Hi

My dad is 68 years old and owes about $23K in visa. He has no assets whatsover and receives a tiny old age pension. Is it a good idea to help him pay some down so he can enjoy some extra room on his visa or simply give him a small monthly money allowance? He obvisiously is not good at saving but his small pension doesn't allow him enough to enjoy life a little. SAVAGE SAYS: I think that's a beautiful and generous thought. The only problem is that he is likely to charge up his card again, simply to maintain his lifestyle. So as an addition to your thoughtful offer, I think you need to go over his budget to see how the charges were run up, and whether he can manage to live without charging more if the card is paid off. If he won't do it with you, then you might want to set up an appointment at Consumer Credit Counseling Services, by calling 800-388-2227. That will connect him to the nearest local office. He's pretty young -- and likely to live another 20years, so it's better to solve the problem itself, instead of just throwing money at it. And you need to be saving money for your own future. Again, I applaud you for your generosity -- but the underlying problem needs to be discussed and fixed. Maybe he could even earn a little more money, perhaps by helping other seniors with driving or chores?? That would give him more money, and more self respect.

Terry, I am 63 and planning to retire soon, should I put all my assets (IRA, investments and 401K rollover) into one brokerage firm like T Rowe Price or Vanguard or should put my assets into more than one brokerage firm for diversify purpose to spread the risk? SAVAGE SAYS: In any brokerage firm or mutual fund company, such as Vanguard or T. Rowe Price, your assets are protected by SIPC -- the Securities Investor Protection Corporation -- up to $500,000. If you have more than that amount, yes you should divide your assets between two companies. But the two you have mentioned are among the largest and finest mutual fund companies, and I have no worries if you have a large amount in either of them.

On Jonathan Brandmeier the other day, you had mentioned a website whereby one could purchase foreign securities using US dollars. I thought it was something like world bank.com. Could you please refresh my memory. SAVAGE SAYS: That was www.EverBank.com -- an FDIC insured bank that allows you to buy CDs denominated in various foreign currencies and baskets of currencies, and gold. Your risk is in the currency movements, but the CD itself is FDIC insured. Go to their website for more information.

I am a current 20 yr old junior in college. I am looking to invest my money most likely in a mutual fund. Any ideas on how much or where to invest? Thanks! SAVAGE SAYS: Well, first, my congratulations that you have money to invest while a junior in college! First thing, be sure to pay down your student loans. And I hope you aren't talking about "investing" your student loan money between the time you receive it and the time it must be paid to your school! That money belongs in a bank! But assuming that you have been working and saving, it's a great idea to start investing. If the money came from a job, you might want to make your investment a Roth IRA -- where it will grow tax free until your retirement. As a starter, I'd go to a mutual fund company like Vanguard.com or TRowePrice.com, and choose a mutual fund. You might want to put half into an S&P 500 Index fund (that tracks the overall market performance) and half into another fund that interests you. (At T. Rowe Price, you might want to choose one of my long-time favorites, the Equity-Income fund, which is slightly more conservative.) If you call the fund companies' toll-free numbers,they have representatives that will explain this to you. And first, I'd make a stop at Morninstar.com and use their learning tools to learn more about how mutual funds work. If you start investing a small amount regularly, without worrying about the ups and downs of the stock market, you should come out well ahead in the long run!

I am 76 years old my wife is 74. We own our own home a have built a nest egg of 200,000 . We have an inlcome of about $25,000. My CPA says I don't have to file any more Income Tax Returns, Is he right...? SAVAGE SAYS: Here are the rules for minimum income required to file for 2011. The minimum income filing requirement does NOT include Social Security, but requirements are different if you have more than $400 in self-employment income. So check details with your CPA before making that decision. Here's that info from the IRS: If your gross income is below the IRS filing limits, you probably won’t have to file a federal tax return this year. Gross income includes all the income you receive that is not exempt from tax, not including Social Security benefits, unless you are married and filing separately. You probably don’t have to file this year if:
n You are single and your 2011 gross income was less than $9,500 ($10,950 if you’re 65 or older).
n You are married filing jointly and your gross income was under $19,000. If you or your spouse is 65 or older, the limit increases to $20,150. And if you’re both over 65, your income must be under $21,300 to not file.

My 92 year old Mom is moving in with us. She will receive $100k from the sale of hr house. Should we put this money in a trust, buy an annuity? She/we don't need additional income but it would be nice to grow this amount. Thanks SAVAGE SAYS: Well, please let me answer a few other questions that you DIDNT ask, before answering your posted question. First, does your mother have a will? If the money from the house sale is her ONLY asset, you could probably solve the problem of a will by just putting the money in a bank, in a CD (yes, earning practially nothing) in joint name with you. Then at her death, the money will pass to you. And THEN, you can start investing it more aggressively if you choose. But for now, that is HER money, and you might need to use it for additional home care aid in the next few years. So don't buy an annuity, for a zillion reasons, and don't "invest" in anything more aggressive than short term CDs. And one more thing: Please make sure your mother signs a healthcare power of attorney -- and a living will (pull the plug document) if that is her wish. You can get a copy of both at a nearby hospital. That will save you a lot of heartache if it becomes necessary. And one more thing: Every mother wishes she had a daughter like you!

I work as a Geriatric care manager. I am currently assisting an elderly couple, he is 99 and she is 87. They managed to amass a bit of money over their lives, and have 5 children all in their 60's who have lived off their parents' money for most of their adult lives. The parents have very little left compared to what once was. The man is now in rehab because of a heart condition. The sons have been caring for the couple with my help, and the daughters are now trying to step in. The younger son has power of attorney for the couple, BUT he is not motivated to step in against his sisters because he has been in drug trouble over his life. Three daughters side against two sons. The sons prefer to care for their parents and not worry about the money, the daughters are all about the money. Last year the couple gave $95,000 to their daughter to purchase a house. They did tell the daughter it was a loan and sent a contract to her which she refused to sign. The loan was made through a bank transfer from one of the couple's accounts to a real estate attorney handling the closing on the house. The couple never received notification of the money being received by the attorney, nor did they have word the funds were actually used to purchase the house. What are the tax implications? What should be reported on the couple's behalf and what responsibility does the daughter have? I need to explain this to the couple before they are willing to act. Thank you. SAVAGE SAYS: Wow!! I did not edit a word of your letter, because I think it is so important for people to see what can happen to a family if parents don't put together a will or estate plan. You are wonderful to want to intervene, but you have no standing in this situation, except for a caring heart. This couple IMMEDIATELY needs to consult an elder law attorney, who will represent them -- not the children. If you need to find one in your area, go to www.NAELA.org -- that's the Natl Association of Elder Law Attorneys. If you live in the Chicago area, I'll give you the name and phone number of an attorney who I have known for years, and who is an elder law specialist. She can help them make a will, and re-title their investment and bank accounts, and get organized. Her name is Janna Dutton and her phone number is 312-899-0950.

Is Long Term Care Insurance a wise investment? Are there other options? What is the best choice/type of Long Term Care Insurance? Thank You SAVAGE SAYS: Well, I wrote an entire section of my book, The Savage Truth on Money, explaining the ins and outs, ups and downs of LTC insurance. It is NOT an investment -- it is a "hedge" an insurance policy for your retirement assets and plan. Just as your homowners insurance is a "hedge" against your house burning down. But once you are over age 65, there is statistically a 10x greater chance that you will need some form of custodial care than that your house will burn down! I hope that if you buy LTC insurance, you never have to use it! (Same thing with homeowners insurance.) But if you need it, it's great to have -- because the cost of care, which is not covered by Medicare or supplements, can run up to $8,000 per month. The only alternative is to use up all your assets -- and then the state will take over your care in a state-funded Medicaid nursing home. I promise that is NOT where you want to be in your last years!

I need to revise my will/trust...I moved to a new area. How do I find a good estate lawyer? SAVAGE SAYS: There are several ways to conduct that search. First, as the trust department of a large bank in your area. (You might let them think you are creating a trust with a lot of money for them to manage! Then they will be inclined to give you some names!) If you moved because you work for a big corporation, ask the corporate legal department. But if you've just retired to a new community, here's a link to the directory of estate planning attorneys, a good place to start a search for a local expert: http://www.search-attorneys.com/ Meet with the attorney, before making a commitment. If you're not comfortable, move on to the next one on the list. This is going to truly be a "lifetime" relationship!

My mom wants to retire in 25 years time, and so decides to start a new retirement savings account. He wants to accumulate 250000 dollars by the time he retires.
Initially, my mom deposits 2000 dollars into the account. she will make further deposits at the end of each month.
The account will earn interest at annual rate 6 percent, compounded monthly.
How much will she have to deposit into the account each month in order to reach this target after 25 years? SAVAGE SAYS: To you, and all the others who post questions testing my math abilities, let me say there's a reason I never respond. They're silly. There is NO WAY you're going to earn 6% compounded monthly! Please stop posting these things on my blog!! (And you might learn the difference between "he" and "she"!!)

I heard the President is going to make it easier for homeowner's to refinance. My husband and I have a FHA, 30 year fixed mortgage at 5%. What do you think would be the best route to refinancing? When we ask our current lendor, they always say we are not elgible for any new programs. We are both employed and have a good credit rating. The current value of our home is less than the amount we owe. We can, also, qualify for a conventional or VA mortgage. SAVAGE SAYS: Big surprise! Your current lender likes the fact that you are paying 5%!!! YOu can do much better. Contact another lender -- one that specializes in VA loans would be a start. In the midwest, I recommend Daniel Chookaszian (312-376-3760) or by email at dchookaszian@baytreebank.com -- He's my VA loan expert.

I am a 65 year old male who has had an LTC policy with John Hancock since April, 2003. I was just informed of a 90% increase in mt premium, from $1379 to $2621 annually. I have been given the option of keeping my current premium if I agree to reduce my annual inflation rate from 5% to 2.7% compounded annually. My current daily benefit is $234. My initial reaction is to reduce the inflation rate and keep the premium the same. Would this be foolish? SAVAGE SAYS: Given this tough choice, that's exactly what I'd do! I'm so sorry for all the people who bought LTC insurance (often at my insistence) and who are now facing huge premium increases. By now, I hope the insurance companies are getting their pricing straight -- and it will be less likely to happen in the future. No wonder, others are deterred from buying -- which reduces their pool of insureds, and contibutes to their losses, causing them to demand higher premiums. But if you need it, you'll be glad you have it!

What is the best way to re-establish credit? I have not filed bankruptacy, just lost my
job and got behind on bills. Since I got all debts satisfied, I have had no credit cards.
I use cash for everything, but now I want to get a good credit standing. How do I start? SAVAGE SAYS: First, good for you, for managing to pay down your bills without resorting to bankruptcy. It's hard to live without a credit card -- for making reservations, purchasing online, etc. YOu could use your debit card. But if you want a new card, go to www.bankrage.com and look under "secured cards" -- These are Visa and MCs, that look like a regular credit card -- but your line of credit is backed by a deposit made at the issuing bank. Then you can start using your card for small purchases, paying in full and on time, and that will be reported to the credit bureaus. It's the best way to demonstrate your responsibility and rebuild your credit.

Terry, I have credit card debt of $15K consolidated into 1 card and will turn 59 1/2 in less than 3 weeks. Besides drawing on my pension each month of $1300 and a lowly paying I decided to take my interest and capital gains out then to help me pay down my credit card debt. I told my financinal advisor this was strictly a 1 year deal with my goal to go back to reinvesting afterward. Was doing this a smart thing for me to do ($600+ extra a month) or is there another suggestion out there like taking out a $15K or less loan from my financial company at 6%? SAVAGE SAYS: I assume you're talking about withdrawing from your 40l(k) plan, which you can do without penalty once you're age 59-1/2. Do you realize that no matter what "portion" ie capital gains or interest, you withdraw, it will ALL be taxed as ordinary income? So you must set more money aside for taxes the following year, because there will be no withholding on those withdrawals. You can never put the money back, but you can start contributing again in the future as long as you are working. And bottom line: you really need to understand how you accumulated that credit card debt in the first place, so it won't happen again once you've paid off the card!

My dad is 88 and has five hundred thousand in a brokerage account. (all stocks) He has three hundred thousand in a cash account. He lives on his pension and S.S.
I don't think, at his age he should have or need any exposure to equities. Should he dump the equities and put the money in CD,s? SAVAGE SAYS: Is this advice for YOU, or for your Dad? Seems to me he's done a pretty good job so far! In fact, I'm very impressed. What you really need to know is whether he has a current "estate plan" -- particularly a "revocable living trust' and has titled his CDs and brokerage account in the name of the trust -- so that if anything happens to him and he can't make decisions, his successor trustee whom he names in the trust, can take over. That's something that should be the subject of a family discussion. And if he (not you, HE -- and your mother if she is alive) don't have an estate planning attorney, they can go to www.naela.org and search their list -- That's the national association of elder law attorneys.

I am 66 and my wife is 62. We both work full time and I collect social security. We have no outstanding debt and both the house and autos are paid for. Between the two of us, we have four IRA CD's totaling $53,000. They are currently earning 2.03% and will come due o3/17/2012. After reading your January 23rd article - "Chicken Money Earns Little", we are in a quandary. We will need to roll it over but with present investment rates what they are, we don't know what to do. After losing big time in 2008, I have no confidence in the stock market whatsoever and am willing to take a smaller return for a safer investment. Where do you think we should put this money and for how long?

SAVAGE SAYS: Given your description, I'd roll it over into CDs, half in one-year, and half in 2-year CDs -- no longer, and nothing less safe.

I just retired in June. My school dsistrict gave a $25,000 retirement incentive . Over $14,000 was taken from my check...I only received about $11,300. How can I recoup this when I file my taxes? This was a lot of taxes to take in a single swoop! SAVAGE SAYS: Wow, this seems like a huge over-withholding! You definitely need to contact them and question this amount. And they will be sending you a 1099 tax form covering the distribution, and the withholding. Be sure to go to a qualified tax preparer this year, because if they did over-withhold, you'll want to get a refund from the government when you file your return.

Terry,

Have you done a comparison and recommendation of the best online trading business/site to use ? I know there are a lot of variables, such as per trade costs, flexibility of controlling trading...etc. As a beginning, safe investor it would be helpful to get an update on the one(s) you think are the best and what to be wary of too.

thank you......geoff SAVAGE SAYS: Every year Barrons does a complete survey of the "best" online trading firms, and sorts based on various criteria. Here's a link to the most recent survey: http://online.barrons.com/article/SB50001424052970203523604576188781715729822.html

I am a single 24 year old female, who is financially stable ( I pay my bills and save consistently). I began a new job in Illinois recently and must choose a retirement plan. My employer offers a traditional 401k IRA vs a Roth 401k IRA. Which of these would be better for someone like me and what percentage of my pay would you recommend I begin with? Thank you SAVAGE SAYS: I would definitely recommend you choose the Roth option. That means you don't get a current tax deduction -- but that all your contributions will grow, and come out tax-free at retirement (if the government keeps its promise!) At your stage in life, you have many years ahead, and don't know what tax rates may be in the long-term future -- but you really don't need the deduction now. As for "how much" -- two responses: 1) at least enough to get any match from your employer, and 2) can you put in as much as they take out in FICA (social security). YOu have a good chance of making money in your 40lk plan over the years, and next to zero chance of seeing anything meaningful from Social Security!

Our financial planner recently recommended that we purchase REITs, variable annuities (from our retirement accounts) and a buffered note to protect our downside, generate sustainable income and maintain equity exposure. What is your opinion of these types of investments? Thank you SAVAGE SAYS: First, ask your financial planner how much commission he/she makes on each of these investments. That is, you should ask "if I invest $x thousand dollars, how much money do you make on that initially, and over the years." A true planner is obligated to disclose that amount. Then write back to me with the answers. I'll definitely be looking forward to your response!

My son is way under water on his condo. He payed 235,000 two years ago. They are selling for 75,000 right now. He wants to know if he should just mail in his keys and walk away and ruin his credit for 7yrs. I have no money to help. The morage company offers very little help help? He is paying 2500.00 a month still owes 175,000 SAVAGE SAYS: My advice is that as long as he can afford to pay the monthly payment, he should stick it out. Why ruin his credit? He's going to have to pay to live somewhere. And if the market ever rebounds, he won't have a chance to recoup some or all of his money? And if he walks away, he might not get a mortgage to get back into the housing market when it starts to rise. That's the thing with buying houses: if you make a (price) mistake, you can always live in your mistake!

My wife and I are 58 and 60 respectively. I'm retired (twice - 20yr military and 18 1/2 yrs AT&T). My wife has 32 mo. before she retires (US Govt). Her income is $120K gross. My retirement income is $20K. We have $650k in cash, IRA's, 401K's, and some regular account mutual funds and stocks. We like diversification. Back in the early 1980's I went to the local library at lunch time and after work and learned what a mutual fund was. We started saving aggressively and still do. My question is this: Should I take a distribution from MY IRA(s) and liquid cash accounts to pay off our $200K mortgage. Current value of house is $250K and have a 5.125% loan. We paid approximately $10K in interest this past year (2011) on that loan. Or, do you believe the $200K we take out of the market could make more than the 5% effective rate we are paying in interest? I believe it's a toss up although I will have a pretty hefty tax bill next year when I file this year's taxes. These are all conventional IRA/401K'S and are in a balanced combination of stocks, bonds, and cash. SAVAGE SAYS: I don't see the benefit of givingup future tax-deferred growth of your IRA, (as well as paying current taxes) to lose your tax deduction on the mortgage interest! But what you should do is refinance that mortgage to a lower rate, and no longer a term than remains on your current mortgage!

Are fixed annuity ok to get into from a good firm SAVAGE SAYS: That depends on how long you're willing to tie your money up. You know there are penalties for early withdrawals. Make sure the "guarantee period" for the rates is does not expire before the surrender charge period. And think twice about locking in the current rates -- even though higher than bank rates -- for more than 3 or 4 years. And if you buy an annuity, then only do it with a small portion of your savings.

Hi Terry,
I am a single, 24 year old, who is financially stable which means I pay my bills and save consistently. I started a new job in Illinois and must choose a retirement plan.
My employer offers a Traditional 401k IRA vs. a Roth 401k IRA. Either plan begins with an automatic 3% deduction, with the option to change.
My questions are:
1. Which plan would be best for someone like me?
2. What percentage of my salary should I begin the account with?
Thank you, SAVAGE SAYS: I'd go with the Roth, since you don't really need the tax deduction now. And because at the rate we're going, tax rates may move sharply higher in the future (which would be a big mistake, but that's politics!) Take out as much as you can contribute. As a side note, they're taking 7% of your salary for FICA -- Social Security, and asa 24 year old, you're not likely to see much from that at retirement!

I have 3 credit cards totaling $25,000 with high monthly payments. How can I lower those monthly payments? I tried to tranfer all 3 to one card so that I have one bill but my credit was denied. So what advise do you have for me? SAVAGE SAYS: Here's the "trick" to paying down a card -- but if you can't manage these payments then call Consumer Credit Counseling at 800-388-2227 and they'll give you more specific advice. But to do it on your own: Figure out the current minimum payment. Double it. Write that number down. Pay that SAME AMOUNT every month. Do not charge another penny. Your card will be paid off in less than 3 years!

Hello Terry,
My RMD from my traditional IRA ( Bank CD ) is approximate. $8000. for this yr., 2011.
I want to withdraw an additional $7,000.( to stay under $34,000. ) from this account in order to prevent my going into a future higher tax bracket eventually as I am 78 y.o. & want to stay under the $34,000. limit that will bring me into the higher tax bracket.
I'm hoping to draw down this account for above reason.
My total taxable income ,with including Social security is approx. $18,000.& I am in the 15% tax bracket.
If I withdraw an additional $7,000.will my bank penalize me ?
(Also, is $7,000. in addition to the $8000.= $15000. RMD ) )a right amount ?) close to $34,000.?
I do understand that only the $8000. will be a RMD but I do pay taxes on the additional $7,000.
I'm Subtracting $18,000.(my total. inc. ) from $34,000.(tax bracket change ) & want to be sure that I don't go over the higher tax amount.
In addition, I own my home & need additional money for repairs & updating.
Thank you." SAVAGE SAYS: Here are three answers to the different aspects of your question:
First, once you are older than age 59-1/2 you can take ANY amount out o fyour traditional IRA without federal tax penalty. And even if you have a cd, most banks will allow you to break it to make a withdrawal, without penalty.
Second, you pay ordinary income taxes on ALL withdrawals from your traditional IRA, regardless of amount.
Third, the amount of taxes you will pay depends on your tax bracket -- and that depends not only on your income, but on your deductions. So to find out the tax impact of a withdrawal you will have to consult your own tax professional.

Last year Dec. 2011 I openned a joint savings account with my daughter,
with the intention of saving enough money for her to buy a co-op apt.
I"ll be putting most of the money. My question is. is this is legal?
Do I have to let the I.R.S. know about it? Do I have to pay extra taxes? SAVAGE SAYS: No, you don't have to file this with the IRS. In fact, you can "gift" $15,000 each year to any person without any tax or estate planning impact. But when she goes for a mortgage, she will have to disclose what portion of her down payment was a gift. And they may not count half of the assets in the savings account toward her ability to qualify, since technically half belongs to you! So if this is your purpose, you might be better off gifting it to her outright to put in an account in her own name -- assuming you trust she will use this for the down payment and not something else!

Hi Terry -

I am considering cashing out an old 401k/IRA or taking a loan from my current 401k to eliminate my credit card debt, which one of these should I consider my last resort? I am 35 & wife is 30 with 2 children under 8. I have around $17K in credit card debt ($550 monthly paymments) that is preventing me from contributing more to my 401k & raided my savings. I make $85K annually & currently in 15% tax bracket, I am a home owner & wouldn't be able to refinance or get a home equity line because of the housing market. I have never defaulted on a payment but over the past year needed to deplete my savings & borrow money from my parents to make ends meet. I have $40K in old 401k & $20K in my current 401k. I understand neither of my two suggestions are recommended but I feel I need to eliminate this debt today to move forward. Any suggestions much appreciated

Thanks SAVAGE SAYS: OK, you know that I'm going to advise you NOT to take money out of your retirement plan -- not only for all the usual reasons, eg, you lose all future growth, and you'll have a tax bill next year. But because this doesn't get to the root of the problem. So let's make a deal: If you will call Consumer Credit Counseling Services at 800-388-2227 and make an appt with your wife to go over your spending/earning situation, and if you can't figure out how to squeeze more money out of your situation (or earn more money if that's possible) then I will bless the withdrawal. I just don't want you to wind up back in the same situation next year! And yes, I truly understand how difficult it must be to be raising a young family in these times. But if something doesn't change, you'll be right back in the same spot next year -- with fewer resources. So get back to me and let me know what the counseling says. Dialing that number will get you to the nearest local office.

