Terry Savage

The Savage Truth on Money

ASK TERRY has moved! Please go to www.TerrySavage.com. Click on the "ASK TERRY" post-it note on the top right corner of Terry's website or click here. There you can post your questions and check back for your personalized response. I look forward to hearing from you!


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Hello Terry,

I work for a company that will be closing its door in California and have been given a date for my last day there. I have been with this company for 11 years and my question is this, If I collect my pension in full now, would this be beneficial to me? Will I be paying some kind of penalty and how do I find out how much I have in my pension? SAVAGE SAYS: Immediately go to your HR department and ask what the alternatives are! It may be that you are getting a true, defined-benefits pension -- a check a month for life. But that my not start until you are a certain age. And you may have to make some choices -- such as whether to take it over your lifetime, or make sure it will also cover your spouse's lifetime if you are married.
AND, it may be that you cannot start taking that monthly lifetime check right now, but instead you can ROLL IT OVER into an IRA (Individual Retirement Account). If you have that choice, you do NOT want to take a check. Instead contact Fidelity (800-Fidelity) or Vanguard (800-Vanguard) and ask them to handle the rollover for you, so you are not subject to taxes on that money. An IRA rollover, if that is allowed, will keep your money growing tax-deferred. So, the first step is to definitely contact HR at your company and ask these questions. Then get back to me if you still can't figure it out!

Thank you very much and I hope to hear back from you soon.



Hi Terry: Thanks to your recommendation, I've been tracking the accumulation of my retirement funding for a number of years with the help of Financial Engines. I love it, and am grateful to you for having steered me in that direction. I am curious though if you've ever had any feedback from any of your readers, now retired themselves, as to the validity of the projections provided by Financial Engines. One would think that it's now been around long enough to have developed an actual track record, and yet I've never seen anyone sharing their actual experiences; either good OR bad, with their use of Financial Engines. Your thoughts, please? SAVAGE SAYS: Thanks, I'm due for a followup on Financial Engines, and I will do some research. Let me just say that they give advice to more than 80% of Fortune 100 companies -- so they must be doing a lot of things right!
Remember, also, that there are two aspects to the planning they do. The first is advice during the accumulation phase, on which funds to use in your plan. The second aspect of their service is planning for both investments and withrawals as you approach retirement. So the "final results" won't be known for a long time!
For those interested in learning more, go to TerrySavage.com and click on the box marked FinancialEngines. And I will do a followup column soon! Thanks for a good idea, and I'm glad you have been using the program.

Thanks for the great presentation at Simmons Women's Leadership Conference this week!

We bought into 2 Marriott Timeshare properties about 8 years ago, and are still paying the monthly mortgage. We would love to sell these, the monthly bills are killing us. Do you have any advice on best way to do this?

thank you,
SAVAGE SAYS: Gosh that's a tough one. But maybe as the economy picks up, the market for timeshares will as well. The best place I know to learn about the pros and cons of trying to sell a timeshare is TUG -- the Timeshare Users Group website: http://tug2.net/
There are so many fees, and charges involved that it's tough to know who is giving you a realistic offer. You can learn more at the above website, which also provides free classified ads for its members. The cost to join is only $15 -- probably the least expensive thing related to timeshares!

Today, I downloaded my annual credit report, s you had suggested, but must I pay for the credit score on the website? Is there anywhere to get it for no fee? SAVAGE SAYS: Unfortunately, credit SCORES are proprietary, and not covered by the government's requirement that you get a free credit report from each bureau every year. So you might as well get the most widely used credit score -- the FICO score. You can get it at www.myfico.com -- but you have to pay for it!

Terry my wife has had a esop program for the past 15 years she just found out that the company she works for will know longer have this program because they will be merging with another company. With this large amount of money she has accumulated through out those years what would be the next best place to put this in, i have heard about IRA .and ROTH this is new to us so any advise will be valuable. Thank you SAVAGE SAYS: OK, the first step is to carefully listen to the options that your company offers. My guess is that they might allow you to "roll over" this amount to either the acquiring company, or to an appropriate custodian, such as Fidelity, Vanguard, or T. Rowe Price. BUT DO NOT TAKE A CHECK! If you do, and if this is a "qualified" retirement plan, you will face taxes and penalties for early wihtdrawal. So, again, be sure to check with your company about the rules. And then consider rolling to a larger, low cost firm like those named above, who will also advise you on how to diversify your investments. One special note; If you do have company stock in this plan, some special rules may apply --allowing you to keep the stock, hold it for a year and then if you sell at a gain, it is possible that long-term capital gains tax rates may apply. That's why it is so important for you to know your situation for sure.

I gave a bill from the IRS t for over $ 7,000 becasuse RJ did not show. The 1099b shows a as RJ omits the cost basis for the sale of DWS Stratgic Value fund. Do I need a tax expert to resolve this with the IRS? SAVAGE SAYS: I'm not sure I understand your question. Could you please write back and clarify.

Terry, I am taking my social security at age 66 this year. I have a full time job and will continue to work for another year. My question is regarding my husband's retirement benefit from the post office. He receives about 2,000 a month after the survivor benefit is deducted. He is taking his social security benefit this year at age 66 which reflects the offset rule for federal employees. This will just pay his medicare payment with a little left over. When he dies how will my survivor benefit that he has taken out of his retirement affect my social security payment? He seems to think I should get both with no change as he has already paid the offset. Social Security is no help. I can't get a answer from them. They send me booklets for Windfall income. What winfall - we have paid for them. Can you answer this question? Thank you SAVAGE SAYS: Wow, this is a tough one. I've sent it out to one of my experts, and will try to post a response next week.

Wondering best place to put some money. Right now it is getting way under 1% interest. Any suggestions. SAVAGE SAYS: First tell me how much of your money you are willing to put at risk of loss.

Dear Terry,

I just spoke with the head of our union Annuity Program. She said there is no 10% penalty for " any" withdrawl, not just the payments. They will only take out Federal Taxes (20%). SAVAGE SAYS: Well that's very good news for you.

I have an annuity that is almost surrender period time. I have made preperations on taking some of it out. Ck. will be coming soon , but the deadline is not quite here. Now I'm having 2nd thoughts that I should have taken more out. Can I still take more out? I'm a recent Widow. SAVAGE SAYS: Well, this is a difficult one to answer without knowing exactly the terms of the annuity -- and your personal situation. If you'll write to me: savage@suntimes.com and explain what you own, and where it fits in your total picture, I'll try to give you a more personal and appropriate answer.

I'm trying to find the Personal Financial Organizer Form and can't seem to find it. How do I get this form? Thank you. SAVAGE SAYS: Thanks for asking. When you go to www.TerrySavage.com a yellow box will pop up. (check to make sure that popups are not blocked) Fill in your name and email address and you will become a "friend" -- and by return email you will get a link asking you to confirm that -- and then a second email will arrive giving you the link to the Personal Financial Organizer form. You can print out as many as you want, and save the link.

My mother passed away in 2012. As executor of her will, I received a check from Genworth Financial for an annuity/life insurance policy that she had. I took this money and divided it equally between my brother and sister as directed in the will.
I recently received a 1099R for this payment. I thought that only interest earned on the policy was taxable but my tax advisor says I am responsible for reporting the entire amount on my tax return.
Is this correct? SAVAGE SAYS: Ok, what's important here is the definition of what you received. Was it a life insurance policy -- or a tax-deferred annuity. Contact Genworth and ask, giving them the account number and other info you have. Sounds like it was an annuity. In that case, the portion that was not areturn of original investment would be taxable. I'm not sure why the entire amount would be taxable -- unless it was an annuity purchased inside an IRA, where none of the money had been previously taxed. But Genworth should be able to tell you the details. And maybe they can distribute 1099R forms appropriately to each of your siblings. Get back to me if you still have trouble getting answers from them.

I was wondering if you received my other reply.
According to my Union, since our retirement age is 55, there is no penalty for withdrawls The only charge is 20% taxes. SAVAGE SAYS: I'm going to ask you to double-check -- I believe they will tell you that no penalty applies IF you take the withdrawals in substantially equal payments over your lifetime!

My wife works a public job(school ) and makes about 50000 a year. I work at a family business. She will be retiring this year and will draw about 2200 a month after insurance. I on the other hand have no retirement other than what I can save.
We are out of debt, 54 years old. I have made investments so that I can have some money when I retire. Problem is the wife thinks I am hiding finances from her, I have been the major bread winner and used the money to get out of debt, buy cars, a farm, cows,etc. I feel it necessary for me to have some money saved up, but she feels like we need total transparency. Her money went into retirement no questions, she hasn't had any access. I on the other hand have been paid all I earned without takeout's for retirement, I have traded and invested to increase the money I will have at my retirement. Should she have full access to my income? SAVAGE SAYS: Wait a minute -- what does she want: Access, or Information?? There's a big difference! If she wants info, so you two can do some smart planning, then that makes sense -- especially if you plan to live out your lives together. If, on the other hand, you are saving secretly so you can depart, then be careful what you reveal! Or maybe she is the one planning to leave, and is wondering what she might be entitled to in a divorce. If you don't trust each other enough to come clean then you'd better start thinking strategically, and separately.

Their grandmother would like to give my (2) college sons, one a jr. and the other a sr., $30K to wrap up college and would like to know what are your suggestions for where should she open up this new account for them; what type of an acct.; and if there are tax advantages are for her? She is in nursing home and has no income other than social security; an e-trade account; and an annuity. SAVAGE SAYS: She should definitely NOT give the money directly to them -- especially if they are receiving financial aid. They'd become ineligible for that. I suggest she pay their tuition directly to the school. That is allowed -- even above and beyond the current $15,000 per year per person annual gift tax exclusion. BUT -- before doing this, you'd better make sure that the nursing home won't make a claim for those funds after she dies. If she is in a Medicaid funded nursing home, taking government benefits, they will look back5 years for any money transferred, and attempt to reclaim it. Similarly, even if she is not now on Medicaid, but eventually runs out of money and claims Medicaid to stay in her nursing home, they will look at her asset transfers.

What recourse do I have against my bank for giving out my account details to my brother? He was given the account balance of a CD and the date It was opened as well as details on a checking account. I am not sure how he did it, but he got the information. He may have even gotten an acquaintance that works at the bank to give him the info. What should I do? He lives out of state and he is apparently upset that I inherited some money. But that is none of his business. Thanks. SAVAGE SAYS: It sure is none of his business! Are you sure he wasn't guessing?? Contact the bank president, by phone and in writing, and state your complaint. At the very least, they should respond with an apology. And in your letter, you might say that you are planning to report this invasion of privacy to both the FDIC and the new Consumer Financial Protection Bureau in Washington. That should generate a quick response from the bank!

Regarding your column about when to start taking Social Security ... Because I have a very large IRA account I opted to start Social Security at 62, knowing that the RMD on the IRA will generate more cash flow than I need in my 70s and later. The three years of early SS income were more valuable to me than larger payouts later. I'm 72 now, and still very happy with the decision.

Just another consideration for people with large IRAs. SAVAGE SAYS: You make an interesting point. Still, the larger base on SS --- if you had waited -- would grow more rapidly. And you could have withdrawn from your IRA without penalty. In each case, you paid ordinary income taxes on the money.

Thank you for your marvelous column, I have learned so much from you.
I have now reached the magical 70-1/2 point in my life and need your help with the RMDs. I know I can bundle all my various IRA accounts' RMDs and take them from one account if I chose to do so. However, I also have two different 401(ks) and one 403(B), can I take these out of an IRA account as well, or do they have to come out of 401(k) and 403(B) accounts?
Thank you. SAVAGE SAYS: You have to total the value of ALL your retirement accounts to determine the RMD -- and then can take it from one or more accounts. BUT, I'm definitely going to recommend that you ROLL any remaining employer plans (such as 40l(k) or 403(b) ) into an IRA Rollover. There are two reasons for this. First a rollover account at a major mutual fund company (Fidelity, Vanguard, T. Rowe Price) will give you a better choice of investment options. And second, this will facilitate distributions to your heirs, who can then stretch out growth of remaining IRA assets. Many company plans are not set up to do this. Also, it will make it far easier to calculate your RMD. But keep this rollover IRA separate from any other IRAs you may have started over the years.

Hi Terry,

My husband is retireing from the Post office. His retirement check will be $7000.00 more if he doesn't take the spousal survivor benifit(me .. Wife:-) ? If he dies I get nothing! We still have 9yrs on home mortgage ($90,000.)credit cards are all paid up.
Should we take the survivor benefit ... Should we take out an insurance policy 4 me? is there some special financial advisor we can go to ( PO ..is no help , they just want our money) I'm scared I'll be left with nothing! I work retail ... No pension , I do have a 401k at my Co(100,000.00) I work full time ( 60yrs old) Can you lead us in the right direct? SAVAGE SAYS: Well, this is a pretty easy question to answer. Just ask yourself how well you would live without at least some of his pension?!! I doubt that you could afford a life insurance policy on your husband, now that he is at retirement age. Don't be tempted by the higher current paycheck. His life expectancy is shorter than yours because he is a MAN! And you don't have that much in assets to cushion the fall when he's gone. Take the joint life payout! (Or go to www.immediateannuities.com and see whether their deal is fair, compared to what is offered at the site. You may be able to ROLL OVER his lump sum into a joint annuity from another company and get a better deal!)

My 19 year old just received an inheritance. I'm trying to encourage her to invest early so that she ends up in a better financial situtation than me. Where would you suggest to be a good place to start? SAVAGE SAYS: Great idea. Go to TRoweprice.com and open an account. Put half in their Spectrum Income Fund and half in their Spectrum Growth Fund -- and encourage her to keep adding to this money over the years! To get help, you can call them at 800-638-5660.

Hi Terry,
My sister and her husband took some money out of a Vanguard Short Term Federal Investment MM account. They were under they impression that they could write checks from this account any time they wanted, but the IRS just sent them a notice saying they owe taxes on the withdraw which was reported on a 1099B. How can this be correct since they already paid taxes on the money they deposited into the account and the return was so minimal? Thanks. SAVAGE SAYS: Was this an IRA? If so, all money withdrawn is taxable. If it was not an IRA, the amount to be taxed should be minimal. But because it was a "bond fund" there could have been a slight gain in principal on the account if the value of the fund shares moved higher, which happens when interest rates fall. Contact Vanguard to ask about it. They very rarely make mistakes.

My I R A lists my wife as 100% beneficiary and the second beneficiary
our living trust . I have four children should I change it to each childs name instead of the trust.I was reading your 3/18/2013 column. SAVAGE SAYS: Generally speaking I would say yes, add your children -- unless they are minors. A trust doesn't have a "life" so you can't extend the tax-deferred growth. But minor children can't be beneficiaries unless a separate, see-through trust is set up for them -- and that may be prohibitively expensive. So the real answer is to consult your estate planning attorney. Or go to www.IRAHelp.com and search for one of Ed Slott's IRA experts and describe your situation specifically, giving ages of your children and other concerns. Many attorneys aren't aware of all the ins and outs of the "stretch" IRA. And, I might add, if you and your wife die at the same time, leaving minor children, then stretching out growth of your IRA will be among the minor issues your heirs will have to deal with!

Can you suggest a identity protection service? I am thinking of companies that monitor your credit for a fee and if something is reported, I get notified via my preferred method.
One I can think of is protect my ID by Experian.

Thank you,
Frustrated to pay $79.95 and still have to spend 23 minutes on the phone to find out what the alert was. SAVAGE SAYS: These alert services are my personal pet peeve! I find that most of hte protection you pay for could easily be done for free, simply by placing a "freeze" on your credit -- so no one can open new credit in your name. (Of course, don't do this if you're about to buy a car, a house, etc!) I don't have a specific recommendation.

I have shares in GAIME and would like to redeem my shares. I was told by computershare I would need to send a letter stating my intent and send the certificate ,but do not sign it. Is this right? I would be sending them my proof of ownershipto them,why would i not sign it?
Also I wrote on 3-4-13 about beneficies and contingents/ I was referring to a retirement from work,pension/401k/annuity SAVAGE SAYS: Yes, that's correct. Send the shares by registered mail, and send a "stock power" with a signature guarantee. They'll provide the form, and you can get your bank to guarantee your signature.

Please read my IRA column re beneficiaries, just posted this week. That applies to pension plans and 40l(k) plans -- any retirement plan that requires you name a beneficiary. You should name a "contingent" beneficiary incase the primary dies before you (or in an accident with you)!

I am losing my company supplemental insurance which I have had since 1981. I was told by medicare due to changes in the insurance, medicare part D was added.Also prescription plan was added. I asked If I could keep the insurance minus the drug plan. Is it possible for me at 75 years old, in excellent health to get supplemental insurance, I am not on any medication. Please give me direction on finding supplemenal insurance. SAVAGE SAYS: Go to www.ehealthinsurance.com and click on Medicare. Since your situation is unusual, I'd suggest you call their toll-free number and explain what you need. I'm sure they'll be able to help you.

Can you give us your thoughts on one using a Financial advisor, such as Merrill, Lynch, Edward Jones, Ameriprise, etc. ?
Some of us elderly do need direction with our finances , not having any investment knowledge.
Thank you, for your valuable & wonderful service !
SAVAGE SAYS: It depends on the person, not the company name. So first you have to figure out what you need -- investment advice, planning for retirement, estate planning, tax planning?? If you are elderly the latter two are especially important. And remember, unless you go to a planner who does not charge commissions on products, a fee-only planner, you'll be getting advice that is paid for only when someone sells you something! You don't want that! To find a "fee-only" financial planner in your area, go to www.feeonly.org. Check references, and trust your instincts!

Terry, you take into consideration the opinions of James Stack and Bert Dohmen. Is Stack bearish or bullish? Is Dohmen bearish or bullish? SAVAGE SAYS: Both are realists -- which is what I appreciate! Right now, Jim says his technical indicators are showing higher market prices. Bert takes a longer term, and more fundamental global view and is very nervous about the global financial situation. After the Cyprus issue this morning, I'm sure he'll send out a warning letter. But you're right -- these are my two "must read" advisors. You can find Bert at www.DohmenCapital.com and Jim at www.Investech.com.

Terry, I'm not sure I understand your reluctance to use the ILL 529 program for the contribution tax break. My understanding is that there is a 5 percent credit up to yearly 20K contributions, so that's a $1K tax credit on ILL taxes. Seems like a no brainer if you care to use it only for that purpose. For example, paying tuition for kids in college the same year as making contributions. There is no holding period, so you can access the account immediately and you can get the deduction for multiple years. SAVAGE SAYS: About four years ago, the Bright Start fund "settled" with one of its money managers for a partial return of capital lost in the 2007 crash in what was supposed to be the safest fund within the plan. I'm very careful how I characterize this issue -- but mis-management is the most understated word I can apply on behalf of the advisor. And I was very disappointed that the state did not at the very least drop this management company from its team. Instead that same company, which refused to make investors whole, continues to manage funds in Bright Start. (You can search the original articles in my archives at www.Suntimes.com) Therefore, on principle, I do not recommend Bright Start -- despite the small tax deduction -- since you can get equally low cost and perhaps better performing 529 plans. To theck them out go to either www.Morningstar.com or www.SavingforCollege.com.

Treasurer Rutherford has been on the radio pushing this very option.

THanks for your input.

My son has huge student loans from law school, Direct Loan and Grad Plus. He went to school during that window of time between when students were allowed to consolidate their variable rate loans at less than 3% and the lower fixed rates available now. Unfortunately his rates are 6.9 and 8.6. He is in IBR but his window on that is the less favorable term of 15% of income for 25 yrs, then loan forgiveness but taxes on the forgiven amount which could be huge. My question is this: how come there is never any discussion of aid for the students who started their college loans in 2005 and the few years after. They are the ones not being helped. The final blow is that the government only allows $2500 of the interest paid each year to be deducted. The whole amount should be deductible. The government is making a nice profit on these loans. What other investment would yield them such high interest! Are you aware of any legislation on this? SAVAGE SAYS: I have written many times about this issue, and I agree completely. It is insane that the government gets to borrow on Treasury bills paying only one-half of one percent, but charges students 6.8 percent to borrow for an education! Sen. Richard Durbin of Illinois has also been outspoken on this issue -- and I would suggest you contact his office, to add your voice to the growing chorus claiming this is unfair!

