Virtual Tour
Even if you can’t make it to one of the tour stops you can still get help. There’s free basic advice on savings and financial planning available via the Virtual Tour option. You even have the opportunity to submit a question* to a Fee-Only financial advisor.
Even if you can’t make it to one of the tour stops you can still get help. There’s free basic advice on savings and financial planning available via the Virtual Tour option. You even have the opportunity to submit a question* to a Fee-Only financial advisor.
Check back to see if your question has been answered. Keep in mind that we are receiving hundreds of questions and are committed to answering all of them, but we cannot guarantee every question will be answered. Please don’t include any personal or confidential information, your question and answer may be made public so that others can learn.
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Q: Reading your answer to a question involving the Roth Ira, you responded " The rules on wash sales (selling a stock at a loss and repurchasing it) have been tighten up to clearly include mutual funds and retirement accounts. To avoid the wash sales issues you have to wait 31 days to repurchase the same security. You can repurchase another international mutual fund immediately." Wash sales do not exist in Roth IRAs as the taxes are already paid, no deduction into the Roth, no taxes on the earnings, am I safe to assume no need to worry about a wash sale in a Roth IRA?
A: Since there is no gain or loss taxes paid inside the Roth, I believe you are correct. I am assuming you are referring to selling a security inside the Roth and repurchasing the security outside the Roth. From a global perspective, I'm not sure why you would sell inside a Roth and repurchase outside the Roth, but that would not be a taxable event (assuming no money was take from the Roth account). If you are referring to selling outside the Roth and Repurchasing the security inside the Roth, that would trigger the Wash Sale Rules.
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Q: I've noticed that most investment articles and advisors on TV are recommending owning dividend paying stocks for these tough economic conditions. The idea being to get paid something while waiting for things to improve. What mutual funds have an above average yield and a good track record?
A: Buying dividend paying stocks is one of many investment strategies. As an advisor, though I like the strategy, I have not historically selected mutual funds based on their yield. Also, remember given our current bleak economic outlook, that the historical numbers used in reporting mutual fund yields will likely change. Many companies have already reduced or eliminated their dividends. One fund I have used is the Royce Total Return fund, it's a small cap fund investing most of its holdings in dividend paying stocks, though the total yield is not high, it's high for a small cap fund. Another fund to look at is Vanguard Equity Income. A fund I have not reviewed is Cohen & Steers Dividend Value Fund. Many real estate funds have a higher yield, but to some they care additional risks. As you may understand, giving fund recommendations, as good as the funds may be, may not be right for you, or others. You need to target an invesmtment strategy and allocation and then implement that strategy.
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Q: My husband and I currently max out our Roth IRA contributions annually. In addition, we put $50/mo into both Vanguard Small Cap Value Index & Vanguard Mid-cap Index taxable accounts. We also put $100/mo into Dodge & Cox International in a taxable account. I also participate in a 457 plan through my employer, putting $400/mo into Vanguard Target 2030 fund. Given what has happened with Dodge & Cox International, should I sell that prior to year end, to avoid capital gains distributions and increase my 457 contribution monthly? (Dodge & Cox International is one of my options for funds.)
A: You may have the wrong planner answering this question. I like Dodge and Cox International fund and I am not selling it for clients. However, your question is a tax question. I would not be (and am not) selling the fund or other funds to avoid the tax able distributions. If you have already incurred a capital gain from a sale and you are looking to off set that gain with a loss - maybe you can consider selling the Dodge and Cox International Fund (or a portion of it). However, you like the fund. The rules on wash sales (selling a stock at a loss and repuchasing it) have been tighten up to clearly include mutal funds and retirement accounts. To avoid the wash sales issues you have to wait 31 days to repurchase the same security. You can repurchase another international mutual fund immediately.
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Q: I am eligible for retirement from my companies defined benefit plan. There is not enough in the plan to retire yet. I am thinking though, when this economy starts to turn around could be a good opportunity to take my lump-sum retirement and get it invested. I could then get another job so that I would not need to withdraw too much of the funds for several years. I know no one can predict a turn around point, but 2nd quarter 2009 is when I am thinking. Any advise one way or another?
A: This is an easy question, nobody knows. A couple of "experts" I've heard or read seem to think it will be mid Summer until we start to come out this mess. That does not mean a recovery by Summer, just the start of a recovery. This seems to be similiar to what you are thinking. Others will say a recovery is a long way off. You many want to consider dollar cost averaging into the market now (if you have the opportunity). I do recommend you develop a retirement spending plan to assure that your thinking is in line with reasonable expectations.
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Q: Is this a good time to buy a 2 to 3 family house.