BD

Why should I purchase Long Term Care Insurance? SAVAGE SAYS: Do you purchase homeowners (or renters) insurance? Well, once you're over age 65 there is a 10 times greater chance that you will need some sort of care to do the basic activities of daily living as that your house will burn down. If you use up all your money paying for care (at roughly $7,000/month now for home or assisted living, and climbing every year) then you must relay on the state Medicaid program for help. They give you no choice of home care -- just stick you in a Medicaid nursing home. If you live in Illinois, you know the state hasn't paid its bills to those nursing homes in months -- Is that where you want to be???
That's why you buy at least a little -- 3 years coverage -- LTC insurance if you possibly can.

Terry,

I heard someone on the radio mention that REIT's may be a good investment for someone looking for yields greater than those offered by bonds. I know nothing about REIT's. Could you offer some edification?

Sammy SAVAGE SAYS: Real Estate Investment Trusts are public companies that own real estate. Sometimes it's one category of real estate, such as apartments, or hotels, or offices. By law, REITS must pas 90% of their earnings to shareholders -- typically as dividends, or sometimes as a partial return of capital. Thus, they have a nice payout -- WHEN THEY ARE MAKING MONEY! That isn't always the case. And the share prices can fluctuate, based on investors' belief in the future growth of those distributions. Go to www.REIT.org to learn more -- or read the section I wrote about them in The Savage Truth on Money.

ihavea mtge of 141000 maturing in 6 years i am 64 years old male my monthly mige payment is 2614.00 how much more i should pay monthly to finishet in 3 years SAVAGE SAYS: Ask your mortgage servicer. They can easily calculate the monthly amount required to pay off your mortgage early.

I make $80,000.00 a year and i have a retirement account that i want to give a gift to my son and daughter in law of $13,000.00 each total of $26,000.00. Do i have to pay taxes on the gift of $26,000.00 to the irs. SAVAGE SAYS: If you withdraw money from your retirement account, you will have to pay ordinary income taxes on the money -- unless it is a ROTH IRA. So don't use retirement account money to make the gift. And if you can't afford the gift out of extra money you have outside the retirement accounts, don't give ANY money! You will probably need it -- and they may not be in a position to help you when you do need money! BUT, to answer your question, when you give a gift of money, the recipient does not pay any taxes. You can give up to $15,000 each year to anyone, and everyone! But if you're planning to give away over half a million dollars in your lifetime, you'll need an accountant and estate planning attorney to explain to you the estate tax implications!

My parents who are 83 have been living in Arizona for the last 25 years. Mom recently contacted me about life insurance for her final expenses. I'm not sure, but it sounds like she may have had a policy which may have dropped her. My sister and I will be visiting them soon to go over this and other financial items with them. Any suggestions for her, I think she should just set some money aside in a separate savings account as I can imagine insurance would be expensive. Also, there are no relatives near them (all my siblings and their families are in the Chicago area) do you have any suggestions about what we should do, maybe have my name on their bank accounts. One last thing, I am their executor, should I have a copy of their will? Thanks. SAVAGE SAYS: Oh, I'm glad you're asking me NOW, instead of after one of them passes away. First, go to TerrySavage.com and fill in the little yellow box, which will give you a link to my personal financial organizer form, which you can print out -- Print as many copies as you like. Take one with you on your visit -- and ask them to go through it and fill it out with you. That will give you locations of important documents,a nd names of financial professionals. YES -- not only should you have a copy of their will (preferably a living trust) but you should arrange to meet with the attorney who prepared it. And if it was prepared more than 7 years ago, it probably needs to be updated. If they no longer have contact with the attorney, go to www.NAELA.org (natl assoc of elder law attorneys) to find a new one. But this lawyer will represent your parents, not you. However, it is important to know where everything is, what you will be required to do, and whether there is any insurance. If they give you the paperwork, you can call the insurance companies while you are with them. And, while you didn't ask, you may be surprised at the sad state of their financial affairs. If they can't handle life situations on their own, you and your siblings might have to make other arrangements for them to live. Just mentioning it so you won't be surprised. Do write back and let me know what happens!

can I turn my inability to generate personal income into a credability that I will be broke for the future and borrow money at a high interest rate, and still save money for my funeral arrangements, or should I finace my funeral and bet that I wont die, with a health insurance debt so that money that I wont make after death does not leave extra money left over, so payin into my retirement doesnt feel so stupid when it my pension is invested in credit that will default and lower my rating so that I cant have faith in money like in the stock market or in legal safety issues that risk my life, liberty and...happiness SAVAGE SAYS: The least of your problems is the cost of a funeral. You won't be around to worry about it!

Terry,

Someone on a radio show mentioned that investing in REIT's is a good way to generate some income. I know nothing about then except that REIT=Real Estate Income Trust. Are they risky? Do they provide more income than highly rated corporate bonds? I appreciate any info.
Thanks,

Sammy SAVAGE SAYS: Real Estate Investment Trusts are public companies that buy real estate -- typically in once category, such as apartments, hotels, office buildings, or shopping centers. REITS are required to pay out 90% of their earnings to shareholders. So you usually get a nice yield, as long as they are making money. (In some cases, the money you receive is a dividend, in other cases it may be a partial return of capital.) The share prices of REITS vary based on investors assessments of the underlying growth of the income stream. For example, in a recession, with less business travel, hotels may not have high occupancies, so investors might sell hotel REITS. To learn more , read the section in The Savage Truth on Money, or go to www.REIT.com, the industry website.

Hi Terry. My questions concerns purchasing health coverage insurance. I am currently covered under my husband's union plan. When he is working, he must work a certain number of hours per month to qualify for a month of health coverage. He can "bank" up to 5 months of coverage after he is laid off. We can COBRA for an additional 18 months. We are both 60. Where can we purchase coverage that is affordable until 65? SAVAGE SAYS: Go to www.ehealthinsurance.com and look for a high-deductible policy (perhaps a $5,000 deductible). At least an unexpected serious illiness won't bankrupt you if you have this kind of coverage. They are very helpful, and you can also call them to go through the website with you and help you choose the best policy for your needs. Then pray you get to 65 and get Medicare before you have any serious illness.

We really enjoy your web site. I would like some advice if at all possible. We are both retired, my husband is 68 and I'm 63. We are thinking about rolling are 401k over to an IRA.What is the best way to go about it ? Is there anything we should or shouldn't do? What ever you could tell us would be greatly appreciated. SAVAGE SAYS: Oh yes, you should roll it over for two reasons. First, the investment choices for retirees are, and should be, different than those put in plans for younger workers. Second, you can get investment advice if you roll over to Fidelty, Vanguard, or T. Rowe Price. Call them and they will handle all the paperwork, so there are no tax consequences. And, honestly, I suggest you go to my website and purchase a paperback copy of The Savage Number -- to learn more about retirement investment choices, and many other issues such as figuring out how much you can withdraw to live on -- and stillmake your money last as long as you do!

Terry,
I'm 62 and plan on working until 66. I have $400,000 in my 401k. I have apx $20,000 in credit cards. I am thinking of borrowing the $20,000 on the 401. If I do, should I take it as a loan or just a payment and pay the tax now. SAVAGE SAYS: I'm quite sure that your plan will not allow withdrawals while you are still working there. But you could take a loan. If you leave the company with the loan intact, it will immediately be considered income. Are you sure you can't figure out how to earn money this year -- perhaps a side job -- to pare down your credit card bills, without touching your retirement account?

Mmy soc sec widows pension is900 a month. I want to quit my job in June , my wages will be 13000. Can I start my benefits now or do I have to wait
SAVAGE SAYS: How old are you? Will you qualify for a higher level of benefits than your current payment? Can you wait until age 67 -- or your full retirement age -- to get the highest level of benefits (assuming you are younger)? Contact Social Security and they will help you with answers for your specific situation.

In 2009, I purchased $15,000 10 year (1.875%) Treasury Inflation Protected Bonds. They will mature in 2019. Since the yield on treasury bonds has since gone down, my account is showing over 20% appreciation. My husband thinks I should sell to lock in the capital appreciation, but I think it might be good to just keep them in my account at my brokerage company. I am not looking for investment advice. Can you please just give your view of selling bonds early or just holding them to maturity? Thank you so much for your consideration.
SAVAGE SAYS: How about this for an answer: I have some TIPS, and I'm not selling -- yet. The time to sell, to lock in the gains, is just before interest rates start to go up again! I have no idea on when that will be. But the problem with selling now is that you will put the money in the bank and basically earn a zero rate of return! Plus, TIPS will give you a little protection,via higher returns, if rates go up because inflation returns.

Good Day Terry,

I am unsure of the choice to make that is best for my wife & I in our situation. Here are the facts:

I am 57 / wife 53

we can refinance our house at a lower interest (our current rate is 5.75 % P&I is $1278.00 )

20 yr fixed - 4.125%
new P&I $814
monthly savings $464

or

15 yr fixed - 3.875%
new P&I $975
monthly savings $303

we have credit cards that we are trying to pay down totaling about $8000 - $10,000

my wife expects to work as long as she can into her 70's I am in the trades and will work as long as I am able,
right now I am laid off due to slow time of year.

Which choice seems best?

Many Thanks
SAVAGE SAYS: Ordinarily, I'd say takethe shortest mortgage and get it paid down before you retire. But since you'll be locking in a fixed, very low rate -- and since the credit card interest is bound to be higher -- you might take the 20 year mortgage, and automatically have that $464 savings taken out of your checking account to pay down your highest rate card first!

Hi Terry,

I have 2 credit cards with high interest rates. I want to negotiate to get lower rates. I have made all my payments on time for the past 2 years. What else can I do and what other factors will the credit card companies consider. SAVAGE SAYS: If your credit is good, you might consider a balance transfer -- which will give you lower rates for about 6 months, before the rates jump again. And read the fine print, to make sur ethere are no balance transfer fees. Go to www.LowCards.com to look at the deals being offered. But don't be under any illusions -- This is just to give you breathing room. You MUST make double the minimum monthly payment each month -- and not charge any more -- to really make a dent.

I have a Living Trust but don't have a large block of money in the trust because I bank on line and it's hard to set up a money mkt account in the trust name. Would it be OK to title the money mkt in my name with the trust as beneficiary?
Right now I don't know what to do with this money because I'm 70 yrs old, hate the stock market and feel very unsure of the economy. Maybe an annuity?

Thanks for you help.
SAVAGE SAYS: WRONG! It is not "hard to set up a money market account in the trust name. Immediately change the name of your MM account to the trust. Ask the attorneyh who set up your living trust to give you the pages required to open an account. He/she will know what is required. If you don't put the money in the name of hte trust, it will go through probate and tie up your estate. No point in creating the trust unless you retitle ALL your major assets@!

Hi Terry- Through Social Security Disability, my wife received a lump sum back pay, and is having money directlly deposited for her and my two kids on a monthly basis. We want to invest the money "designated"for the kids so that we can give it to them when they get older (i.e. 25 yrs old or after). What would be the best investment strategy for that money? We have a 529 established; no credit card debt; I'm a State worker (21 yrs)with a pension and 457 I contribute to monthly; life insurance and health insurance through work,etc. Your answer will hopefully assist me in making a decision regarding my need for a CFP. SAVAGE SAYS: Well, a lot depends on how old your children are now, whether they are in college or not. If you're planning to apply for financial aid, then you certianly don't want to put the money in their name, or as "custodian" for them. Since you already have a 529 plan, that woudl help pay for college. But since your wife is disabled, are you sure you won't need the money yourselves? In that case leave it in your name -- yes, in a low-paying CD at the bank. Remember, you can always give the money to them at any time in the future, with no tax consequences to them. So maybe it's better to retain control and ability to distribute the money at the appropriate time if you still don't need it.

What gives? Where is the form you promised we could print out? SAVAGE SAYS: Go to my website, fill out the yellow box, wait for a return email (which will come instantly) and click to accept. Then you'll get another email with a link to the organizer. You can print out as many copies as you want, keep the link.

Hello
I inherited a CD IRA annuity from my mother who recently passed. The value is over $10K and will be divided three ways between myself and two siblings. What are my federal/state obligtations? We are listed beneficiaries and live in massachusetts. We are all in our early 40's if that matters.

Thanks! SAVAGE SAYS: The CDE will be divided into inherited IRAs for each of you -- at least, that's what the bank should do! Then you will each have the opportunity to let the money continue to grow tax deferred for your own retirement. If your mother had already started taking mandatory minimum distributions, then you will have an obligation to continue taking distributions -- and the bank can calculate the appropriate amount for each of you. If you don't need the money now, you should probably let it continue to grow. But, if as most heirs do, you decide to take your share out of the inherited IRA that you receive, then you will owe ordinary income taxes on the money you withdraw. Double-check with the bank and the estate attorney, but this is the way it should work.

Terry:

You may want to add the NCUA to your reference to FDIC on your list of "Terry's Important Links" for those of us who have savings in credit unions (NCUA) rather than commercial banks (FDIC). The deposit insurance rules appear similar but not identical.

I have found your web site and newsletter very helpful.

Thanks, SAVAGE SAYS: Thanks for your nice comment. The rules should be exactly the same, re insurance for deposits at commercial banks and credit union shares. But not all credit unions carry insurance from NCUA -- the agency that insures credit union deposits. So make sure that if you have deposits in a credit union share account, they are covered by NCUA insurance.

Harry

I can't find the yellow box. There is no yellow box on the home page and there isn't a site associated with Terry Savage on the net. I clicked the yellow "post it" but that didn't get me signed up.

Please help. SAVAGE SAYS : To all who are looking for the yellow box at my website, www.TerrySavage.com, please make sure there is no popup blocker on your computer. Look for a line at the top of your browser that says "popups blocked." Click on that to enable the yellow box to appear. Then put in your name and email address. By return mail you'll receive a confirmation to click on, and then immediately a second email will appear in your in box with a link to the organizer form. Click on that link, and you can print out as many copies as you like.

I have no question, just congratulations on your appearance on the PBS Newshour last week. Of the three panelists, you were the only one who had a sense of history and wasn't trapped in straight-line projectionist thinking. SAVAGE SAYS: Thanks so much, I hope to have the clip up on my website tomorrow for those who didn't see it!

Terry,
I saw you a news show and you mentioned a company that will give advice on managing my 401 k,i have about 250 thou in mine and it is all in fidelity select portfolios, the thing is i never know when to move or where to move and sometimes it has cost me big, at 53 i i am finally smart enough to know i need advice!!!!! If you can hook me up with some good links i would really appreciate it.

thank you
John
SAVAGE SAYS: Go to my website, and click on the link to FinancialEngines - They give personalized investment advice to employees of major Fortune 100 companies. You can get a free one-year trial to the service if you click on the link at my website, then follow all their instructions. You'll securely fill in some information about your personal situation -- age, retirement goals, fund choices in your company plan -- stuff that employees of big companies have automatically filled in for them. Then you'll get the appropriate advice. There's no guarantee -- but it's far better than guessing!

Terry, I read your column this morning and was motivated to sign up for Manilla.com. What you didn't mention is that it is very much a work still in progress. Some providers still are not set up with them, "they are working on it." Like Schwab!

Further, account updates in many cases have to be done manually.

Would have appreciated your input on that.

Thanks for everything else you do. SAVAGE SAYS: You are absolutely correct. But this website is backed by the Hearst Corporation, which is committed to making it THE online bill presentation site. It has gone well beyond the startup phase -- and is moving quickly to add billers, based on requests from participants. All major credit card issuers, for example, are now participating -- as well as more than a thousand other billers. Don't you want to be an "early adopter" now that this is a proven benefit??!!

Does the giftee need to pay taxes on
$13,000 received? SAVAGE SAYS -- No taxes are owed if it is a gift, and not income in payment for work.

I have a CD with a rate of 4.9% which was for 5 years and expires at the end of 2012. What do you suggest I do with it at the end of that time? SAVAGE SAYS: Let's wait until next year and see what's happening with rates. No sense worrying about it now!

Hi Terry
I currently have a variable annuity (26K) that is from funds from old 401K plan. I would like to move this to an IRA but am not sure how to do so as pre-tax dollars. I was thinking a traditional IRA would be best. I also have an indexed annuity locked in for 1 more year. Would you suggest rolling this into an IRA as well?
Thanks
Angela SAVAGE SAYS: OK, here's the thing. If you rolled over your old 40l(k) into an IRA -- and THEN purchased the annuity inside the IRA, then you can get out of the annuity and do something else with they money, inside the IRA -- and presuming there is no penalty for getting out of the annuity. BUT if you made the mistake of taking the money out of your 40l(k) and then purchasing the annuity (you would have had to pay taxes on the withdrawal from teh 40l(k) back then) there is no way you can now put the money back into an IRA -- except as a new contribution if you are eligible.
As for the other annuity, I suspect there might still be surrender charges. You don't want to break the annuity before the surrender period ends. And then, if you are eligible to make an IRA contribution for the year, you could use that money (after paying taxes on the gains) to contribute to an IRA, up to the annual contribution limit.

In November I wil be 59.5 and hope to retire at 62. I am currently working on being debt free but in order to do that, I'm considering pulling money out of my 401K to do do. Without this, I will remain in debt until retirement and will not be able to retire. Eliminating debt in November will relieve high interest payments and allow me to take access funds and reinvest back into retirement, ie Roth, etc. I realize this goes against what all financial advisers recommend, but I don't see any way out at this point. What is your advice? SAVAGE SAYS: Well, the advice is "standard" because it is good! You are not only paying taxes on the money you withdraw, but are giving up all future tax-deferred growth on that money. I can understand the desire/need to be debt-free, because you are probably paying so much interest. Isn't there any other way to earn extra money? That would be a much better solution. And I'm pretty sure your desire to retire at 62 is unrealistic. Check out my book: The New Savage Number to get the big picture on that, and some calculators that can help you.

I would like a copy of your financial organizer
SAVAGE SAYS:
See instructions at www.TerrySavage.com -- You need to fill out your name, email in the yellow box that pops up -- If it doesn't appear, look for a line across the top of your browser that says "popups blocked" -- Click on it to enable the box to appear, then sign up!
Terry Savage

I'm interested in investing in dividend payings investments, AT&T etc. but don't have a clue as to the best way to go about this. I see all these investment firms and don't know which is best. I'm 65 and retired.
Thanks SAVAGE SAYS: I think your best bet would be an "equity-income" mutual fund. Please understand that although stocks in the fund pay dividends, the prices can fall despite that fact, so there is some downside risk. I would start at Fidelity or Vanguard. And I have owned the T. Rowe Price Equity Income Fund for many years. Go to their websites -- just put the company name in your search engine (or add .com after their names). You can also talk to them on their toll free numbers, and they will help you set up an account. There is no "load" or "commission" to do this -- which is why you have to do some of the work to get started!

How do i sign up for personal financial planner? Thanks, Linda
SAVAGE SAYS:
See instructions at www.TerrySavage.com -- You need to fill out your name, email in the yellow box that pops up -- If it doesn't appear, look for a line across the top of your browser that says "popups blocked" -- Click on it to enable the box to appear, then sign up!
Terry Savage

The best corp retirement plan that employees don't have to participate in ? SAVAGE SAYS: Sorry, I don't understand your question.

Interested in comments on finance SAVAGE SAYS: Welcome to my website, www.TerrySavage.com -- where my columns are posted, and you can search the archives. Or you can buy my new book: The Savage Truth on Money.

Happy New Year Terry. After hearing your interview on TV this evening, I was emboldened to ask a question that I have posed to others and never received a thoughtful answer. Here goes: I am 62 and employed, though my salary will be cut for the second time in January to 24K. I have a 401K plan with 3% kick by company and my 6%. Right now I have 17K in that account and 6K in savings. My health insurance cost from company cost me 8K per year. Next year my net will be about 14K. My wife collects SS to the tune of 500 per month and we pick up change by selling items at flea markets we pick up at yard sales which nets $150 per month.
If I continue to work, or should I say, if I am not RIF...I am thinking of beginning to get SS at $1300 per month and get a kick too my bride's SS with spousal benefits of around $80 added. Given that the barrier is 14,640, I am fearful that by collecting SS at 63, the taxes I pay would basically negate any earnings. I get the run around from planners having paid one $300 to advise to which the end result was no better than I could figure out. We have a first deed of trust on our home, no credit card debt and around $3000 in medical bills. In total, our assets total 300K that includes a 120K universal life, our home, savings and 401. Perhaps in writing this again, it may be to complicated to answer. But if you would like, any thoughts would be appreciated. Thanks Tom SAVAGE SAYS: You've done the current math, but it's not all about the numbers. First, there is that permanent reduction in your monthly SS benefit, a shame to give that up. Second, you lose the chance for tax-deferred growth AND the match in the 40l(k) plan if you quit now. And that could ad dup to a lot of money. I assume your wife is also now on Medicare -- but perhaps that's not true, which would explain your huge costs for company insurance. Did you check into raising your deductible on the plan? Or perhaps a high-deductible plan, which you might find at ehealthinsurance.com. You're doing all the right things, earning extra money, living frugally -- and for the "big picture" I hope you can keep on doing that for another 4 years. It will make a huge difference in your eventual retirement security. Go to www.choosetosave.org and fill out the "ballpark estimate" -- and you'll see the difference between quitting now, and soldiering on for another few years till you get full SS benefits -- and keep saving in the 40l(ki) plan - (It's the best planner on the web, free, and a creation of the Employee Benefit Research Institute -- a non-profit organization).

If I sell stocks that are held within an IRA account and then make a withdrawal (I am over 60) is that withdrawal considered an income for income tax purposes? Suppose I sold the stock at a loss from what I bought it for how is that taken into account? SAVAGE SAYS: Gains and losses don't matter inside a traditional IRA. If you deposited pre-tax money into that IRA, then all the withrawals are considered ordinary income, added on to any other income you receive that year. If it was a Roth IRA, with money put in after-tax, then the withdrawals are tax-free. And if it was an after-tax, traditional IRA (few people have these) then part of the withdrawal is a return of your after-tax investment and thus tax-free, while the remainder is taxable. But again, there is no tax benefit to gains or losses INSIDE an IRA.

My mother recently passed away at age 90 without a will. I have one older sibling. She had a substantial amount of cash in her checking account that included both my brother and my name on the account. Mom previously paid taxes on this account and her unwritten instructions was for the cash to go to me since my wife and I were her caregivers for the past five years.

Is it necessary to set-up an estate? Are there any type of income tax requirements that I should be aware of? Do I have to report this as income? We live in Mississippi.

Thank-you,
SAVAGE SAYS: Let this be a lesson to all that unwritten "instructions" do not make a bit of difference after you die! If both of your names (yours and your brothers) were on that account -- either as joint owners or joint beneficiaries -- then then you are each entitled to HALF the cash! As for estate taxes, unless the estate was worth more than $500,000, there will be no taxes. But, depending on her other assets and how they were titled, and how this account was titled, you may have to file for probate in your state court. I'd suggest you consult an estate-planning attorney in your state for advice on what is required. (Probate is the process of changing title to assets, not a tax process.) Any money you and your brother receive from the estate will come to you free of income taxes.