Was able to collect 39,563 under the southwest home equity assurance plan. They told me it was tax free because it pertains to me getting a fair value for my house. I only made 100 on my home that I lived in. I was issued a 1099 misc. income form. How do I explain to IRS that this is not income. It means I will either get 5,000 or owe 6,000. My tax man file to receive and explain on the letter they send for an audit.? What should I do? Called IRS but they said they would get back to me But never did
SAVAGE SAYS: I'm still researching the correct answer. Have patience. I promise to post a better response next week!

When my grandparents died, the four surviving grandchildren inherited all of the property. I was only 16 and told that they have put $30,000 in a deferred trust that I couldn't use until I graduated from college. I am 19 now and just got an e-mail from one of the cousins that told me I owed $20,000 to the IRS from this trust. Please help, I do not have any money. My father died and I can barely afford food. SAVAGE SAYS: That doesn't make any sense. When you I heritage money, you don't pay any taxes. You need to find outmore details of your grandparents will and the trust. You can get that information from the probate courting the county in which you live. That will give you a start on tracking any money that may have been left to you. If it was put in a trust, the trustees had a legal obligation to keep it safe for you. Eventually, you may need a lawyer, but first things first. Get the will and find out the facts. The write back to me. And for heavens sake, don't give money to anyone for "taxes"!

I efiled my taxes on March 13th, thru AARP, to have it direct deposited. I got my state refund but why is it taking this long for the federal? I have the same message when I go on their site. I only had a 1099 & unemployment to file.

I am homeless and need the money like yesterday. SAVAGE SAYS: There was a big snafu with the efile program. Here's a link to the story: http://www.newsday.com/business/irs-e-file-glitches-trigger-refund-delays-1.3589846
They say they are about caught up!

Thank you and have been a big fan since you were a regular on NBC.


I need to know where to find info about retiring now. My husband turns 65 next month, he is still working for his company in a part time basis called transition to retirement. He will need to retire at the end of the year because of the program. He then is qualified for full SS benefits in 3 months from retirement. I am 7 years younger then him and currently unemployed. I need somewhere to get the info I need for planning this as he has always left this stuff up to me. I need books or articles to read to have the knowledge to figure this out. SAVAGE SAYS: I'm not sure what you have to figure out. His company will let him know the benefits he will be getting -- either a rollover of a 40l(K) plan, or a pension. If he has a choice of doing a rollover, contact Fidelity (800-FIDELITY) and they will handle all the details, and give advice about investing the money. You, on the other hand, have the real problem. If your husband retires, will you have health insurance? (He should apply immediately for Medicare.) Go to www.65incorporated.com for details about applying for Medicare. But you need a job, to earn money and to get healthcare benefits. You have seven years before you can get SS benefits -- either on your own work record, or on his work record. So put that time to good use.

WE are thinking of moving to Sun City Arizona, from Roswell New Mexico
We are thinking around $80,000.00 with a 31/2 percent fixed rate loan for 30 years.
We have excellent credit and would like to know what the Monthly payment would be
with a 5% DOWN PAYMENT. SAVAGE SAYS: You're likely to have a problem getting a loan with only a 5% down payment these days, and it certainly won't come with a low rate -- unless you qualify for a VA loan. And you'll need a good earnings history. Start checking first with local banks where you're moving. And also check with Quicken Loans to see if there might be some special programs for which you qualify.

Hi Terry,

I am 66 years old and my wife is 65, we have an income for the next 4 years. We have approximately $2,000.000 in a fix annuity, guarantee of 8%, when we start to collect it will be 8% based on the above mentioned, plus the accrued interest. We estimate our social security to be approximately $65,000 (both of us), plus the $160,000 from the annutiy and we have estimated from cd's etc an additional income of $90,000 per year. My question should we continue to leave our money in cd's, thus elimnating stress of the market or should we invest in one of the Rowe Funds.

Thank you
SAVAGE SAYS: Well, it certainly looks like you're in good shape -- but you really have no "hedge" against inflation eating away at the value of your money, your spending power. You might want to contact T. Rowe Price and ask about their Retirement Income/Investment planning service, and just take a look at their recommendations. It's free if you have money in their funds, and costs $500 if you just want the service. But it's well worth it! (This is not the online calculator, you'll work with a financial planner who will do "monte carlo" modeling to show you the likelihood of your money lasting as long as you do!)

Hi Terry, just wanted to say hello here in your column, reading some of them, I am not sure but I think my not having money is easier to manage than trusts and stocks and such LOL Anyway I have raised 4 kids who all graduated high school and they are all wonderful ,kind people,, Quite proud of them . The youngest was the only one to go to college, and it has been a nightmare with student loans!
SAVAGE SAYS: Well, you make a point! I'm proud of you, and glad you are a regular reader. Now it's your turn to enjoy life as much as possible! Thanks for your note.

I am interested in buying a stock mutual fund. Could you please recommend one or two sources that would give me the information concerning the various funds. I would prefer a no load. Thank you. SAVAGE SAYS: Go to www.Morningstar.com and spend some time at that website. You will learn everything you need to know about mutual funds -- and then you will get some great advice about choosing one to get started.

I'm 63, wife 66. She has a tiny pension, and Social Security of $975. I just retired, will have a $3400 pension, almost no COLA. With those 3 monthly checks, and likely a few thousand dollars of annual part time work by me, we have just enough for our expenses. I have $190,000 in deferred comp, maybe 3/4 in stock mutual funds. Only 3% of that is in a Roth account, rest taxable when withdrawn. When we do hit an extraordinary expense, like replacing a car or other, what should I tap first, my deferred comp or take early Social Security? If I take it now I would get $1766, if I wait till I turn 66 estimated as $2096.
SAVAGE SAYS: If you'll wait two weeks, I'm about to write a column about a new Social Security calculator that will help you make that choice. But I think you'll want to wait to take SS, because of the higher payment, and because future COLA increases will be based on that higher payment. The real question is whether you should work at least four more years, maybe longer, to put your retirement on solid footing. To get some help on that go to www.choosetosave.org and use the "ballpark calculator" to evaluate your situation. This is a great website, and calculator put up by the non-profit Employee Benefit Research Institute.

I'm 50 and have an IRA and a Roth IRA. Neither has much money in it. One is BEQGX (american century equity growth fund). The Roth is an international stock fund that I want to change to something else. I looked at Vanguard Total Stock Market but that seems to have alot of overlap with the American Century I have. Any ideas on what I should look at? I have alot of catching up to do. Lastly, can I invest monthly in both an IRA and a Roth IRA? Work has no 401K plan. Thanks. SAVAGE SAYS: You can contribute to one OR the other -- up to the limit -- which will increase in 2013 to $5500 (under age 50) and $6500 if 50 or older -- and that's assuming you meet the income levels for a Roth: $178,000 to $188,000 for married couples filing jointly
$112,000 to $127,000 for singles and heads of households -- But if you contribute to one this year, you can use the other next year -- thus balancing out your tax situation for retirement. Go to www.Morningstar.com and usetheir portfolio X-ray tool to find funds that do not overlap. But if you are sticking with large company growth funds, you are likely to have an overlap, even if you use an index fund and a managed growth fund.

Retired in '87, was refused lump sum, heart. Monthly retirement amount halved so that wife would at least have reasonable income on my passing. We now have approximately 80M savings in company credit account. Never invested all these years. We're both 84? Kinda late now to do much of anything??
Kindest regards, SAVAGE SAYS: Yes, kind of late -- so keep that money safe in your credit union. BUT what you should, must do now is make sure your will or estate plan is up to date, and that each of you has given your physician a copy of your healthcare power of attorney (detailing who will make decisions if you cannot) and a living will (explaining your wishes for end-of-life care). Betterto think about this now, and not during a crisis. Also if you do not have an adult child to handle things for you as you age, you should speak with your credit union about getting some help in that area.

Hi Terry...BIG FAN as you well know...It's a joy to hear and read your words. Quick question...What is the interest yield range of bonds or Treasury Notes. I have a fixed annuity maturing and I'm not interested in tying money up again for 5 -10 years and subject myself to penalties, with a microscopic rate of return. Other than stocks..any fixed short term growth vehicles you can recommend? SAVAGE SAYS: Well, this is the BIG question being faced by every investor who wants growth, and fears inflation. If you already have enough in stocks, I'd suggest leaving it in a money market fund. I know that's just a 'break-even' proposition --but I fear that all this moneyh creation by the Fed will lead to inflation and higher interest rates, so I'm not locking up my "chicken money" for longer than a year! You can do that at www.TreasuryDirect.gov, buying Tresury bills, or in a bank MM deposit account.

Terry, I enjoy reading your comments online.

I am 71 years old. My husband died in January, 2013. I have $200,000 in stocks and 107,000 in T Rowe Price Equity Income Fund. I am only receiving his SS, $1100/month. I will need $3,000 more each quarter to live comfortably and pay utilities, insurance, taxes. Should I sell stock each quarter to get the $3,000/quarter or would it be better to withdraw $3,000/quarter from the T Rowe Price? Which would result in less costs and less taxes each year?

Thank you. SAVAGE SAYS: Well, I think you're in a pretty good position. T. Rowe Price Equity Income fund is my all-time favorite fund -- probably because I invested in it so many years ago, and my account there has grown so nicely! It is a 5-star fund! BUT, it also means you are in the perfect place to get some terrific help. T. Rowe Price offers a free Retirement Investment/Income analysis to its clients - a service that I recommend to everyone! So contact them and ask to work with one of their financial planners to come up with the right balance of investments that will give you income without forcing you to sell stocks at the "wrong" time. You'll be glad you went through this service, and please post again if you still have questions.

how does primary beneficiaries and contingent benef. work? I have more than 1 primary ben. and more than 1 contingent Do tALL primarys have to die before contihgents collect? SAVAGE SAYS: Typically the term "contingent beneficiary" means the person named to receive assets if the "primary" beneficiary is no longer alive. But in the case of a trustwith specific restrictions, it could man "contingent" on certain other things specified in the trust -- such as, "my son will receive this contingent on remaining married . . ." I'm not sure whether you're referring to a retirement plan at work, or a life insurance policy -- or some kind of trust. So it's difficult to give you a specific answer. You should ask the HR department if it is a workplace retirement program, or the lawyer if it relates to a will or estate plan.

I have two older kids with 529s with t Rowe price AL. I've moved a chunk into money markets because of shortening term until college. Therefore choices and fees are not a concern. I was thinking of opening a 529 for both and moving 10k per year into IL 529 strictly for the tax break. Is there anything from stopping me from doing this every year as on a net basis I figure I will come out way ahead just by moving from one m mkt investment to another? SAVAGE SAYS: Don't fool around with this college money. Leave it where it is. Getting an income tax break on $10,000 a year put into the Illinois 529 plan just to get a break from state taxes, isnt worth the hassle. And I'm not sure that it is even legal, although you can transfer from one plan to another. Obviously, you're smart enough to figure this out -- so use those smarts to figure out how to contribute MORE to the existing plan, or to a new Illinois plan to build that college fund.

My brother rolled his Il State Teachers Retirement of $95,000 over to a money market on November 1, 2012. On November 15, 2012 he withdrew $75,000 to pay off debts (not medical), then left $25,000 in the money market for an IRA.. Would his basis for tax purposes be $25,000?
SAVAGE SAYS: IRAs do not have "basis". All withdrawals are considered ordinary income. And if he withdrew before age 59-1/2, he would also be subject to the 10% early withdrawal penalty. I would assume he received a 1099 form from the custodian, detailing his tax liability. And, I just realized, I assumed he "rolled" the retirement plan into an IRA. If he just tookthe $95,000 from the plan and put it into a regular money market fund, he would owe ordinary income taxes on the entire withdrawal!

Dear Ms. Savage,

Recently my uncle passed away and has made me the trustee to his trust. Included in the trust are investments in Behringer Harvard REIT I which I have very limited knowledge. Through the financial advisor I have been informed that this is an illiquid investment even in the event of death. Since this has been left with me to deal with I am at a loss as to how to handle this account. Within the trust, besides myself are 5 beneficiares. The financial advisor has been very evasive with me. I am trying to research what past information I can gather on this investment my uncle made but I feel I have no recourse.
Thank you very muchf for your help.
Kathleen SAVAGE SAYS: Ok, a couple of things come to mind. First, you need to contact the trust itself, to see if there is a liquidity opportunity in the case of the estate. Here is a link to their website: http://www.behringerharvard.com/ (I found it by searching the REIT organization website, www.nareit.com.) There is a "contact' button on the website, so I'm sure you'll be able to get specific answers from them. The other thing that raised a question is the response of your father's financial advisor. I wonder why he didn't do this for you -- get this info from the REIT. Is that because it was an "inappropriate" investment for your father? Just wondering. But if you don't trust him or her re this issue, then don't use him for future investment advice. And I hope he isn't also the attorney for the estate. Hope this helps. Do write back and let me know what happens.

Terry, I wrote you a response reference the checking account tatic used by this agency not doing replacements. Can you provide your direct email. I think you might be interested
SAVAGE SAYS: I'm not sure what you are referring to. You can always email me directly: Savage@Suntimes.com. But in general, unless privacy is an issue, I respond on my blog.

I am 68 and retired my wife is 60 and still working. When is it better for my wife to start collecting social security at age 62 or wait until full retirement at age 66? When my wife is 62 I will be 70 and have have to do the mandatory withdrawal form my 401Ks, I am not withdrawing anything now. SAVAGE SAYS: Look for an upcoming column on that subject that will give you a great calculator to use in making this decision!

Have not seen anything since feb. 13. Is it my computer? SAVAGE SAYS: I'm just catching up! Was on a speaking event in California last week!

Dear Terry,
I am retired on disability and a pension, after 34 years in the construction business.
I have an annuity plan that I don't know what to do with. I don't know if I can withdraw it without a penalty.
I am 55 years old and survive on a pension and social security.
Any advice. SAVAGE SAYS: Please contact the person who sold you the annuity, or the company that issued it, and get the details. Then get back to me. There may be "surrender charges" that prevent you from withdrawing some or all of the money. Ask about those. And also ask how much money they would give you in the form of a check a month for life --and how much they would give you in a lump sum. Of course, a part of any withdrawal will be taxable, based on the earnings in the account -- assuming this annuity was not purchased within a retirement plan. If it was part of a retirement plan, then all of each withdrawal will be taxable. Ask about the taxes, too. Then post that info and I can respond more accurately.

Hi Terry,
I'm back again, asking for your help & suggestions.
You've helped me in the past & I have also read many others' questions sent to you & your replies to them of which have been a great advantage , especially to us many Seniors.
I have a bank IRA ( 5 yr. CD ) that will be maturing in Sept., of this year.
Would it be wise to roll over to & invest this IRA ( $100,000. + ) with Vangard, Schwab, Fidelity, etc.when matured ?
I know that you highly recommend these companies but not sure at my age of 82 that this would be your recommendation in my situation ?
Should this not be a good idea for me, could you please offer any other suggestions ?
An "Amerprise" financial adviser has approached me , asking that I allow him to manage this account after maturity with them.
Should I go with this idea or stay with a new bank IRA CD , although the interest rate is hardly much ?
You are Much appreciated ! SAVAGE SAYS: I know you're not earning much interest on a short-term CD -- but I also know you won't lose money! And at your age, that is the primary goal. So please take my suggestion and keep rolling the money in a short-term (1 year or 6 month) CD. That's assuming you don't need to withdraw some cash to live in in the coming year. I don't know how long it will take, but one day interest rates will rise --and you'll be glad you have this flexibility. Of course, I'm making some assumptions with this advice -- assuming that it is a high priority to keep your money safe, and that it is a significant part of your assets.


My husband is retired and I will retire next year. We both have pensions and social security that will replace 85% of our current income. We have $638,000 in tax deferred IRA and 401K accounts. We have bought land and are thinking about paying it off and building our retirement home. In the next 2 years, we would be using $88,000 from our IRA's and would be left with a balance of $550,000 for our retirement IRA's. Until we have to take RMD's, we will probably only withdraw from 2 to 3 % from our IRA's. We each have health insurance and long-term care policies. Does it sould like we have a solid plan for retirement? SAVAGE SAYS: You're leaving out a lot of important facts, including how much money you need to spend each year, how you are investing the IRAs, and how you figure your life expectancy. (For a hint on that go to www.livingto100.com -- you might be surprised!) -- Then I'll give you two suggestions. If you want to "do it yourself" go to www.choosetosave.org and click on their "ballpark estimator" tool. That will allow you to see just how long your money is likely to last --and whether it covers your life expectancy. Or you could contact T. Rowe Price at 800-638-5660 and ask about their retirement income/withdrawal advisory service. It is free if you have some money with them, but $500 if you don't. And it is well worth the price, because you'll work with a financial planner who can explain as well as giving both investment and withdrawal advice.

I need to take some money from my IRA for a business I've started with my husband. (Yes, I know I shouldn't take since I'm only 50 but we need the cash for the business.) i have small amounts in both an IRA and a Roth Ira. Which one should I use? SAVAGE SAYS: Don't do it! Please, don't do it. Tell your husband I said so! You may lose not only this money -- but all the future growth on it. Remember the old Savage Truth: Desperate money never makes money!

I have a small amount in a mutual fund. I want to keep investing in the total stock market but the DOW is really high. Should I continue to invest or have I missed the boat by sitting on the side lines too long? SAVAGE SAYS: Only time will tell!! Was it "too high" a year ago? Two years ago? Please read my book -- The Savage Truth on Money and you will understand why the market is never "too high" (or "too low") and why you must make and stick to a plan of regular monthly investing for long-term success.

Insurance Agent lied on the application to generate more business. The agency surrended my annuity and instead of using a correct 10x35 exchange paperwork, he recommended that I place my funds into my checking account, then wait for the money to clear and then write a personal check to the new insurance company. He did NOT state the money was from another annuity and lied on the application to avoid transerfer paperwork and to by-pass the laws regarding annuity transfers. I lost surrender value, taxes to be paid, and the loss of my tax deferred
product. He said that My bonus would recap the loss, but didnt tell me that it would take 14 years to get the difference. I have done some research and all points to fraud, can anyone help, what should we do. ? Concerned Senior citizen

SAVAGE SAYS: Ugh -- I absolutely hate these stories. You need a lawyer. Contact Andrew Stoltmann -- He specializes in this type of securites law -- His contact info is: Stoltmann Law Offices
10 S. LaSalle, 35th Floor
Chicago, IL 60603
p: 312.332.4200

Have a 401K rollover to IRA,age 60 with 7220 active. Can I gets funds for dedt without penalties?
SAVAGE SAYS -- Since you're over 59-1/2 you can withdraw without penalty -- BUT you will owe ordinary income taxes on the money. So be sure to set some aside to pay the taxes next year, because you don't want to pay down this debt and then wind up owing taxes to the IRS!

My plant closed and I have to transfer my 401K into a rollover. My wife has all of her retirement investments with Vanguard. I understand what market risks are. However since AIG and the banking issues, I am worried about most of our retirement money in one Company. In the unlikely case that Vangaurd pulls an AIG or even worse, the company mixes company money and clients money, how safe is my money in the individual Vangaurd funds in the event Vanguard has issues? The total between my wife and I would be a little over one million dollars. Should I just split our accounts between 2 no-load mutual fund companies? Or is there some kind of insursance for this at the larger companies? Thank you. SAVAGE SAYS: I have absolutely no doubt that there is no issue with having all your money in Vanguard. But if you will sleep better at night using two different fund companies, go to TRowePrice.com or Fidelity.com. You'll still have an excellent, low cost choice of funds. And yes, your money is protected up to $500,000 by the Securities Investor Protection Corporation in a securities account -- protected against fraud --but not against losses stemming from your investment decisions!