A: I guess that depends on how many families you are supporting! There are many issues to this question. If you have never owned real estate before and been a landlord, there are a number of horror stories. Personally, my brother and I managed a 6 apartment house in the early 90's. It was a disaster, we could hardly give the place away and it had no debt at the time! Location and the quality of tenants is another important aspect to buying property. Also, how much are you investing (likely at least 20% given today's credit markets), when the tenants don't pay or you have a vacancy and the fuel bill is due, do you have the cash to support the building. Our economic outlook is tough at the moment, possibly that means people will continue renting instead of buying or are selling (or being forced out) of their homes, but the tough economic times may create a financial hardship for your tenants. More than the finances, are you ready and do you have the personality to manage tenants?
If you are putting all your money into one property, I'd vote against it. If this is one of many properties, or a way to diversify other money, I would at least give it some thought.
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Q: I am retired and on a fixed income. I owe a credit company $17,000 with a very high interest rate. My income has decreased as of late. It is difficult to pay more than the min. as I have in the past. That interest is killing me. Is it possible to negotiate a lesser payoff? If so how do I go about arranging this.
A: The first step is to call the credit card companies and be honest, tell them you have had a reduction in income and your are concerned about being able to continue making the payments. Ask them if they can reduce the interest rate (ask for a 0% rate). If your situation is truly tough, you have a good chance and getting some reduction. If this doesn't work, I suggest looking for a credit counseling agency that is a National Foundation for Credit Counseling member and be sure to check with your local Better Business Bureau and State Office of Consumer Affairs to be sure that the agency you are considering does good work for consumers. Remember that no agency can wipe out a bad credit record faster. It takes time.
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Q: I have US government securities trust B with Morgan Stanley and with my last statement I have lost $600. I am 68 yrs old and do not draw from this acct. Should I be with Morgan Stanley and should I be in this particular trust. Thank you in advance for any suggestions or help.
A: First, I am not familiar with your fund. Though I would not be concerned with a $600 loss, I also do not know your total balance. If you are thinking about selling or moving this you need to understand the B indicates there may be a fee to close the fund. This will depend on how long ago you purchased the funds. Also, the underlying expenses (the expense ratio) is fairly high for a US Government bond fund. I like Vanguard's Bond index funds, they have low expenses and do not have any fees to buy or sell the fund. A quick look at your fund looks like it was invested in the Fannie Mae and Freddie Mac Bonds. This is likely the reason for the decline in value.
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Q: I have a supplemental retirement account invested in the stock market. Should I leave it there or roll it over to a more stable investment? Also I have to use a portion of this acct periodically because I am unemployed because of health issues. I will not be able to draw my retirement from my job until 2011. I'm on a fixed income and I have ongoing medical bills because of illness.
A: Thanks for asking a great question. From what you have presented, this is a case where needed to know more information applies. Your question has a number of issues and angles to it. I am uncomfortable giving specific advice as a result. However, I'll address some general thinking around being invested in the market today. The majority of my clients remain invested in the market today. They, like everyone else, have taken a large hit to their account values in the last year, particularly in the last month. For clients that are not spending their money, either because they are still working or have a sufficient cash reserves to avoid/delay selling holdings now, we are waiting out the current crisis. However, based on your question, it appears you have invested money and you need some of that money now or shortly. Personally, I have yet to deal with this issue with a client, but this is what I'd look for. First and foremost, how does the current asset allocation compare with your target allocation. If you have targeted 60% of your invested money in stocks, most likely your stock allocation is low currently. Prudent asset allocation theory would indicate that you may sell the non-stock holdings first, at least to the point of bringing the asset allocation in line with your target. Next I'd look for poor performing holdings (I know they all look poor right now), but look for those that have lagged in the last 5-10 years. Then I'd look to see if there were holdings that I might sell that may have been on my "watch" list.
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Q: I am on Social Security disability. I owe $10k in credit card debt most at 2.99% if not zero for a year. I have excellent credit(740 points). What rules or laws allow me to wipe out my debt legally?
Note: I have been paying my minimum to keep my rating but I'll never be out of debt, No change expected for my health.
A: Assuming you do not have other assets that could be used to pay the loan, like equity in your home, I would suggest that you try Consumer Credit Counseling to see if you can negotiate a principal reduction from the lenders. Often, in situations that the lender sees little hope of collecting the full amount, they'll consider a negotiated settlement. If that is not successful your only recourse may be bankruptcy.
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Q: I have about $16,000 of credit card debt. My question is should I use one of those credit card services that are being advertised on many of the TV stations to reduce my payments and get me out of debt? Thank you.
A: What works for one set of circumstances, may not work in another. Generally the advertised services are charging you a fee to help you reduce your credit cards, often they are more concerned with collecting the fee than reducing your debt. One website we like is www.moneymanagement.org. It will take a while to payoff your credit card debt. I suggest contacting the card issuers and asking for lower interest rates and paying any extra you can on the highest rate card first.