Personal organizers: could you please send me your personal organizer?
SAVAGE SAYS:
See instructions at www.TerrySavage.com -- You need to fill out your name, email in the yellow box that pops up -- If it doesn't appear, look for a line across the top of your browser that says "popups blocked" -- Click on it to enable the box to appear, then sign up!
Terry Savage

I bought a house in 2005 fo r$232,000. I put $80,000 down. I now owe $164,000 and the value of the home is approx $85-95000. I live in Cape Coral Fl and don't see much of a future in this investment. I'm a retired Chicago Police officer and get a pension and have some savings. I'm thinking of short selling this home. Any ideas? SAVAGE SAYS: Well, I've written a lot about this. From a moral, and a practical, point of view you might want to think twice about defaulting on this property -- if you can afford to maintain it, and especially if you want to have a Florida home. At some point the market will come back -- and if you have a default on your record you will find it difficult to get a mortgage on a new property.

Terry,
I retired in December 2011 and receives about $4000 a month in my account after taxes and insurances. I was advised to invest a portion of this money because I do not have an IRA or any stocks. My debt is less than $8000.00
What would you do? SAVAGE SAYS: I would pay down your debt as fast as possible, then build up a savings account in your bank as fast as possible. Yes, I know you will earn negligible interest these days, but write me back when you have a "cushion" of at least $15,000 in your savings account! And in the meantime, don't listen to that "investment" advice!!

Financial organizer, for free
SAVAGE SAYS:
See instructions at www.TerrySavage.com -- You need to fill out your name, email in the yellow box that pops up -- If it doesn't appear, look for a line across the top of your browser that says "popups blocked" -- Click on it to enable the box to appear, then sign up!
Terry Savage

I was quite interested if not excited by the views you expressed last week on the News Hour. Your optimism was quite refreshing. You have undoubted written them. Can you direct me to a source?

thank you so much. It's encouraging to have you around and speaking out!

Dennie SAVAGE SAYS: Thanks so much, you'll find all that and more in my new book: The Savage Truth on Money which you can order on Amazon, or autographed at my website, www.TerrySavage.com. You can also read my regular columns there. And I hope to have the PBS interview posted this week.

I saw you on PBS. Your defence of the the American way was spot on. I this country social structure, economic status has nothing to do with success. All one need is the will to "WANT TO". Thank You Terry. David Albue. SAVAGE SAYS: Thanks for your comment! For those who didn't see the piece, I hope to have it posted on my website this week!

Terry,

I have very good credit, cash assets, no late payments on mortgages, no credit card debt, and six figure w-2 income. I was trying to get a $200,000 mortgage and had $90,000 to put down but found that I could not because i have separate small business losses from a s-corp I have on the side for just the last two years. I never knew that having a small business and only recently writing off losses would mark me as a bad prospect for a mortgage. Yet I see that some are still getting FHA mortgages with little money down.

Lesson learned but I feel very discriminated against as a small business person.
SAVAGE SAYS: Try getting a loan from another financial institution. They're all very picky these days -- but the smart ones look behind the scenes at the totality of the picture. Let me know what happens.

Terry, can you assist me in navigating thorugh ALL of the different CREDIT CARDS out there available now.

I'd like to open an account for a CREDIT CARD , VISA, MASTERCARD, DISCOVERY, etc. ??? & know that there maybe others, BUT I want to find one with "perks" &/OR a lower interest rate.

Is there a place to SHOP for best offers, I've seen some now that'll give a NEW ACCOUNT, Frequent Flyer miles as initial offering... I am sooooo confused.
I look forward to any advice you can oiffer.
SAVAGE SAYS: Go to www.lowcards.com and you can learn more, as well as choose from among those that suit your situation. Try for one with a low annual fee, and a low rate if you plan to carry a balance (don't do that!!)

Ms. Savage,
As an "older person" who has been paying his bills with paper for over 50 years I rejoice with those humans who would pay their bills electronically (see Manilla.com). However, as a former member of the Naval reserves in communication during the Korean conflict with a Top Secret clearance I learned at the early age of 18 yrs "What man can make--encode--man can break, i.e. there is no such a thing as perfect security. Manilla.com and other web sites may cite their security, but daily we read where hackers break their security. I would rather keep my hands on paper, envelopes and stamps (with its attendant lack of security) than let multiple sources have access to my checkbook electronically. I realize that my protocols have security problems, too. Let the debate continue.

Please continue with your great work.

SAVAGE SAYS: I understand your trepidation. However, when you think about how many people have access to your paper check during the processing AND when you realize that these online bill pay systems use the same security that banks use to transfer literally trillions of dollars securely, I think you might change your mind! (Not to mention the fortune you'll save on postage -- and all the trees you'll help save when you use digits instead of paper!) Thanks for writing.

If my taxable amount which includes capital gains from stocks which were aquired by my late husband from his company savings & retirement plan (the stocks were held as a joint tenancy under his name and mine as his wife under my soc sec number when my husband was still employed, his employment ended in April 1983 he passed away in 1987), now I have sold the stock and purchased an annuity immediately as the stock market value is too scary ( I am still confused and always believed that those stocks were like a 401k plan, but my investment adviser told me that they were common stocks). I am 69 years old. Can $34,500 be deducted as not taxable from the over 200,000 in capital gains?
SAVAGE SAYS: You need to talk to an accountant immediately -- and stop believing the person who sold you the annuity. I have no idea from your description whether the money was held INSIDE an inherited 40l(k), which would have been rolled to an IRA -- and which would have allowed you to keep the money tax deferred. If so, you should NEVER have taken the money out until required to do so. And if this money was not inside an IRA or retirement plan, then your "cost basis" for gains would have been based on value at the date of his death (or at least half of it would have that basis).
I have no idea where your numbers are coming from though, so please consult a CPA -- NOT an "investment advisor" who is really a salesperson!

My mother died in January 2008 and left an IRA naming me and my sister as beneficiaries. She had apparently been having the required distributions dump into a savings account in her name as co-owner with my sister. There is $29,000 left in the IRA account, but we didn't know about the IRA or the savings account until this week.
My questions
1) Do I inherit 1/2 of the IRA's value as of the date of her death, rather than today's value (she was 75 at death).
2) What are the tax implications for me when I didn't do anything with withdrawals, etc, because I didn't know the IRA existed?
My sister plans to decline her 1/2 of the IRA and the balance of the savings account so that my brother can inherit to make up for the fact that my mother gave her $200,000 before she died. I don't know how much is in the savings account)
SAVAGE SAYS: You need to contact the "custodian" of the IRA -- the bank or mutual fund company or brokerage firm -- that is holding the account. The money will be rolled over into an inherited IRA when you present the custodian with the proper forms including the death certificate. If you didn't know about the account, you should have gone through her papers immediately. Contact them THIS WEEK -- before the end of the year, so that if she had already started taking the mandatory distributions, one can be made for this year. Otherwise there are steep penalties. CALL the custodian on Monday after Christmas -- DEMAND help to make this distribution appropriately because there is a 50% penalty on top of the amount that should have been withdrawn if you fail to do so. And do you have an attorney who is probating the estate? That attorney should have known about this, too. D IT NOW -- BEFORE YEAR END -- TO AVOID A HUGE TAX PENALTY.

Hi Terry -
Thank you for all your great advice - it's helped keep me on track! I have a son that is a Jr in High school & an 8th grade daughter, so this has to do with paying for college. My son has his own ED IRA $20K + 2 Prepaid College IL semesters + $1500 in savings bonds + $2K in savings, but I know I will most likely need more than just his money. If he can qualify for any scholarships, I will apply for them & he might go to an in-state university. Is it an ok idea for me to use my daughter's ED IRA $20K + Unique 529 $12K to pay towards my son's college expenses? I think my daughter will qualify for free tuition at her college of choice since our adjusted gross is around $40K for our family of 4. I know things can change, but my daughter is determined to attend an ivy league & has the grades/drive to support this. I would really like our children to graduate with as little debt as possible. Thank you from another Teri SAVAGE SAYS: You've done a great job of saving for college for both of your children -- and I think you should stick with your plan, using the money you've divided it between both children. You never know what will happen in the intervening years -- and it might become very important to treat them equally. I agree aboaut having as little debt as possible -- and one way to do that is to attend acommunity college for the first two years, and then transfer to a university for the final two years. I'd start estimating your ability to qualify for aid right now -- by going to FAFSA.ed.gov. Given the money you've saved for them, you might not qualify for as much aid as you think for your daughter. It's best to start with a reality check. Again, somewhere down the line I just have this feeling that it is going to be important to show that you saved for each of them!

My mother is very much disabled and is living with me. I am providing total care for her. She is 85. She has a Living Trust and I am the sole person listed on the trust. She has an annuity, it is a non qualifying, one time premium. She has never had a payment from this annuity and it is earning around 3.4 percent. My question, as her beneficiary and the person she has listed on her Living Trust and as her medical and financial POA, do I have the authority to cash in her annuity? I am looking at renovating my home to make it handicap friendly, or possibly buying a one story that is more what we need to care for her, whichever makes the most sense. Am I allowed to cash some or all of this annuity? SAVAGE SAYS: First, make sure you are deducting your mother as a "dependent" on your tax return. Second, consult the annuity company to see if there are penalties or surrender charges involved in cashing it in. Third, you need to see an elder law attorney to determine if the terms of the trust allow you to take over at this point and use the money. (The attorney represents your mother's interest -- not yours. If you don't know an attorney, probably the one who drew the trust documents in the first place, then go to www.naela.org -- the association of elder law attorneys.) And finally, before you do this, you must find out the tax consequences of this withdrawal. Since it was not pre-tax money that went in, then a portion of the withdrawal will be taxable, based on the growth of the money inside the annuity -- if any. You need to know how much that would be, because it could impact her Social Security benefits, Medicare premiums and other government programs -- as well as your ability to deduct the cost of her care -- depending on the amount of the withdrawal. To determine that you need to talk to an accountant who knows both your tax status, and hers.
By the way, as always I consulted with my annuity expert - Jeffrey.Oster@raymondjames.com, and here's what he added to my comments:

Does the trust own the annuity, or just the beneficiary? If so what tax ID is associated with the trust.

If it's moms, mom or the trust as mom will be taxed as ordinary income on amounts above after tax principal invested

If it was bought before Aug of 1982 (pre tefra) she can take principal out tax free first.

If the trust allows for it, and owns it, the trust should be amended to add the daughter as ttee, with the provision that either ttee can sign off on transactions like this.

If the trust with her is the beneficiary not the owner, she has no ability to cash out the annuity- only the owner does.

If the owner is just Mom, and the trust has the same tax id as Mom, they can change ownership to the trust.

Seems a bit like extra work if mom can just cash it out tho..the taxes are the same..
If Mom can't sign due to incapacity, then they need to add daughter to trust under the POA with an attorney, change ownership to trust if the ss# is the same, and have daughter cash out as ttee with power to sign as individual...

And yes attention should be paid to the tax years they incur income...they can control that.

And, they should NOT annuitize, even for 5 yrs certain...3.4 is a great rate today....is that the lifetime minimum??? What IS the lifetime min rate??
they should just withdraw over time as needed if no surr charges...

Whew....

Merry Christmas, dear Terry.

Hi Terry,
I am a Reverse Mortgage Consultant for MetLife Bank here in Schaumburg / Oak Brook. I know you can't refer business to a single entity, but I would like to request that I be added to your list of approved lenders for reverse mortgages that you may give to your readers. I have been originating reverse mortgages for over 11 years and have helped literally thousands of seniors and their families with their questions. I fully understand if you cannot give out any information directly to your readers, but if you can please include me. Thanks. SAVAGE SAYS: I'll be happy to post your comment here. I do believe in reverse mortgages in the right circumstances, and in fact did one for my father at least 10 years ago.

Hi Terry,

I have become disabled by MS and thus have lost my job after 25 years. I am 50 years old and have 118,000 in my 401K from my ex-job, which I would like to roll over. My husband and I own a home that was payed off but we recently took a 100,000 loan against it in order to buy a second summer home. Should I just roll the 401K over, or should I apply some of it towards the 100,000 loan? Also, can you recommend the proper way to roll over a 401K? SAVAGE SAYS: Well, frankly, under your circumstances, I'm surprised that you borrowed money to buy a second home. I certainly hope you are not overloading yourselves witih debt -- especially since it is unlikely that you will continue to work. I'm assuming that you can make the mortgage payments with just your husband's income. YOU should roll over the 40l(k) -- and the best way to do it is to contact Fidelity at 800-FIDELITY or Vanguard -- 800-VANGUARD -- and they will handle the entire process to make sure the money stays tax deferred, and if you explain your situation, they will advise you re appropriate investments for your new IRA rollover. Please don't withdraw -- as you'll lose all future tax-deferred growth -- and you'll owe both taxes and a 10% penalty on the withdrawals (since you are under age 59-1/2).

Thank you

Hi will be in the next couple of days receiving a gift of monies 33K I have no idea what this will do to my taxes or how I deposiit it or what taxes I pay.... Of course I am trying to pay as little as possible as it will be used for a house.

SAVAGE SAYS: If it is truly a "gift" -- and not income -- then it will not affect your taxes at all! So if this is an inheritance or a gift from anyone, you are free to do with it what you please -- and it does not have to be reported on your income taxes! Just be sure the person giving it to you is considering it a gift, and not a payment of some sort. Enjoy your new house!

how much would 10000 be worth today if it was held in the 30yr. treasury bill for the last 15 yrs? SAVAGE SAYS: Well, this is impossible to answer, becasue there is no such thing as a 30 year Treasury bill. But assuming you bought 90-day treasury bills and kept renewing them as they matured, you would have been paid interest at varying rates over the years. (In fact, with Treasury bills, you receive your interest check up front when you buy the bills.) Now, if you had saved all that interest, you would have kept up with inflation along the way, because that's what Treasury bills are designed to do. So at final maturity at the end of 15 years, you would have your $10,000 back -- and all the interest you would have earned if you kept it instead of spending it. So at the end of 15 years you would not have lost any buying power. Hope you understand that explanation!

My husband and I have purchased gold bullion which we own jointly. The account does not have a provision for a beneficiary. We are not sure what would happen If both of us would die at the same time. All of our individually owned assets, mutual funds, annuities, IRAs, etc., have assigned benificiaries (spouse or one son). We have 2 boats and 2 cars that are titled jointly. All of our savings and checking accounts are also jointly owned. Do we need to establish a joint revocable trust to provide for who should receive this gold? Would we need one for any of the other things I mentioned? SAVAGE SAYS: If you have the bullion in your possession, it is probably in a safe deposit box. If the box is jointly owned, the survivor would own the gold -- and you could name a third party to have access to your safe deposit box. BUT you have inadvertently revealed the problems with joint ownership. If one of the parties is incapcacitated, then half of the property could be tied up until a court decrees that the co-joint owner can take action. That's why, especially with so many different assets, it would be better to create a Revocable Living Trust, and name a successor trustee to act if both of you die in the same accident. Consult an estate planning attorney in your state for specifics of your situation.

I found an old article that you wrote in the Sun Times where you would provide a 4 pg. Personal organization form that we could print out and fill in with all our info. Is this still available ? if so, how can I get it ? SAVAGE SAYS: Go to www.TerrySavage.com - -and fill out your name and email address in the little yellow pop-up box. By return email you'll get a link to the organizer, and you can print out as many as you like -- and give them to friends and family over the holidays!

One of the advantages of waiting beyond age 62 to take Social Security is that the benefit amount increases each year we wait. However, if the Fed chooses to inflate our way out of debt, will the expected increase percentages be offset by the inflation rate? SAVAGE SAYS: Only if the published inflation rate, which determines the annual cost of living increase for Social Security recipients, reflects the ACTUAL inflation rate. I am not aware of how the adjustments for waiting to receive your first benefits are tied to inflation. Let me check on that!

Hi Terry,
I listened to your interview on YouTube of Warren Buffet at the Junior Achievement fund raiser in Chicago a few weeks ago (although the video was incomplete). I am 66 years old, recently retired and am trying to prudently reallocate my investments for this stage of my life. I have been targeting an allocation of 50% bonds/cash and 50% stocks but after hearing Warren trash bonds and CD's during your interview, I'm not sure that's the right approach. Every investment strategy I read emphasizes having an appropriate amount in bonds and CD's based on a person's retirement horizon. Warren Buffet is obviously a very smart investor and on one hand I don't want to discount his remark, but on the other hand I'm very reluctant to be fully invested in stocks at this stage in my life. There is a tremendous amount of uncertainty in the US economy and European debt crisis. What do you think is the best scenario for a retiree in today's world?

Thank you for your comments. I'm a big fan of you and your outlook on America.
SAVAGE SAYS: Well, each person is different. Buffett knows that stocks yield more now, and have a greater chance of keeping up with inflation. But even if he put ALL his money in stocks, and there was a huge crash, he wouldn't be worried about keeping a roof over his head! That's the difference between "theoretical" and the reality faced by a retiree.

Personally, I still own some bonds purchased long ago -- but I know that when inflation gets going again, I will lose money on them, so I will be prepared to pull the trigger (almost did, many times!). The reason I'm not too worried about that position is that it is hedged by my holdings of gold stocks and bullion. And I do think that at least 50% needs to be in a diversified stock portfolio. But where I disagree with Mr. Buffett -- because of the reasoning above -- is that I hold a LOT of cash equivalents -- chicken money -- so I can sleep at night! Hope this helps you think through your own situation.

Do I need to be living in my condo inorder to do a refinance? I currently have friends renting it. And what could be the consequences should the refinance go through and I am not living in it? SAVAGE SAYS: It is much more difficult to refi a rental property. But you must be honest about it, because it is a federal crime to act fraudulently on a mortgage application!

is there a way to refinance on a house without having to pay all the bank fees? SAVAGE SAYS: The fees can be rolled into the mortgage amount at the time of refinancing -- but check the fine print to make sure that you aren't losing a deduction by doing so. For example, points paid solely to refinance a home mortgage usually must be deducted over the life of the loan.
Here's more from an internet source:
"For a refinanced mortgage, the interest deduction for points is determined by dividing the points paid by the number of payments to be made over the life of the loan. This information is usually available from lenders. You may deduct points only for those payments made in the tax year. For example, a homeowner who paid $2,000 in points and who would make 360 payments on a 30-year mortgage could deduct $5.56 per monthly payment, or a total of $66.72 if he or she made 12 payments in one year."
Your mortgage lender can help you with these issues.

Terry,

My husband and I have been saving for years and we have invested in mutual funds for over the past 15 years. Now, we would like to start investing in other commodities. We am unsure as to what steps to take to get started. We use a financial planning firm to manage the mutual funds. We have not made any changes to the funds since we started over 5 years ago. How do we know what is a good investment? What steps should we take and what literature should we read (in addition to your books) to help us educate our selves?

We are both in our early fifties and so we would like something with modest risk.

Thank you SAVAGE SAYS: Your letter reveals a lot about your lack of knowledge of mutual funds -- and the kinds of funds you own. I'm not promoting my book here, but it is designed to give you exactly the knowledge you need! You can buy it on my website www.TerrySavage.com -- and I'll give you a personal money-back guarantee that if you read it you will not only understand the mutual funds you own, but what other investments might be suitable -- given your situation. For sure, I hope you have been contributing to a 40l(k) at work --and typically they will advise you on how to diversify your investments within the plan.

MY WIFE AND I ARE 64 AND PLAN TO RETIRE IN AUGEST OF 2012. WE OWE APPX $146,000 ON OUR HOUSE WITH PAYMENTS OF $1375 MONTHLY. WOULD IT BE ADVISABLE FOR US TO PAY OUR MORTAGE OFF, TO GIVE IS THE $1375 TO GO TOWARDS LIVING EXPENSES. WE HAVE $825,000 TOTALY FOR OUR 401K. THANK YOU SP SAVAGE SAYS: Well, my first bit of advice is that it's too early for you to retire -- unless you have health problems and think you don't have long to live. Your 40l(k) money is before-tax money -- so at even 33% tax bracket, you'll have only two-thirds of that to spend. And that spending power will be diminished -- actually cut in half -- by inflation at only 3% within 25 years! My advice is to keep working until your mortgage is paid off!

My question pertains to the combonation ""credit-debit" card issued by many banks. Since this account number applies to both are persons vulnerable to ID theft and having a savings or checking account depleted when they use it? For example, I would use the card to set up an account at a video store and emphasize they use it as a credit card. howver, they have all my personal info they could steal the account number then use the "debit side" t depleat the acoounts mentioned above...couldn;t they? SAVAGE SAYS: Do NOT set up automatic payments or leave your debit card info at any retail establishment or use it for online purchases. Keep a separate credit card for that type of purchase. Whether debit or credit, you are 100 percent protected against fraud. BUT someone with access to your debit card info could drain your entire checking account (and overdraft feature if you have it) and it could take a lot of wrangling with the bank and a long time to get your money back.

Hi Terry,
Went to your Nov 30 lecture - felt like I've made some good decisions on my own and with my financial partner. Whew!
I've shared your recommended sites (livingto100, choosetosave, etc.) with my planner, my sisters and friends. Thanks!
When my first niece and nephew graduated from college, my gift to them was $150 to invest in a company of their choice, and a monthly match of up to $10 (unending) to continue that investment. I explained that I started with $5/month in employee stock purchase in my first job, when I didn't have 2 nickels to rub together, and that became the down payment for my house. Neither has accepted, and it's been a few years. What can I do to encourage them to take action? SAVAGE SAYS: You know the old saying: "You can lead a horse to water . . ..!" Maybe a copy of The Savage Truth?? Or open an account at Sharebuilder.com which has no minimum investment, and you keep contributing to it for them -- You can choose from 7,000 stocks, and many mutual funds including Fidelity and Vanguard. Maybe when they see the money mounting up they'll start adding to it with their money!

Greetings Terry Savage,
My name is Jared Wilson (One of the 20 year olds in the crowd, 22) and I had the privilege of attending your “Savage Truth on Money” Event yesterday, 11/29/2011 at the Lincolnshire Marriott. It was a great experience filled with good advice, insight, and knowledge. Near the end of your presentation, you talked about the value of gold and mentioned possibly buying “Gold Bullion Coins”. My question for you is if you bought these coins and left them as a gift for your children to cash in once you passed, who would they need to see and where would they need to go to cash the coins in? Thank you in advance for your help and time.
Best Regards, SAVAGE SAYS: Well, I'm glad there were so many 20-somethings there to learn about money. You should buy your coins from a reputable dealer. (I always recommend Harlan J. Berk on Dearborn in the Loop in Chicago.) They will always buy back the coins. And I assume you're hoping your parents buy them for YOU -- not that you're planning for your children! But gold stands the test of time!!