Terry the money we received from the southwest home equity assurance program- our taxman says is taxable because we were issued a 1099 Miscellaneous Income form. But the program says we don't. Should we have been issued a different 1099? It around 10,000 difference! SAVAGE SAYS: Was this a Federally insured Reverse Mortgage? If so, then the money is not taxable and this is a mistake. But if a company issued you a 1099 form then I doubt this is a reverse mortgage. Contact them and ask --and then get back to me on this blog.

I have 110k in a pension plan from a prior employer. I am interested in putting it in an annuity, but I would like to avoid tax charges on the withdrawal. What options do I have in order to accomplish this, and what would be the approximate monthly income that I could generate from this amount of money? I would be looking at a joint and survivor annuity, but could consider something that would still retain some principal if the numbers came out somewhat favorably. Can you help me? Thank you. SAVAGE SAYS: I'm presuming that the prior employer's plan will allow you to "roll" a lump sum out of that plan. That's what you should do -- roll it directly into another contract, so you don't pay taxes until you get the withdrawals. Now, you probably read my most recent column on annuities (available at www.TerrySavage.com) -- so you know there are many different kinds of annuities, different deals and costs and restrictions. I send everyone to the one person I trust in this business -- trust enough to have purchased my own annuities from him -- So contact Jeffrey.Oster@raymondjames.com and get some specific ideas from him. And if you just want an immediate annuity -- to cover your life, and that of your spouse -- then you can compare what you could get by going to www.immediateannuities.com, enter your specific situation and the amount of money you want to invest, and you'll get a good idea of what major insurers are offering in terms of immediate annuities.

Option stock trade vs. buying the stock with no options. How (if possible) can you make more percentage in an option stock trade? For example purposes, could you show the difference in starting this same long trade of XZY stock at $10.00/share and closing it at $20.00? Thank you.
SAVAGE SAYS: When you buy an option, you can "control" a larger amount of shares for a small price. BUT you have to be right on the direction of the stock -- AND the time period. The option might expire in 6 months or a year, and if the stock makes its move after that expiration, your money is down the drain! For more on understanding options, go to www.cboe.com, and click on the "education" tab.

I'm 701/2 live in Texas I will withdraw my first AMD from an IRA this year, Same old story I was sold annuities I have two that are Non Quilifiing one has no surrender and I would only pay2,605 in taxes would be annuitized 31,000 tax free the other one has surrender value 2,979 with tax free amount of 40,615 the only problem my income next year 2013 would be about 60,000year would it be worth it to get out SAVAGE SAYS: Could you please write back and explain more clearly what it is you own?? I see you have two annuities. I know that if they are NOT part of your retirement plan -- non-qualified money -- that you are not required to take money out. So I don't see how this impacts your RMD each year. Or did you buy them inside your IRA? In that case, you need to ask your agent how much you can withdraw each year based on a "protected withdrawal base." Details, please.

Thank you in advance for your advice. Single female, I turned 70 Nov 2012. Unemployed -- Company closed Dec 2012. Have 401K worth $117k at 12/31/12. Stocks 75% Bonds 25%. Will have to take a minimum distribution from 401K by 70-1/2. Shd I convert to traditional IRA? S/S monthly income $2950 after ins premiums deducted. $58k mrtge on $125k home. RE txs $4599/yr, No cc or other debt. Appx $20k in svgs+chkg. Good health. Employable. Wd an annuity be an option for any of 401k or IRA $? What is more appropriate distribution for my age/status of my 401K or IRA $? No dependents or other responsibilities. Very much appreciate your time and advice. SAVAGE SAYS: I have the perfect answer for you. First, yes, you should "roll" your company plan into an IRA. I would suggest you contact T. Rowe Price (800-638-5660) to help you in this process. Then, you can take advantage of their free (because you have money invested with them) Retirement Income/Withdrawal modeling plan. You will work with one of their financial planners, who will show you how to invest, how much you must (or can) withdraw -- with a reasonable certainty that you will not run out of money before you run out of time! They have top-rated mutual funds, no-commission, low annual fees -- so this is the place for your money, even if you decide not to take their advice. If you do go through the program, please write back and let me know what you think of it! Everyone I have recommended it to has been very pleased.

I have 40 quarters in S.S. so I qualify to collect . But I receive a pension from the city of Chicago of about 50,000 per yr. will I collect anything at all? What do you think. I'm also able to gat Medicare SAVAGE SAYS: I don't know when you're planning to retire, but I'm quite sure you will get money from Social Security,and I am presuming that if you retire in the next 5 years, your Chicago pension will also come to you. But you may not get other benefits which the city promised in the past -- and if there is an annual cost of living increase in your city pension, that may be removed or adjusted downward at some time in the future.

How much of ones retirement should be held in gold? What type of gold do you recommend and where would I purchase it? SAVAGE TRUTH: Hold only a part of the money you do not plan to spend in retirement! Gold should be used as an "insurance policy" against inflation, which destroys the buying power of your other retirement money. The price can be volatile, so you shouldn't buy it all at once. Buy a mutual fund that owns gold stocks -- Or buy coins from a legitimate dealer, take possession of the coins, and store them in a safe deposit box. The price of a "bullion" coin, such as a Canadian Maple Leaf or an American Eagle should be no more than 5% above the actual bullion price, which you can find online daily at Kitco.com. If you live in the Chicago area, I recommend purchasing coins at Harlan J. Berk in downtown Chicago.

My mom is 62 years old. She had 109,000 in a thrift savings plan. She rolled it over to a traditional IRA at our local bank. She took out 35,000 and did not elect to pay taxes. Is she subject to the early distribution tax for withdrawing the 35,000?

Thanks in advance! SAVAGE SAYS: Once she is past the age of 59-1/2, there is no penalty for "early" distribution. BUT she still must pay ordinary income taxes on thewithdrawal. That amount will be added on top of her other income (from Social Security, or interest, or other work income). It could push her into a higher tax bracket - -and might even impact other programs she would otherwise qualify for, such as food and medical assistance from your state. I hope the money went to a good cause -- because she has lost the future tax-deferred growth on that money, as well.

We owe 180k with 12 years & 9 months left on our current 15 year fixed mortgage via Kinecta CU. Rate is 3.65. Equity is $420k. Our First Entertainment CU is offering a 10 year at 2.5%. Zero pts or origination fees. Closing costs would be $1500 to $2000. I calculate we'd save $25,885 interest with a 10 year loan, though payment would go up from $1514 to 1715. Called Kinecta & banker said interest rates are rising, Kinecta can't match 2.5; nor could he advise us to refi from a 12 year plus down to a 10 year, saying our PAYOFF WOULD BE THE SAME when closing costs and the Federal tax deduction for interest paid over the remaining life of the loan are calculated. Do you understand his logic? SHOULD WE REFI? Also, I asked Kinecta about home equity loans, since we have one kid in private college, another going in September and the interest on a home equity loan would be less than a Direct Student Loan @ 6.8 or the Parent Plus at 7.9, given our income ($180k plus) Kinecta "isn't much in the business of home equity loans" replied banker. He suggested we shop other banks for a more competitive rate. Terry, how do YOU feel about judicious use of home equity loans to help bridge the gap between college costs and family/student earnings, savings, scholarships, work study, etc. Please don't say community college. Too involved to get into but that's not much of an option. State of California has an overburdened, underfunded state college system and it's a nightmare. SAVAGE SAYS: I think I'd go with the shorter loan at the lower rate -- but ask them why closing costs are so high? You may be able to apply some pressure -- or shop around for an even better deal. Now, if your mortgage were your only issue, you'd be in good shape --It's great to have your home paid off by the time you retire, and great to lock in current low rates. So don't delay, as rates have been rising! Now, to the second part of your question. I recognize that home equity loan rates are much lower than PLUS loans -- BUT HELOC rates typically float -- and are likely to float UPWARD in the coming years. I think it's a huge mistake to take out a home equity loan to finance college. And it's equally hard to recommend PLUS loans at their insane rates. You told me that you won't consider two years at home at a community college for your child -- but that's the obvious answer. What else do you see as an alternative???

Hi Terry,
When my widowed daughter lived here in Illinois, she opened a 529 plan for my grandson, who was 3 at that time.. She has since remarried and moved to Wisconsin
She now has about $14,000.00 in the IL 529 ......should she keep the IL 529 or transfer it to a Wis 529 plan. My grandson is now in 7th grade and keeps a 4.0 grade average....for some wonderful reason, he does not take after me or my daughter and always gets straight A's .
Please let me know what is the best course regarding his 529 plan.

Thank you !!!!! SAVAGE SAYS: As you know, you do not have to be a resident of a state to use their 529 plan. I have not recommended the Illinois plan since the allowed one of their managers to remain as part of the plan, despite a settlement for mis-management of their section of the plan. BUT, you don't have to switch to the Wisconsin plan, either. In fact, at Morningstar.com you can see the ratings for the top 529 plans. Wisconsin doesn't get any stars! I suggest she transfer the plan to either Vanguard or T. Rowe Price -- each of which earns Morningstar's top rating! The process is simple, and they'll handle the transfer. They have lower costs, better choices of funds -- and the money can be used for any school in any state. The only advantage to using your own state's plan may be a small tax deduction -- and this is rarely enough to offset the costs of a badly managed or expensive plan.

I am 69 1/2 years old, already retired and want to Rollover my $100,000 401k to an IRA. My main objective is conservation of it, growth is secondary. At age 70 1/2 I will be required to take Minimum Distributions from either my present 401k or a Ira I rollover it to. Would the Vanguard target retirement funds be the best place to rollover my 401k into an IRA or are there a better choices you could recomend?

Thank you in advance SAVAGE SAYS: It's a good idea to do a rollover, and Vanguard is a good place for your account. But you might benefit from their free advisory services, instead of just a target date fund -- since those are most effective in the accumulation years. They will handle the rollover and they will help you distribute the money appropriately in their funds.


My friends husband is in a nursing home.
My friend claims that Medicaid is paying for the nursing home.
Can she still be receiving his Social Security check as well as her own?
Thanks and please delete my email address after you answer me.
SAVAGE SAYS: If your friend's husband is receiving SKILLED care, (nursing care), then Medicaid will pay for a limited number of days after a hospital stay. But if it's just "custodial" care -- ie help dressing, feeding, toileting, then Medicaid will NOT pay. And yes, he is alive, and so his Social Security check is still being sent to him.

I am 64 and work in a steel industry. It is very physical and I need to retire. I have some medical issues and I don't see how I can afford it. My problem is that I have over $28k in debt plus an $800 mortgage, utilities etc. Refinancing is not an option.
I have about 40k in an IRA and after taxes etc it would be gone if I use it to pay my debt.
I do not see that I could I make it on a small pension ( around $1200 monthly until social security.? Please advise.
Thanks SAVAGE SAYS : This is the kind of question I hate to receive -- one with no good answer! I'll make two comments, though. First, it does help to have another set of eyes looking over your situation -- but I can't do that because I don't know all the details. So please call Consumer Credit Counseling at 800-388-2227. That will connect you to the nearest local office, and they can give you more specific advice. It may be that bankruptcy on your credit card debt is your only option -- but they will know whether that impacts your home and IRA in your state. (In most states they are protected, as long as you are current on your mortgage payments.) The second thing is to think creatively inside your current job. You really have a potentially big gap for healthcare -- until you reach age 65 and get Medicare. So you should plan to work at least that long, but maybe in a different sort of job if your company is willing. And finally, there are others in your situation. So if you own your home, you might find a friend to rent a room in your house. Or consider other odd jobs to supplement your income when you do retire. That's the part about thinking creatively, which is tough when you're only looking at the current burden. Best wishes, and please write back and let me know what you decide to do.

Hi, Terry. Thanks for all your educational advice. I have $70,000 in a VALIC 403b. I'm 63, retired from public school teaching with a pension. I don't plan on using the 403b for some years to come. I think I should redistribute my asset allocation and would like your advice. Right now it's very conservative and I know you have said to have some money in stocks. My current allocation is: Money Market - 27%, Fixed Account - 27%, Vanguard Wellington - 19%, Vngrd LT Corporate - 15%, Core Bond - 9%, Vngrd LT Treasury - 1.7%, Growth Fund - 0.37%.
Other funds available to me are: Mid Cap Index Fund, Stock Index, Small Cap Index, Sci Tech, Vngrd Windsor II, Small Cap Value, Mid Cap Value, Ariel, Ariel Appreciation, Large Cap Growth, Mid Cap Strategic Growth, and Emerging Economies Fund.
Any suggestions however general would be appreciated. SAVAGE SAYS: I don't think you understand how risky your portfolio really is. You have more than half of it in bond funds. And if interest rates rise, those fund prices will fall! It's OK to have a quarter of your money in a MM fund -- but otherwise you might want to GRADUALLY switch another 20 percent out of the long term corporate and into a conservative stock fund. I don't see an equity-income fund among your choices. If you're retired, you might want to think of dong a rollover to a place like Fidelity or T. Rowe Price where they will guide you into a better choice of funds that are more appropriate for your age. Remember, most of those funds are designed for current workers who are looking for growth, and not preservation of capital. T. Rowe Price is 800-638-5660 -- Call them and ask about their services to help you continue to grow your money -- and plan for retirement withdrawals.

Hi Terry,
Have used your advice before looking for it again. My wife just got a big raise so we now have a extra 1,000 a month.we have a morage of185,000 at a very low 3.25 interest a V.A. 30 yr fixed. Should we put it toward the morage or invest? What would you do? If invest ? In what? Buy gold.? SAVAGE SAYS: Well, that's a bit like a doctor trying to prescribe based only on knowing your temperature! First, if you have any other consumer debt, pay it down. Second, are you both saving at work, and putting the maximum in your retirement plan -- especially if you get a match? Third, do you have, or plan to have, children, and thus may need a college fund? If all of those are taken care of, and I'm assuming you do not qualify for a Roth IRA based on joint income, yes, I would start investing that monthly sum. And to keep it simple you'd want a diversified investment portfolio -- something like half in T. Rowe Price Spectrum Income Fund and half in their Spectrum Growth Fund. Or the T. Rowe Price Equity Income Fund. Or the Vanguard Star Fund. All give you wide diversification. Learn more about them at Morningstar.com.

Terry, we have a 24 year old son, who recently graduated from college and to begin paying off his college loans, was forced to take a job as an independent trucker. Given his expected increased income, he has been balking at our suggestions to start contributing to an ira. He has the added advantage of holding no mortgage on his townhome he completely bought with proceeds from an accident. He says he will start a savings account but as you are well aware, savings accounts have very modest interest rates. What would you advise? Also, what would you advise for him at this time taking out life insurance on himself now that he is in highly risky, dangerous position as trucker carrying highly flammable. His main debt right now is his student loans, while his parent help him paying monthly $370 for parent-plus, he and his live-in girlfriend will be paying about $500 per month. SAVAGE SAYS: I think you already know my answer. Without doubt, he should be paying off his student loans. And if he is making enough money to do so, he should be paying the portion his parents are paying -- so they can save for retirement. As for life insurance: Who would be the beneficiary -- the girlfriend, or the parent? And then what would you do with the money if he dies??? Why pay the costs of life insurance products, when he would be better off in the long run NOT paying the interest on his student loans!

2 days after my husband passed away, my step-daughters withdrew each $4,600 from his bank account thru internet banking.

I have transferred $5000 to his account to pay a loan/debt
The daughters refused to pay back anything.
He did not write a will & has not put anyone as beneficiary.

The bank account is opened in Colorado & he passed away in Vancouver Washington. SAVAGE SAYS: I'm going to suggest you contact a lawyer in the state where you live (and where he died) immediately. That will tell you your rights. If the daughters had a joint account with their father, they were entitled to the money --and you acted foolishly in giving him money to put into that account. Absent any loan agreement, there would likely be little chance of getting the money back. But as his spouse, in most states, you are entitled to at least 50 percent of his assets, if he died without making a will (and you would get everything that was held in joint name with rights of survivorship). It looks like that checking account that held your "gift" money was not in your name. There are two lessons here: Don't make gifts and expect to get the money back. DO make a simple will even if you don't have a lot of assets, to avoid family fights after your death.

Can I file in small claim court as this $5000 is not a gift

Can I file in Colorado or I must file in Washington state

I am 54. I can take a full retirement in one yr. I have 250000 in 401. I have mortgage of 1500. I can take an accerated pension of 2500 until I'm. 62. I will continue to work somewhere. Do I have enough to take my retirement? SAVAGE SAYS: That all depends on how long you expect to live, and the style in which you expect to live! I think you should either make an appointment with a certified financial planner just to get a more specific analysis. Or go to www.ChoosetoSave.org and use the "Ballpark Estimator" tool to do some estimating on your own. BUT, I think what you are really saying is that you don't want to do your current job anymore --but are willing and able to work at something else to bring in income. That is the sign of a midlife crisis -- and you should not ignore it. Too often, life is shorter than we expect. You are not chained to this job -- but in this economy you are lucky to have one. So do your research, make a plan, determine that you can stick to your spending plan, and don't forget to consider the impact of inflation (which you'll see in the Ballpark calculator). Then if you feel confident in making the move, you will be better prepared.

Hello Terry!

I have benefited from your Chicago Sun-Times articles.
I am a senior who wants to sell her timeshare, ( Westgate Vacation Villas), that I purchased in Kissimmee, Florida in 1983. I understand that the market for the selling of timeshares is weak. However, while vacationing at Westgate Vacation Villas in November 2012, a few purchases were acknowledged. On the internet, I found two realtors that may be acceptable for me to use, for which I would be thankful for your opinion, or other suggestions. They are 1)Premier Timeshare Resale Realtors which is associated with ReMax and 2)Timeshare Realtors. I look forward to your response. SAVAGE SAYS: OK, timeshare is not my strong suit, so I consulted a friend involved in the industry. He warns that most of those resale sites charge upfront fees, and don't deliver! But he gave me this website for you: http://tug2.net/ It's a website called "Timeshare Users Group" and they have no upfront fees for listings. Again, do your homework --

Thank you,
Geraldine T.

Hi Terry,
My mother is 86 and has a yearly income of $19000 per year through SS and a widow's pension. She has $95000 in an account (Allianz Power of 7 Annuity) which she wants to withdraw. It's now 10 yrs. so she avoids a withdrawal fee with them.
She wants to help her three grandkids and some of her own medical expenses.

How will this withdrawal affect her financially/taxwise? I took her to an accountant
about 5 yrs. ago and due to her income, he said she did not need to file any taxes unless her income increases, which it won't, except for this instance.

I guess I'm asking is there a smarter way to withdraw this money other than a full
withdrawal, in order to avoid taxes or whatever?

Thank you very much,
Eileen (her daughter) SAVAGE SAYS: Before I can answer, YOU have to contact the annuity company and find out what the death benefit is -- the amount her heirs would get when she dies, if she hasn't withdrdawn all the money. Ask them to project, if she dies in 3, 5, 10 years -- at the current rate of withrawal. (I presume she is already withdrawing a monthly sum -- but is not "annuitized", which means the insurance company would keep the balance at her death!) Then, get back to me and I can give you a better answer.

Hi Terry, I emailed you several years ago after I had paid off 58,000 in debt. I am still debt free except for my mortgage which is a small payment every month of $227. I lost my job of 39 years a year and a half ago and drew unemployment until the benefits ran out. Being 61 years old I have not been able to find another job. I sent out a year and a half of resumes with only three interviews. I am not counting on being able to work again. I draw a widows pension of $1050 from SS and am drawing $504 a month out of my IRA. I will turn 62 in April and could draw my own SS which would be about $200 more a month than what I am drawing now. I have decided to keep drawing from my husbands as I am now and switch to mine when I get full retirement age. It will be a considerable difference of about $600 a month from what I am drawing now. Is this the right decision? I think it is but really respect your opinion that helped me get myself out of debt before. I am able to live off what is coming in now though it is tight. Your advice would be appreciated. Thank you. SAVAGE SAYS: Well it is great news that you are out of debt -- and very sad news that you're out of a job. Keep sending out resumes, as the economy is picking up. And look for other kinds of work -- perhaps even babysitting for a working mom could add a little bit to your income. And yes, I think if you can stretch it, it would be wise to delay receiving SS on your record until you get the full benefit amount. I know that health insurance will also be a problem until Obama-care is fully enacted, so try to take good care of yourself. You've come so far, I'm sure something will open up to add to your income. Keep trying!