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Q: Many of the online retirement calculators talk about needing 80 - 100 percent of your current income for retirement. But are they including cost-of-living increases (inflation)? I'm 25 years from retirement, and it seems to me that even a loaf of bread will cost much more 25 years from now. Say I earn 40,000 a year now. With inflation, that same 40,000 won't get me very far in 2033. Should I rely on the online calculators to give me a realistic retirement savings target?
A: Great question, you are absolutely right. If you use that formula of 80-100% of your current income for retirement spending needs, you do need to inflate that number. For example, if you think you will need $40,000 a year in retirement (based on today's income) you will need $84,000 in 25 years (assumes 3% annual inflation). As long as the on-line calculators factor in inflation, they should give you some indication of what you'll need in retirement. However, there are so many on-line retirement calculators it is hard to endorsement them all. Both TDAMERITRADE and Kiplingers, Your Money Bus partners offers a retirement calculator.
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Q: I saw your show this morning on the Today Show and thought it was a great service to some folks. I was wondering why Reno, Nevada was not considered a stopping place along with Las Vegas. They are at different ends of the state. Thanks for your consideration.
A: Thank you for the suggestion of a Your Money Bus stop in Reno. Our ordinal stops considered the population of a city and the population of our volunteers, NAPFA (National Association of Personal Financial Advisors) around that city. Once we determined target cities, budgetary constraints limited our total number of stops.
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Q: I heard an interview with a financial advisor who recommended keeping our savings in a Federally Insured banking institution. I have several mini-savings accounts with a Credit Union. Most of these accounts are not high dollar but rather, used for budgeting and auto-payments, but a couple of savings totalling about $25,000, and some of which represent my son's life savings as well. The question is, my share deposits are insured for up to $250,000 per account; however, they are not FEDERALLY insured. What is my exposure? Are credit unions different from regular banks?
A: The National Credit Union Administration (NCUA) is the federal agency that administers the National Credit Union Share Insurance Fund (NCUSIF). The NCUSIF, like the FDIC�s Deposit Insurance Fund, is a federal insurance fund backed by the full faith and credit of the U.S. Government.
The NCUSIF insures member savings in federally insured credit unions, which account for approximately 98 percent of all credit unions. All federal credit unions and the vast majority of state-chartered credit unions are covered by NCUSIF insurance protection.
Credit unions that are insured by NCUSIF must prominently display the official NCUA insurance sign. No credit union may terminate its federal insurance without first notifying its members.
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Q: I have $25,000 in savings and about $23,000 in student loan debt. I have no credit card debt. Should I use this lump sum of savings to pay off all of my student loans, or keep my savings for a rainy day and continue to make my monthly payments? Also, the interest rates on my loans range from 4 to 8 percent.
A: This question is a typical question that is both easy and hard to answer. My daughter is currently a graduate school student. She asked a similar question and I recommended that she not pay off one of her higher rate student loans and conserve her cash. In my opinion there is nothing better than cash to cover unexpected expenses or to get us though the current financial crisis. However, she ignored the advice of planner (me) and paid off the loan. But, I think the answer depends on your current earnings vs expenses and the amount of cash you would have left after paying the loan. I would not be in a hurry to pay off the 4% loan.
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Q: Most of my retirement money is currently in a variety of Fidelity funds (large, medium, small, growth, value, international, and bonds funds)which have grown an average of 7% a year over the last 15 years except. However, my funds are down 11% in the last year. In light of the "wall street crisis" and the planned bailout by Congress, should I go to cash, stay put, or make adjustments? If adjustments are necessary, what do you suggest?
A: That's a great question. I am nervous telling you to hold tight, but that is what I am doing and what I am doing with my clients. It may take a long while to regain the market highs of year ago, but looked at from the longer term perspective, a 6-7% return on a diversified portfolio seems reasonable. The current crumbling of our financial system is more than troubling, however, some of this is a necessary cleansing.
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Q: What financial info would I need to bring to get the best advice?
A: We recommend you bring some basic information. These one-on-one advice sessions are not meant to review your entire portfolio or even to make specific investment recommendations, but rather to offer suggestions and tips for getting your financial life in order.
*Responses are based exclusively upon the limited information provided, and without consideration of other facts and circumstances that may be relevant to the issues presented. Moreover, due to various factors, including changes in your personal financial situation, investment objectives, applicable laws, and/ or market conditions, the above response is subject to change without notice to you. Please also remember that: (1) past performance may not be indicative of future results; (2) different types of investments involve varying degrees of risk; and, (3) there can be no assurance that the future performance of any specific investment or investment strategy will be profitable, equal any historical performance level(s), or be appropriate for your personal situation or investment portfolio. Finally, you should not assume that the above response serves as the receipt of, or as a substitute for, comprehensive personalized advice from the author. To the extent that you desire a more comprehensive review/response or have any other questions regarding your specific issues and/or the above response, you are encouraged to consult with the professional advisor of your choosing.