I am 58yrs going to be 59 this February. I have $210.000.00 would like to put this in an annuity. I also have $200.000.00 invested with a financial advisory. Not sure what to do with the 210.00.00 all money is tax deferred. I will be losing my job due to the plant losing this December, I will be paying my own health care. I will need about 2,500.00 a month to live, need some advise. SAVAGE SAYS: Well, don't put it all in one place! You are a "sitting duck" unless you get good financial advice. Can you email me at Terry@TerrySavage.com and tell me where you live. You need someone independent to review your current investments -- that are with a "financial advisory" firm. If this $210,000 is a rollover of your retirement assets, you really don't need an annuity to keep it tax-deferred. And I woudln't tie all of it up just to get a monthly check that might be ravaged by inflation. I would really like you to read my book -- The Savage Truth on MOney-- because it is meant for people in your situation. I know many will think I'm trying to "sell books" -- but I'll give you my own money-back guarantee if it doesn't give you a better perspective on your situation -- and where you should turn for advice.

Thank you for doing the "The Savage Truth on Money" at the Marriott Lincolnshire yesterday, I really did enjoy it. You had some great pointers, and I fear looking at the age estimated web site.

Also, thank you for spotlighting Bob Wallace, I was able to tell him how much I appreciated him back from the Channel 2 days, I think he really appreciated it.
All the best,

Philly D. SAVAGE SAYS: A huge thank you to you -- and all my friends from the newsletter -- who came out to give us an overflow crowd! Glad you enjoyed it!

Terry,
When deciding whether or not to refinance, most articles mention the reduction in interest rate (resulting in a lower monthly payment) and the amount of closing costs as factors to consider. However, it would seem that the number of payments (years) made on the current loan would also be important. Early payments on a loan consist mostly of interest, and as the payments continue more money goes toward principal. So, it might not make sense for someone who has had a loan for a while to refinance, since they would be starting over by paying mostly interest. Is there a way to determine/calculate at what point in a current loan it would still make sense to refinance (or not refinance)? I'm sure it depends on interest rate, number of years paid on loan, number of years one plans on keeping the property after refinancing, etc. But are there some general guidelines or some "always"/"never" type scenarios? Hypothetically, if the interest rates were to go down every year, is there harm in refinancing every year if all costs are covered??
Thanks. SAVAGE SAYS: Good point -- and the simple answer is to refinance to the shortest term loan possible -- at least no longer than the remaining years on your current mortgage -- if your goal is to pay off your mortgage completely.

Hi Terry,
My wife Jan and I were at your talk tonight. Our son Zach is beginning his career in business in may 2012. I do want to instill upon him your one set of ppts about the value to save when you are young. We actually did this, but as you said, life got in the way. Ramped up our life style and as you know the rest is history.

It would be helpful to get the slide deck to share or refer me to a link that has this info. Thanks for the book and we really enjoyed the talk.

Best, Mark SAVAGE SAYS: Almost every slide I used is in the book you received -- courtesy of Allstate. And if your son will read just the first four chapters, he will be on his way to understanding how to manage his money. Thanks for joining us.

hi terry,
can you suggest a good gold mutual fund?
thank you.

SAVAGE SAYS: There are many gold funds -- Fidelity and Vanguard have them. I like the American Century fund, and also the U.S. Global Investors funds (www.usfunds.com). But you can get a complete list, and performance history, at Morningstar.com.

You said it best last night, almost as though you knew that the market was about to take off, "don't bet against America".

Congratulations on a wonderful presentation in Oakbrook last night and thank you for your guidance. I have just ordered your other book from Barnes and Nobel and I can't wait to read both it and the one you gave us last night.

Allen SAVAGE SAYS: Thanks, you made my day!!

Hi Terry ?
Hope you come back to your Financial advice column here !
You are certainly missed !!
What will we do without you ?
Probably get ourselves into lots of trouble !
We do need you & hope you do know this.
Thank you so much !
SAVAGE SAYS: Did your newspaper drop my column? If so, you can always read it at my website -- www.TerrySavage.com.

I owe more than $600,000 dollars in debt and my annual income is $85,000. Over $500,000 of this debt is from student loans. I have tried everything from credit counseling to bankruptcy (but my bankruptcy was discharged because my debt ratio was too high). I don't know what else to do. I need so much help, do you have any suggestions? SAVAGE SAYS: I know student debt is a huge load -- but I am at a loss to figure out how anyone could accumulate that amount of student loan debt, even with interest accumulating! Can you provide some details. Have you called the National Foundation for Consumer Credit at 800-388-2227. Do that, then get back to me and tell me what they say.

Hi Terry, I'm 64 and just retired 5 months ago, my monthly pension and social security payment are more than I need each month because I live very conservative. I also saved enough for my retirement. I have three grown up children and all have professional job. My 27 years old daughter is my youngest kid, single and lives in her own apartment, she makes $55,000 and has $10,000 student loan which she pays back $120 from her checking account every month. She doesn't have other debt because I always reminder my kids to pay off their credit cards in full every month. She contributes 5% to her 401K to get the matching which I think she should put in 10% or more. My question is: Do you think it is a good idea that I open a Roth IRA account for her and put in my surplus money into her Roth IRA. Thank you. SAVAGE SAYS: Honestly, no. You've done a great job of teaching your children. Now be careful with your own money -- and enjoy it, because you've earned it. (And you might look into Long Term Care Insurance.) Check my website for columns on the topic, or read that section of The Savage Truth on Money. If you ever need it, you'll be glad you have it -- because it will allow you to leave the rest of your money to your children instead of spending it on nursing care -- For quotes call MAGA LTC 800-533-6242. You do not have to use my name, as I get nothing out of it -- but the satisfaction of knowing that one more woman is covered!

Dear Terry,

How can we coordinate a major effort to have all those in Springfield make dramatic
changes to our financial state of Illinois. Changes that will balance the budget.

It seems to me no one is doing anything to correct the terrible state of affairs this state and this country is in.

It seems to me everyone down there is only interested in putting money in their own
pocket.

John
SAVAGE SAYS: Oh my goodness, I've been trying to do that for years. Also www.IllinoisisBroke.com has spearheaded this movement. There's an election coming . . .. We had better wake up!

I am an elderly retired widow female, live alone, own home, worth approx. $170,000.
I am having a rough time paying household expenses, taxes, insurance, utilities, etc. on my total income of $26,000.which consists of SS benefit, small retirement (from work ) & IRA savings acct. of which I draw a monthly RMD.
In CT our Medicare savings plan offers help with Part B, prescriptions, etc., depending on your income which is needs to be below $23,000.
Is there any way that I could adjust any of my total income to meet this eligible amount as I am so very close ?
Thank you for any advice that you could offer.
SAVAGE SAYS: Well, check with the state to see whether they count your "gross" income, or after-tax income for that limitation on helping with Part B. Maybe after deducting your real estate taxes, you would qualify. I would also suggest you look into a Reverse Mortgage -- which could give you a check every month as long as you live in your home. And you can never run out of money, no matter how long you live, as long as you stay in your home. Go to www.ReverseMortgage.org -- or read my books and articles. I did that for my own father, and he loves having the extra money every month. That could help you pay those bills.

i am a senior i have only ss i co signed for my grandson a student loan with sallie mae he has not pd anything on it i got a call about it they are coming after me i have no assets but a car i am paying for to get to the dr i owe on it pls my other is ss thats all i have i can pay only small pmt they dont want that i cant make large pmt i dont know what to do ca they take the car that is not pd for also my ss which is all i have thank u SAVAGE SAYS: Oh, this is terrible! And a warning to others who co-sign. Immediately call 800-388-2227, which will put you in touch with the nearest agency affiliated with the National Foundation for Consumer Credit. Tell them of your problem, and see if they can help. If not, please get back to me. You can email me directly: Terry@TerrySavage.com. Maybe if we tell your story in the papers they might back off and go after your grandson.

I bought a car through HSBC in July 06'. The original mature date was to be July 10'. Their company sold my loan to Santander Consumer USA a couple of years ago. Any way, the mature date was moved to 2/6/2012 (8 more payments) I dont know why. I logged on today and now it is 3/6/2012 so they added another month I already have paid 56 payments. My concern is I only owe 4 more payments totaling $1046.20 but my payoff balance through 12/8/2011 is $3429.54 and the balance due is $3371.19. Why is there a difference of almost $2500? If they keep adding payments I will never get this loan paid off. The car is 10yrs old now and falling apart..I havent driven it in 3 weeks because it is being repaired again..What is going on, I hope you can help me. SAVAGE SAYS: Please send me an email to Savage@suntimes.com. Include your name and phone number. This sounds like a problem for our "Fixer" column -- which deals with specific consumer issues. I will try to get some help for you. Please put the word "Fixer Help" in the title of your email.

I am in the process of applying for Medicaid for my elderly mother, who is in a nursing home suffering from Alzheimer's. I have been advised that she will need to cash in her small life insurance policy, which will be about $12,000. She supposedly also has to cash in her small IRA, which was worth about $18,000, but probably less now. My question is, what will the tax consequences be for her to cash in these policies? Obviously, she has very limited funds, so my goal would be to lessen the chances she will end up paying unnecessary taxes. After inquiring with several people, I have been advised to do something different by each one.

SAVAGE SAYS: I checked with legal experts in Illinois -- and each state is different -- but the cash value of life insurance over $1500 must be used for her care. There is a way around this: You can convert the cash value into a "burial trust" and it will then be a "non-countable" asset. An elder law attorney can help with this process. Find one nearby at www.naela.org.
As for the IRA, it depends on the state, but in Illinois it is a "countable asset" -- She is allowed $2,000 in that type of asset, but everything over that amount must be used for her care -- unless you can withdraw the money and add it to the burial trust, or an elder law attorney could draft a caregiver agreement that would allow her to give her IRA money to the daughter in exchange for her previous caregiving services. I'm not giving legal advice, and there may be specifics of your case that require individual consultation. But I can refer you to Marty Fogarty who is an elder-law attorney. He can be found at www.HeartlandLawFirm.com.

I have an IRA annuity of $120,000.00. I want to surrender the IRA, place it in my credit union and use the money for my monthly retirement pay. I was told the penalty would be $7,800.00 for early withdraw and $11,000.00 for taxes. Would I need to pay more taxes on the balance of my withdraw? An adviser told me I would only walk away with about $60,000.00 when it is all said and done. I find that hard to believe. I am 61 years of age and expect to draw my social security next year. Why should I save this IRA and for how long? SAVAGE SAYS: Oh wait -- you have no idea what you're doing. What do you mean by IRA Annuity? Is it a standard IRA account that is tax-deferred? Or did you purchase an annuity within the account? How is that IRA invested -- that's the first question.
Second, are you still working? If not, why not? It's way too early to contemplate living only on Social Security -- And if you take SS early, you will be penalized for money you earn. Can you wait another 5 years?
Your goal should be to keep the IRA in place, growing tax-deferred, as long as possible. Since you are over age 59-1/2, you can take the money out without penalty -- but only take out as much as you really need, because you will pay taxes in the withdrawal. And if it really is in an annuity -- which probably was a bad idea in the first place -- you must wait untilthe surrender charge period has ended, typically about 5-7 years.
Please write back with more details so I can give you better direction.

Hi Terry,
I have a variable annuity account with one of the top brokerages. The annuity is in three mutual funds with insignificant total amount (@50k for the past five yrs). I received a letter from the brokerage last week encouraging me to buy an optional rider for an additional annual fee of 0.95% if I want to:

1. receive lifetime income guaranteed by a highly rated insurer (Monumental Life Insurance Co., which I've never heard of)
2. benefit from potential upturns in the market, i.e., my income form this rider can go up if the markets rise, but will NEVER go down, and
3. start, stop, skip this rider at any time.

Is this additional rider worth my while? Is this something you would do? Hope to hear from you. Thanks!

Victor SAVAGE SAYS: I checked with my annuity expert -- Jeffrey.Oster@RaymondJames.com -- and he came back with the following comment:
We'd need more details. Are they offering him a new annuity with a rider attached, or allowing him to add to his current one?
Is there a rate of return associated with the rider?
When he says skip, does that mean turn the income on and off? Drop the rider entirely?
Who is the primary carrier and what is the name of the policy?

My suggestion is to contact Jeffrey directly and give him detailos. I trust his advice completely.

I have an investment property that has a $375k mortgage and a possible property value of $350k, or less. Please advise what to do. The value of the property four years ago was $650k to $700, nice property, but everyone has to sell their homes to buy this property and the market with foreclosures increases and the market price decreases. Thank you, DB SAVAGE SAYS: Well, if you are still receiving income (rent) from this property -- enough to cover the mortgage -- I would suggest you hang on to it. One day, though probalby not soon, prices will rise again. But if you can't afford to carry the monthly payments, ask your bank about doing a "short sale" -- ie for less than the mortgage amount, and see if they are willing to forgive the difference.

Terry, do you feel this is a good time to dollar cost average into foreign funds? Is this a good time to buy or should I hold off? SAVAGE SAYS: The answer to that depends on your risk tolerance -- and on whether you want to bet that Europe avoids a recession given all this monetary uncertainty, austerity programs,a nd higher interest rates!

Terry,
I am a City employee with a 457 plan in which I have around $220,000. I have 3 funds in this plan, all of them Vanguard Funds (small,med,& large cap) I am looking to retire anywhere from 4 to 7 years. I was wondering if now would be the time to move all of the funds into a fixed account to avoid the uncertainty? I have a pension as well, that hopefully will be there somewhat in its current form, when I retire. SAVAGE SAYS: I know you want an answer -- but what you really need is perspective. Bonds can be even more dangerous than stocks, and can lose more money, if inflation returns. Please, please read either The Savage Number or The Savage Truth on Money -- I'll give you a personal money back guarantee that they will give you perspective -- then write back and re-ask your question! You need to have a longer-term perspective -- not just until you retire, but THROUGH your retirement to make your money work for you. So the answer is "some of each"!!!

Good Day Terry,

I have a tax question for you. Earlier this year I bought a condo. I was finally able to sell my old condo several months later. The selling price was not only less than what I paid for it a decade ago, but also less than what I paid for the new one. Will I have to pay taxes on this money?

Thank you for you time. SAVAGE SAYS: Well, you never pay taxes when you take a LOSS! And sadly, since it was a residence (I'm assuming) you cannot deduct the loss on your tax return! But thankfully you were able to sell -- and are now in a new place that you like, so enjoy!

Dear Terry,

I've made nondeductible tradtional IRA contributions for 25 years and have not filed Form 8606 (not intentional but ignorance). Do I need to amend my prior returns and attach completed Form 8606s in my 2011 tax returns?

I'm 66 and will be required by IRS to make the RMDs in about 4 years...Please HELP!!

SAVAGE SAYS: Well, to get a specific answer I recomment you contact a Certified Public Accountant. But I checked with my sources, and here is some general information on the topic. First, here's the citation directly from the IRS: If you do not file form 8606 to report non-deductible contributions, all of your contributions to your traditional IRA will be treated as deductible contributions when they are withdrawn. All withdrawals will be treated as taxable, unless you can show, with satisfactory evidence, that the contributions were non-deductible at the time they were made."
Thus, the burden is on you to prove that these were after-tax contributions. Your first step is to ask the custodian whether they are going to -- based on the information they have -- issue a 1099R, showing any withdrawals as taxable income. An accountant could help you restate prior tax returns,but there is still a penalty for failure to file the proper forms. You definitely need help from a professional accountant on this one -- because you need to know whether first, you can prove these were after-tax contributions, and second what any possible penalties are and whether the cost of refiling and potential penaltis add up to more than the income taxes you will pay if these withdrawals are treated as taxable!

Thank you. I appreciate the feedback. So, you would not recommend taking out a loan from my 401(k)? Should that only be as a last resort? SAVAGE SAYS: Absolutely, only as a very last resort!

Terry, I was just informed , this week, by my bank located in Oaklahoma ( I live in Georgia) that they may not be able to Pay the RMD on an inherited IRA. I do not what to PAY the outragous 50% penalty by the IRS by not being able to take this RMD. What do I do, Terry SAVAGE SAYS: What do you mean "they may not be able to pay"???? What excuse did they give you? Is all the paperwork intact? Have they been paying out RMDs in previous years to the decedent? There must be some reason -- Tell them you are going to contact the IRS and bank regulators unless they can give you a very good reason! And let me know what happens. I'll be wondering about what their reasons are!

DEAR MS.SAVAGE,
I READ YOUR ARTICLES DAILY AND I VALUE YOUR INFORMATION AND UN-BIASED OPINION. I AM A CHICAGO POLICE OFFICER AND I AM COMMENTING ON YOUR ARTICLE FROM 9 NOV11 IN REGARDS TO THE TERRIBLE STATE OF THE PENSION. MANY POLICE OFFICERS I HAVE TALKED WITH AGREE THAT SOMETHING NEEDS TO BE DONE AND THAT WE NEED TO CONTRIBUTE MORE TOWARDS HELPING THIS GOAL. THE PROBLEM MOST CITY WORKERS HAVE IS THAT WE WERE GUARANTEED THIS PENSION, IF WE DO AGREE TO HELP FIX THIS ISSUE WHO'S TO SAY THE CITY WILL ONCE AGAIN RE-NIG ON PAYING THEIR SHARE AND THAT WE ARE AGAIN IN THE SAME BOAT IN 5 OR 10 YEARS. EVERYONE MAKES US OUT TO BE THE ONES BANKRUPTING THE CITY WHEN IF THE CITY WOULD HAVE DONE THE RIGHT THING FROM THE START WE WOULDN'T BE IN THIS SITUATION.PAY TO PLAY AND LUCRATIVE CONTRACTS HELPED BANKRUPT US.THE FALSE LAWS THAT HELP MAJOR POLITICAL CONTRIBUTORS GET A PENSION AFTER WORKING 1 WEEK, NEEDS TO END. SAVAGE SAYS: I couldn't agree more. As far as I've read, there is no move to reduce your earned pension -- just a discussion about reducing benefits on FUTURE earnings.

i have a question for you. my wife and i are both 64 and will be 65 in next augest. i know you are not fond of annunities. but fidelity had an annunity with med-life that guarantees you 5 1/2 % interest yearly. after 5 years if you want., you can take your $$out. i need 5% returns to retire. and i know not to put a lot in this.. BUT do you think mybe 1/3 would be ok??? i have around 800,000 thanks again lee SAVAGE SAYS: I don't know where people got the idea that I am "against" annuities. I even own some (the tax-deferred, variable kind) myself. But with EVERY annuity, the devil is in the details!
I haven't seen the details of this product, but I am absolutely 100% sure, that you cannot earn 5% over the next five years and then decide to take your money out, including the 5 percent return! So you clearly don't understand the inherent penalties. Yes, maybe you can take your original principal out -- but surely not that interest earned. Second, you didn't tell me what they can change the rate to after 5 years! Maybe the next rate will be significantly BELOW current market rates, to make up for the above-market rate you are now getting! There are a million other little details about these products that are never clear -- until you want out!
So now, if you want to know where the "catches" are with this deal, contact Jeffrey.Oster@RaymondJames.com -- my annuity expert. In fact, I'll contact him with this posting and ask him to give me the details if he can, based on the skimpy info you gave me.

Dear Terry,
Im in what I think is a jam and I truly don't know what to do. Im hoping you can just give me some guidance. I have a 15 year mortgage at 3.25% All was great until I got my crook county tax bill. I knew my mortgage would go up but was shocked to find out there is a 1800.00 shortage. So my comfortable mortgage payment has gone way out of my comfort zone. I need to get this payment down. I can send 1800.00 which I don't have and my payment will still rise or I can refinance. I know it would be a higher rate. I was thinking a 20 year at 4.00% with 0 points (as of today).This is through my lender that I currently have (Citi). Is this a really stupid idea? Im thinking that if I did this I would be able to throw in 200.00 more per month. I am so torn. If I didn't put so much money into this house over the 18 years I've lived here I sell and rent. If it were up to me thats exactly what Id do. So what do you think? I have always found and tried to abide by your advice and I could really use some advising now. Thanks. SAVAGE SAYS: Ok, I'm still trying to understand your situation. First, I'm assuming this is because of your property tax bill increasing by a large amount. If you just received the bill you might be in time for an appeal. Check out that possibility. Second, are you sure that you're getting all the property tax breaks you're entitled to -- maybe a senior citizen exemption?? Now, I think what you're asking is whether to refinance -- even at a higher rate -- to a longer term mortgage to get a lower monthly payment. Is that correct? I agree that it seems a shame to do that, but if it saves you enough every monthto pay your taxes, AND if you have equity iin your home and good credit, and want to stay there for at least another 5 years, then that might be a good route. Try to negotiate a rate below 4 percent though. And, of course, you'll be stuck if property taxes keep going up every year. But this is a terrible time to sell, plus I sense that you want to stay in your home. So let me ask you to think creatively on the other side of the balance sheet: Is there anything you could do to EARN another $50/week? Have you considered renting a room to a college student, or a senior who could pay rent? Check with local colleges, or with your church. There might be a good match that would enable you to keep your home without refinancing -- Let me know what you decide. Terry

I was 65 y.o.last april. I want to close out one of my IRAs to reduce some outstanding debts so I can refinance the house. What interest rate would I have to pay on closing that IRA? SAVAGE SAYS: You will pay ordinary income taxes on all the money you withdraw. The money will be due next April 15th, if you take it out now. And, if it's a CD, the bank could impose a penalty for breaking out before it matures. Be careful to figure out how much you'd owe in taxes, because if you take out too much it could put you in a higher tax bracket, and if you are on Medicare it could increase your premiums next year! So check out all the possibilities. And, you didn't ask, but I'm assuming you are still working and could qualify, based on income, for a new mortgage. You might want to check that out before you take money out of your IRA.

HI TERRY,
I PURCHASED A CONDO IN MARCH 2011 IT WAS APPRAISED FOR $120,000
I OWE $110,000
I NO LONGER WANT TO LIVE THERE.
THE NEW REALTOR SAID IT IS NOW APPRAISED FOR $60,000 and IT SHOULD HAVE NOT HAVE BEEN APPRAISED FOR $120,000.
I OWE $110,000.
COULD I SUE THE APPRAISER?
THANKS FOR ANY HELP OR COULD YOU ADVISE ME OF SOMEONE TO SPEAK TO.

THANK YOU
SAVAGE SAYS: Oh, gosh -- this is a tough one. Not only could you sue the appraiser, but the bank that gave you the mortgage, the broker who sold it to you, and the seller. But I don't think you'd get a penny out of this, and probably would have big legal expenses. You were taken - -although I don't know how this could happen. Did you go back and check sales made in the past year to see if they were in line with what you paid? Does this broker have any idea what he/she is talking about? Did something happen in the building in just the past few months to lower the property values? Something really doesn't add up here. Do your homework and write back with details. It is so outrageous that probably you should consult an attorney -- but first you have to know how out -of-line your purchase prices was.