Should I convert my traditional Ira to a Roth IRA since my family only makes $55,000.00, my husband will start collecting social security as well but I see our income only going down, not up? SAVAGE SAYS: I see no reason to convert, and if you do, you'll owe taxes on that amount next year. Just let the money keep growing tax-deferred as longa s you can, and until you're required, at age 70-1/2 to take minimum required withdrawals.

Terry, before I begin, I would like to thank you for all the valuable information I have received from you, your books and your personal appearances. My question is: If the economy collapses what happens to the stock market and the shares/money we have invested in it? Thank you. SAVAGE SAYS: We've already seen what happens. The economy DID collapse in March, 2009 -- and the stock market (the DJIA) went down to 6700. At the time I urged people to stay calm, and keep contributing and investing within their retirement accounts. Today we are within 4% of the all-time highs! That's not great market timing on my part -- It's a belief that America can get through the toughest times, and will grow in the future. This is where you will live, and retire -- so you should keep investing here. And if I'm totally wrong, and the economy completely collapses, and the stock market with it -- then we'll all have more important things to worry about than our investments. But there could be periods of several years when stock prices fall again. That's why I always advise having some "chicken money" in the bank (even earning almost no interest) so you aren't forced to sell your stocks at the bottom, but instead have some money to live on, whether in retirement, or just to keep you from panic during a market decline.

Terry - our son is a junior in high school - we have been saving for years and I feel we have done a pretty decent job. We have also reached the point where we need to buy another car. Our credit rating is very good. We pay all bills on time, and do not carry any balances on our credit cards. Our debt is only made up of our mortgage ($260,000) and our two auto loans ($31,000).

My question - if we take on another car loan, how negatively will this affect our credit rating as we prepare to take on the college loans? Will we need to pay a substantially higher interest rate? We could possibly pay a car in full up front, but would then not have as much in savings. Is it worth taking on another car loan if it causes us to pay more down the road for college?


Dan SAVAGE SAYS: The additional car loan won't impact your quest for financial aid, which is based on income and assets. In fact, it might even help to show less in available savings. The real question is whether you can carry this additional debt -- and pay the "expected family contribution" for college.

Additionaly, my expert on this topic, Joe Orsolini, of CollegeAidPlanners.com, makes this very good point: "Spending the money on a car that you NEED is a good strategy to reduce your assets for calculating your "expected family contribution" for college. The rates on federal student loans are predetermined and do not fluctuate based on credit score. All students that complete the FAFSA automatically qualify for loans - credit scores are not even checked. While federal parent (PLUS) loans do check your credit score, be aware that they do not examine your ability to repay the loan...which makes it easy to get over-extended."

If my semi weekly gross pay is the same as in 2012 why did the Gov`t deduct approx 2 % more from my Soc. Sec. deduction.on my pay check? SAVAGE SAYS: Weren't you keeping up on the "Fiscal Cliff" discussions. For the past two years you've had a reduction in FICA (Social Security) that was deducted from your paycheck. As of Jan, 2013 that "gift" went away, and you're back to paying the full FICA contribution!

Terry, my sister and I have joint ownership of a vacation home in Northern Wisconsin which lies right on a lake and which was given to us by our parents in which they had been going up to the lake for over 60 years. My sister is hinting now to me that she would like to sell her half to me this year. I've already talked it over with my family, and my kids love the place and thus would like to keep it. Problem is I am retired now with a company pension and social security to start in 1 1/2 years. Even though my wife still works at $85K per year, I don't know whether we can afford it what with us paying a portion of our 2 kids college loans. The property taxes which had been evenly split between my sister and I is $1300 total per year and the homeowners association and other expenses over year amounts to $8K year. What options make sense to you- the place is worth $200K+. Would 2nd mortgage on that property with us buying out sis's portion for $100K: taking out $100K from my 401K or selling our half to her? If we decide to sell our half, it reminds us that it costs $1000+ a week to rent up there when we decide to vacation in beautiful Wisconsin. Plus, my kids would probably crucify their old man if I tell them we sell. I really need to find a way to keep it if not only for the nostalgia and my parents. SAVAGE SAYS: Ah, that is truly a tough decision. And having a Wisconsin vacation home in my own family, I understand that this is more than a financial decision. In some ways, this asset is priceless. But you have to face financial reality, too. You may be able to afford this now -- but will you be able to afford it in the future? Will your children be earning enough to contribute? Will you ask them? (No, I haven't asked my own son!!) If you decide to proceed, the first thing is to determine a fair valuation-- You and she may think the property is worth $200k -- but is it really, in this market? You might decide to list it with a local broker, see what price they advise, and see if it sells this summer. Then, if you don't get any offers, you might want to revise your deal down to a price at which you would be willing to both buy and sell -- That is, a price that won't destroy your family relatinship -- sort of like letting one kid cut the cake "in half" and letting the other one choose which half to take! The second thing is that I notice you won't take Social Security for another year or so -- Does that mean you're just 60? If so, it may be too early to retire! Would you be willing to find another job and work for another 5 years to afford the cost of this house, with an additional mortgage? That's something to consider.

I am a 69 years old woman recently retired. I have a 401k with $100,000.00 in it. I am considering to rollover $80,000.00 to an IRA and rollover the remaining $20,000.00 to an immediate annuity for a monthly income. I am not planning to be an active trader, I want the IRA assets conservatively allocated for long term growth. Is that a good move or should I rollover the entire $100,000.00 in the 401k into an ira? SAVAGE SAYS: Well, your idea of moving only a portion to an immediate annuity make sense -- if you need the additional income now, and for the rest of your life. But the real question is whether you are getting the best monthly payout for the dollar amount you are investing. To check that out, go to www.immediateannuities.com and see what other insurance companies are offering for the sum you have to invest. And then I think you are right to move the rest of the money into an IRA -- do a direct rollover. You might want to get some help from Fidelity or Vanguard on the rollover, and on the investment choices. That will be the least expensive way to handle this change. (I'm assuming that you are retiring or leaving your job, because that is the ONLY way your company will allow you to roll out of your 40l(k) plan.) You definitely don't want to put it ALL into an immediate annuity because that fixed monthly check won't keep up with inflation over the next 20 years -- and in fact at only 3% inflation annually, the buying power of that check will be cut in half during your projected lifetime!

Happily, I have managed to completely pay off a sizeable credit card debt. There are 3 or 4 credit cards (an AMEX, a couple of Visa cards and a store CC that I want to continue to use and pay off each month. What should I do with the other 5 or 6 credit cards I have that I don't intend to use again-tear them up? Close them out? If I close them, will that hurt my credit score?

Thanks SAVAGE SAYS: It's a balancing act. Keep the oldest card, and cancel the others -- and keep the remaining ones which you continue to use. Your credit score is based both on the length of your credit history -- and the percentage of your available credit that you are using.


Hi Ms. Terry,

My question is I'am 60 and have a 401K and Roth IRA at Harris were we do all our banking and at the this time in our life we need some income for retirement and tired of the up and down in the stock market.
Our finanial adviser suggest we put our money in Semi-Annual digital yield generator CD coupon payments linked to basket of 10 stocks Companies which is FDIC Insurance and terms: 7 years and the Maximum Variable Rate of Return: 4.00%-5.00% per semi-annual period 8.00%-10.00% (APY)

Do you have a insight for me, and if this is the right thing to do.

With thanks,

Laura SAVAGE SAYS: I'm willing to bet that this "financial advisor" is not with Harris Bank! I've heard of some wild "linked CD" products before, but nothing this crazy. NOTHING that is near riskless these days offers that kind of yield. Don't talk to this person any more!
As for your 40l(k) account -- it can't be at a bank; it must be done through your employer. So I'm not quite sure how to advise on that -- or if you have explained your situation. But you only have the investment choices offered by your employer -- and there surely must be a conservative one. (If you are in stocks, please remember that we are at 5-year highs, so you can't have done too badly holding stocks in recent years!) And if your Roth is at Harris, I'm sure they can give you a combination of stock market index funds for at least 25% of your Roth, and more conservative funds for the rest. You're likely to live another 30+ years -- and you need to make your money grow and work for you.

My friend and I purchased a piece of property total was $170.000 dollars I put up $134.000 and he put up $34,000 dollars. the question is what percent of the property does he own? tg4ng7
SAVAGE SAYS: $34,000 is 20 percent of $170,000 -- BUT if you didn't have a written deal, there is no way to say how much of the property you purchased! If it's in his name only, then he "owns" all of it -- and you might have made him a gift of the $34k. You should have created a company (LLC) with a defined percentage of ownership to buy the property.

I have a rollover IRA from an old 401k retirement plan. Can someone tell me the penalties and taxes involved if I take the money out? I am 61 years old. Thank You. SAVAGE SAYS: Since you are over age 59-1/2 there is no tax penalty -- but the amount you take out is added to your ordinary income and you will pay taxes at your tax rate. AND, you will lose all future tax-deferred growth on that money --so think twice before taking it out now.

What is the ira rmd monthly amount on a new $80,000 ira from a 401k rollover starting Feb. 1, 2013 for a 69 year old women that becomes 70 years old on Nov. 20, 2012, her 70th birthday? SAVAGE SAYS: I'm going to give you a link to the IRA-RMD calculator provided by FINRA -- It will help you and others do the calculation. Remember, you must take this amount out in the year you reach age 70-1/2. You can take it from one account or several. But the calculation must be based on the total of ALL your IRA accounts (except Roth). Here's that link, which you can copy and past into your browser if the click-thru doesn't work: http://apps.finra.org/Calcs/1/RMD

Dear Terry,

My husband and I are in are mid-fifties. We have a freshman in highschool and we would love to not worry about his college tuition. We just received a smaill inheritance and are thinking of buying into the Illinois Prepaid College Tuition program. (Actually we signed up for it and must pay by Feb 1st if we are going to proceed. ) My concern is that this program has had some really bad investments and is under-funded. What do you think? SAVAGE SAYS: I no longer recommend any new investments into the CollegeIllinois prepaid tuition plan -- not because of past bad investments, but because I worry that Ilinois will not be able to make good on its promises -- given the huge number of outstanding bills, the indebtedness of the pension plan, and fiscal mismanagement. And the CollegeIllinois plan is lower on the list of required payments than many other obligations. Sorry, this is a real disappointment -- but plan mismanagement over the past decade only added to the issues that have called the plan into question.

I always enjoy your "Savage Truth" Emails
Please identify the SAFEST investment(s) that will maintain today's purchasing power when U.S. $ inflation starts taking its toll??
SAVAGE SAYS: If you assume that inflation WILL happen, then the answer is simple: Gold. The problem is that we don't know when inflation may hit -- and in the meantime gold has also become a vehicle for speculation on the timing of inflation.

My husband an I just purchased a new home in August of 2012. We are thinking of stopping our payroll deduction on our 401K. We would eave it as is for the moment allowing it to grow on its own. We would then put the money we were having deducted for 401K put towards principal reduction towards our mortgage.. Would this be good move? SAVAGE SAYS: Last year the Dow Jones Industrial Average had a total return (dividends included) of 10.25%. That is right on trend of the 50 year average total return of the DJIA. I'm assuming you have a fixed rate 30 year mortgage of around 4%. Now, isn't the answer simple?!!

Hi Terry,
I do enjoy your helpful answers to many of our financial questions.
I am an elder female widow( 80+ ) just moved to an adult rental living apartment.
I now have $150,000. from the sale of my home & deposited into a liquid savings acct. where I also have my checking acct.
It will be paying .50% interest.
Should I leave this money here or do you have any other suggestions as to what I should do with this money ?
I don't want to invest in anything complicated or long term.
Would greatly appreciate your advice.
Many thanks. SAVAGE SAYS: Leave the money right where it is. One day rates will start to go up. Meanwhile it is safe.

Question, I have about $100,00 in student college loans. Besides a modest 401k plan I have approximately these amounts in separate mutual funds, 20G's, 50G's, and 30Gs.
The 6.7% interest on the (college) Direct Loans is eating my lunch as I can barely make the monthly payment. On occasion, when I get a bonus, I can pay off a $10,000 chunk or so, but that's only once each few years then the interest keeps building.
Should I redeem those mutual funds and take the tax hit associated with selling them, so I can substantially pay off, or down, the student loans? I guess I could then take the money I had making monthly payments and reinvest again.
I am 55 years old if that matters, and the 401k has about $230,000. My house has a value of $370,000 and I owe $280,000.
Thanks very much, Rick SAVAGE SAYS: That's a tough question -- still having student loans at age 55. Yes, I would bite the bullet, especially with stock prices near their all-time highs, and liquidate the funds and use the money to pay down the loans. Then be sure to keep saving the money you had been paying on the loans. I think this will not only be a good financial strategy, but take a lot of stress out of your life! But do take note of the tax hit, and you might want to do this over a period of three years to spread out the gains if they will put you into a higher tax bracket -- or impact other benefits you may be receiving.


I have read before you recommend long term health care insurance and I lost the company/person to contact.

I am 54 and self employed. I would like to find a company that will allow me to pay a set amount for 10-15 years and be done with payments. I would rather not have to pay for the rest of my life (unless you disagree)
I did try for Genworth and very disappointed they raised the amount before the policy even started. So they lied about what it would cost. It was thru AARP

Since I am self employed - I would like to be able to write off the premuims now before I retire.

Any thoughts on companies that do it this way? Also I am interested in what you recommend in dollar amounts and length of time. I am single no children.

thanks SAVAGE SAYS: I'm working on a column about that, and it will appear in the next two weeks!

I am 71 years old and had an earned income of 35,000, can I invest in my regular IRA account if I am already taking a limited withdrawal based on my age? SAVAGE SAYS: Sorry, the Internal Revenue Service allows you to open and contribute to a traditional IRA during a given year only if you will not turn 70 years 6 months by the end of the year. The govt thinks you're "too old" to be making tax-deferred contributions, and in fact you know you must start taking Minimum Required Distributions. For you, and others over 70-1/2, this good deal is over!

Read more: The Maximum Age for IRA Contributions | eHow.com http://www.ehow.com/info_8055671_maximum-age-ira-contributions.html#ixzz2IlVlfKe4

We are trying to decide what to do with a lakefront property summer home that is in need of about 375k in rehab and repairs. We bought the property in 2008 for 600k, at the time it was a steal. We haven't stayed in the house since we bought it because of the repairs that are needed.

The only way to afford the rehab is to refinance the property from a 15 year motgage to a 30 year mortgage and take 190K to assist with the project. We would then need to take 100K out of our 401k. We are both 48 and combined have approximately 1M in our 401k accounts. The remaining money would come from stock and savings.

If we were to sell the property, conservatively we would profit 450k.

Our question is do we sell or do the rehab? SAVAGE SAYS: So am I getting it right here that you could take about $1 million out of this property -- your original $600k cost plus $450 profit -- minus capital gains taxes which will be higher in 2013? OR you can invade your savings and spend a year or two remoding this with money that you may or may not, recoup? Well, this is as much a personal lifestyle as well as a financial decision. Who knows, you may be better off in real estate than in stocks over the next few years, given what the economy looks like. But in a bad economy would you still be able to afford the ongoing cost of maintaining the house -- and the mortgage payment -- especially if one of you loses a job? And is that where you want to live? If you do decide to go ahead, this would be a good time to refi to a 30 year fixed rate loan. Figure out how far that would get you in the project, and whether you could stop before you have to invade your retirement account. That would be a great discipline point -- and it would help you make the decision.

THERE MUST BE SOMETHING THAT I CAN DO. PLEASE ADVISE WHAT STEPS IF ANY I CAN TAKE. I HAVE NO MONEY TO PAY LEGAL BILLS ETC. Savage says: Call Consumer Credit Counseling at 800-388-2227 and tell them your story . They have resources to help you.

Terry, I am single, live alone and own a home. I let a friend move in to live in a spare bedroom and he pays me $500 a month, do I have to report it as rental income? Thank you. SAVAGE SAYS: That depends. If your friend is giving you a "gift" of $500 per month -- and you are just being a good friend and offering a gift of shelter, then it would not be considered rental income. And that's especially important, beyond taxes, because if you do have a renter that person has some rights under your state law -- so that if you want him/her to move out at any time in the future, you do not want to trigger this person's "renter's rights." If you do decide to consider this rent, then you should have a lawyer draw up a lease with specific provisions for exit, and term of the lease. Then it would be reportable income, taxed at your marginal tax rate. And it could have some impact on the gains on the ultimate sale of your house.

Bought a house before I sold mine. Sold mine -have to refinance with money I made on mine to lower payment for new house in that process now.. How long to I have before I have to pay taxes on what I made. About 100 thousand..
SAVAGE SAYS: You won't owe any taxes if it was your principal residence. Individuals can profit up to $250,000 (couples: $500,000) before taxes are owed on the sale of a primary residence. Consult your tax advisor on details.

Terry, I am a 65 year old window and just retired a year ago. I live comfortable with my pension from my job and SS. I don't need to dig into my IRA and 401(K) to supplement my normal living expenses because I live very conservatively. My question is how should I invest my retirement accounts to keep up with inflation? Thank you. SAVAGE SAYS: Well, that's the BIG question for all retirees! I think you should have some stocks (equities), perhaps through a diversified stock fund or two -- My favorite conservative fund for this purpose is T. Rowe Price Equity Income Fund (favorite perhaps because I have owned it for more than 20 years). Then you need some liquidity -- even though money market funds pay no interest! It's hard to buy bond funds here, because of inflation fears which would push interest rates higher -- and bond prices lower. Right now, as I write, gold and natural resources prices are lower, but that might be a good time to accumulate a small position in a gold shares fund. If you don't have anyone to advise you specifically,, call T. Rowe Price (800-638-5660) or Fidelity (800-FIDELITY) and ask about their retirement investment and income programs, which give you specific diversification advice using their funds. I know you don't need to withdraw now, but you MUST start withdrawing from a traditional IRA at age 70-1/2 -- so it's a good time to make a plan.

If my geandfather passed away and left me a $95,000 CD that matured do I have to pay taxes on it? SAVAGE SAYS: No, you do not have to pay taxes on it! This is a windfall. When the estate is settled, the trustee (probably the lawyer) will send you a check for the full amount. Deposit that check in a bank, in your own name -- and keep it safe. If you owe credit card debt, pay it down. Otherwise, don't be in any hurry to spend or invest it -- or to tell anyone about it!!!

I owe $2,100 to Toyota Credit from an old loan from 2009 when I voluntarily repossessed my Yaris to them in perfect condition. 6 months ago I sent a letter to Toyota's address in the East Bay in California regarding the setting up of a payment plan (yes, it was sent registered/certified, return-receipt) to get rid of the debt. I received no reply whatsoever to that letter. It never showed up on my credit report either (thankfully).

Months pass, I hear nothing and then today I get a call on my work telephone line as well as my cell phone wanting to discuss the debt. I told the collector that I cannot discuss the event via phone, but would make plans if he sent it to me at my address via U.S. Postal Service.

I don't have $2,100 to pay off the loan. My question for you is whether I should try to settle for a lesser amount (do you know Toyota's history as to whether or not they have a reputation of negotiating things like this?) or should I send a certified note stating that I'll agree to send them $100 per month until the loan is paid off in order to save myself a bunch of legal fees? I know that I have the right to request that they ONLY contact me via USPS mail. The rest, I'm unsure of what may be best considering my situation, or what my rights are in California.

