kris wasn’t as savvy as Cathleen. He didn’t begin investing in his 401(k) until age 40.

At age 40 Kris invests the exact same amount per year as Kathleen did and his employer also invests the identical amount for a total of $23,250 per year. His investments also average a 7% annual return.

Kris continued to invest the exact same amount for the next 25 years, 15 years longer than Cathleen, for a total investment amount of $581,250, including the employer contributions.

At age 65, Kris’ account is worth $1,578,700. Now, this is a great amount of money, but, let’s compare Kris’ total investment with that of Cathleen.

Cathleen and her employer invested $232,500 and ended up with $1,830,700 at retirement.

Kris and his employer invest $581,250, more than double the amount that Kathleen invests, and ended up with $1,578,700, roughly a quarter of a million dollars less than Kathleen.

And that’s the second reason to start investing now.

By starting to invest earlier, you can amass greater wealth with a smaller investment amount.

Assumptions: Cathleen and her employer invested $23,250 per year from age 30 to age 40. Kris and his employer invested $23,250 per year from age 40 to age 65. Each earned an average annual return of 7%. No adjustments were made for taxes or inflation.

3. You should start investing now so that you have a better chance of reaching your financial goals.

Investing isn’t only to amass money for retirement, although that’s an important goal. Investing is one of the best ways to build up cash for any goal that is intermediate-term or occurs in seven years or more. These intermediate term goals might include, funding a child’s education, buying a home, taking a special vacation, or buying a car with cash.

If you keep your money in a bank account or certificate of deposit, you’ll earn low single digit returns. While, the investment markets have averaged much greater returns over long periods of time. With greater returns over time, you’ll be more likely to reach your financial goals.

The reason investing is ideal for intermediate or longer term goals is because in the short term, the financial markets are volatile. While, over the long term, they have been shown to grow your wealth more rapidly than a savings account.

The smartest investors understand, that since money in your retirement account needs to stay put until you’re at least 59 ½, or you’ll pay a penalty for withdrawals, it’s a good idea to invest in a taxable account, too. This might be an investment account at a major broker like Fidelity, Schwab or eTrade. Or you might choose to invest with an app like Robinhood or M1 Finance.

In fact, some intermediate term goals, that you might have thought were out of reach, could be achievable by starting to invest now.

3 Reasons to Invest Now – Wrap up

The simplest reason to invest now is because your money grows exponentially, the longer it compounds. So the earlier you begin investing, the easier it is  to amass a large retirement stash or money for mid-term goals.

Whether you start investing with $100 per month or $1,000, the most important reason to invest now is to develop the saving and investing habit. It’ll make your future richer and your financial worries fewer.

Disclaimer; The information is provided for discussion purposes only and should not be considered as advice for your investments. Investing involves risk. Your investments are subject to loss of principal and are not guaranteed.





About the Author:


Barbara A. Friedberg, MBA, MS is a veteran portfolio manager, expert investor, and former university finance instructor. She is author of Personal Finance; An Encyclopedia of Modern Money Management and several other books. Friedberg’s websites include Robo-Advisor Pros.com and Barbara Friedberg Personal Finance.com.


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