Mary Christmas expects a tax liability for the year of $2,000 and she expects her withholding will total $1,200. What is Mary required to do?

a. Make estimated tax payments
b. Increase payroll withholding
c. Increase the number of exemptions
d. Either make estimated tax payments or increase payroll withholding. SAVAGE SAYS: Part of he answer depend on how she accrued that tax liability -- if it was extra income or if she is simply not having enough withheld from her regular paycheck. If this is the first year of having a liability above the withholding, it will probably not be a problem. But if this is an ongoing issue, she should make arrangements to make quarterly estimated payments online.

my son has college loans from Salliemae and us department of education direct federal loan program totaling over 50 thousand dollars. He had been working in Japan for 2 years and had been been making loan payments of approx 600 a month. Now he is back in the states and looking for work but Salliemae is increasing his payments to almost 600 dollars according to what they said they were going to do. I do not know what my son is going to do but he feels if he doesnt keep up his payments the interest rates will go up and he will have to pay more. Is he right there is nothing he can do or is there anything out there that can help him? SAVAGE SAYS: OK, first thing he has to do is talk to someone at www.IBRinfo.org -- that's the income-based repayment plan. Or talk to a counselor at Finaid.org. They can determine what kind of student loans he has -- and what to do about them. I can't see how the rates could go up unless these were private loans, which is not the type that Sallie Mae typically makes. But it depends on the specific loans, and whether he has -- or can -- consolidate them at lower rates. Talk to anyone BUT the people at Sallie Mae! They are a private company, NOT a government agency - -and they just want to collect their money!! Pls write back and let me know what happens. Terry

We are looking to refinance our home. We owe about $424K ($7K above a conforming loan) and have a rate of 5.75%. Some potential lenders said with our "A-" FICO scores we would have a better chance of getting a conforming loan if we can pay down, or bring in, more money at the close. I was considering taking a loan from my 401(k) to cover the $7K plus any additional fees. I already have a personal loan from our credit union that I COULD have taken out for more, but that opportunity has passed. Credit union stated we could reapply for the balance due, plus the $7K. What would you recommend? The refinance really all depends on the appraisal. Should we also pay for an appraisal just to see if this entire refinance can even take place? If the house value is not at the magic 80/20 loan-to-value, then we're talking PMI, so lowering our monthly payments would not even happen after all. HELP!! SAVAGE SAYS: Welcome to the strange world of mortgage refinancing! Yes, pay for the appraisal -- because if the house doesn't appraise to the needed value all the rest doesn't work, as you already noticed. Then, I'm not quite clear on how much you already owe your credit union, and whether they would refi your existing loan to include the extra $7k. (There should be no other fees or legal expenses in the refi -- ask your credit union.) If they get your mortgage refi business, they might be more inclinded to increase your existing loan -- as long at they think you can manage both payments.

Terry, first time poster! Okay, so here's the background: My wife's aunt (age 62)has terminal cancer and doesn't have long left. It's a tragic situation. I'll get to the point. She has a living trust with some items in it, and some aren't. She owns quite a bit of land that is paid for(in the trust) some personal property (in the trust) and a bank account with about 70k in cash and 50k both Roth and Traditional IRA's(in the trust). She also has a traditional IRA with about 100k in it that is not in the trust; my wife is the sole named beneficiary of that IRA. Her will spells out the division of the trust fairly clearly. My wife, her niece, is the 'trustee' and executor of the will and living trust and has a full durable POA on the trust and all financial and medical matters. The Aunts sisters are named as partial recipients of proceeds from the sale of the land, house, personal property and such as well as my wife, with equal division. The non-trust IRA she wants to go to my wife as the aunt had no children and is a widow. The trust and the will are pretty cut and dry, so to speak. But, here's the question: Reading about the gifting abilities of an individual has raised a question in regard to the non-trust IRA. My shallow knowledge of the subject indicates that it seems like she should close the IRA, assume the income tax liability and gift the 100k to my wife sign a 709 form. It would be well within her lifetime 5 Millon dollar limit and would prevent/protect my wife from messing with not only the taxes, but all the red tape that comes with an IRA, let alone an non-spousal inheritance of the IRA. Then, nothing could be that easy! What's your thoughts on this? I've googled this situation, and can't really find an exact match, which is surprising. It seems that those folks that know they are going to die soon would want to keep as much of their assets as possible from going to the IRS. It appears that if things stand as they are, a good part of that 100k will go to taxes. Oh, since the aunt is 62, she has not taken any withdraws. It's also lost about 30k in size in the last few years, about 7 this year alone. In respect to the assets in the trust, do you have any advice there? Thanks so much for your thoughts and time. It's greatly appreciated. SAVAGE SAYS: Well, I'm not going to practice law without a license, but I'll give you my non-legal, financial opinion: Your "shallow knowledge" is going to sink your wife!
First an IRA is not in the trust because it has a beneficiary (in this case, your wife) and so does not need to be distributed according to the terms of the Revocable Living Trust. Now, when your wife inherits this IRA, she should immediately and directly ROLL IT OVER into an inherited IRA, where it can keep growing tax-deferred. Then, depending on whether the aunt has already started a program of withdrawals, your wife will either be required to start making annual withdrawals OR can keep it growing tax-deferred until she (your wife) reaches the mandatory withdrawal age of 70-1/2. Thus there will be NO TAXES on the inherited IRA (although it is part of the aunt's estate) until your wife starts making withdrawals! If instead, the aunt were to withdraw the money while she is alive, she would owe ORDINARY INCOME TAXES on ALL the MONEY!!!
Stop playing financial advisor and get some qualified help. The trustee of the IRA would have been able to tell you this -- or go to a place like Fidelity or Vanguard, for the rollover to an inherited IRA at death. They will give you specific advice.
If you want an attorney who should have expertise on these issue go to www.naela.org -- the national association of elder law attorneys.

I have 3 sons ages 18-23 that received EE Savings Bonds for birthdays... They date between 1990 and 2004. What would the tax consequences be if they were to cash them in? Are there penalties? Is it worth holding them waiting for a specific event? Right now the certificates are in a safe with no plans or thoughts on what to do with them. Any thoughts and help would be appreciated. SAVAGE SAYS -- DONT cash them in! Hang on to them! They are the older, floating rate EE bonds with a higher interest rate floor. Keep them for the next 20 years, until they stop paying interest. You can't get a good deal like these bonds anymore!

I'm doing a personal loan. Itf they finance $ 50000 at 7% how long will it take to. Pay od
Thanka
ROGER SAVAGE SAYS: That depends on how they calculate the interest. Ask your lender. They are required to give you all these numbers.

Hi Terry! I've always read your column and found your advice to be very helpful. I know that you mention every year a website one can go to to get a free credit report (once a year) and if I am not mistaken, it is www.annualcreditreport.com right? I went to the site and they are asking for my social security number. Although I think it might be necessary to give it out in order to properly be identified, but I don't believe you have ever stated it's a must...unless I have the wrong website(?) If so, can you please tell me what the website is that I can get the free reports? Thank you very much! Kristi SAVAGE SAYS : Yes, you have the correct website: www.AnnualCreditReport.com. Look for the links to each of the 3 separate bureaus, and choose one -- it doesn't matter which one. When you get there, avoid the suggetions that you sign up for a credit monitoring service. Then start the process of getting your credit report securely online. YES, you must give your Social Security number, address, and much other data that only you would know. They'll ask questions (multiple choice) about car loans you may have, and addresses at which you may have lived in the past. All this is done to guarantee that no one else can get your credit report. I agree, it's a bit scary to give that info online, but these are secure websites. And it only takes a few minutes to get your credit report. If you want your credit SCORE, then go to www.myfico.com -- You can get it free by signing up for -- and then immediately afterward cancelling -- their credit monitoring service. Warning: I did that recently and it was almost impossible to find the way to cancel the monitoring service! Read the fine print!

Hi Terry,
Husband and I have bumped up to the limit of not being able to contribute to our Roths. What do you think about contributing to a non-deductible IRA and then the first of the year convert to a Roth? We are contributing to both our companies retirement plans-401(k) & 403(b).
Donna SAVAGE SAYS: Your question was technical, so I turned to the guru of IRAs, Ed Slott of www.IRAHelp.com. Here's what he said: "Terry, Yes, this can be done, but they do not have to wait until the first of the year to convert, unless they wish to.
They can contribute to the nondeductible IRA and then convert the next day to the Roth. I would probably wait a few days though for the nondeductible IRA contribution to clear in the IRA before converting it.
Ed" Hope this helps. Terry

Hi Terry,
I had to have my computer restored & since have been checking your Q & A & find that there has not been any activity since 9/23/11.
I'm just wondering if I'm having a problem on my end or have you not written anything since this date ?
I am a Senior & so enjoyed & educated myself with your replies to others & myself.
Hopefully you will continue this valuable service to many!
Would appreciate your response regarding my question.

Many, Many Thanks ! SAVAGE SAYS: My apologies. I have been traveling the country on an extended speaking tour and have neglected this blog. But I'm planning to get to all the questions in the next few days. Thanks for caring!

What are your thoughts on Health Savings Accounts?
I have health Insurance with the company I work for however, I feel I pay to much and it is hard to meet my monthly obligations.
I thought of stopping my Insurance with my employer and looking into one of these accounts.
Thank You,
Sam SAVAGE SAYS: Health Savings Accounts can be a terrific way to deal with insurance needs -- IF they are combined with a high deductible comprehensive insurance policy. To learn more, and to search for these combo savings/insurance plans, go to www.ehealthinsurance.com.

We are a couple in our mid to late fifties who lost almost all equity in our home, sold it, moved to another state due to employment relocation. What are you thoughts about buying a home in a new state and area that we do not intend to stay more than 10 years? And to do so we would have to withdrawl money from 401k for a down payment SAVAGE SAYS: I know that home ownership is the American dream, and I do expect home prices to move higher in future years. Yet I cannot advise you to take money out of your 40l(k) plan, pay the taxes AND penalty (assuming you are under age 59-1/2) AND lose all the future tax deferred growth on the account -- just to buy a home. I think renting is in your future, even though it exposes you to ever-higher monthly rental costs down the road.

Hi Terry,

I have a question about my daughter's college fund. She is two years old and when she was born my husband and I started contributing $200 per month into a Bright Start account. Now, I'm wondering if we should have chosen another college fund to contribute to b/c of the economic state of Illinois. Should I stop funding Bright Start and open a new account or continue?
Thanks for your help. SAVAGE SAYS: Bright Start is one of two different plans that Illinois offers. The Bright Start plan does not depend on, and is not impacted by, anything that develops with the state's finances. It is simply an investment account managed by others, with various investment choices. CollegeIllinois, on the other hand, is a promise of future tuition made by the state. It will be difficult for them to keep this promise. One other thing: I have been truly angry with the Bright Start plan for allowing one of the management companies to keep its contract with the state, after causing huge losses a few years ago in one of the funds in the plan. So for that reason alone, I am not advising anyone to invest in Bright Start. That doesn't mean you have to take existing moneyout. But you can always start a NEW plan, a second plan, simply by going to the Fidelity or Vanguard websites and opening a second account in either of their plans. Remember, money in ANY 529 plan can be used for any child, at any school, in any state!

Is a "Structured CD" from a bank a good investment? We are trying to decide whether or not to invest 2000.00 there as a way to get FDIC insured savings and hopefully gain some interest at a rate higher than a regular CD. Thanks..Linda and Mike SAVAGE SAYS: I do not recommend structured CDs. They entice you with high rates, but give all the advantages to the bank.

Hi, I have a personal finance question for you. My mom went to an event with Allstate and came home with your book and left it on my purse for me. After reading a first couple of pages and saw your website I knew I had to write to you! My current situation: I am 23 years old and after I graduated from the university of Minnesota with a degree in business and marketing I moved back home to save money. (yes I am a saver) I was fortunate to graduate debt free because my parents paid for my college tuition. All throughout college I had a part-time to full-time job so I was able to pay off a Toyota corolla that I purchased myself. I have great credit as well. I am now employed as a sales representative in the automotive industry. My company pays for my vehicle (they ended up buying my car for 9,000 which I put directly in my savings account) they also pay for my gas and cellphone each month. Since I still live at home I have absolutely no bills. My monthly expenses include food, entertainment and extras. Each month I save 1,200 to 1,800 minimum. After living at home for a year, I have 40,000 saved. (that includes extra money I received for my car and a few bonuses I received from my job) NOW, my question for you is what is my next step? I plan to buy a home in the next few years when I get married, other than that I have no set plans and am not sure how to invest my money or what to do. (note I do have a Roth ira started, but haven't started putting money into it yet and will also have a 401k in the near future with my employer) If you could give me a little advice I would really appreciate it! Thank you for your time. SAVAGE SAYS: Well, first, before any advice, you get my CONGRATULATIONS! And please pass that on to your parents, because you had to learn that savings ethic somewhere, probably at home! OK, don't let that money burn a hole in your pocket. Keep it safe in a bank CD short term, or a money market deposit account. (I know you earn no interest, but you won't lose any money!) Then immediately start contributing to your company 40lk -- at least enough to get the match. And if you are not eligible for the 40lk in 2011, then go to TRowePrice.com and open an IRA -- put it in their Equity-Income fund. (It's my favorite fund, the first one I invested in, and I still have that account growing!) You can put $3,000 into it -- assuming you earned that much this year -- and you can deduct that contribution if you were not eligible for a 40l(k) plan. On second thought, make it a non-deductible ROTH IRA contribution -- You won't get the tax deduction, but all the money will grow and come out tax free years from now. Keep the balance safe in your banki account.
And enjoy the book!!

Hi, I am trying to make some decisions for my limited property and money now that I am disabled and will not be able to return to work. I am 58 years old. I am single own one home(rental) live in another ( 6 years from being paid off ) mortgage $844.
SSDI 1700 MO. Workers Comp $2800 (lifetime award)monthly.Rental income $650. monthly At age 60 I will have a $125,000 retirement annuity that I can draw benefits from. Monthly bills approx. $600 includes utilities and cell phone. Yearly property taxes $2500, property insurance$ 1200 Car insurance $1300. No car payment.No charge cards. I have 2 grown ,single children and 2 grand children. I would like to leave the house with the mortgage to my daughter since she has the children. Should I pay it off with annuity money? Double up on payments? Also, along with 2 siblings own my late mothers home and condo in Virginia.Both properties are rentals. Thanks alot. SAVAGE SAYS: This is a bit more complicated than I can respond to in a paragraph. I'd be a bit concerned about using all your liquidity now to pay down the mortgage. But again, that depends on the rate you are paying, and whether you could refinance to a lower rate based on your current income and the equity in the home. Second, I'm wondering if you have a current "estate plan" -- a revocable living trust (better than a will), and have retitled the property in the name of the trust. And you also need a healthcare power of attorney, and a living will (pull the plug) document! I think you need an attorney who specializes in these issues, or else a financial planner, or both. Start witih www.NAELA.org - -the national association of elder-law attorneys -- even though you are not an "elder" yet! But your issues are similar, and they can help with an estate plan. If you're not confortable after the first meeting, select another attorney - one who will listen to your specific situation. That should be well worth the cost -- The first meeting should be free, then ask about the cost of the entire plan.

Terry,

I'm in my mid-20s, have $11k of "chicken money" in an emergency fund earning less than 1%. I also have $9k of outstanding student loans (down from $17k six months ago) at a 6.8% rate that I want to pay off ASAP. I loathe the interest charges! How much of the loans would you pay off now (no prepayment penalty) and how much do you recommend setting aside as chicken money near the beginning of one's career? SAVAGE SAYS: Pay off most of the loans, all of them if you think you can live with only a few thousand dollars -- ie if you are living at home, or have a good job that will help you rebuild your savings. That 6.8% is way too steep!

Thanks!

My Mother has savings bonds that are designated POD to my brother. Her wishes are to distribute these according to her will to her four children. Is my brother legally obligated to pass these to us or can he take sole possession because of the POD? Can these bonds have more than one beneficiary? I also think she has her estate in trust to him, but thinks the will takes care of distribution. We learned the hard way with my husbands family that you can't always count on your siblings to do the right thing or carry out your wishes without legal ramifications.
SAVAGE SAYS: If the bonds say "payable on death" they will go to your brother. period. Has your mother updated her will, talked with an attorney who specializes in those issues? You're right, families fight over estate plans and happy memories are destroyed. Go to www. NAELA.org -- the National Association of Elder Law Attorneys to find a lawyer. But remember, this lawyer will represent your mother, not you. At least that will give her some good advice about how to get her assets to the people she really wants to have them.

I just received the proceeds from a $100,000 insurance policy for my husband who died last month. I am 62 years old & work full-time earning about $30,000 a year. What is the best investment I can make with this money to help me if I live to retire in 5 more years? Thank you. SAVAGE SAYS: For the moment, put it in the bank, earning less than 1 percent - -and don't tell anyone how much you have or where it is!! Then write back to me in 6 months, and I'll give you a better answer. Seriously. And in the meantime, you need to make your own will and estate plan, with a healthcare power of attorney and a living will (pull the plug) document.

Terry,i'm just filling my options letter for my pension.They say i'll be receiving about 2250.00 a month before taxes are taken out.How much federal tax will the gov't take out of my pension every month? SAVAGE SAYS: That depends on the information you give them. If you have other income, from dividends or other earnings, you might need to set up a program of quarterly estimated payments so you don't get hit with a big tax bill in April. For that, you need to talk to a CPA who can look at your entire income situation and make recommendations. Then you can make the quarterly payments online, easily. And, you didn't ask, but make sure that you don't sign away spousal benefits after your death (if appropriate) just to get a bigger current monthly check!

I love your new "Savage Truth on Money"

I believe that there is an error on page #111. You say that the S&P 500's total return has been positive 17 of the last 20 years ending 2010. My research however shows that it has been positive 16 of the last 20 years (1991-2010.) You list 1996 (-2.0%), 2002 (-5.9%), and 2007 (less than 1%) as the total return for each year. Actually it was 1996 (+22.9%), 2002 (-22.2%), and 2007 (+5.4%.) The negative years were 2000 (-9.1%), 2001 (-12.0%), 2002 (-22.2%), and 2008 (-37.0%.) All these numbers were from the Vanguard S&P 500 fund VFINX.

Thanks for a great book. SAVAGE SAYS: Thanks for your note, and for your sharp eyes. I got my data direct from S&P, but I'm willing to believe there could be a discrepancy. You get the idea though: Over the long run -- at least 20 years -- you want to be invested in the stock market!!

We have approx 800k dollars in a 401k and 200k in taxable accounts. In retirement we will have mix of 60 stocks and 40 bonds. What withdrawn rate do you recommend? 4% or 3% I think at 3% with inflation factor the money will last a long time? I know lot more information maybe need to go into this answer, however what has the research indicate ? I plan to retire in the near future and work part-time . I am 55 year old and my wife is 45. She going to continue working. I will have pension of 18k and medial insurance. I just finished your book. thanks, John SAVAGE SAYS: Go immediately to T. Rowe Price -- 800-638-5660 -- and use their Retirement Income Modeling service (for $250 -- and you don't have to have an account with them). That will let you know the many scenarios, using Monte Carlo modeling described in the book. That's the only way to make the investment/withdrawal decision.

I have a $15,000.00 in debt, should I try consolidation or bankruptcy? I have a $6,000 personal loan, $443 personal loan, and the rest is my car payment. SAVAGE SAYS: Call Consumer Credit Counseling Services at 800-388-2227 to make an appointment to discuss your entire situation, in person or over the phone. They will give you specific advice you can trust.

I currently have a mortgage balance of $110,000 that will be paid in it's entirety in 6 years. I am 64 years, employed and have no intention of retiring. I would like to know if it would be advantageous for me to refinance and for how many years with interest rates being as low as they are? Since most of my current payment will be applied toward principal going forward my tax deduction for interest will be lower each year. SAVAGE SAYS: You didn't give me your current interest rate, so I can advise. But if you can lower your rate by a point, pay no fees, and take out a FIVE YEAR MORTGAGE LOAN, then do it!

Is it possible to negotiate with your bank for a lower mortgage rate instead of doing a complete re-finance? Currently have 22 years left on a 30 yr 5.75% with BofA. Also have a line of credit with Chase, but don't want to loose it in a re-finance. Above Average credit score, mortgage payment made ontime. House is worth about double what we owe on it. Thank you. SAVAGE SAYS: My advice is to do a complete refi since you seem to qualify based on income, credit score, and equity in your home. Consolidate all your debt in this new mortgage -- especially since your line of credit (if you are drawing on it) has a floating rate. The money you save on the monthly payments (and refi to a 25 year term so you don't extend the loan or else make extra principal payments every month) will be a great benefit. And if your credit is good, you can probably get a new line of credit.

Terry - I really enjoy your columns. I have two questions.

Do you ha\ve any concerns about Bank of America ending up in bankruptcy and do you think the Federal Government would bail the bank out (again) if it looked like bankruptcy was the only other alternative?

I ask because I have one very large 18 month CD (i.e., well over the FDIC-insured limit of $250K) with B of A and when I ased them about splitting the money into three different CD accounts with B of A and its two affiliated banks, the rep said, "oh, you can do that but we'll have to charge you a 3% penalty on the amount withdrawn over $250K even though you are leaving the money with B of A and its affiliated banks." The rep claims that disclosure was made to me in the Deposit Agreement for CD accounts but I was never sent that Agreement and knew nothing of the 3% penalty. I was aware that banks normally charge a penalty of 3 months' interest for early withdrawal from a fixed-term CD but 3% of the principal amount is ludicrous, especially when the money is stayting with B odf A and its affiliated banks. Any suggestions? Thanks.
SAVAGE SAYS: That's ridiculous -- and I've never heard of that! Immediately go to the Vice-President or Manager and tell him you want to transfer a portion of your account to a completely different bank - probablby Chase. If it's in one CD, which is a bad idea in the first place, then wait if it's only a few weeks until maturity. Otherwise it might be worth paying the penalty -- but check on the timing of any withdrawal to minimize the penalty. And please write back and hopefully tell me you talked to an idiot at the bank -- and there is no such penalty. But you don't want to be over the insured limit!