Should I sign up with Consumer Credit Counseling in order to protect myself against expensive attorneys' fees that they may impose?

Thanks for any help that you can provide in settling this debt with Toyota Motor Credit!

SAVAGE SAYS: It's likely that this loan was sold, as part of a package of defaulted loans, to a collection agency. I don't want to give you legal advice as I don't know the specifics of collection law in your state. BUT I do suggest you immediately contact Consumer Credit Counseling Services at 800-388-2227, which will automatically connect you to the nearest local office. They have experts there who can tell you your rights, and give you good advice. Now that this issue is "alive" again, it's possible that anything you do-- or don't do -- could put this on your credit report -- even if you agree to a settlement. Ask them about that, too.

I heard quite a while back that there was a savings account that you can have report to credit agencies. You would set up regular deposits to the account and it would report them like payments to debt, doing good things for your credit. Is this true?

My wife and I are about to pay off our car and our next vehicle will have to be larger because our family has grown from four to six since we bought our mini van. We would like to continue to sock away our current payment until we buy because we'll need a big down payment on the larger vehicle, however we would like to continue to build our credit.

Any ideas?

SAVAGE SAYS: No, Actually you're getting things confused! There is a "credit card" that builds a credit report, because it is actually a debit card that limits your credit buying to the amount you have in your savings account. Then when you buy things, and pay promptly, the payments history is reported to the credit bureaus. That is called a "secured card."
But if you already have good credit, and paid off your current car on time and on schedule, then there is no reason to do anything about your credit. I'm assuming you also have a credit card or two, and pay promptly. That will keep your credit report up to date, and looking good. What you CAN do is set up an automatic monthly monthly "transfer" from your regular checking account at your bank to a money market deposit account, where the cash will earn a teeny bit of interest, but will be there when you need a down payment on a new car. Good plan!


I have been reading your column for years. They are always insightful.

My question is as follows:

I am currently paying down a significant amount of debt and in the process of refinancing my mortgage at a lower rate. A significant amount of debt is credit card balance accrued while putting our kids through college. I have been able to pay down a lot of that debt, but would like to reduce the interest rates on some of the cards. If one contacts a credit card company to inquire about reducing the interest rate, will that reflect badly on one's credit rating?

Thanks. SAVAGE SAYS: The card issuer knows they have you over the barrel, and it is unlikely they will reduce your rate. BUT, you can search for another card issuer and transfer your balance. But read the fine print -- What looks like a lower rate on the new card might just be a "teaser" rate that will jump even higher than your current card rate after 3 or 6 months! It shouldn't impact your credit negatively to do a "balance transfer." But another fine print item you should check: If you then start charging on the new card, the rate could also jump, or be much higher for new purchases than for the balance transfer. Ask about all that, in writing, before you make the jump.
AND, congrats on being able to pay down your debt so well. That's an inspiration to others!

In the event of a death of parents is it a good idea to have an insurance policy to pay the inheritance tax that would be due upon the death of both parents? SAVAGE SAYS: This is a great, but complex, question. First, right now, there is no "inheritance or estate" tax if the estate is less than $5 million. But if the "cliff" happens and we go back to the pre-Bush tax rates, that limit will drop to $1 million exclusion from estate taxes. The "estate" includes everything the individual owns (and if one spouse dies, h e/she can leave an unlimited amount to a surviving spouse -- but the govt will levy taxes if applicable when the survivor dies.) That's why it's important to get good counseling from an estate tax attorney. As to insurance, if the individual OWNS the insurance policy, the proceeds are considered part of the estate for totaling up the value of the estate! So the children could purchase and own the policy on the life of their parents. Or the parents could set up an Irrevocable Insurance Trust, with an adult child as trustee -- and gift the trust enough money to pay the premiums each year -- which the trustee will do. Then when the parent dies, the proceeds belong to the trust, and are not part of the estate! But the money can be used to pay estate taxes -- so the family home or business doesn't have to be sold. This is fully explained in each of my books -- but I always say that estate planning is best done by professional specialists, estate planning attorneys -- because you won't be around to fix a mistake when it is finally discovered!

My husband has an annuity with Hartford that must start distributing the money. The options are to take the total amount of the annuity or an arrangement for distribution. My husband is 89 years old and not in the best of health. The amount totals to $36,000 and the cost is $25,000. So is a timely distribution lessen the tax bite..I know you do not tell your audience what to do but have you anyone that could put me on the right track? SAVAGE SAYS: What you haven't told me is the "terms' of the annuity. If your husband dies, does the insurance company keep the balance? Or does it keep paying the same, or a smaller, amount to you -- his surviving spouse? Or is there an even larger "death benefit' if he dies? You need the answers to these questions before making a decision. And that amount of money is not likely to have significant tax or Social Security consequences, so the real question is not about taxes but about how you, the survivor, will be able to have the greatest amount of money. Pls write back when you get the answer, and I will post a reply more promply!

I plan to sell my house in March 2013. I purchased it for 33K and plan to sell it for 59K. I have receipts for 15K of improvements (bathroom, rewiring, replumbing, roof, etc). How long do I have to reinvest the profits & how bad will I get dinked on taxes? I plan to sell it to my brother and rent it from him. This will reduce my payments and he needs a tax write-off and the house still needs a lot more improvements. I am seeking employment elsewhere and this would eliminate the need to rush to sell my house when the comes time to move. By the way I'm 54 yrs old and make 56K a yr. Single. no dependents. SAVAGE SAYS : You're thinking of the old rules where you had to reinvest proceeds to get the tax break. But under the current tax law, a single person can exclude up to $250,000 of gains on the sale of a residence. There is no requirement that the gains be reinvested. And you can use this exemption more than once. (If married the exemption rises to $500,000.) But given your situation, the gains will be minimal at best, because of the capital you put in to improve the property.

Hello Terry, Your columns are excellent.
My son has student loans with 3 institutions worth $28K. I would like to consolidate the loans. He has a mixture of subsidized and unsubsidized. How can i consolidate all of the loans? Thanks for your help. SAVAGE SAYS: There are different repayment terms, based on the two types -- and a third consideration if they were private student loans. You can learn more about your options at www.PayBackSmarter.com, where you can also get help determining the best solution for your situation.

Dear Terry,Are all expenses within a mutual reflected in the expense ratio of that fund including the buying and selling of securities. Thank You Michael. SAVAGE SAYS: Good question. The "expense ratio" refers to the ongoing expenses of managing the fund -- research, commissions to buy and sell, accounting and paperwork. They are in addition to any up-front (or back-end) commissions or sales charges to buy or sell the shares.

Im renting to own a home from my parents. I pay 700$ a month to them. How much of the 700$ should goto the buying of the home? SAVAGE SAYS: You need a legal contract with your parents, which will determine how much is rent and how much is allocated to the purchase price. They should be reporting the "rent" portion as income on their tax returns, and will one day -- when they transfer title -- include the "ownership" portion of each payment as part of the sales price. And this extra "income" might impact their Social Security benefits, cost of Medicare, or other senior programs. If this sounds complicated, you're right! There may be a better way to accomplish this, depending on their financial situation. They could "gift" the house to you -- and it would become part of their estate plan. They could trust that you would "gift" money to them each year in the future, to cover their living expenses. If you don't have siblings to object, this might be the way to go. OR, consult a tax attorney and have a "rent-to-own" contract drawn up, spelling out the details -- especially what happens if they should die before the purchase is completed.

im 61 retired on 825.00 a month and a 401k I dont know what way to go on my 401k and my s.s.thinking of taking a monthy check on my 401k --- SAVAGE SAYS: You need some big picture advise. I don't know how much you have in your 40l(k) plan, what your expenses are, etc. I suggest contacting Fidelity (800-FIDELITY) or T. Rowe Price (800-638-5660) and ask about their retirement income modeling service. It's designed to show you how to invest, and how much you can withdraw so you don't run out of money before you run out of life!

Dear Terry Savage,

I am 67 and my wife is 64. We are both retired and receiving an Illinois TRS pension. I also get a small social security payment which goes to my Medicare. We signed up for long term care last year with AARP/Genworth and we have been paying quarterly. Our agent says there are many benefits to paying off the premiums in full. I would like to know if this is true, and if so, should we each take out of our IRS's or take all of it out of a Tax Sheltered Annunity? It is hard to know what to do. SAVAGE SAYS: Is your agent talking about paying a full year premium at one time, OR about paying up your policy in FULL in 10 YEARS? The latter is hugely expensive, but it means that premiums won't increase after the 10 years. Probably it's too expensive for you to do at this stage. Paying annually instead of quarterly might save a small amount -- but shouldn't make that much difference. There are also some other "combined" policies that allow you to make one huge deposit into an annuity or life insurance policy, and access that money for long term care coverage if you need it. So please write back after you ask your agent specifically what he/she is recommending.

Thank you,
Douglas "Delvis" Wilson

Hi, Terry,I would first like to wish you and family and friends a Healthy and Happy Holiday Season and New Year. I have been renting different places all my life,i amin my early 60's,and having Problems where i am living and would like to move My main income is S.S.D. With a possibility of the fiscal cliff coming, if it were you would you invest in a lower end condo $50,000 or less, or would you look for another apt with new noisy neighbors and other problems. I;m grateful you are there for me and others Terry. I feel better i wrote you, and if you e-mailed me and let me know how to give just you my cell number i will. Thank You, J.R. I forgot to let you know i am on disability but i am grate ful i can still get around. SAVAGE SAYS: First, sorry to all of you who wrote in recently and have not received a response. I'm busy catching up. Thanks for your questions --
AS for this question, I think you will have to continue renting, as you probably can't get a mortgage with only disability payments as income. And buying a condo is not a guarantee against bad neighbors! Instead, investigate a rental complex that is restricted to seniors only. They're less likely to be noisy neighbors! You might choose one that offers assisted living, or just meals, as part of your rental price.

Over the past year or so I have elected to take distributions from my IRA's - for education expenses (some deductible), a wedding, home repair. I am over 60. My problem is that I have certain subsidies that I receive, but they always look at my AGI. I mentioned to the people who do the review that my annual income is actually much lower than what I have shown on the last two tax returns, but appears higher because I have had to declare the IRA distributions as income. This doesn't seem right to have to declare the distributions without qualifying that it is not recurring in the way that regular annual income recurs. Now I read that if Obamacare goes forward, they will be looking at tax returns to determine eligibility standards. Am I going to fall into the same problem? Is there a way around this? SAVAGE SAYS: Income is income -- according to the IRS, and for other Federal programs, including the cost of Medicare. After all, this is money coming from an IRA, in which you invested money on a pre-tax basis. So you should be careful about withdrawing too much in any one year, putting you over approved limits for various programs.

Our direct marketing business, which had been successful for 12 years, took a 90% dive in 2008 with the economy. Subsequently we were unable to pay the mortgage on our home of 12 years. Four months ago we finally completed a short sale, and are currently leasing a much smaller home with an option to buy. We have put a lot of work into this place but are now finding that the only loan we can get is at a 14% interest rate. Our business is now doing fairly well and apart from the mortgage we always paid our bills on time. My name was on the mortgage, even though I was a stay at home mom and did not contribute a penny, thus making it impossible to get a normal loan. Any suggestions please? SAVAGE SAYS: Grrr -- this is what is happening to so many people who were foreclosed or went through a short sale. First, are either of you veterans?? They have great programs at low interest rates. Second, contact National Foundation for Consumer Credit at 800-388-2227. They work with many lenders and may know of special programs that could get you a mortgage at a lower rate. Third, would the seller consider "taking back" a loan, perhaps at a rate of 8 or 9% -- high, but still less than the ones you are being offered -- and more than the seller could earn on the money in the bank? Finally, don't give up on looking around at smaller local institutions who might require you to get PMI -- private mortgage insurance (which protects them, not you) but might be willing to make the loan at a lower rate.

I have approximately 150,000.00 in student loans and a net income of 42,000.00 I am wondering how likely it is that I could file for bankruptcy. Thank you for your response. SAVAGE SAYS: You should know the most basic thiing about Federal Student Loans and bankruptcy: STUDENT LOANS ARE NOT FORGIVEN IN A BANKRUPTCY! Contact your lenders, to see if you can work out a graduated repayment plan or go to www.IBRinfo.org to learn about graduated repayment plans. Don't delay in dealing with this, as the problem will only grow!

Thanks for the otherwise snooty response. " maybe I should spend time getting them jobs"? Really that's your response to a question about what life insurance is good for young adults! Apparently you don't think much of life insurance.
SAVAGE SAYS: Wait -- I just went back to your question, which was whether you should by life insurance ON your children, so if they die without repaying their student loans (which you co-signed) you would be able to pay off that debt. And you think my response was out of line?? I suggested that your real challenge is not worrying about what happens if they die -- but in helping them to get good jobs so they can repay the loans! I stick by that advice. But you do have an "insurable interest" -- that is, a valid reason for buying insurance on their lives, just in case -- I wonder what they'll think when you tell them this is the course you have decided to follow! They will have to take a physical exam to be insured, so they will know about the plan one way or another. I think it's a pretty cynical idea.

I was receiving quarterly distributions after retirement from my (non-governmental, non-profit) 457b plan. After 9 quarters I was told by my previous employer that this is not a method of distribution that should have been used and that they will have to distribute the rest as a lump sum before year end. I have requested a copy of the plan itself from both the employer and the plan administrator, Fidelity, in order to review the distribution options. But I can't seem to get it! I would think they have the fiduciary responsibility to provide this document? What federal or state agency would I file a complaint with.

Thanks for your help. SAVAGE SAYS: If you will send me an email (to Terry@TerrySavage.com) with more details, including your phone number, the name of the employer and a contact there, I will set up a conference call to see what this is all about --

I have $4 million dollars in stocks,bonds and cash and will retire when i am 66 which is in 4 months from now. My wife and i (she never worked) will receive the highest social security benefits based on my earnings history. I will need or would like to receive combined social security and interest from my portfolio of $10,000 a month net. Does this sound achievable please ? I have no debt. SAVAGE SAYS: This is not a "back of the envelope" kind of calculation! I suggest you contact T. Rowe Price at 800-638-5660 and ask about their retirement income modeling service. If you use any of their funds (low cost, no load) the service is free, otherwise $250 -- and well worth it. They will show you how your investment and withdrawal decisions interact, and take Social Security into account, as well as likely longevity -- AND inflation, which at even 3% will cut the spending power of your money in half in about 20 years! That's the way to figure this out -- and to learn more about this process, go to my website and order The Savage Number; How Much Money do you Really Need to Retire?

I have been sick and unable to work for the last few years. I have 0 income and owe 8400 dollars in medical and credit card bills. I also have over $20,000 in student loans. My question is should I file for bankruptcy and if so, what kind? I know you are not a bankruptcy lawyer or anything, but I would appreciate your best advice. I know a bankruptcy would not erase my student loan. I am starting to recover and hope to return to work eventually and it would b a lot easier without the other debt hanging over my head. SAVAGE SAYS: With such a relatively small (large to you, I know) amount of debt, a bankruptcy might not be necessary. Contact the National Foundation for Consumer Credit at 800-388-2227, which will put you in touch with the nearest local office. You can trust them. They may be able to work something out with your creditors. If not, they will connect you with a reputable bankruptcy attorney. You'll get this behind you and be able to start over.

My mother bought a co-op that I have lived in since she bought it (9 years). She bought it as a second home and has never lived there full time.

She now has dementia and has been living with my brother for 5 years. For the first 3 years of her illness we shared care with her staying with me 3 days a week. For the last 2 years it has been too confusing to her to be shifted back and forth.

Her primary residence has been sold.

Should she have to go into a nursing home eventually, will I have to leave my home? Can I transfer the mortgage into my name?

My brother and I have power of attorney.

Thank you for any advise you may be able to provide.
SAVAGE SAYS: For this you need an elder law attorney in your state. If you live in the Chicago area, contact Janna Dutton at (312) 899-0950 -- Feel free to use my name. She will have all the answers for you. And if you live in another state go to www.NAELA.org -- the Natl Assoc of Elder Law Attorneys to find a specialist in this area.

The Wells Fargo financial advisor over a family trust does not like the fact that a family member is getting paid to take care of the remaining parent. He also is questioning the amount that the other care givers are being paid. So he froze the accounts and none of us are getting paid. He also is threatening that a nursing home would be cheeper to put her in than home care. Can he do this??????? The lady is 92 with over a million dollars and he complains that she is spending too much money getting coffee at Tim Hortons!

SAVAGE SAYS: What? First, if you're at Tim Horton's you're likely in Canada. Is that correct? Is there a Wells Fargo office in Canada -- or is this a U.S. Trust? And who is the TRUSTEE -- certainly not a financial advisor at Wells Fargo! You'll have to write back and give me more details. The law says that the TRUSTEE can make decisions, and may allow the Trustee to change financial advisors. Contact the attorney who set up the trust and get the facts, and then get back to me.

i ve owned a business for 20 years and have a irs problem i owe approx 19000. but with penalty and interest it is up to 39000. i have hired a lawyer but he did nothing to help get a reduction but billed me for 4000. . my business is still open and i am trying to sell it just to pay this debt. the building where the business is located is owned by me but free and clear but i cannot get a loan for this multi use building. any suggestions?
SAVAGE SAYS: Well, it sounds like you had a terrible attorney -- and I hope you didn't pay him for his non-service! You might want to try going directly to the IRS Ombudsman: http://www.taxpayeradvocate.irs.gov/About-TAS/History
They're not there to help you win a case against the IRS -- but they might point you in the direction of an "offer in compromise" that could possibly reduce your tax bill. Or find an "enrolled agent" -- a tax specialist who can tell you if that is a possibility. It shouldn't cost much to at least meet with an enrolled agent or CPA to let you know if this is even a possibility. Hope this helps --

Asking question to help a friend, as I do not work and I am on SSD...ok my question is....my friend is 66 getting SS of $12,000 pension $5,000, and wants to continue working but she will earn around $10,000.or more.... Does she have to pay taxes on her SS? I read that a singe person with income over $25,000 will have to pay taxes....trying to see if she would continue to work, or just get a smaller part time job...so her SS is not tax....to keep all income under $25,000 SAVAGE SAYS: Yes, that's correct. If you have total income over $25,000 as a single person (or $32,000 married) then the benefits are taxable -- But the tax rate may be low (and there is no FICA on SS benefits), although you may owe state income taxes as well. Even so, having some money left over after taxes may be worth working the extra hours.

I am 65 years old and have recently retired from a full time position. I have a small pension and most all of my savings are in an IRA. How do I best invest at this time?
Right now most of my IRA is only in the money market because I am so afraid to have someone handle it. I know that financial planners are only human but I have found that I have lost money using them and they have still made theirs. Please help. SAVAGE SAYS: I understand that feeling that you have so little money that you can't afford to lose any of it. And in that case, you'll have to settle for earning almost no interest, but keeping the money safe in a MM fund. Of course, that won't protect you from inflation -- especially since the Fed is forcing interest rates down. My real suggestion is that you look for a part time job, maybe not even in your previous line of work -- but perhaps in an office, or helping with someone's childcare needs -- just to earn extra money so you won't have to dig into your savings to supplement your pension.

Terry, when I retired from my company I had 401K in Fidelity where I have since maintained small amount but also, transferred the majority of my holdings into Edward Jones because I knew the advisor there. Does it make any difference by going with both Fidelity and Jones or should I have gone with only one? What are the pros and cons of having accounts in both firms? SAVAGE SAYS: I'm assuming you rolled your 40l(k) into an IRA -- and yes, you can have IRA accounts at more than one place. If you value your advisor's help and advice, then it sounds like you are well diversified. BUT I suggest you ask about the total cost of your investments at each place. At Fidelity you pay no commissions to get into or out of their fund, if you invest directly. You will have annual fees on those funds, likely less than 50 basis points (half of one percent). And depending on the size of your IRA you might have an annual maintenance fee. Ask your Jones advisor how much you pay in annual fees, AND in commissions when you buy or sell stocks or mutual funds. Ongoing costs are an important component of retirement plan success.