I am a Vietnam vet. Any suggestion for sources of loans for vets? SAVAGE SAYS : Are you talking about a mortgage loan? If so, you would benefit from a VA loan, which I've written about frequently. Contact Daniel Chookaszian. His email is Dchookaszian@baytreebank.com. This is his specialty.

hi terry
i just want to thank you for answering my question so promptly. ("anonymous", september 20, 12:16a.m.)
i appreciate the advice and thank you for all you do.
i have been greatly helped by all your columns, as well as the letters
printed here.
take care,
dore

Is it too late to purchase gold? If not should I buy actual gold or a gold company that distributes dividends? SAVAGE SAYS : OK, as I write this gold is trading at about $1689 per ounce, down sharply from selling across the world to meet margin calls, and out of a belief that gold is ONLY an inflation hedge. If there is no inflation, but instead global recession, then who needs gold -- or so goes the market reasoning.
I'd like to be on record that eventually gold will go much, much higher -- as efforts to "bail out" the global economy result in creation of new credit by central banks. Now, how long it will take for that realization to take place is anyone's guess -- but I think it would be within a year. I'm not a good trader though, only a long-term investor!
You can buy gold coins (and store them securely) or gold mining stocks, whch have lagged in the recent run up. Or just buy the gold exchange traded fund (ETF) symbol: GLD. Full disclosure: I am talking my own position! I maintain a long position in gold, and have for years. And I may buy more -- in the ways described here -- at any time.

Hi Terry,

I currently owe my mortgage company for a home equity line of credit I took from them in 2009. This month is the deadline and I want to know if there is any way I can have them increase the payment time period or settle for a settlement. SAVAGE SAYS: You can ask -- but unless you can totally refinance your loan (meaning that you have enough equity in the home, and still have good credit), it is unlikely. Is this a "second" mortgage, behind your major first mortgage? If so, they may work with your lender on the original mortgage to help you find a solution. At least you could suggest that to them. But if this is the ONLY loan you have outstanding, you should ask for it to be convereted into a traditional 30 year, or 15-year, mortgage. Again, that will depend on your credit and the amount of equity you have in your home. Call Consumer Credit Counseling Services at 800-388-2227, to be connected to the nearest local office. They may be able to point you in the right direction.

hi. our house is "underwater". our mortgage is difficult, but manageable, but we owe $90.000 on a home equity loan. i am on disability and my husband, 64, has been out of work for 1 and 1/2 years. we are short about $1200. every month.
we just got a back settlement from social security/disability for $30,000.
using this money, we could actually make ends meet until he finds a job.
but we have been paying interest only on our HELOC, and i would like to pay it down.
but $30,000 is a drop in the bucket, and we do need some of it to make ends meet.
should we just use a little of it every month, and then add maybe $200 to the HELOC?
it seems like it won't make a difference, but that loan is really hanging over our heads.
(we have no credit card debt)
thanx for your assistance SAVAGE SAYS: I really dont think you have a choice here. You need some liquidity -- and you'll be ok on your HELOC until rates rise. And the Fed seems determined to keep rates low. So this means you can at least meet the required monthly payment on both mortgage and home equity loan -- and stay in your home for a couple of years -- And hopefully one or both of you can earn that "missing" $1200 to keep your home when this cash windfall runs out It doesn't give you a lot of peace of mind -- but at least you can stay put for a while.

My worries about the economy had me switching from passive mutual index funds to actively managed funds. My question now is this: Am I the "investor" now, or is the fund manager the "investor". In real life terms, should I be the one to pull out from bond funds, say, when the headlines say that interest rates are going to rise, or will the actively managed fund managers do this for me? thank you. SAVAGE SAYS: You are always THE INVESTOR -- because it's your money at risk! If you've invested in an "age-based" or "target-date" fund, where the managers promise to adjust the investments appropriately, then you've given them this responsibility. But if you have invested in "actively managed" funds, then it is your decision to be IN the fund, or OUT -- based on your market outlook, risk tolerance, and overall game plan. As a matter of fact, even if you chose to put SOME of your money in a "target-date" fund, you still need to decide how much to allocate to that investment, and howmuch to keep on the side as "chicken money" -- so you can relax and trust the target-date fund manager more easily.

Hi Terry, I'm a 19 old college student that is employed and I have never taken out a loan and I don't have any credit history. I'm looking to establish credit. I don't know which credit card would be best for me. I don't want a card with a high APR or Annual Fee any suggestions? Is a credit card the best way to establish my credit? SAVAGE SAYS: Go to www.Bankrate.com and click on "secured" cards. Those are cards that give you a credit limit based on your deposit with the bank. (In effect, it is a debit card -- and looks like a traditional Visa or Mastercard. Use it regularly, repay on time and in full -- and you will build a credit history. Then other card issuers will offer you cards, not related to a deposit. Choose a low-annual-fee card - and don't be concerned about the interest rate, because YOU ARE NOT GOING TO CARRY A BALANCE OR PAY ANY INTEREST!!

I am thinking of filing bankruptcy. I am about $14,000.00 in debt. I have a $4000.00 CD in one bank where I have major credit cards which I want to file. And I have about $5000.00 in savings in another bank where I have another major credit card. This money was left to me by a family member who passed away. Can I leave my money in the bank or do I have to remove it and put it my grandsons name? This is my emergency money for repairs to my car or house. My car is paid for. I want to retire soon and I feel like I can save a little if I file bankruptcy now. I live paycheck to paycheck. What happens if I don't file the credit card at one of the banks? Am I allowed to keep it? SAVAGE SAYS: I'm not sure that bankuptcy is the best course of action. You need to speak to a professional who can give you specifics about your accounts, and your state law, and your siutation. Call 800-388-2227 to be connected to the nearest Consumer Credit Counseling Agency. You can trust their advice.

Ten years ago, my husband and I were deeply in credit card debt ($125,000), and to help us, my mother-in-law bought our almost-paid-off house and let us stay in it rent-free as long as we paid all utliities, taxes, and upkeep. We did. And we used the money to get out of debt. I then found a good job, our financial situation improved significantly, and today we continue to be debt free and I have a 401(k) plan with more than $100,000 in it. Seven years ago, my mother-in-law gave us a quit-claim deed for the house (duly registered -- the house is in our name), and then three years ago, she passed away. Now my husband and I are thinking of selling the house and moving out of the the city (to a different house) when I retire in a year or so (he works from home as a free-lance writer, and it doesn't matter where he lives). We inherited stocks and mutual funds worth about $400,000 today from my mother-in-law and $200,000 (now in CDs) from my elderly uncle. My questions are: (1) will that quit-claim deed cause us problems, and (2) will we be able to get a mortgage when I no longer have a steady job (I will also return to freelance writing). SAVAGE SAYS: You'll need a local real estate lawyer to do a title search but if the quit-claim deed was properly filed, there should be no problem. Do that even before you list the house fo rsale. Your last question ismost important. The answer is NO -- it is very unlikely that you will get a mortgage on a new property without an income history and a current income stream. So maybe don't give up your job until you purchase your new property!

I have $50,000 to invest where should I put it. Wife and I are 62 in good shape financially. SAVAGE SAYS: That depends. How much are you willing to lose?

Hello Terry:
Thanks for considering my question.
I am travelling to Europe in late December /early January for vacation. I've noticed the Euro and GBP currency rates have dropped considerably in the last couple of weeks. Does it makes sense for me to purchase these currencies now (say at JP Morgan Chase downtown) instead of waiting. I've read some of your recent columns and noted that you recommended using ATM machines in Europe. However, I'm wondering if this is a buying opportunity? SAVAGE SAYS: It is a buying opportunity for Euros only i fyou think something great will happen there and that the Euro won't sink more! With Greece on the brink of default -- followed by Spain and Italy having problems, I personally think the Euro could go a lot lower.

You have said that when interest rates rise people will rush to sell their bonds. I know that the value of the bonds will decline. If you are retired and living on the income the bonds provide, does it really matter what the value is as long as you don't need to cash in the bonds for an emergency? Thanks. SAVAGE SAYS: I never said that people will "rush to sell bonds" -- only that bond prices will drop. If you're content with the income stream, while others who waited to buy bonds are getting a higher return, then no problem. Similarly, no problem if you purchased your house and it is now worth less than the purchase price--as long as you are living in it, enjoying it and are not forced to sell -- then, no problem!

Hi, Terry,
I have a question about refinancing my home morgage. I tried to take advantage of the lower rates being offered these days so i applied but was denied because my house was valued lower than the original financed amount. My credit scores was great at 800. Is there anything i can do to get those lower rates? SAVAGE SAYS: That depends on how large your mortgage, and how low the appraisal. Banks are generally requiring at least a 20 percent equity to make a new mortgage. Do you want to put more cash into the deal to lock in these historically low rates? Keep searching for a lender, if you're close to 20% but not quite there.

TERRY
Could you recomend to me a credit card debt counseling service that I can trust?
I live in Westchester, I Il.

Thank you SAVAGE SAYS: Yes the number is always on my website. Call 800-388-2227 to be connected to the nearest local affiliate of the National Foundation for Consumer Credit -- You can always trust them.

Since we are not tied to the gold standard any more , why can't we sell some of the gold the government holds to pay off our debt? SAVAGE SAYS: At what price per ounce? The government currently values our gold holdings at slightly over $42/ounce. That's not a good idea!

My husband and I plan to retire in three years (we will be 65 & 66 years old). We want to build a house in North Carolina (of which we already own the land and have plans started). With the housing market sinking, we now don't have as much equity in our home to sell at the price we thought we would get a few years back. (we own our current home outright) We planned to use the money on the sale of our current home to build the house in North Carolina and have a little left over. Now it looks as though we will get no where near what we thought we would and may have a $100,000 mortgage. We downsized the house we're building just about as much as we can, but building costs do continue to rise, even though selling a house isn't.

I feel it is bad to have a mortgage payment in our retirement years because we don't know how long either of us will live and it would be bad to saddle either one of us with a mortgage payment to pay for. My husband doesn't feel this is a problem. I will have a pension of about $1300.00 per month and SS of about $900.00. My husband will have a $350.00 pension and about $2300.00 in SS per month. This give us about $4800.00 a month in income. With medical costs increasing and not knowing what's going to happen with Medicare and SS, I truly am afraid we'll be biting off more than we can chew, especially with a mortgage. We have invested money in 40lK's & 457's and have a few other accounts with our only debt at this time being a car payment of $400 a month for five years. But like everyone else, our investments are not as high as they were in the past and with the economy situation, I'd hate to speculate on them being any higher (just hoping not to lose too much more).

I know we are luckier than most people with our situation, and if we weren't planning on moving and building a new house in another state, I probably wouldn't be writing you at this time.

Because both my husband and I respect your opinion, I'd really like to hear your feelings on this. Help please! I'm losing a lot of sleep over this!

Eileen SAVAGE SAYS: I sympathize with your situation -- and am tempted to tell you to go ahead. But I can't, in good conscience do that! There's just too much risk in the rising cost of building the new place. Is there a possibility that you could sell your house and rent in the area, while you decide whether it really makes sense to build? Just put the money in the bank -- and maybe get a deal on a foreclosure in the area?? My cardinal rule is not to have a mortgage payment in retirement, and I can't advise you to break that rule.

Hi Terry,
I am so appreciative to have your guidance !
I also find reading others questions & answers , especially related to Senior concerns of great interest !
I check your E-mail every day & wait patiently to check your new postings of advice/suggestions that you so kindly offer to us.
I wrote you about a pending decision about selling my Condo & moving to an over 55 adult apartment which is close to where I am living now as I prefer to stay in a familiar area.
Well this is only an apartment for Adults over 55, no assistance provided.
At this point, I am fairly active, clean my own home, cook, drive & don't feel the need for assisted living housing nor do I think I would be happy with this type of living at this time.
I live in Connecticut & assisted living is very expensive, much more than I can afford.
My yr. income is $25,000.which includes my RMD from IRA
As I mentioned, I will have approx. $150,000. from sale of my Condo & also have $30,000. in EE bonds..
I had some extensive winter damage this year to my Condo & it took all of 8 mo. to repair with much , much nudging on my part . resistance from Condo insurance & I just became overwhelmed with this horrific responsibility.
I just feel that renting would make life so much less complicated for me at this point in my life.
I just needed some reassurance that this move would not be a mistake.
Gosh, thank you much for offering a recommendation for an elder law atty., but unfortunately, I don't live anywhere close to Chicago , otherwise , I would certainly consider calling her.
Does she offer advice for a fee, perhaps living in a different state, rules are very different ?
I am thinking of making & pre paying for my funeral arrangements from the $$$ from sale of my home .
Would this be a wise thing to do in my circumstances ?
I do have a will & power of atty. (nephew ) composed by an Elder Law Atty., Needs to be updated.
I don't have any LTC insurance.
I feel that should I become incapacitated it would be much easier transition from a rental as opposed to owning & having to sell.
My 2 children, as I had previously mentioned, are disabled & therefore would not be able to be involved with selling my Condo so I think making this move now , like you mentioned, while I am still in control may be wise.
I would like to make a decision real soon as to selling & renting.
Because the tentative move (rental ) will not be an assisted living arrangement, do you still believe that this would be a wise move ?
I am planning on heeding your advice to update my estate planning.
Your suggestions are so greatly appreciated.
Mim SAVAGE SAYS: Thanks for the extra insight. I will make this answer short and sweet. That is EXACTLY what my mother did -- and she never looked back. I think it gave her a lot of peace of mind to have money in the bank, and not worry about the value of her condo,, or the special assessments that might come along.

Dear Terry,

My COBRA insurance will end this month. My severance package gives me the option to pay full COBRA coverage ($980/mo. for me and my wife) until I am 55 years old (I am 53). I will then qualify for healthcare benefits at the retired employee rate, which is very reasonable. The company I was severed from is a major pharmaceutical company, so I don't anticipate this benefit not lasting for the rest of my life. So, do I invest the $20+K over the next two years to insure I have healthcare coverage in my retirement? Or, switch to my current employers plan, save the money, and take my chances?

Thanks so much,

Steve SAVAGE SAYS: OH, tough choice! Couple of questions: How secure are you in your new job?? Will you have it until you qualify for Medicare? In this uncertain economy, I personally would probably invest in the two years of COBRA -- but only if you have it absolutely correct that they cannot/will not eliminate the retiree health plan! You know that issue has come before the courts, and courts have ruled that while pension benefits cannot be cut, healthcare promises do not fall into that category. I believe the case was a steel company in the Chicago area, and this ruling came down at least 15 years ago, and set a precedent for companies to legally renege even on written promises of retiree healthcare, or else to dramatically raise the costs to retirees.

What are your views on REITS, and are they a good investment now, namely ARR. SAVAGE SAYS: I don't comment on individual stocks, but I have personally owned and recommended Real Estate Investment Trusts over the years. But not all REITS are the same -- although they are generally a good way to own a diversified portfolio of real estate, which passes the income on to shareholders. But some REITS specialize in hotels, or apartments or office buildings -- or other types of properties. So the economy can definitely have an impact on their profitability -- and the distributions they make. Go to www.REIT.com and click on "individual" to learn more.

Hi Terry,
My variable annuity company sent me a letter regarding the Guaranteed Minimum Withdrawal Benefit. It is in regard to something called the Step-Up provision. They want to know if I wish to elect to take this option of stepping up my GWB to the current Contract Value. I have 30 days to decide. Is this to my benefit? Also, at what age do I have to begin making withdrawals on an annuity? Does it differ with each contract? I am 62.
Thanks so much for your response.
SAVAGE SAYS: Here's the answer, direct from my annuity expert -- and you can contact him directly: Jeffrey.Oster@RaymondJames.com:

When a client gets a notice allowing them to "step-up" their GWB to the current contract value, this simply asks the client (and hopefully their advisor) to compare the client's current account value to the GWB value now in their variable annuity.

If the the current account value is HIGHER than the GWB, the client can "step up" their GWB to this higher value.

A couple of things to consider:

Over the past few years, I have seen very few contracts with cash values that exceed the GWB value.

IF the GWB is able to be stepped up, you MUST ask if there is going to be any change compared to the current GWB - this includes increases in rider cost or change in the actual benefit structure compared to their current rider.

If the cash value is LESS than the rider value, you simply let the account hopefully grow for another year, and compare again when the next opportunity arises, usually at the contract anniversary.

I hope this helps!

I'm going to Italy 9/11. Do I exchange dollars for euros here or there? (Chase Bank has a $5.00 service fee and $100 U.S. = $65 Euros) Thanks. SAVAGE SAYS: I've written about this before.l You may need some Euros upon arrival -- for a taxi to town. But basically, the best way to get cash is to go to a bank ATM (INSIDE the bank!!) and use your debit card to make withdrawals in Euros. There is a fee for each withdrawal, so take out enough cash to last you for a day or two, and stash it safely in your wallet in your front pocket!

Hi Terry,

My mother lives with me and my husband, and she rents her house out for $2,450.00 a month. She is retired and her monthly income from retirement and social security combined is around $2,200.00 a month. So, she actually have an income of $$4,650.00 monthly, with no writeoffs. Well, the only write off she has is the interest on her home, which is not very much, she only owes $100,000.00 on her home. Her home was just appraised at $420,000.00. This past year she had to pay Internal Revenue $2,500.00. Should she be investing in something to prevent her from having to pay Internal Revenue. SAVAGE SAYS: Well, the obvious question here is why she is living with you - -and not in her house. Or more precisely, why she isn't selling her house, and living off the principal? It seems that maybe she needs an overall financial plan -- and an estate plan -- although that's not what you asked. (But I hope you have her healthcare power of attorney, and have titled the home in a revocable living trust so you don't have to go to court to get power of attorney should she be incapable of handling her own affairs.
As for more of a deduction, she could get depreciation on a rental property -- but that would be a complicated tax return, and the cost of preparing it would probably be more than the deduction is worth!

Hi Terry,
I am a 78 y. o. widowed female residing in a Condo ( mortgage free ) for the past 27 yrs.
Because of the responsibilities of having to pay condo fees, taxes, insurance, total responsibility of interior, furnace, appliances , having to contact the Condo manager for any outdoor observed problems, etc. I am trying to make a good decision as to moving to an over 55 adult apartment with much less concern/worries.
I'm at the point of being tired & at times overwhelmed.
I don't have family or children ( both disabled ) that can assist me, therefore, I'm on my own.
The apartment that I may consider will be costing approx. $400. more per month than I am now paying , but I will net approx. $ 150,000.from sale of my home to use toward the rent to make life easier.
The idea is something that I have thought about for the past 10 yrs. after going thru some serious medical problems, athough I am now doing farrly well.
I would appreciate some of your thoughts on any pros or cons of going ahead with this before making a definite decision.
I'm a long time follower of your interesting & most helpful advice, love your book & as I've mentioned to you before, you are a gift to so many of us !
Thank you ! SAVAGE SAYS: I think you're very wise to consider this kind of move now - -while you are still in control of your situation. Be sure that the senior community you choose will also provide assistance should you need it. It's not enough to just live with older people -- you should now consider a place where they offer meals (at least two meals a day) and assistance for some other tasks. Do you live in Chicago? I'm going to recommend you contact my favorite elder law and estate planning attorney, Janna Dutton. She's downtown and her number is 312-899-0950. She can guide you through some of the other issues you should be considering now, including figuring out who will have your healthcare power of attorney and a "springing" financial power of attorney should you be unable to handle things. She can also look over the documents for the places you consider moving into, and advise on the real costs and liabilities. And for those of you in other parts of the country,, go to www. naela.org --that's the Natl Assoc of Elder Law Attorneys - to find someone to help you though this process. Don't procrastinate -- it's important to make these decisions while you are still in control. And if you don't have someone to rely upon, there are bank trust departments that will help you out, along with attorneys.

My mom is 83 and in excellent health--still driving & active in community. She purchased Long Term Care policy 10yrs ago, but the premium is becoming a burden. She chose lifetime coverage beginning 60 days after care is needed.($100 per day) any suggestions for lowering premiums? Thank you!WW SAVAGE SAYS: I just wrote a column about this two weeks ago! Go to www.TerrySavage.com and read it. Also, contact MAGA LTC -- the long term care insuranc experts and ask for Brian or Murray -- and ask them for ways to perhaps cut back the coverage to just 4 years, and thus lower the annual premium cost. You can trust them. And you can mention my name, or not -- as I get nothing out of this! Their number is 800-533-6242, and they are in Northbrook, Il.

Terry, Love your book The Savage Truth on Money. I purchased an autographed copy that you did at Joseph-beth in Lexington, Ky. but I purchased from 50% OFF BOOKS. What a Great Buy. I'm retired, sold my business and was very lucky to have saved some money for retirement. My question is my Financial Helper is wanting me to purchase an Annuity, so I would put $80,000 in this Annuity and I would get $500 per month for life. However after reading you book on Immediate Annuities and going to the shopper.com for the comparison, I like the $767 per month for 10 years and my kids would be guaranteed the $$ remaining when and If I died before the 10 years. But my REAL QUESTION is that I also have some BONDS, for Ky all Tax free, paying the lowest of 4.9%, 5%, and even 6%. Why wouldn't I be better to invest my money in these tax free BONDS, get the money every 6 months which is OK for me and my kids will get all the $$ when I die? What is wrong with my logic......... SAVAGE SAYS: Aha! You're pretty sharp -- and it didn't all come from reading my book. So, here's the thing, I don't know how old you are, and have no idea if longevity runs in your family. But even at just 3% inflation, the value of your $500/month lifetime annuity would be cut in half in 24 years. And if we have 6% inflation, you spending power of that monthly check would be cut in half in 12years! So, while an annuity might be ok for PART of your money, you certainly don't want to tie up all your money -- especially now with rates so low. I'd even hold off on that 10 yeaer annuity But it's hard to make recommendations without knowing the full picture. Having some tax-exempt bonds is just fine -- but again, you don't want to lock up all of your money there -- especially with states now having such a tough time paying their bills. Sorry, I can't be more specific than to advise you to diversify -- and to beware of locking in today's low rates. They're creating so much credit that I believe we will ultimately have inflation -- and higher interest rates.

Hello Terry--I am 46 years old and i currently gross $60,000 per year. I am putting 25% of my income into my company's 401K plan although they only offer a 5% match. I have zero credit card debt; owe about $100,000 on my condo in New York; and I have over $50,000 in emergency funds.

My question pertains to investing. I am looking into buying a second property in Long Beach, California. I am particularly interested in buying a 1 bedroom condo not exceeding $150,000. I will need to use $30,000 of my emergency fund to finance this purchase. Is this prudent given the precarious state of the economy?

I thank you in advance for your assistance in this matter.

Sincerely, Edward R. SAVAGE SAYS: For the life of me, I can't figure out why you'd want to own property in California -- a state that is in huge financial trouble, has a high tax rate and will probably keep raising taxes to pay its bills and employee pensions! You're doing a great job at saving money -- but please write back and tell me why you arent' considering Florida -- a state with no income tax at least, if you're considering moving! Believe me, there are plenty of bargains there too -- if you dont mind hurricanes (vs earthquakes!).