Do you have a table that you could post (and send to my email address!) to show your readers how to calculate their taxes for FY 2012? I've been reading suggestions that it might be a good idea to increase one's withholding because if taxes increase significantly, not only could taxpayers be looking at a larger tax bill in 2013, but they could also be subject to penalties for not having paid enough through withholding. The article I read suggested that it would be better to overpay now, and receive a refund, than to underpay and be subject not only to a higher tax bill, but also to penalties for having underpaid. Thanks! SAVAGE SAYS: If tax rates change for 2013, then your employer will automatically adjust the amount withheld from your paycheck. Plus, if the FICA or payroll tax goes back to 6.5% from the current 4.5%, you'll also see less money in your paycheck. So if you have the correct number of "exemptions" you don't need to adjust your withholding.

I have $2500 substitute teaching income. Can I use income from a rental house I manage as more earned income to put in a Roth IRA? SAVAGE SAYS: That depends on whether it is a "salary" for "managing" the house -- or just rent from an investment. "Earned Income can be put into a Roth IRA -- up to $5,000 (or $6,000 if age 50 or older). But dividends, rents, etc do not count as earned income.

Hello Terry, I read your column in the Sun-Times and now has come the time to ask you a question about long term health care. I am 64 years old and am in very good health. Is there an agency or individual I can contact to talk over the options that would have available to me.

Thank you, Lucy M SAVAGE SAYS: I consistently recomment Brian or Murray Gordon of MAGA LTC -- They're in Northbrook, but help people from all over the country, specializing only in LTC insurance. Call them at 800-533-6242.

Hi Terry,

From your latest e-mail, you mentioned the following:

"Very wealthy people must consult estate planners now, before the estate tax returns in January at the $1 million level. (Since that “estate” includes the value of your home and retirement plan, and maybe even your life insurance, the cliff on estate taxes will impact even the very middle class.)"

Can you please elaborate on this.


SAVAGE SAYS: Your estate is everything you own. That includes your house, and your retirement plan. That retirement plan will go directly to your beneficiary -- but your "estate" is resonsible for estate taxes -- if the total is over $1 million (assuming the Bush tax cuts expire, because the Bush changes lifted the "exemption" to $5 million. Where most people make a mistake is owning their own insurance poilicy --instead of creating an Irrevocable Insurance Trust to be the policy owner (and gifting the trust money each year so it can pay the premiums). If you own your own life insurance, then the benefiicary receives the proceeds tax-free -- BUT because you owned it, the total amount of the proceeds is considered PART OF YOUR ESTATE! If the exemption limit reverts to $1 million, you could easily be above that level -- and estate taxes quickly rise to as high as 55% under the pre-Bush rules, which soon may return!

I have three children currently in college and by the time they graduate, combined they will have close to $250,000 in student loans that my wife and I co-signed for. What do you think of the idea of us getting life insurance policy's on them in case something happens to them? What different types of insurance is good to get for young adults? SAVAGE SAYS: That's sort of like "throwing good money after bad" as the old saying goes! Yes, you'd be responsible for their loans if something happened to them -- or if nothing happens but they can't pay! Maybe you should spend your energy helping them get jobs! But you do have an "insurable interest" so if you're really concerned you could own a term life policy on each of them -- assuming they're willing to make the application!

I would really love your advice on a student loan I have for 62,000. I went back to school to get a degree and now can't pay it back as I am sick and cant always work. thank you. SAVAGE SAYS: Contact your lender immediately to at least let them know your situation. If it is a Federal student loan -- a Stafford loan, for example -- you can ask for deferrment, for an extended period of time. But even with bankruptcy, you can't get out from under your loan completely. They promise to go after your Social Security check if you haven't paid it back by retirement. I know that sounds outrageous, but you should definitely contact your lender.

Is it legal for a company to charge a 2% fee to make a payment with a credit card? There is no charge if you pay with a check. SAVAGE SAYS: Yes, under the new credit card laws, a company can either give a discount for cash, or charge more if you use credit. I'd avoid that retailer.

I am trying to invest about 200,000 for my aunt who is a 93yr old nursing home patient so that I can grow her money without too much risk on the principal.
My financial advisor is suggesting I put this money in JP Morgan Chase Coupon Certificates. I read through the documentation, but the amount of interest earned is based on the price of the stock one year from the purchase date. In a bad market, it seems unlikely that you would ever be able to make any money. The JP Morgan Coupon Certificate is a 7 yr plan. What are your thoughts on this investment and do you have other suggestions for investing this money? SAVAGE SAYS: This money ONLY belongs in a series of 6 month or 1 year FDIC insured CDs, or in a Money Market Deposit account at Chase. Your financial advisor has no business advising you to do anything else -- and no business collecting a
commission on anything like this certificate. If you have your aunt's power of attorney, you must do the safest thing for her. And the safest thing is a short term FDIC insured deposit. You won't earn any interest these days. That's not the point. It is in her best interest to make sure that the money is there and safe for her needs. If you inherit it after her death, then you can make investments that are more appropriate for yourself. But don't use this "financial advisor"!!

Dear Terry,

I am hoping that you can help me with a question I have, for the state of Colo.
I currently received a notice from an Attorneys office regarding an unpaid charge card that my ex-husband is to pay, which is in our divorce Decree.

My question is: Do I call their office? I have 5 more days to respond. I have all of my paper work including the divorce decree.

Thank you,
Carol SAVAGE SAYS: It would be better if your attorney would call the credit card company. I am assuming that the card is in the collection process --and I'm not sure how far you will get. But if you don't want to pay your attorney, you can give it a try. Then you'd need a certified copy of the divorce decree and send it to them by Fedex or registered mail, to prove that this card debt is not yours. Also, contact the credit bureau and make sure this card is not on your credit record. Joint credit cards should have been closed -- or your attorney should have made certain that your name was no longer on the card as a joint owner. Definitely do try to reach your divorce attorney regarding this, because he/she had some responsibility to make sure this was dealt with at the time of the divorce. Then get back to me and let me know what happened. Sometimes, if collection agencies won't listen to reason, they will listen to the press!

What are the pros and cons of paying cash for a home? I'm a spinster in my mid-50s and I've never owned a home. I've got enough money in a savings account to purchase a suitable home and some land out West. (As I see it, a home is an investment, and I would never invest in Chicago or Cook County or Illinois!) If I find a home that interests me, should I tell the seller that I'm going to pay cash? Should I expect a discount on this account? And if we come to an agreement, how exactly do I pay for the home? Would I go to my bank and get a cashier's check for the full amount? Will there be sales tax?

As I see it, the main benefit of paying cash (assuming you're financially able to do so) is psychological: You own it free and clear, and aren't obliged to pay interest to a soulless money-lending entity. Please don't even mention the tax deduction business: I don't itemize, and anyway that deduction doesn't make a lick of sense.

LN SAVAGE SAYS: Well, that's an interesting question. I agree that most people should set a goal of paying off a mortgage. And if you've saved enough to buy a home, then there is no reason you should not pay cash. BUT you need a competent real estate agent and a good real estate attorney to guide you through this process. You may be in a better position to bargani on the purchase price if you can pay cash -- since the sellers will know there is no need for a mortgage approval. There is no sales tax on the purchase of a home, but there will be other fees -- and your real estate agent and attorney can explain those to you. Sometimes the seller pays a portion of the fees, depending on how desperate they are to sell! But let me add one more thing -- since this is your first home, I think you need to do a lot more research on the additional costs of owning and maintaining a home. And also consider whether you want to live alone so far from a city environment, if you haven't lived in the country before. A large country home could be an expensive burden as you get older. Just some things to think about before you rush into a purchase.

My 16 year old son has been learning about personal finance. He has a small sum of money that he won't need for several years so he would like to try investing it. I would like to open a custodial account for him via one of the online trading companies.

We have hit a snag. Although we are both American citizens, we are residing abroad and we keep getting blocked from opening an account. I don't feel comfortable using the address of an extended family member. What would you reccomend? SAVAGE SAYS: Let me look into this. I'm answering you late on Sunday night --so it will take me a couple of business days to research and get a specific answer.

My husband receives 900 a month SS, he is self-employed. Right now he is working, however, he has reoccurring prostate cancer, and we dont know the outcome as yet, if he can no longer work we have only the 900 per month and we cannot live on this. Is there any resources out there to help us, we live in calif. SAVAGE SAYS: Well, first have you applied for Social Security on his record? You can do that, even if you havent worked and don't qualify on your own earnings. That would help. Next, I think you should contact your nearest agency for the elderly. I believe you would qualify for food stamps, and for other housing assistance. Don't be too proud. There are plenty of community agencies and churches that can give you help directly --and can help you get assistance from the state. Please write back and let me know what happens.

Can I transfer, now, an estate worth less than $400 ,000 of assets from my mother, not yet deceased, to myself as part of her Lifetime Estate Exemption without paying State or Federal tax, so that I can reduce her Estate and she can qualify for some benefits offered by the VA and other organizations sheand her husband were a member of.
If so is would this be tax exempt from State and Federal Tax.
If so what IRS form do I use to show this shift of assets to avoid taxation.
Thank you. SAVAGE SAYS: You're wandering into a complicated situation, and you need an estate tax attorney to guide you. Actually since it is your mother's money, the attorney would represent her, not you. But, I should also point out that the programs you might be thinking of -- such as nursing home care -- have a "lookback" period to see if assets were transferred out of her estate to avoid paying for these benefits. And you will find that if she needs nursing care, she will be in a much better situation if she has the assets to pay for it, instead of depending on the state to pay for her in a Medicaid-funded nursing home. To find a qualified elder-law attorney go to www.NAELA.org -- That's the NationalAssoc of Elder Law Attorneys.

I noticed that you suggest people rollover a former employer's 401K into mutual funds such as Fidelity or Vanguard. Is that more economical than rolling it over to a company like Charles Schwab? Is it simpler to stay with one family of funds?

Schwab seems to offer a wider variety of investment vehicles but its a little overwhelming. Does Schwab offer the same kind of help with allocation that a Vanguard fund does?

May I buy an annuity from an insurance company that is not licensed in my state if I buy it in a state where they are licensed?
SAVAGE SAYS: Only if you reside in that state.

Retired widow & when spouse died his retirement ira rolled over to mine. We had fee based managed ira's so broker received large commission based on value of both ira's. When spouse died broker continued to lose money due to unsuitable activity, fraud, etc. Received a settlement before going to FINRA litigation. Since losses were from my ira & i wanted to return any settlement to my ira, should I be taxed on attorney fees as my income that also has caused me very large taxes & put me in AMT even though I never make that kind of income & now i am facing financial hardship because of excessive amount of taxes due. I owe 24k to fed alone. I don't even have saving of that amount. Is it legal for IRS to tax the money twice? The attorney has to claim his money received from settlement as income. I have also been taxed on money I had to take out of my ira in order to pay the IRS. My intention was not to receive a windfall so I had attorney send my portion in a check to my ira custodian. I feel I was the victim when this happened & now I'm the victim again from amount this is costing with the IRS. SAVAGE SAYS: Wow this is truly a double-whammy -- AND it is beyond my ability to give you advice in this situation. I'm thinking that your attorney should have had the settlement check made out to the IRA -- and the money should have been rolled back into the IRA. And you would have paid him fees from money you had OUTSIDE the IRA. And maybe the attorney is liable to you for this mistake -- But for that you'd need another attorney! More importantly, right now you need a CPA to help you fight the IRS on this -- because I believe there have been "private rulings" that say the settlement can/should be rolled back into the IRA -- Sorry, but I'm neither a lawyer or CPA -- just wanted to point you in some possible directions.

i have a trust that a few years ago was worth 1.86 million and has been steadily declining to a current amount of 1.4 million and i believe the firm is mismanaging it.when they buy in large amounts(15,000 and larger) they either lose money or stay the same, they never make a reasonable amount from them(the largest gain i have seen from one of the large ones was .5%).when they buy in small amounts (2,500-15,000) they usually make 5%-100%.is there any way to get a change of trustee? SAVAGE SAYS: I agree that is a terrible return, especially in a year when both stock and bond markets rose in value! Contact the attorney who set up the trust -- or get the actual trust documents and go to an attorney (proabably an estate planning attorney) to see if you are in a position either to change the trustees -- OR to demand that the trustees seek a new investment advisor. An attorney can help you, because you might need to go to court to prove the incompetence of the current investment advisor, or even malfeasance for charging fees and losing money in an "up" market! Just the threat of legal action may get their attention. Then the question is WHERE would you have the money moved?? Let me know when you get to the point of being able to do that!

If I take distribution of part of my 457 plan before the end of this year do I have to report that income on my 2012 taxes of can I defer it to my 2013 taxes? SAVAGE SAYS: If you take the distribution in 2012, you must report it as income for 2012.

I've I just inherited a portion of my inheritance from my Father ( $20,000) . I'm single and have 8 more years until retirement (65 years old)

I have $150,000. in RRSP'S and a $10,000 morgage on a $350,000.home and a $15,000 credit line debt.....I'm self employed, and although I expect another $80,000. in inheritance, I'm wondering what would be the smart thing to do with this money. My instincts tell me to pay off my debt ( morgage at 5.5% or credit line at near 1.5 %. All of my cash is in my RSSP and my credit line is $180,000. .......... I will need a new car in a year or two...... Should I paid off my debts , invest , or settle money aside for the purchase of a car ? .....I'm concerned about retiring with so little in savings , the economy is very flat and I've been unable to save for the last two years...... Needless to say ,I'm very concervative and wish to use this money gift in the smartest of ways. SAVAGE SAYS: First, for my readers who are wondering, let me note that your RRSP is the Canadian version of our IRA accounts -- a retirement account. Second, it sounds like you don't "trust yourself" not to "blow" this money! But you should have some cash liquidity outside your retirement savings. I'm guessing that is what you've used this "credit line" for -- atthough a 1.5 percent interest rate seems amazingly low. I'd suggest paying off that line of credit -- even at the low rates -- UNLESS it is something you can never get again for use in an emergency. Your mortgage is so small, and timed to be paid off just about at retirement, that I'd keep it in place -- as a sort of savings discipline. And then maybe put $5,000 away in a 1 year certificate of deposit in the bank --so you would have cash without penalty, outside your retirement plan. But Canadian laws vary from the US so double check with your tax advisor about the implications of paying down your line of credit and your mortgage. I do know that unlike the US, your mortgage interest is not necessarily tax deductible.

Dear Terry,

My question is about my daughter. She is married with one son (5 yrs. old). They bought a townhouse when they got married nine years ago. Now they would like a bigger house, but they owe at least $50,000. more than there townhouse is worth. They also have large credit card balances. They are up to date on there mortgage payments and are not late on any bills. My question is, how will they ever be able to buy a house? I don`t think the price on their house will ever go up to the point it was before. It would cost them money they don`t have just to sell their place. Do you have any suggestions? I feel so bad for them. They are running out of room. Thank you, SAVAGE SAYS: This is a tough situation, but they're just going to have to gut it out until the economy improves -- and it will! Think of all the immigrants who came to American and squeezed into small apartments because it was all they could afford. Now, our children's generation is facing the same kind of situation. Right now, they need to work on paying down their credit card bills -- not even thinking of taking on a larger monthly mortgage payment. If they do that, they'll be ready to move when things change. I know this is tough for you to watch -- but your parents and grandparents likely made it through the same scenario and came out just fine. And don't you dare dig into your retirement income to help! Let them work through this with your encouragement -- but not your money, or your pity.

How can I get rid of a timeshare? It is paid for, we've never used it, and pay monthly maintenance. I can't tell if these companies that offer to sell it are any good-all want money up front to 'sell' it for me. SAVAGE SAYS: Yes, you're right to avoid any reseller that wants cash upfront. Timeshares always look so attractive, but are very illiquid. You might consider offering it for specific weeks, to "use up" your days -- and it may be easier to get someone to pay on that basis, rather than purchase the entire timeshare.

I live in the state of Michigan. I am retired, i own a home in which I rent out the lower flat. I have serveral annuities and Ira accounts. I have a niece who is 17 year's of age, who has a driving permit. I would lke to let her drive sometimes and once she get's her license would be letting her use my car. Do you think that I should get and umbrella insurance policy? SAVAGE SAYS: I think you should check with your insurance company to make sure that she would be covered if driving your car with permission, and that she should take drivers ed and not be allowed to drive unless she gets an "A" in the course. l Then ask the insurance agent about your limits of liability, and whether an umbrella policy might be necessary, and whether it would cover the situation if she had an accident and was at fault! Umbrella insurance is relatively inexpensive -- but your agent would need to coordinate it with your existing homeowners and auto policies.

I have been selling (from a 35-65) stocks to fixed portfolio
1/2 of the long term TIPS that have huge profits, the Ginnie maes, the PTTRX Pimco
and buying VCSH, VFICX, DLTNX and CMFIX which all have much shorter maturities
is this a good strategy
I could not find anyone who could give me a reason how an individual TIP, expiring in 2042
paying 2.02 yield which had gone from 34000 to 55000 (while payinh interest for 3 years)
could possibly go up anymore
thanks SAVAGE SAYS: I think you're on the right track! But be sure that you're not selling out of anything that has a locked in base rate that gives the investment additional value.

My wife and I think we have accumulated enough to retire. We're invested in mutual funds, bonds and cash, plus we each have a government defined benefit retirement plan. Our concern is that the stock market will tank no matter how the government deals with the fiscal cliff and interest rates will also rise at the same time. Where can we put our money (403b, Ira, Roth IRA) to best protect it if bonds and stocks are all under attack? SAVAGE SAYS: Honestly, you need a better perspective. I suggest you order my book" The Savage Number: How Much Do You Really Need to Retire?" -- It costs very little from the bookseller on my website -- and it covers the very important question you asked. I'll give you a personal money-back guarantee if you aren't better prepared after reading it!

I rolled over my company401k and have annutines totally about 400,000 and a house worth about 60,000.Should I purchase a seprate umbrella insurance policy? SAVAGE SAYS: An "umbrella" insurance policy covers damages to property or personal liability over and above the underlying home and auto insurance, in case of some lawsuit or other liability event. It doesn't have anything to do with your investments! And in most states, retirement plans and annuities cannot be accessed in a lawsuit -- but check with your state's liability laws.


As a 60 year old AT&T retiree, I have $47K basic life insurance from the company while my spouse- still a current employee with Loyola Hospital and has about $150K basic life which she contributes out of her twice a month paycheck. We just refinanced our mortgage so it's now a 15 year fixed @3.75% $198K. Since my spouse currently is solely handling the mortgage, while I handle the much of the rest household expenses with my pension and part-time job, we're wondering if you advise us to obtain more life insurance of the private kind- for my wife only or for both her and me and if so how much, and if is should be term or whole? Thanks SAVAGE SAYS: That depends on how much debt you want to leave her -- or how much she wants to leave you -- if something happens tomorrow! You didn't mention any retirement savings that a surviving spoouse would get to pay off debt. At age 60, it may be difficult and expensive to get life insurance, depending on your health. But it's worth a try, and term would probably be easiest. Try for at least 15 years each -- and maybe the simplest thing would be to get a "first to die" policy that covers both lives and pays off only on the death of the first spouse -- thus taking care of the mortgage obligation!

I'm a 55 year old father with a 21 year old son in college who will be graduating in a year. When he first started college my wife and I had enough money to pay for all 4 years, but we had him take out a government loan through finanacial aid as an incentive to do good, as we told him we would pay off his loan when he graduated. We also have a mortgage of $38,000 left. We have 50,000 in a safe investment where we can take it out anytime we need it, so to use it to pay off his loan.
But I'm starting to think maybe I should instead use 38,000 to pay off my mortgage, and save the rest for emergencies. I have other money to pay for his last year. I'm thinking about retiring in 5 years. I'd like to retire with no mortgage, although I do plan on working part time. Any sugestions? SAVAGE SAYS: A promise is a promise. If he kept his end, and did well in school, you must keep your promise. And work a few years longer, because yes -- it's agreat to retire with no mortgage.