I am 61, my house is mortgage free...I have a daughter who is renting a house and the owner want to sell...she is unable to get a mortage on her own, so I was thinking of using the equity in my home to buy this house and she would make the payments to me....Do you have any suggestions on how I can do this??? SAVAGE SAYS: Ugh -- not a good idea for multiple reasons. Unless this is a structured mortgage, she couldn't deduct the interest for the payments, and you would have to declare it as income -- or loan forgiveness. All very complicated. If you really want to mess up your retirement finances to support your daughter, you could consider co-signing a loan for her. But remember, you're on the hook for all if it if she loses her job or flakes out!

I just locked on a 15 year re-fi loan at 3.65% that includes a $80K cash out. The cash will be used to rennovate my home over 1 year period of time. Where is the best place to put this cash while I draw down? SAVAGE SAYS: In a money market deposit account in your bank -- where it will earn no interest, but you won't lose a penny!

If I want to purchase a house in 5 years by making a 20% down payment on an $80,000 house. You just inherited $10,000 from your great-aunt Susie which you will conservatively invest at 4% per year. How much do you need to set aside per month at the same 4% rate to have your down payment? SAVAGE SAYS: There is no way to "conservatively invest" and get 4 percent these days! So you need $20,000 -- and with your inheritance you have half of it. Just put that money in a bank, where it will earn less than a quarter of one percent -- and KEEP SAVING!

I am a 60 ordained minister planning to work another six yrs or so. My husband is 65 and will work a couple of more years. Our house will be paid off in one yr. We have emergency cash for 6 mos, but no other big assets other than his 401k ($125,000) and my 401A (75,000). I have a chance to reallocate my funds right now since an error was made in my account. Choices are managed fund (well run) high growth fund, bond fund, money market fund. I'm thinking of doing a 50% managed fund, 50% money market. I can change again at the end of the yr. I know you don't have a crystal ball, but would a different allocation make more sense in this volatile market? SAVAGE SAYS: You'll need some growth that comes from the stock market over the years -- but I'm not quite sure that you want a "high growth" fund. Isn't there a S&P 500 index fund as part of the offering? That would be a bit more conservative for the stock portion of your retirement plan, I think. And you don't have to put it all in at once. You could put 70% in the mm fund -- and then move about 5% every couple of months till you are balanced 50/50 -- Just a thought.

Hi Terry,Iam 71 do i need Term Life Insurance or Permanent Life? SAVAGE SAYS: Why do you need life insurance at all? Is someone still dependent on you? At your age, insurance is going to be very expensive -- and you'd want LEVEL Term -- a guarantee that the premiums won't rise. You could probably only get 10 year level term -- But go to www.Accuquote.com to price term policies. If you need live insurance for liquidity for your estate (to pay estate taxes) then you should consult an expert -- and make sureyou purchase your policy in an irrevocable life insurance trust.

I am unemployed, age 57 and my 10 yr relationship ended. Thus, my income is not enough to keep my house (Fannie Mae Conventional)..I have begun a short sale through my lender BAC and hoping to be able to apply for the HAFA program..In a panic, I paid off my car via Credit Card and have the car for sale (value approx $16,000)..Bought an older car, again, by Credit Card. I did all this to get as much cash on hand to purchase a Senior Coop which are cash only (no mortgages)..I can live for $250 a month (taxes and maintenance fees) after paying in full for 1 bedroom coop ($17,000)..Bottom line, I now have 20,000 in Credit card debt..If things are still too tight financially, should I consider Chapter 7? If I do find a job, the most I believe I can make would be $ 30,000 a year, at the most. SAVAGE SAYS: I'm so sorry you're in such a tough spot. But I think you've made things worse. You need help you can trust. Immediately call Consumer Credit Counseling Services at 800-388-2227, which will connect you to your nearest local affiliated agency. They will go over your situation and give you advice, and even introduce you to a bankruptcy attorney if they think that is the best solution. Please write back and let me know what they say.

My home is about 100,000 dollars upside down. The line of credit of 100,000(from another lender) was taken out and used in business in 2007. I can probably sell my house for what the intial loan is for, but the 100k makes it upside down by that amount. If I had the 100k, I dont think putting it down to payoff the loan makes good financial sense. I need to sell my home and move within 12 months. What do you recommend? I have no financial problems except for the home. But again why dump good money into a bad investment. What is your advice? SAVAGE SAYS: If you default on your home equity loan, it will be on your credit for 7 years. You may never get the chance to buy another home. So if you want to stay in the same area, why not keep paying. If inflation returns it could eventually push home prices higher. And it seems as if you can afford the monthly cost of the payments -- but are just angry at yourself for being upside down. Don't cut off your nose to spite your face!

Hi! I have a mortgage on my home $127,00.00 at 5%,there is still 28yrs. to pay on it. I have 2 part time jobs and I am just making ends meet. Should I put the home on the market and get out. I know that I will not make much money from the sale and am thinking of renting afterwards. any ideas would help. SAVAGE SAYS: Well, first check with a realtor and see if you could get enough money for your house to pay off your mortgage. Second, check the cost of rental apartments that you would consider living in. Would you really be better off making this switch? Is there another alternative -- ie taking in a "boarder" -- someone from your church, or perhaps a college student, or a woman getting divorced who needs a less expensive place to stay?? These are all possibilities to consider before making this move. Andthese solutions might help you get back on better financial footing, and maybe your house will appreciate in the future.

My husband and I are recently retired. He has a pension which pays $4800 per month and I take out enough from my 403b to pay the medical insurance. We have a mortgage of $138,000 and we have $500,000 in other retirement accounts. Should we pay off the mortgage so that we do not have the $1100 mortgage payment each month or keep the mortgage so that we have the $5000 write off for the interest each year? Our retirement accounts are not making anything right now!!!
Thanks for your help SAVAGE SAYS: I don't know how old you are, or what your jobs were, or how long you think you'll live -- but I think the REAL problem is that you retired too soon. Or at least, that you need to continue to have some income in addition to your pension -- enough to pay that $1100/month mortgage bills. That's a different perspective, isn't it?!! But maybe a part time job -- if not a return to your previous employment??? Read my book -- The New Savage Number -- to learn about Monte Carlo modeling offered by major mutual fund companies like T. Rowe Price or Fidelity -- so you can see how much you can withdraw to make your money last your lifetime --

I'm on met-life long term disability . I'm not up for review again until 2025. Can they deduct distributions I've had from Fidelity. I moved my money from Fidelity to an IRA, but I think I still receive three percent of my pay into an employee savings account. Can that be deducted , also ? SAVAGE SAYS: I'm not sure I understand your question, but I think you should immediately contact your Met Life agent and ask about your policy and the specifics of your situation.

Terry,I am 83yrs.old and several yrs.ago your column in the sun-times discussed chicken money.The article was very favorable regarding I-BONDS.Do you still favor them as a safe interest earning invesrment? SAVAGE SAYS: NO! Current I-bonds lock in a low fixed rate, and the total yield everey 6 months is dependent on the government's definition of inflation. I think you should avoid I-bonds now.

Hi Terry,
Do you have any information on a single premium whole life insurance policy called "Legacy Master?" If so, could you give me your thoughts. The policy is issued by Western-Southern Life Assurance Co. I would be putting 134,000. into the policy with a guaranteed death benefit of 233.474 with no premium outlay. Any information you could pass on to me would be appreciated. I'm 72 years old and would be doing a 1035 exchange from an annuity into this policy.

Thanks, SAVAGE SAYS: Whoa! Don't do anything yet! First, why move from the annuity to a life insurance policy? Who is the beneficiary? Why do you need life insurance? And are you sure you won't need the money before your beneficiary does (at your death)?? There is a HUGE commission for the insurance agent here-- and are you sure there are no surrender charges with your annuity? What does your annuity promise that you are giving up by making this switch? You must first tell my WHY you would consider doing this!! Please write back with more details!

In 2007, I pulled $30,000. & invested it into a rental property in Florida. Since then it has gone into foreclosure. My question is can I recapture any of the initial investment? Can the IRS tax me on the difference on the sale of the property? SAVAGE SAYS: You need to consult your own tax professional, as I am not sure how you handled this investment, took depreciation, etc. The forgiveness of a loan on a residence that is foreclosed andsold for less than the mortgage loan is no longer considered taxable income, but I'm pretty sure that does not apply to investment property. Again, consult your own tax professional.

I have just retire and have a 403 b of $10,000. I am 61 years old and am wondering what I should o with it? Also what tax implications there are. SAVAGE SAYS: Well, it's a good thing you have at least that much money. You should contact your bank, and have them ROLL IT OVER and put it into a money market deposit account. Do not take a check! Let the bank handle it. And beware of any other products that might be offered by the investment department of the bank. Make sure it is in a FDIC insured money market deposit account. Then -- a little extra advice -- could you at least try to earn a bit more money every month?? You don't even qualify for Social Security yet. What are you going to live on? Try not to touch this money in your rollover account until you are at least 70! You'll owe ordinary income taxes on the money when you take it out.

I'm 47 years old. My employment is to be terminated soon. I have $100,000.00 in my 401 but no savings. What do you suggest I do? SAVAGE SAYS: Find another job! Quick! Not being "cute" about this -- your 40l(k) is meant for your RETIREMENT, not your unemployment. In fact, be sure to contact Fidelity or Vanguard, and have them do a direct rollover to their mutual funds. Theyll handle the process and give you advice on which funds to choose. But again -- just as you can't access your Social Security --and you've been paying into it for years, probably more than your 40l(k) -- this money is not meant for now. You'd pay taxes and a 10% early withdrawal penalty -- and lose all the possible future tax-deferred growth.

One of the best pieces of advice that I received when I began a job with a 401k was to use my annual raise (if we were given one) to increase my percentage saved into my 401k. Let's say you are fortunate enough to get a 4% raise. You could easily raise your 401k contribution by 2 or 3% and not even notice a change in your income. You may even see a slight increase in your take home pay! I have done this for the last 6 years at my current employer. I started at the 6% in order to get my match. Since, I have ratcheted up each year to where I am now at 13% of my income. I have been tempted every now and then to move it back to 6 or 7%, but as of yet I have not had to and I am socking away a good deal of my income to save for retirement. What do you think of this option? Could you implement it? SAVAGE SAYS: I think this is a great idea -- and I am posting your comment with the hope that you will be a great example to others, who can nevere find the money to save and invest!

Hi Terry,

I currently use my credit card online to pay monthly household utilities and car insurance. I "heard" that it would be better for me to use my bank's "bill payer" option, as to not give the people i owe my credit card info. True? Why?
Thank You. SAVAGE SAYS: There's no reason not to use your credit card for these payments -- IF you can manage to pay the credit card bill in full every month! You'll even earn points or miles! Your Visa or Mastercard has a ZERO liability fraud guarantee, and is as secure as your bank bill payment. Just be sure to check your card balance on line every few days to make sure you find and report any unauthorized charges promptly

Hi Terry

after loosing my credit card of 5 years, i received a replacement card with a new account number. i'm wondering how the new account will effect my rating with the 3 credit bureaus. is the new credit card and number recognized as a continuation on 5 years of good credit or is it considered a newly established account ?

Thank You ... SAVAGE SAYS: It will be reported as the same card, with your history intact. Next time you get your credit report (free at www.annualcreditreport.com) -- in a couple of months, check and you'll see that is true.

Everything being equal right now, would you rather invest in EE or I savings bonds? SAVAGE SAYS: ONLY invest in I-bonds right now, as they at least have a floating rate (based on the govt's inflation figures). Series EE are totally unattractiave because they lock in the current low rates for the life of the bond. Personally, I think even I-bonds aren't such a great deal now, because the floor or base rate will be low for the life of the bond, and the inflation-adjustment will lag as the official statistics on inflation don't seem to reflect the true rising cost of living. Maybe just use short-term CDs or a money market deposit account for now --

I filed for chpt 7 about a year ago. I chose to keep my house and i am current on that loan. I have a 2nd on the house that i negotiated with the lender after not paying for about 9 months. we negotiated a 0% interest on the 50,000 that i owe. My house is upside down by about 75,000 on just the 1st. I can afford the 1st mortgage and would like to stay in my house, but im not sure if i should continue to pay the 2nd. I have a letter stating our agreement, but i have been late on the payment a few times and Im not sure if they will come back years down the road and want interest or penalties.. Also im thinking they might negotiate further in a few years if i havnt paid, because the house will still be upside down and they cant get anything if they foreclose on me. SAVAGE SAYS: I'm going to defer to the bankruptcy attorney who helped you on this matter. You have a letter of agreement -- but I'm not sure what it says about being able to push you into foreclosure if only the second loan is delinquent. Get some good legal advice, because you said you don't want to lose your home. And you never know what will happen to make the value go up down the road, so don't worry about current market price. If you are foreclosed, you'll find it difficult to buy a new home.

We have a 7-year-old grandchild living in Europe with his mother. What is the best way to send them money without having to pay an outrageous exchange rate and still be sure they receive it safely?
Thanks,
Mary Kate SAVAGE SAYS: You're always going to pay fees, and get "ripped off" on the exchange rate -- It's just the way the financial institutions make money. Here's a thought: You could open a U.S. checking account and give them the debit card. Then they can access the cash at any ATM. You can reload easily. There will still be fees and the "spread" in exchange rates that will be deducted, so they should not take out a lot of small amounts, but instead use it for larger withdrawals.

Hi Terry: This past week I have been laid off from a full time position. Sad to say, I have no retirement accounts, or savings for this. I will be turning 65 in the next few months. I owe about $20,000 on my current mortage with another 7 years @ 7.25% and a payoff about $20,000. Knowing I would lose a good deal of money if I sold now, what would be your opinion on this?

Although, I do not know if I could find a cheaper place to live.

Thank you. SAVAGE SAYS: Oh, I wish you had written BEFORE you were laid off. You could have renegotiated your mortgage down to a much lower rate! Even so, what's the point of selling and taking a loss -- unless you stilll have a lot of equity in the home? If you do have cash equity in the house and sell it, you could rent. Maybe this is the time to do a complete analysis of your budget, how you will live on Social Security, and whether you can at least earn some income on a part-time basis? You might get some interesting and personalized advice on that by calling Consumer Credit Counseling at 800-388-2227 -- which will connect you to the nearest local office. They offer a service to help you make these decisions.

i am essentially debt free---with $900,000 savings and approx $2300 a month pension and ss combined. I am 65 Can I retire comfortably? SAVAGE SAYS: That all depends on how much you spend each month! (Read my latest: "The New Savage Number" which explains the issues you will face. And don't forget to make an estate plan, a healthcare power of attorney, etc etc). Enjoy retirement!

I was wondering if you could recommend a good budget planning tool?
Thanks,
Nancy SAVAGE SAYS: Yes, get Quicken -- go to www.Quicken.com -- download onto your computer, start paying your bills online, and everything will be downloaded automatically into categories -- even credit card spending. Plus you'll get reminders of where you stand on a regular basis. This is the way to do it! (And it's VERY easy to set up!)

Hi Terry,
Is it advisable to refinance my mortgage with $125,000 balance at %6.625 and i have 9 more yrs left to pay off my balance. If I refinance no points it will cost $4,000 for escrow, insurance and etc.
My loan will go up to $129,000 at 3.25% for 10 yrs to pay.
Thank You SAVAGE SAYS : I think you're getting ripped off on those fees! Check around and see if you cant get that same low rate for no fees. You already have homeowners insurance, and don't need mortgage insurance with so much equity. What escrow on a refi? Really -- the banks want to make loansto people with equity and good credit. Find another less expensive lender --and do it!!

What is the difference in taxes on a 401k early withdrawel and a retirement age withdrawel? Thank you! SAVAGE SAYS: There is an additional 10% penalty for withdrawals made under age 59-1/2 (unless you retire after age 55, and agree to take substantially equal payments over your lifetime). After age 59-1/2, you pay only ordinary income taxes. But most companies will not let you "withdraw" from a 40l(k) while you are still working there. You can, from many plans, take a loan,, and some allow a hardship withdrawal. The same tax rules apply if you do not repay the loan within a specified period of time. Ask the HR department at your company for details.

Which is financially more sound/smarter for a 70+ still-working self-employed widow: Consider a Debt-Reduction Program (under the provisions of the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 ....OR ..... file a Chapter 11 Bankruptcy proceeding?

I still have an underwater, large monthly mortgage payment, education loans to pay off, and credit card debt for business expenses.

Would appreciate your advice. SAVAGE SAYS: OK, this is a tough problem. I could send you to a directly to a bankruptcy attorney -- but you know what his/her advice would be! So instead, start with the Consumer Credit Counseling Services. Call 800-388-2227 -- which will automatically connect you to the nearest member agency. You can trust their advice, very inexpensive -- they will give you all your options. You do know that you can't get out of Federal student loans (for your child, I presume) through bankruptcy. But you'llget that info and more at CCCS.

Terry,
I am a single retired woman(56) with an after tax pension of $38000/yr. I own my home(approx value $360000), have no debt and have approx 150,000 in stocks and corporate bonds, and another 150000 cash. I do not need this money right now, should I be concerned about my future economic situation in view of the current markets, and how do I protect my monies.
Thankyou,
Annonymous SAVAGE SAYS: I think you're in great shape, well-diversified, and shouldn't panic and make changes. But you might consider Long Term Care Insurance -- because the cost of care could be overwhelming if needed. At least a LTC insurance policy will let you get into a private facility if needed -- not a state-run Medicaid program which will definitely not be your best choice. And be sure you've made your will and living trust, healthcare power of attorney etc -- Don't tempt fate!

Hellow Terry, I have 5 years of mature U.S. savings bonds, Bought when I just started working 37 years ago. They were intended to supplament retirement. Needless to say I am unable to retire and afraid of the tax consequenses if I cash the in. What do you suggest. Thanks. SAVAGE SAYS: Go to www.TreasuryDirect.gov and use their bond-finder tool to find out when these bonds mature and stop paying interest --probably within the next three years You no longer have the option of converting to Series H bonds and deferring taxes. So you'll just have to cash them in, and add the gains to your ordinary income taxes -- Or if it's a lot of money and since rates are so low anyway, you can let them sit, not earning more interest, until you are in a lower tax bracket at retirement. Or spread out the process over a few years to make sure you don't move into a higher tax bracket because of cashing them in. Note -- even if you gifted them to someone, you'd still owe taxes now!

Hi Terry,

My ex husband bought EE savings bonds on which my name was listed beneficiary. He has since died, is there any way for me to remove my name from these so that they go to his only daughter without having tax implications for me?

Thanks,

Mary SAVAGE SAYS: Yes, go to www.TreasuryDirect.gov, click on "Individual" and then on Savings Bonds, to get information on this. You will need a certified copy of the death certificate.

Can I rollover C.D.'s left to me in a will into my annunity? SAVAGE SAYS: If you were left money as a bequest from a will -- or even as a joint owner without benefit of a will -- you'll be much better off taking the money in cash. Then purchase a new annuity if that's what you want to do -- so you don't trigger an extended period of surrender chartes in your existing tax-deferred annuity. To find out what you could get in an IMMEDIATE annuity -- a monthly check for your life -- go to www.immediateannuities.com, and enter your age, and the sum you have to invest For a tax-DEFERRED annuity -- one that will keep growing your money until you choose to take it out, there are plenty of choices. Readabout the pitfalls and costs of these products in my new book: The Savage Truth on MOney. (It's absolutely my personal guarantee that if you read this first you'll save the paperback cost of the book many times over!!)

Terry,

I work for a company that is a mutual company so the 401(k) has only a fixed income, large cap, balanced fund and some target funds to choose from. I have a IRA at Fidelity that is invested in some gold stocks and dividend stocks. My question is that if once I turn 59 1/2 I can withdrawn some money from my 401(k) and roll that over to my IRA to invest in dividend stocks without a penalty? In your opinion do you feel this is wise? Thank you. SAVAGE SAYS: You cannot withdraw money from your company plan while you're still working there -- unless it is a hardship withdrawal. And you'd still have to pay taxes on the withdrawal. Check your company plan rules. Then once withdrawn, it cannot be rolled into an IRA-- it becomes "after-tax" money. You could re-contribute it the following year to a Roth -- IF you qualify based on income. But all in all,the costs of doing this outweigh the benefits. Just save more outside your company plan!!

Hi Terry:
at
My Mother passed away and my sister and I are splitting her estate. I am a retired senior citizen and have a mortgage on my home. How should I invest the money at the least risk to me? SAVAGE SAYS: It's hard to give that advice without knowing more about your situation. I would say that you would want to put the money in the bank. And if you can pay off your mortgage with about 1/3 of the cash you receive, that might be a good idea -- assuming you want to stay in your home. Do NOT buy stocks, or an annuity or anything tempting you with higher interest rates! Just leave it in the bank. And make sure your own estate plan is up to date, including a living will, healthcare power of attorney, etc.

I inherited a $30,000 IRA CD in the state of Missouri. I want to give half to a sibling. Tax wise what is my best option. SAVAGE SAYS: You can give $15,000 to your sibling with absolutely no tax consequences! Just write him/her a check. (You can give $15,000 per year to as many people as you want with no tax consequences!)

Terry:

Some of these questions are correct. Many states and many more plans do not require/offer a cash balance or a money market account where a timid babyboomer can park his/her 401K during turbulent market.

I was shocked to begin seeing this on my clients 401 K plans.

Most, however, do have treasury or gov't bond choices.
SAVAGE SAYS: Yes, that is a tragedy -- for a plan to have no "safe choice' options for those nearing retirement. Just remember, you can lose as much in bonds as in stocks! When and if interest rates rise (because of inflation) then bond prices will FALL.

I have a monthly dividend equity and cash. The only time I buy stocks are rarely and when I do I buy durning panic turmoil. When my stock breaks trend I sell. Other than this I watch people buy and sell constantly only to fail. Do you think stocks are cheap? I do, but I am wondering what you think. SAVAGE SAYS: Cheap, compared to what?? We'll only know in hindsight!

Hello, I need a $3000 long term loan asap. I have been working at my job for 4 months now and need a loan for me and my son to get our own place. Everything always brings me to a payday loan site or some people say i need to be working for 6 months. I have poor credit from my son's medical bills that are in process of having insurance pay for them and take them off my credit. Where can a can a loan for poor credit that will approve me? SAVAGE SAYS: I'm sorry -- but no one will give you a loan without good credit. And if they do give you money at a payday loan place, you'll be sorry because the interest will be huge, and will pile up and you'll never be able to repay it -- further ruining your credit -- Contact your state benefits offices to see what you qualify for -- including state medical funding, food stamps, subsidized housing or whatever you can get to make life easier.

Hi, Terry,

Need your opinion, if possibel. We are in our early 70's and own several Vanguard bond funds,which have appreciated over time.

We are nervous and wonder if we should sell but where to put the proceeds. Sooner ar later int will go up and the cap gains will disappear.

have you any ideas. Thanks SAVAGE SAYS: Aha! Welcome to the club! I'm in the same situation -- and haven't liquidated my bond funds yet -- becaused the alternative is zero percent interest in a money market fund. I have no idea when rates will start rising -- but if you think there was a crowd rushing to get out of stocks, wait till you see the crowd rushing to get out of bonds when the world is convinced rates must rise!