Hello, I am 64 years old, I am drawing SS, I also have small annuities from three other area's. I currently have 27,500 in and IRA at a local credit union, I also have a vehicle loan (22,000) with a $534.00 per month payment. I think I should take 11,000 out of the IRA before the end of the year and then another 11,000 right after the first of the year to pay it off and keep that 534,00 in my account as increased monthly income which would be nice to have. Now this is not my only retirement account, I have about 265,000.00 in the Federal Thrift Saving Plan from which I draw nothing and have no plans to anytime soon.
Should I use the small IRA to pay off my Vehicle ? SAVAGE SAYS: It sounds like you're not working right now. First choice -- at age 64, if you can still do some kind of work -- get a job that pays you $200/week, enough to make your car payment! Let the IRA keep growing. If you can't do that, then remember that you'll owe ordinary income taxes on your IRA withdrawal -- so be sure to have extra money for taxes next April.

I am in FL &I was stupid & cosigned a loan on a boat with my exboyfriend. Have not been with him for over a year and has had sole possession of boat. He was to take care of payments which apparently he is not doing. Now he claims that he is selling the boat for cash & not paying off loan. He is selling it illegally without the title & my name is on registration. Basically he is leaving the loan in my lap & leaving me at the hands of the law for his illegal actions. Is there anything I can do to protect myself? SAVAGE SAYS: Ugh, ,this is a messy situation. You might need an attorney to file suit against him, alleging fraud and theft. But in the absence of any written agreement, you will be paying to chase him. You could also contact the Consumer Fraud division of your state atty general's office and see if they have other suggestions.


SAVAGE SAYS: You may, or may not, have two choices -- either to take a monthly check for life (or for your life and that of your spouse) -- or to "roll over" the money to a qualified IRA Rollover account, where you can decide how to invest it, and how much to withdraw each month.
So, the first step is to ask your HR department if indeed you have these two choices. Then, if you decide to "roll over" your account contact Fidelity (1-800-Fidelity) and they will handle the transfer directly so you don't incur any penalties or taxes. And they will advise you on how to invest it and how much to withdraw so it is likely to last as long as you do! And anything leftover in your account can then be left to your heirs.

Hi Terry, my 27 year old single daughter is buying her first house in Nashville. She told me that she doesn't need to have a lawyer for the closing because some of her friends bought a place and they didn't need a lawyer. I thought we always should have a lawyer for any real estate transaction. I would appreciate your advice. Thank you. SAVAGE SAYS: I completely agree with you. Saving a few dollars by not having a real estate lawyer at the closing, could be very costly in the long run!

In your latest article you recommended that if we have an IRA to convert it to ROTH. I thought that you could not open a ROTH if you made so much money (can't remember the number). If I make over $80,000, I thought I could not even think about setting up a ROTH IRA. Thanks for your answer. SAVAGE SAYS: Now anyone can convert their eligible accounts to a Roth IRA regardless of income or marital status (prior to 2010 only those who had a modified adjusted gross income below $100,000 were eligible to convert). But you'll owe taxes on the money converted when you file your return next April. Make sure that you have the cash -- and that this tax bill doesn't use up all your liquid cash. And be sure to consult with your tax advisor with regard to your personal circumstances.

I am 66 , laid off from my school district, on retirement ss. My husband is 71 on ss and has had two major strokes. We live in my parents (deceased) old homeplace that was built in the 1950's, also in the house is a 41 year old nephew, the house needs a lot of work, getting very run down. We receive about $4000 per month. We have a 17 year old grandson that we have raised since he was 2 months old, who is in his first year college. We do not know what to do. We have a vehicle payment, utilities and insurance(vehicle,and medicare supplement ins.) That covers about $1600 of our income not including food or prescriptions. We also need a new vehicle for when the grandson goes to school. We need advice, i do not think its feasible to remodel this old house-but what to do. SAVAGE SAYS: Wow, you have taken on a huge burden -- and you're getting to the age where that is more than you can handle. A few comments, and then I'll give you some direction. Is your 41 year old nephew working -- and contributing to the costs by paying rent? If not, invite him to move out! Second, is your grandson living at home while attending college? If so, why does he need a car -- and why is this YOUR responsibility?? And has he applied for scholarships and student loans, to cover the cost if he moves into campus housing?

For more specific advice, I'm going to suggest you set up a meeting with Consumer Credit Counseling Services. Call 800-388-2227 to be connected to the nearest local office. I'm not suggesting this because you have debt -- but because you need help in making a big decision: whether you can afford to stay in the home, or whether it might be less expensive to move. And whether you might qualify for some subsidized senior housing that would give you more flexibility. I applaud what you've done for your family -- but one day you'll be gone. You need to let them learn how to live on their own! NOW!

Terry with everything going on here and overseas is our money in the banks secure? SAVAGE SAYS: Up to the FDIC insured limits (www.fdic.gov). The government will print enough money to pay everyone off to these limits, if necessary!

My insurance agent sold me an annuity 3 years ago, and wants me to surrender it early and place the funds into my personal checking account, wait 30 days, date the new application with another insurance carrier and on the replacement form he says it not coming from another annuity, when it clearly did. He is the writing agent on both contracts.
I did some homework on this and I think hes actually just trying to by-pass the replacement paperwork, and suitablity. Can you tell me if this is wrong. We all know it was from an annuity, and hes saying its NOT and from my checking account. If the other insurance company finds out can I get into trouble.
I asked him why is there replacement paperwork, and an annuity comparison worksheet from one annuity to another annuity, and he replyed with the fact if we place the funds into my personal checking account, they will think its new money and it will go much easier with underwriting.
please respond, asap.
SAVAGE SAYS: This is ridiculous, it's fraud -- and it's BS!!! Please send me an email with his name and phone number and I will raise the issue with him personally! (My email is Savage@suntimes.com) -- He's just trying to get another nice, juicy commission. Avoid this sales-jerk. And do let me know who he/she is!

Hi Terry, I would like to get some info about refinancing my mortgage. last time i did was dec of 2009 when i got a rate of 4.25% for 15 years, down from 5.25 for 30 years, which i thought was low but now i called my mortgage co and got a rate of 2.75%. the amount is less than 20% that they require. i don't want to pass this up. but i need extra money for an addition to my house. small addition roughly 500 sf but i am not sure yet of how much i need, 50 to 100k, nor when i will need it, 3-6 or 6-12 months. can you give me some tips as in the refi goes and what to do about the additional amount of money i need. one other question, is it better to go thru my current mortgage or find the best rate out there?

thank you for all you do!!
SAVAGE SAYS : That's a pretty complicated question,and I'm not quite sure I understand. It's wise to refi to a lower rate. It's unwise to take all your savings to do it. Go to www.guaranteedrate.com and contact Leslie Struthers -- the best refi person in Chicago. Her direct email is: Leslie Struthers [leslie@guaranteedrate.com]

I am recently retired and have $116,000 in my 401K, which remains with my former company. Is it wise to invest a portion of it in an immediate annuity to get a monthly income? This is all the money I have, plus a monthly pension. I will file for social security in about 2 years.

SAVAGE SAYS: First, I think you should directly ROLL OVER your 40l(k) to a place like Fidelity or Vanguard or T. Rowe Price. They'll handle that -- and advise you on a few funds that will give you some growth, and some safety. The problem with a fixed annuity (which is basically what Social Security is, despitethe COLA) is that what might look like an attractive monthly sum today could buy very little if inflation returns. At T. Rowe Price you might want to go through their Monte Carlo modeling program for retirement income. They'll help you balance safety, growth, and income.

My mother is an 87year old widow who has never worked or handled the finances during her marriage. When my father passed she was left with a widows pension of $1,100.00 per month and $40,000 worth or credit card debt. I have been using funds from my annuity to help pay her bills but it is draining me financially. I am thinking of having her apply for a reverse mortgage.What do you think of this idea and what website could I use to research how to get the best deal in this situation? Are there any other alternatives I should explore? SAVAGE SAYS: Oh absolutely, if you think she will still be in the house for at least 4-5 years, you shoud do a RM. Go to www.ReverseMortgage.org to learn all about it. That will solve your problems, so you can save your money for your own retirement!! I did this for my father, so I truly believe in Reverse Mortgages!
Thank you for your help.
Pamela Brown

hi, my name is Tocha. i am from the small town of jena, la. i am looking to invest in a 5 unit apartment building as my first investment, it is brick, has all appliances, they are selling it for $200,000 with an income of $1375. is that a good investment for a first timer. i also need to know whats the best way to get a down payment or to finance it with me having bad credit. SAVAGE SAYS: Well, you sound very ambitious, and that's a good thing. But first you need to save up for a down payment, AND you need to get your credit in order. So pay off your bills, and keep paying on time every month to fix your credit. And while you're at it, save some money in a savings account in a bank, automatically every month. And when you have $10,000 write back and I will give you further instructions on how to purchase real estate.

I was told to look into long term care insurance because of me being single.
What are the pro & Cons of this? This would be for if I would have to go into a home
SAVAGE SAYS: I don't know how old you are, but if you are healthy and in your fifties or sixties, I would definitely consider LTC insurance. I have written many articles about how it works (search the archives at TerrySavage.com or read my book) If you are looking for a LTC agent I always recommend MAGA LTC -- at 800-533-6242, LTC insurance is all they do -- and they're the experts.

i worked at geico is co for ten years and two years ago i was forced to retire,due to health problems.i was suppose to wait until age 65 to get my monthly retirement checks.three day ago i received a letter saying they were offering me and option to take my retirement money now lump sum and not wait until age 65.can you explain why and, how much would it be. e2g9re SAVAGE SAYS: They are probably trying to "clean up" their retirement plan, and get you off their books. Whether this is a good deal depends on how much they are offering. So ask what the lump sum would be --and also ask what you would receive on a monthly basis if you wait to collect. THEN go to www.immediateannuities.com -- and input your age, the amount of the lump sum you would have to invest -- and click to find out how large a lifetime monthly check you could get from various annuity companies. That's the best way to see if this "lump sum offer" could yield you the same thing you'd get by waiting a few years to get your lifetime monthly payment from the company. (note to my picky readers -- yes it's not quite the same comparison because you'd have to wait to get your company pension, but it gives you an idea of how generous this offer is, or isn't.) Now, don't stop reading, because there is one more important issue: You must find out whether you can ROLL OVER this lump sum into an IRA, where it can continue to be invested and keepgrowing tax deferred. Since you weren't planning to use the money now, that's the best idea. And you can go to Fidelity or Vanguard or T. Rowe Price and they will help you handle this rollover. Ifyou do it wrong, that is if you take a check yourself, then the money will be subject to immediate income taxes which will take a big bite!

Is whole life insurance better than term? SAVAGE SAYS: I will answer your question in this week's Q&A column in the Chicago Sun-Times, and it will be posted on my website. But the short answer is: "It depends!" More later this week!!

Just started receiving 450$ tax free fora disabity form the V.A. Luckily could get by without it. What could I Invest it in. Don't want to lose the tax free benefit. Would like to do it monthly with bill pay? Sorry to hear about your mom. Just lost mine . Even when their sick you can't prepare for the lost
SAVAGE SAID: Thank you for your sympathy. I would suggest you have this money directly deposited to your bank -- but not to your regular checking account. Instead, open a money market deposit account, a separate account at the same bank. It won't earn much interest, but the money will be there when you need it. And at any time you can have some money transferred to your checking account if you need it Then write back in a few years if you find you have "too much" money piling up in that money market account!

Recently I've inherited a $60000 fixed annuity and about $60000 navy credit union traditional iras. All of these have an interest rate of about 3.5% until 2016. Do I have to roll them into another annuity or Ira right away? I already notified them about it.
I am 61 yrs old. If I roll them into the same type of investment, will I have to pay taxes on the interest it earned since the inception date or just this year? Thank you.
SAVAGE SAYS: These are separate questions, and the attorney who handled the estate can answer them better than I can. But let me point you in the right direction, without knowing the details. Let's start with the annuity. I'm not sure if you received a lump sum as a beneficiary of a tax deferred annuity or a monthly check because your spouse or relative added you tothe annuity to keep receiving checks after his or her death. If the latter, you will just keep receiving monthly checks, which may be all or partially taxable to you. The annuity company will let you know about that. BUT, if you received a lump sum as the beneficiary of a tax-deferred annuity, it is simply your cash to keep and invest as you see fit! The annuity company may offer to give you a new tax-deferred annuity (they'd like to keep the money), but you don't have to do that. You can use the money to pay off bills. Just know that if you purchase a new annuity, there is likely to be a "surrender period" of about 5 years, with penalties for withdrawing the money before that time. Depending on your situation, you might be better off taking the money and putting it in the bank while you decide. Get some good, independent investment advice and don't be rushed into anything. You get this lump sum tax free, as the estate paid the estate taxes on it if you were the beneficiary as a death benefit. Again, check with the attorney who handled the estate -- or with a Certified Public Accountant, as to the specifics of the annuity situation.

As to the IRAs, this is a completely different story. You probably want to continue to hold them as an IRA, and depending on your relationship to the person from whom you inherited them, you can do that -- deferring the need to pay taxes until you are ready to withdraw at your own retirement. The Navy Federal Credit Union will surely show you your options. But your goal should be to extend the IRA over your lifetime, so it cancontinue to grow tax-deferred. And be sure, once it is in your name, to name a NEW beneficiary! Hope this helps -- Again there are specifics I don't know, so ask these questions of the people who are handling the estate, the IRA, and the annuity.

If my 90-year-old mother died in New Jersey (after living with our family for 4 months while she had dementia), but had originally lived in Florida for 30 years and put all of her assets into a revocable living trust in Florida, including her mutual funds, how do I, as executor, access those funds to divide the total dollar amount into three equal parts? First, since we had transferred her residency to NJ 4 months ago, do the laws of NJ or the laws of Florida prevail, or do both prevail? Second, if I transfer ownership of the mutual funds into my own name -- so that I will legally be able to liquidate the shares -- don't I end up having to personally pay taxes on the total dollar amount of the mutual funds?? What is the best way to handle mutual funds so that I can divide their total value up equally into 3 parts, but without having to pay taxes on the total dollar value? SAVAGE SAYS: Ugh -- there are a lot of issues here. But the most important one is that as a Florida resident there would have been no state estate tax -- not sure about New Jersey! You should try to keep the estate in Florida if there is a NJ death tax -- and that means you need a Florida attorney to determine whether the estate can be handled there -- probably the one who created the RLT. If you actually changed the addresses on her mutual funds to New Jersey, then find a NJ estate attorney, because that is likely to prevail.
You say you are the "executor" -- but are you also the trustee of her RLT? There's a world of difference when it comes to your "powers" -- and you need legal advice to tell you exactly what powers you have.
You can't do anything without the proper legal papers -- The mutual fund companies won't change funds into your name, but presented with the appropriate documents they will create an estate account, which can then be divided (again with paperwork) into separate accounts for the named beneficiaries. You'll have to show them the terms of the RLT, and I hope the mutual funds were titled in the name of the trust, giving you the authority to handle this process.
So, bottom line - -contact the attorney who created the trust in Florida. Tell him/her the situation to see if it can be handled there, if there is a tax advantage over NJ. The attorney will get certified copies of the death certificate and the appropriate certified copies of the instructions for the trustee upon her death. You will present those to each mutual fund company. And they will walk you through the process.
The beneficiaries won't owe taxes personally, only the estate if it is over $5 million. And when each receives his share there is no tax due on the investment gains in the funds. They are valued as of the date of death. Also, though you didn't specify, if some of the mutual funds were in IRAs, you'll want to consider rolling them into a new beneficary IRA, keeping the tax deferred growth going, and again the mutual fund companies will advise.
And as a reminder, I am not an attorney, so please double check re your personal situation with the attorney you choose to handle the estate.

My Wife and I have decided to open Roth IRA accounts. We have never made any personal investments to this point. When we met with our acct.(financial advisor) he went over investment choices and fee schedules. As far as fees are concerned we have two options.
A four percent fee on money as it is invested
B one percent on the entire portfolio
if we choose option A we will not be responsible for fees after we retire
if we choose option B we will be responsible for one percent of the portfolio for life

If we decide to use this advisor option A woul be best for us since the max fee would be $480.00 per year. My question is would you consider these fees reasonable?

SAVAGE SAYS: In a word: NO! You are helping your financial advisor's retirement as well as your own! Just call Fidelity (800-FIDELITY) or Vanguard (800-VANGUARD) or T. Rowe Price -- (800-638-5660) -- and they will offer fund with NO fees to invest or withdraw, and very low annual management fees! And they will also give you some basis investment advise, helping you to choose an appropriate fund, depending on your age, and stage in life.
If this is the only advice your "financial planner" has given you, feel free to say "thanks" and walk away. But if your planner has also looked over your situation, worked on your estate plan, helped review your life insurance, talked to you about long-term care insurance, then you owe him a flat fee. Ask what that is! And next time you see a planner about those issue (which he/she likely did not raise) go to www.feeonly.org to work with a planner who does not make money selling you stuff that you could otherwise get for free.

If I bring home $$2,328 a month, will I be able to afford an apartment that is $1,665 a month which includes, water, heat, air conditioning, cable and pet fees? I also have a car insurance payment of $80.00, cell phone 120.00 and apt. ins $25.00. SAVAGE SAYS: Only if you don't eat much!

My husband and I are helping my 26 year old great nephew to get back on his feet. He's had some mental health issues and was hospitalized at Tinley Park mental health facility twice in the past year for several weeks each time. He was also hospitalized at a local hospital for 3 days prior to being transferred to Tinley Park. He was unemployed at the time had no insurance and now the bills are in collection. He was unemployed for the year since the hsopitalizations (until recenlty) and has no money to pay the bills. He is now living with us and working with a temporary job agency while he looks for permanent employment. This work is spotty and he's making minimum wage. I don't know how much the bills are (yet), but I imagine they're quite substantial. He isn't able to pay them. What are his options for dealing with this so he can establish/reestablish credit? Should he consider filing for bankrupcty? Can he get the debt reduced somehow? Can the state garnish his wages given that Tinley Park is a state-run facility?
Thanks for your help. SAVAGE SAYS: He should immediately contact the NFCC -- Natl Foundation for Credit Counseling at 800-388-2227. That will connect him to the nearest local office. In the Chicago are that will be Money Management Inc. You can trust them completely to give good advice, and it is free. Go with him -- sounds like he needs your support to work through this. What a good deed you are doing!

4. You want to borrow $7,500 to buy a used boat. First Century Bank will lend you the money at 15% for 12 months. Fidelity Savings and Loan will lend you the money at 10% for 24 months.
a. How much will the loan cost at First Century Bank?
b. How much will the loan cost at Fidelity Savings and Loan?
c. Which loan would cost you less?
d. How much less would it cost (difference between them)? SAVAGE SAYS: Show each bank the other's deal -- and ask THEM to compare!

My grandmother has Nine Series I Bonds, worth $10,000 each. They were issued in 2001 and 2002. Three are in my deceased grandfather's name and six are in my grandmother's name. She keeps them in a safe in her house. Are they as good as cash? Should they be in a safety deposit box? She keeps the receipts for the I bonds in the safe as well. Should they be in a separate place from the bonds? She lives out of state and I am going to see her this weekend, so if they need to be in a safe deposit box I want to get them in there when I see her. Thanks
SAVAGE SAYS: Oh sorry I didn't get to this before last weekend. You/she should make a copy of the receipts, including the serial numbers and date of purchase, and you should take that with you, just in case of accident, fire or loss. Then they can easily be replaced. And by the way, these older EE bonds are definitely something special and should be kept, as they pay a higher guaranteed base rate than anything offered today. So she should hang on to them!