I am retired and I lived off of my social security and pension. I co-signed a credit card for my daughter of which she was paying until she was laid off from her lub. She has been umenploed for more than 2 years and of course she does not have the money to pay. I can't pay becaus I have been helpiong her and her daughter. In addition I travel back and forh to Conecticut from New Jersey to take care of my mother. As soon as my daughter gets a job, she will continue to pay on this bill. This collection agency is threatening to take me to court. I do know that my pension and social security benefits can not be garnished fro a credit card debt. I do not have any money for no lawyer. What's your comment on this..In addition, I have a mortgage and property tax to pay. I am recovering from Prostate Cancer. I am trying to stay worry free so that I can take care of my 92 year old mother. I car for her tweeks out of the month and my sister take care of her the remianing two weeksin the month. SAVAGE SAYS: Oh this is a heartbreaking story. Call the National Foundation for Consumer Credit -- a great non-profit organization that you can trust, at 800-388-2227. That will automatically connect you to the nearest local office. They will help you deal with the collection agencies, and might suggest some other help that could be available, as well. The are usually free for people in your situation. Please write back and tell me what develops.

We are a rugby club that has recently been registered as a non profit organisation. We really a tremendous amount on sponsors and donations. How does this benefit the donor/sponsor? To what extent can they claim a tax refund?
SAVAGE SAYS: That depends on how you registered. If you are a 50l(c)3 non-profit, then those who make contributions can deduct the contribution (above the amount they receive in services, such as tickets, for example) to the extend their own return allows such deductions For that, they should contact their own tax preparer. But if you have a different "non-profit" registration, then you need to ask your attorneys -- who filed for this designation-- the specifics of contribution deductibility. It is not enough to say you are a 'non-profit" -- You must actually file for that status with the IRS.

my lender told me to pay a lesser amount until my modifaction was approved and now I am 20,000.00 behind, and the modifaction was denied. How can this happen? SAVAGE SAYS: UGH! Did you get this in writing from them? Let me also give you the number of the National Foundation for Consumer Credit - a non-profit group you can trust. Call 800-388-2227, to be connected to the nearest local office. And you might check with legal aid, or your state Attorney General. I doubt you have this "deal" in writing -- to pay less than the full amount. I think it was their attempt to get any and all of the money they could. And they might have been across the line of legality -- so contact the AG in your state with your complaint.

If a house costs $32,000,can i take out a $50,000 loan to buy and renovate it? SAVAGE SAYS: Not unless the house appraises for $50,000 more than you paid for it!

Hello Terry. I have 7 years left on my 15 year mortgage, with a $137,000 balance, @4.625% . I calculated that if I pay another $590/month, then I could pay it off in 5 years. After considering the interest deduction, it's essentially a 3.5% interest rate. With the uncertainty of the stock market (at least more uncertain than normal), do you think it's a good idea to pay it off early, or should I continue to invest in the stock market? I would continue to invest the maximum in my company's 401k and my wife and I each contribute $5,000 to a Roth IRA. I'm conservative by nature, and since I'm not confident I'd get a return greater than 3.5% in the stock market, I think paying off early is a good idea, but I'd appreciate your insight. Thank you. SAVAGE SAYS: That's exactly what I did -- even while people kept saying you should have the largest mortgage to get the tax deduction! I'm so glad it's paid off. You will be, too!

Good morning Terry, We're underwater on our mortgage (like many families right now) / I've been out of work for a year (an experience many families share) / my wife strongly feels we should pay $350 against our principal in addition to our regular mortgage payment each month to increase our equity (which is also influenced by the real estate market - something we have no control over) / we're challenged monthly to pay our regular expenses. Until we have more income coming in should we continue to pay extra against our mortgage principal? Thank you. SAVAGE SAYS: Although I believe strongly in paying off your mortgage (see letter above) I also believe in having liquidity for emergencies. Perhaps your wife is worried that if you build $350 a month in a money market account you'll be tempted to spend it?? A compromise is in order here. Pay an extra $100/month on your mortgage -- and put the $250 in a money market account for a year -- and see if you can keep your hands off it, except in case of a dire emergency!

Hi Terry,
My question concerns the age I should begin drawing social security. I am 61, retired, and drawing a pension. My wife has a very good job and plans to work four more years. We are comfortable financially. I plan to wait until I am 66 to begin drawing social secutity, but I have friends who tell me this is a mistake. They say I should begin drawing at 62 and just put it in the bank if I don't need it. I am in good health and have longevity in my family, so I think I should wait until 66 to get the full benefits. What do you recommend? Thanks! SAVAGE SAYS: The problem with drawing Social Security early -- especially if you file a joint return and your spouse is working, is that you will be penalized based on your other earnings. Here;s the explanation, direct from SocialSecurity.gov: If you are younger than full retirement age during all of 2011, we must deduct $1 from your benefits for each $2 you earned above $14,160."

And of course, you will permanently get a lower monthly check if you start taking it before "full retirement age." That's definitely something to consider.

Terry,where is the best place to sell gold? SAVAGE SAYS: that depends on whether it is gold coins or jewelry or bars. Generally, you can't get too badly ripped off on bullion coins because there are several online markets to quote prices --and you know that a bullion coin is going to be worth plus/minus 5% of the current "spot" gold price. Jewelry is something else, because it is not 99.9 pure gold, it is alloyed -- 14 or 18 carat gold -- so there is a discount by weight, and the buyer has melting costs. Rare coins are an entirely different matter and you need a dealer who is a member of the American Numismatic Society (www.money.org).

I have a 529, UTMA, and Coverdale Ira for my son. I earn too much for a tax break or financial aid. In what order should I draw down the accounts?
SAVAGE SAYS: That depends on whether your son is in school already or not -- and how you have them invested. I'd draw the UTMA account first, becuse when he reaches the age of majority (18 or 21, depending upon your state) the money is his. Probably the Coverdell next, because you can always "save" the 529 for another child, or for your self, or for graduate school. And you can use the Coverdell for pre-college expenses if needed. But you can only withdraw up to $2,000 a year from the Coverdell.

How can one buy a CD from a Canadian bank? I want a safe, dull bank. Can I do this from the US? thank you. SAVAGE SAYS: Yes, it's easy. You can open an account over the phone in most major Canadaian banks, then "wire transfer" money into that account. Right now, the Canadian dollar is at a slight "premium" to the U.S. dollar, meaning if you deposit $10,000 US, you'll get slightly less in terms of Candian dollars. And, of course, you must file a special form to report the existence of a foreign bank account, and pay the U.S. income taxes on the money you earn.

Hi Teery,
My wife and I have been taking care of my mothe-in law for almost a year and a half. She has power of attorney over all my Mother-in-laws assets. She can do what she pleases with them as it says in the document. Recently my wife leaves a lot and returned one day. After a week she told me she was filing for a divorce. Meanwhile she has been collecting SSDI rrom another state and uses a different address. Usually a P.O. box. My mother-in law left her with a lot of gold and financial money including her ssi. Not that I really care at this point if I ever got a penny ,but I paid over 6,000.00 towards my lease when I moved in with them both to take care of her. I believe she has only greedy thoughts. But my 2 questions are these. Does she have the right to collect ssdi when having complete control of all my mother- in -laws assets? And should I after what I have given up allow her the divorce without compensation? I am the one who is mainly here with some help from care givers. But for her to do this to me feels criminal not to say humiliating. Even my mother-in-law believes I am a good man and has told her on more than one occasion that. She even went to say that if she was younger she would take me from her. What hurts the most is I love her and have gone through a lot. I don't know what to do. She even asks me to sell her mothers gold so she can pay bills and spend money on herself. Plus collect ssdi from the state. Is this criminal? Because I don't care as much about the money as I do someone who would take from anyone they can, including me. I have been through thick and thin with her for over 20 years. Man I really feel like a fool. Even at this moment while my mother-in-law is here she is out whooping it up. Any advice for a lost heart and broken person? SAVAGE SAYS: While I'm not a relationship advisor, that is quite a story. I'll give you two pieces of advice. First, if your wife has filed for divorce, you need to get a divorce attorney immediately to advise you of your rights. Second, if you really care for your mother-in-law, you should contact your state Attorney General's office and advice them that there is "elder abuse" going on -- and let them investigate. Taking an older woman's assets and misusing them, even with power of attorney, is a crime. Make sure they pay attention to you -- and they will, especially if SSDI is involved.

My 401(k) has been lagging behind due to the market. At this stage in the game, what should my balance average? I have some friends who have around $400K in there 401K portfolios...but I am a saver and very conservative. Should I worry if I only have $150K at age 40? My spouse and I currently have zero debt - no credit cards and about $550K (cash and conservative investments) SAVAGE SAYS: You are doing way better than the "average" American, since you have no debt! And keep your money safe in those conservative investments for a while, though you do need some of yur 40l(k) to be in a diversified stock portfolio for the long run. Believe me, others who read this post will be very envious of your position. Keep up the good work!

Hi Terry,
We're long time fans of yours.Here is my question: My husband who is 73 has 2 Universal life policies for $50,000 each that were taken out in the 80’s. One policy is tied to interest rates, the other to stock market. Our agent for MetLife called to say that because of the volatility in the markets, these policies will not be guaranteed (1 good for 10 years, 1 only for 5 more years) He suggests we apply for a rollover. This involves a physical,etc and being approved by their underwriters and an increase in premiums. My husband had prostate cancer but was treated successfully and is now good. My question: Is applying for a rollover something we should consider? Or, should we just leave things as they are? We need to taken action by the first week in September.
Thank you.
SAVAGE SAYS: First, and let me say strongly: I don't like your agent! He/she didn't give you information needed to help make all the real choices that are available to you. Let me explain -- but if you want to do somethng with this policy, I suggest you ask to contact the regional manager for Met Life (wherever you live) and then show him or her this answer, and get some better help in making your decision.

First, depending on when your husband had his prostate surgery (not so important if it was at least 7 years ago and he is symptom free) the new policy will cost a LOT more than the existing one, because of your changed health situation. So let's start by figuring out what to do with those two existing policies, which are likely to be less expensive from an insurance perspective than any new one you could buy.

Before you start, ask yourselves if you still have the need for life insurance! Maybe you have enough savings to take care of the surviving spouse. But assuming you do want to maintain some life insurance, here are some possibilities that your agent didn't mention:
You are allowed by your insurance contract to reduce the face amount to a minimum -- probably $25,000 for each policy. Ask how much premium you'd have to pay annually tif you reduce the face amount. On the interest rate policy, rates can hardly get any lower, so you'll get a reasonable estimate. As for the stock-based portfolio, there will be no guarantees. But still, reducing the face value will lower your costs.

You might want to ask if you could do a 1035 tax-free exchange of the stock portfolio (giving you no more chance to make money on the upside) and roll it into the interest rate policy, so you would have at least some extra money in that policy to apply to future premiums. That only works if there IS money in the stock-based portfolio. The agent should have given you the cash value of each policy now.
Or very basically, if you still need the insurance, you can ask what extra money you would have to contribute to keep each policy in force -- AS IS -- without buying a new policy. Remember, if you buy a new policy your health considerations will make it cost a LOT more! But the agent gets a big commission on a NEW policy, not on one of these suggested changes!

So again, don't ask this agent about these choices! He/she should have outlined them in the first place instead of trying to sell you a new policy!

Can I use losses on a Roth IRA and regular IRA to offset my tax bill if I sell some of these stocks and mutual fund that are losing money? I already will owe penalties and interest because I had to take money out (I'm in my 40s) to cover living expenses while unemployed. SAVAGE SAYS: NO, you can't use lossed in a retirement account to offset income taxes. And you're making a big mistake if you take the money out and incur penalties and taxes -- AND lose the future tax-deferred, or tax-free growth of the money. (There is an exception for Roth money invested for 5 years -- but I don't want to tell you that because you absolutely shouldn't tough that money until retirement!)

Considering how volatile the stock market has been, what kind of portfolio do you recommend for future 401(K)contributions. I am a teacher in the state of Alabama and contribute to the state retirement system. We only get to choose between stock and bonds but not the funds in each. I currently contribute 80% to stocks and 20% to bonds. I am 38 years old and plan to work about another 20 years. I also contribute $1,000 per month on top on the 5% contribution by the state. Thanks! SAVAGE SAYS: It's tough to give this advice in these wild times, but I think your asset allocation is about right -- maybe go down to 70/30. Over the long run, if America is still here, and if you get a chance to retire, you'll want the growth that stocks will give. And, as I often say, if I'm wrong about this, we will all have a lot more to worry about!

Can a person use a 401K received in a settlement to pay off their morgage and because it is an investment not have to pay taxes on the money (capital gains tax only)? Amount is $50K. SAVAGE SAYS: That depends on the terms of the settlement. If your ex-spouse agreed to pay the taxes on the withdrawal from the 40l(k) -- which is highly unlikely -- then it is just a marital distribution asset, and can be used for any purpose. But if they "divided" the 40l(k) and either kept a portion in your name, or allowed it to be rolled into an IRA, then any withdrawals will face ordinary income taxes, and a 10% penalty if you are under age 59-1/2. There is never a capital gains tax on withdrawals from a retirement plan -- only ordinary income taxes apply.

Hi Terry, how do we get the answer to the question we just asked you Thanks SAVAGE SAYS: I don't know which question you posted, but I answer questions when I get the time to do so. By the end of each week, I'm usually pretty well caught up.

we have a rental in nevada. we need to know if we should take out money from our 401k and pay it off or is the tax deduction worth paying interst on the loan. It is only rented 4 months a year. We pay 7% INTEREST. We have 179.000.00 in the 401k. We feel if we bought somthing with our 401k at least we would get something out of it if the bottom drops out SAVAGE SAYS: I'm sure you're worried about the stock market, but it is still an opportunity to grow your investment tax-deferred inside your 40l(k) plan. If you take the money out and pay taxes on it (and a penalty if you're under age 59-1/2) you'll lose all that future tax-deferred growth. Can you refi the condo? probably not if it is a rental. But don't throw your good investment down the drain after your bad investment in the condo.

I am a 45 year old female. I have two properties one mortgage has a balance of $34000 and the other is $144000. The larger home is currently under a lease purchase until July 2012. I have $100000 in my 401K. I can take our $50000 without the 10% pentalty because it was a settlement. So would have to pay taxes only leaving enough to pay off the $34000 mortgage. Since I am living in this home I would contribute to my present 401K at the highest amount possible...15% which would be taken out of $950 per week and possibly even add to an IRA. I have $75000 equity after the real estate downfall. Does this sound like a good idea? SAVAGE SAYS: My head is spinning trying to figure out what you just wrote! Suffice to say, I NEVER believe it is worthwhile to withdraw from a retirement plan early -- because you lose the tax-deferred growth. Wait till your other property sells, pay off that mortgage, and if there's money left over, pay down the smaller mortgage.

last aug my husband retired. we put 101,000 in a ira. we are 67. im afraid with all that we are losing now, should we go to a money market account..im not worried about making money now, just losing it.we have lost 5000 in the past couple weeks. thanks so much SAVAGE SAYS: I understand your feelings, but it's hard to give advice without knowing what other assets you have. I don't think a retired person should have all of their assets in the stock market -- more like 50 or 60%. And if it's keeping you awake at night, use one of these rallies to move a portion into the money market fund. You have many years to live, and you need some stock market growth, which I believe will happen over the long run -- at least 20 years. But you don't want to have a heart attack over your investments in the meantime!

My husband just started a new job with - should he move over his 401K (he doesn't have to) to his new job while the market is so low and he's lost, or should he wait it out until it gets better? Is there a timing he should try to figure out or does it really not matter because he'd be selling low and buying low? SAVAGE SAYS: Unless he has company stock in his 40l(k) -- which may have other tax consequences -- I typically suggest people roll DIRECTLY into an IRA. There you'll have more choices -- meaning at Vanguard, Fidelity, T. Rowe Price -- and can get their investment advice as well. The timing shouldn't matter, and in fact this might be a good time to evaluate your investments as part of the process.

This is an algebra type of thing that I don't know how to do. If my company pays 7.5% into my 401k and they put $1400 as my share last year, how much salary did I make then? I just can't figure out how to do this. SAVAGE SAYS: Me, either! Why don't you check your year-end paycheck stub? Of your W-2 statement?

HI, MY HUSBAND LOST HIS JOB , BUT DID FIND A NEW ONE. BUT LESS THAN WHAT WE WERE MAKING FOR THE LAST 22 YEARS. WE HAD TO TAKE SOME MONEY OUT OF OUR IRA, WILL I NEED A TAX ATTORNEY TO HELP ME WITH MY TAXES FOR THIS YEAR. I KNOW THAT THERE IS A PENALTIES, BUT I HAD NO OTHER OPTIONS TO KEEP US AFLOAT.. THANK YOU Savage Says: You'll need a tax preparer -- or you can use a popular tax program such as TurboTax. There is a form to report IRA withdrawals. You'll owe ordinary income tax -- so be prepared to pay! And if you're under age 59-1/2, then there's a 10% penalty, as well. So make sure you have some money put away!

i have a credit card for £900 at 32% and i pay a direct debit of £40 a month to it and they r wanting more money every month i think £40 is enough. i need to know thanks. SAVAGE SAYS: Nice to know I'm now getting questions from England! It's insane to pay 32% interest. Your goal should be to pay it off as soon as possible! And they don't care a bit what you think is "enough"! Double the minimum payment next month -- and keep paying that same amount until you get it paid off. Carrying this balance is like trying to swim with a refrigerator tied on your back! Find an evening or weekend job, but find the money and pay this down!

My mother is 75 years old. She has $150K to invest after selling her home. She is dead set against any risky investments. What investment plan(s)will give her a rate of 4%-5% on her money? Everything we've looked into is offering 1.5% OR LESS! She is keeping $60K in her personal savings account so she can leave the $150K in for 5 years or so. HELP! SAVAGE SAYS: There is absolutely nowhere she can get 4-5% riskless! All of it should be in a bank CD of 2 years or less maturity, or a bank money market deposit account. She'll still be under the $250k insured limit --

I am 65 years old, have recently retired, and have moved from Pennsylvania to Massachusetts. All of my contributions to my defined contribution retirement plans (both employer and employee contributions) were fully taxed by Pennsylvania as the contributions were made. I will shortly begin withdrawing money from these plans. Since Massachusetts taxes retirement income as it is withdrawn, am I now liable for Massachusetts tax even though I paid Pennsylvania tax as the contributions were made? If that money is not liable for taxes because of prior taxes paid, how do I claim it? SAVAGE SAYS: Typically, contributions to a defined contribution plan are pre-tax. I dont know of any DC plan that takes after-tax money. So I think you need to consult your CPA or accountant to find out exactly what was taxed when you made the original contributions, and what the tax laws are in your current state of residence --

Hi Terry,

My mother has opened a CD account in her name, along with mine, in an "or" vs. "and" account. At each renewal, she pays the required taxes on the interest. Upon her death,this money would technically be mine but I'm wondering what consequences there may be, without a will, specifying that these are her wishes? Can you offer any suggestions? The amount is over the annual gift allowance but under the amount you can leave someone, before having to pay taxes. The last I knew this amount was 600,000. Thank You SAVAGE SAYS: Wow, that's a lot of money to leave in a CD -- and it's over the FDIC insurance limits. Your mother needs to see an elder law attorney and create an "estate plan" -- including a revocable living trust, naming you as her successor trustee (assuming you are her trusted son). Go to www. NAELA.org -- the national assoc of elder law attorneys -- to search for a capable attorney in your area. And while you're at it, she needs a living will (end of life wishes) and healthcare power of attorney. Do this NOW, while she is still capable -- or you may find yourselof fighting with the state over her money and her care!

P.S., I am an adult vs. minor.

I am 64 years of age I have a 10,000.00 whole life insurance policy which I borrowed $300.00 from previously. If I cash it in now what will be the surrender value. I have no choice. SAVAGE SAYS: Contact your insurance company and ask them what the surrender value is. That depends on the interest rate they have been crediting, the amount of your premium payments so far -- and the charges they have been debiting for the "mortality" or insurance costs.

I have a house that is paid off and I want to rebuild.Can I get a loan to build and then when I sell my house pay off the loan without. SAVAGE SAYS: You could get a new mortgage or a home equity loan -- if you qualify. I would suggest a fixed-rate mortgage -- and mortgage rates are extremely low these days. A home equity loan will carry a floating rate -- and if inflation returns it could cause your payments to jump dramatically.

A few years ago, I opened a Roth IRA and transferred funds from my regular IRA to the Roth on a yearly basis. Now that I am over 70 1/2 I have to make required withdrawals from my regular IRA and have requested my bank to transfer funds to the Roth. My banker says that is not allowed. I checked with the IRS and they confirmed what my banker told me. Why is this so? Since I have to pay taxes on the money I withdraw, why does the government care what I do with it? Is it because they will be deprived of further tax dollars if I put the money in the Roth. If this is the case, I don't think the government is playing fair. I look forward to your response. SAVAGE SAYS: If you currently have EARNED INCOME, you could make a contribution to a Roth, as long as you fall within the income limits to do so. And you could take money from any of your accounts to make that contribution. But if you do not have EARNED income, you cannot make a Roth contribution for that year.

Can a parent lend his adult child $50,000 without reporting it to the IRS? Bob SAVAGE SAYS: Yes, you can. But you should get a written "note" or loan agreement, specifying a rate of interest (at least 4%) and a repayment schedule or termination date. That way, if the loan isn't repaid, you may be able to deduct all, or a portion, as a loss on your tax return. If this is really a "gift", you still don't have to report it on your tax return, but it will come out of your "unified estate and gift tax credit" at your death. Currently you wouldn't have to deal with this unless you leave an estate over $5 million. BUT your other children might want to be treated equally - -now or through a larger bequest at your death. Something to think about, because you won't be around to explain at that time.

Can a person over 70 years of age, move a CD or IRA-CD to a different bank w/better interest without penalty, even if the CD time limit hasn't expired? SAVAGE SAYS: Some banks allow you to "break" an IRA CD without penalty when you're over age 70-1/2 . That's becuase you may need to use that money for required minimum withdrawals. But it is not a requirement for banks to allow this. So check to see the policy at your bank.

My 403 b is -9% ,I am putting $450.00 a month into this account ,and I see only loss not gain what can I do? SAVAGE SAYS: After the close on Monday, August 15th, the Dow Jones Industrial Average was down less than 1 percent year-to-date, and teh S&P 500 was down just a bit more. So if your investment in the 403B plan is down that much THIS YEAR, then you're invested in some very speculative things! Stick with the S&P 500 fund, which I am sure is in your plan. And put 20% of your monthly contribution into something more conservative, like the short-term money market or very short-