My wife and I are in our late 50's and considering purchasing long term care insurance. Does it make more sense to purchase it now or wait a few years? Hopefully we will not need the coverage for many years, so what would be the advantage of purchasing it now and paying those extra premiums for the next several years? SAVAGE SAYS: Well, traditionally you wanted to buy earlier to get lower prices, which we all assumed would stay level for a lifetime. That myth has exploded as prices keep rising. But you also want to buy while you are young enough and healthy enoughy to qualify for a policy! Read my recent article on combo Life/LTC policies, which give you LTC benefits and/or a death benefit if you do not need care.

In this tough economy where can seniors safely place their money as a temporary holding place other than under the mattress? SAVAGE SAYS: In a short-term, FDIC insured CD in a bank -- Yes, payng almost nothing, but it is SAFE! And it is the only truly safe place these days. Don't get tempted by slightly higher yields. They willcome back one day -- and you'll get higher CD rates. So don't lock your money away in anything longer term now --

What is your opinion about structured CDs? I am trying to help a 90 year old senior with her finances. Historically she has always put her money in CDs. She needs to generate income to help pay for her assisted living facility. She is risk averse and likes the government guarantee. SAVAGE SAYS: So how are you trying to "help"??? Let her leave the money in short-term bank CDs -- she can use the cash as she needs it if it doesn't pay enough interest. Just make sure she has a current will or revocable living trust, a healthcare power of attorneyand a living will. Don't get "cute" with her money!

I owe $35,000 0n my house - 5.5 years left to pay - Interest rate 4.75 - Monthly paymet $730.00. Would like to know about 2 possible ways to pay this off and try to cut down to 4 years or less.
(1) Increase monthly payment by $100.00 a month to $830.00.

(2) Take our $730.00 payment - cut it in half and make payments on the 1st and the 15th of the month - in addition, add $50.00 to each of these payments on the 1st and 15th. Any help would be greatly appreciated.

SAVAGE SAYS: Don't try to get too cute, or you'll wind up with lots of accounting issues. Just tell your lender that you are going to pay a regular, additional amount every month and that you want it credited to PRINCIPAL. Then ask for a new amortization schedule and they will tell you how soon your loan will be paid off, if you do that every month as part of your regular monthly payment.

You responded to our question from March 10,2012 about refinancing our house, and you asked us to let you know what happened. We started to pursue the refi right after we got your response and today, believe it or not, we finally closed. As you indicated, it took a lot of legwork and I had to contact many lenders before someone would consider us. Most were only willing to refinance our first mortgage, and not roll in the home equity loan, which was one of the main objectives. As it turned out, the lender on our first mortgage (Citibank) was the only lender who would consider it. The first time I contacted Citi, the rep would not consider it. But on a second attempt, I worked with a really customer-focussed individual who was willing to really listen and make it work. We ended up getting a shorter term (20 years) loan with a 4.25% rate. As you thought, we had to contribute cash - $12,000, and we'll have to pay PMI for 22 months. But even with the PMI, our payment on the new loan is considerably less than our previous two payments combined. We also put a lot of elbow grease into making the house look as good as possible for the appraisal (painting, minor repairs that we had been putting off, removing all clutter - that felt good!, tidying up the landscaping and yard). That work definitely paid off. With no substantial improvements of any kind, our appraisal went from $305K in Jan 2011 to $340K in June 2012 so that helped as well. I'd love to get to the point where we could pay biweekly payments to shorten our term. If you have any advice on that, we'd appreciate it. Also, would biweekly payments get us to the point where we could remove the PMI sooner? Thanks again for all your help!!
SAVAGE SAYS: First of all, Congratulations! And thanks for the good news. It will be an inspiration to others. As noted in the answer to a nearby question, my favorite way to pay down a mortgage (I did this myself years ago) is to add a regular amount to your monthly payment -- maybe an extra $100, or maybe just "rounding up" your payment from something like $1563 to $1700. Do that EVERY month. Specifyto the servicer or lenderthat you want the extra amount credited to PRINCIPAL. Then at year end check to make sure the credit has been applied. You can ask them to give you a new amortization schedule, telling you when PMI will end, and when you will have paid off the loan.

i have the money to pay off my home mortgage which has an interest rate is 5 3/4% on a $108,000 note. I have a very limited income, finding it difficult to meet my monthly payment. I have excellent credit, no children, single and no retirement fund. i am aware of a 9 month 1/2% payout CD. Which option is best? I have only two more business days to decide. SAVAGE SAYS: Gosh, I hate to see you give up all your liquidity to not have a mortgage payment. What happens in an emergency if you have no cash?? I'm sure that you cannot refi on a limited income, but your interest rate is not that high. Maybe you want to split the difference,and put say $50,000 toward your mortgage, so you will pay for fewer years. Keep the rest safe in short-term CDs. (And yes, I think you won't get that high rate with less than $100k, but it's more important to keep some safe, chicken money on the side, even at a slightly lower interest rate.

I am a City of Chicago employee for 25yrs. Im looking to retire in 6 yrs at age 55 and have $260,000 in a 457 plan. My pension, if its still there, will give me about $7,000 a month. Am I better off diverting some money i put in the 457 plan to a Roth IRA to ease the future tax burdens? SAVAGE SAYS: If you're not getting a match on it,, and can live without the current deduction, I definitely think it is wise to have some after-tax savings -- especially if they keep the promise that it will all come out tax-free!

My town changed from semi-annual taxes billed to quarterly billing. I received an escrow analysis from my mortgage company that is DEFINITELY incorrect. it should read $1300 paid quarterly, instead it reads $2600 twice and then $1300. Essentially they are asking for and additonal $1300 too much. They say I have to pay what the analysis states, because my tax bill only projects for the first two quarters, and my town sets the rates in Dec. (however my town anticipated the voted increases in their $1300 bills).

Is this legal? How can I get this extra overage off my bill? I am now paying the increase monthly or my payment will be considered late.

FRUSTRATED!! SAVAGE SAYS: Wow, that's horrible. I'm assuming you're in the Chicago area. My best source for help on property tax issues is Andrea Raila. Her website is: http://www.taxestoohigh.com. Contact her immediately! And if you're not from the Chicago area, seek a property tax expert in your town. And do get back to me and let me know if this isn't straightened out asap. I will get someone at the paper to investigate, assuming you're not the only one in this situation!

I just turned 62 but want to wait till older to gets.SS so iwiill get more money. Is there anything I have to do? Do I need to inform them of my intentions? Or can I jutst wait till I'm able to get full benefits? SAVAGE SAYS: Yes, wait until you're at least full retirement age, just after age 67 for you (go to www.socialsecurity.gov for the exact month) and then you can sign up. Remember, i fyou need health insurance, you can sign up for Medicare at age 65, without signing up for Social Security. But instead of deducting the cost of Medicare from your SS check, you will have to arrange an auto-debit from your bank account. And at that point you can buy a Medicare supplement policy, and be sure to sign up for Part D -- the prescription drug progam at the same time. If you need help doing that go to www.ehealthinsurance.com, and they will help you through the entire process.

Hello Terry,

I'm trying to help a young relative restore his credit. He's in his mid-twenties and it seems when he was a teenager his mom put a utility bill in his name.

Unfortunately, she was not able to pay the bill and his credit is ruined. We were wondering since the bill has been sent to collections and is 8 years old, should he try to make arrangements to pay it off? What can he do to start rebuild his credit.

Thank You

SAVAGE SAYS: There is absolutely no reason to pay it off now, when it was written off years ago. That would only bring it back to the top of his credit report. Instead, go to www.bankrate.com and click on credit cards, and then on "secured cards." That will let him apply for a Visa or Mastercard, with the credit line being the amount of his deposit in a savings account at the issuing bank. He should charge a little bit every month -- then pay it off in FULL and ON TIME -- EVERY month. That will build his credit report. Pretty soon, he'll be getting offers from regular card issuers, so remind him of the lessons of the dangers of debt!

What is a liquid trust?? The other day I went with my friend to his PNC Bank for a CD that he had and the CD had matured. He requested to withdraw some money out of his CD. The banker said he could not take money out since he had a living trust and is the trustee. He would have to get a liquid trust. The bank changed policy but he was never notified. He closed the account and went to another bank.
SAVAGE SAYS: I have no idea wha that banker was talking about. If he is the trustee of his OWN revocable living trust, he has full power to move money, withdraw, etc -- subject to penalties for early withdrawal, which did not apply in this case. I suspect the banker just didn't want to "lose" the deposit money. He/she should be reported to a bank officer for saying that!

Hi Terry. We have a UGMA account for my 16 year old son. He is currently a junior in high school. Should I close out the UGMA account before the end of 2012? My idea was to take that money and put it into my home equity line of credit. Therefore when he is ready for college I can take it back out. Is this a good idea?
SAVAGE SAYS: Well, it's a good "idea" -- but not strictly legal. Money in an UGMA account must be spent for the benefit of the minor. So if he needs a computer or a car, that would work. But money in an UGMA account also weighs much more heavily against you in the aid formula, so you definitely do want to get it out of his name this year. I'll leave it up to you to decide what to spend it on!

I am buying a co-op, to my daughter-I will put down 99% of the money.
She is going to pay me back, without interest.
She will become the sole owner. do i have to pay a penalty to the IRS?
SAVAGE SAYS: STOP! Don't do it that way. Go to www.nationalfamilymortgage.com and let them set up a legal document, and monthly repayment system, to make this deal legal. If your daughter were to stop making the monthly payments, you would be liable for them. Plus, since it is shares in a co-op, the board must be informed of the true owner. I admire your motives, but this is the wrong way to go about it!

Hi Terry, I currently have money in an intermediate term municipal bond fund which has done very well. At this time, however, would you recommend going into a short term fund or is it appropriate to keep the intermediate term fund? Thank you. SAVAGE SAYS: One day interest rates will go up -- out of fear for the amount of U.S. debt, or fear about inflation as the country creates more money to pay down that debt. As interest rates rise, the value of your fund will fall. I don't know what that day will be -- and that's the challenge. Also, since it's a muni fund, be sure ithas high quality bonds. Cities have their own financial woes, that could hit bond prices.

I am 61 years old and need to retire my husband is very sick. Will I be able to retire and take care of him. SAVAGE SAYS: I have no idea how much money you have saved, what your insurance situation is. I think you need some financial counseling. Start at your company to learn about your retirement benefits -- Also call 800-388-2227 to talk with consumer counseling about making a projected budget. This is a big decision, and you need more specific help than I can give in a blog.

Hi Terry,

Regarding your column on buying gold, how and in what form would you buy gold?

Coins, mutual funds, etc.

SAVAGE SAYS: All of the above, depending on your other financial considerations and investments.

I was wondering about Vanguard Wellington. I understand you can enter the fund with an initial $3000.00 investment and then contribute to it with a minimum $100.00. I am going to be 60 years old and was wondering if it is worth starting this now and if it is a good investment vehicle.

Thank you.
SAVAGE SAYS: Vanguard is an old, and well-respected, diversified stockand bond fund with an outstanding performance history. But don't take my word for it. Go to www.Morningstar.com and read about Vanguad and similar funds in its category. And, of course, all Vanguard funds carry very low fees. But, any investment should be made as a part of an overall portfolio strategy, so any recommendation would depend on the balance with your other holdings.

My husband has a variable life insurance policy we purchased about 20 years ago There is a $200.000 death benefit. The investment part never really made any money. There are no surrender charges. We are approaching 60 years old and wondering if we should take the $35,000 dollars out and invest in something else. I say just keep it. He wants to invest in something else.

What so you think?

SAVAGE SAYS: Well, first consideration is whether you could get along without that $200,000 if he dies before you??? I don't know if he is currently insurable, but I doubt you could buy that insurance for $35,000 right now. There might also be tax considerations if you give up the policy. And if you simply do a "direct 1035 exchange" to a different policy, there might be a new 2 year contestabiilty period before the life insurance takes effect. I don't know all the details of your policy, and if you haven't made any money inside it, there is a distinct possibility that it is charging huge fees for the investments and for the death benefit inside the policy. So there might be a better insurance product for you. But don't ask the same guy who sold it to you! I suggest contacting Byron Udell of Accuquote.com and asking his recommendation. He will look into what you have now, and you can trust his advice.


My Financial Advisor moved stock from another country into street name.
I was the registered holder and had no problem with
My stock in another country. I never signed a stock Power.
He had copies of my signature and it's my belief he
Transferred it to OTC pink slips from ordinary stock with those powers for use
On other stocks. He obtained the certificate as I was a widow
And said he will hold it in the vault in back office, next thing I knew
I had a new name on my stock I didn't recognize
And it appeared to now be a US stock, I stopped getting foreign dividends.

I feel he commuted forgery by insertion, alteration and I intended use
Of the form.

Is that still forgery and what can I do?
He says it's in ADR's but the company said the stock was sold.

What could he have gained by doing this?
SAVAGE SAYS: He could have made a lot of money on commissions on the sale of hte old shares, and purchase of the new shares. You need a lawyer to deal with this. I suggest contacting noted shareholder attorney Andrew Stoltmann at 312.332.4200. He can best advise you how to proceed.

Hi Terry,
I'm married with two kids who are 4 years away from college. I recently lost my job, which accounted for more than half of our household income. We have $67K left on our 15 year mortgage which has an interest rate of 4.875. According to our current schedule we have six years left of payments. (We pay an additional $100 each month.) The new, historic lower rates have gotten our attention and we're wondering if it would be worth refinancing for a 10-year loan at 3% with $2000 in closing costs? Would the monthly cost savings from the refinance--if reapplied to the principal--make the effort worth it? SAVAGE SAYS: First thing is to find out if you qualify for a mortgage now, since you have lost half of your income. I'm guessing that will be a problem. If you can refi, you can always roll those new closing costs into the loan, by accepting a slightly higher rate. However, the first challenge is to find out whether you qualify. And you didn't ask, but now is the time to prepare your children to attend a local community college at least for the first two years. Don't hide your financial problems from them; they probably already are worried. But if they start now, while in high school, they can get involved in clubs (debate, school newspaper)or athletic programs that might help them earn scholarships or grants.

I am 22 years old and would like to know if it would be bad for my credit rating to cancel my discover card that I have not used in over a year. I currently use a Chase visa card which I pay off each month. SAVAGE SAYS: Is that your only other credit card? Do you pay an annual fee for the Discover card? Your credit rating depends on your payment patterns, and on the amount of outstanding credit you use. Since you pay down your balance every month on the Chase card, your credit score should be excellent. (Go to www.myFICO.com to check on it.) But oddly, a credit score is improved a bit by the amount of credit you have and the length of that credit in your history. So if it doesn't cost you a lot, you might want to keep that second card. If, however, it is one of many cards, then no problem closing it -- and make sure the credit report says "closed at customer request."

I found a resturant that is up and running i would like to buy it i have bad credit and no assets and need 200,000 dollars. do you know of any banks or loaners that would over look my credit and lack of assets? SAVAGE SAYS: No.

Terry I have had 4 Separate IRA accounts expire this year. Can I roll these accounts in to different banks IRA accounts within 2 days of expiration ? without a penalty or taxes. I do pay my RMD every year and I am 76yrs old, of course also retired. SAVAGE SAYS: I think you are telling me that your CDs will "mature" this year. If you want to change banks, the first thing to do is tell the current bank to put the CD in a money market account in the bank, not to renew your CD. Then you have to establish an IRA at a new bank, and ask them to do a DIRECT ROLLOVER of the funds from the old bank. You do NOT receive a check, or take the cash. There is no specific time limit to do this after maturity of your old CD, because the money is just sitting in a money market fund. But it is a lot of hassle, so unless you have a very good reason for switching banks (and most are offering about the same rate), you might as well leave it in the first bank.

I turned 70 in May, 2012---I had a 401k account that I have been taking monthly withdrawals from since 01/2011 . I converted the 401k to a traditional IRA on 08/7/2012. I also have two other IRA accounts( no money has been withdrawn from either account) Will the withdrawals made before converting to an IRA and the subsequent withdrawals after converting satisfy the RMD for the combined amount of both types if it meets or exceeds the RMD ? SAVAGE SAYS: Your RMD is calculated based on ALL your retirement accounts, but the money can be taken from any account, or any combination of accounts. Any of your IRA custodians can help you calculate the RMD, but you must give them the total of all retirement funds, whether IRA or 40l(k). To see if you too out enough last year, look at your year-end balances. The contact the IRS to rectify things if you didn' take out enough (considering ALL accounts), because there is a huge tax penalty for under-withdrawals.

Terry, fyi. I did not voluntarily retire at 59 but was forced out at age 54 from AT&T. Fortunately, I just was able to get my 30 years service in with the company. I know it wasn't the best time for me being a couple kids getting ready for college and still 20 years mortgage left on the house. Thank, besides the couple years unemployment I received and then afterwards the $1339 monthly pension I began getting in 2006 and the crossing guard job ($6000 yearly), I am getting by. Even at my age of 54 at the time and currenntly approaching 60, It is not easy to find full time employment with benefits now at my age. I know it's unfair for my wife to pay mtges but what can I do except keep my head up and contribute to this family whenever possible. SAVAGE SAYS: It sounds like you're doing everything possible. And I hope your kids are chipping in too -- going to community college, working, and paying for their education. These are strange times, not at all what boomers expected.

Terry, we have 13 years left on our gmac mortgage which is $164K at 4.875% and then also a pnc home equity loan which is $26K at 6% for 5 years and we are looking to refinance consolidating both loans for 15 years with gmac. Problem is our home value has now gone down to $190-$200K. Would consolidating still make sense for us and what would our alternatives be because it figures as if gmac may advise against both into one because we don't have enough equity left in our home ? SAVAGE SAYS: You may be eligible for the HAMP program (Making Home Affordable), which is designed for people who are current, and have good credit, but don't have enough equity to refinance. Your original mortgage had to be insured by Fannie Mae or Freddie Mac (govt agencies) to qualify. Check with your primary lender first to see if you qualify.

Regarding reverse mortgages. When the owner of the property dies, does the state claim the entire property or simply seek to recoup what the owner received? In other words, do heirs receive money from the estate? SAVAGE SAYS: The STATE doesn't claim anything! (Unless the owner had been cared for under the state Medicaid progam, and the state is looking to recoup the costs of that care.) The RM lender recoups the amount that has been withdrawn over the years, plus interest at the promised rate. Then the heirs get anything that is left over, if there is any money left over. Go to www.Reverse Mortgage.org to learn more.

We would like to take advantage of the low interest rates available now to refinance our mortgage, but do not know which mortgage companies to contact for this. Can you please suggest the ones you know to be honest in their dealings with applicants and intersted in helping them to get the best home refinance. Thank you. SAVAGE SAYS: Start your search at Bankrate.com, putting in your city and state. They stand behind all the lenders that offer mortgages on their site.

I recently changed careers from working in a corporate environment to becoming a speech pathologist. I did take a pay cut and am in debt with student loans. Unfortunately, my husbands business is not doing as well due to the economy. Our monthly expenses are about $1800.00 a month more than our income. Fortunately I have been able to sustain us for a while with our savings, but things do not seem to be getting better. I need to find a way to balance out our monthly income/expenses.

We own a house that I originally mortgaged at around $280,000 and now owe about $220,000. Our equity on the house is also maxed out as we used it to buy the business, pay for home improvements and some of my schooling. Our interest rate is only 3.25 and will change again in November, but I'm not expecting it to go up, however, if I refinance, I know it will increase. I also have about $325,000 in my proift sharing with McDonald's that I built up over the last 17 years. I hate to touch it, but I'm trying to find out if it makes sense to take a portion of that money and refinance my house at a lower amount. Then I can use some of the equity to pay off my smaller bills that are at higher interest rates to bring down my monthly expenses. Since I changed careers, I will now be receiving a pension that I no longer expected and will help me in the future. I don't know a good financial planner and need some guidance quickly. I'm also concerned with how the mortgage requirements have changed that we will not be able to refinance.

I do not regret the change I made since I am able to spend more time with my family during the summer and I really feel like I am helping people/kids. I am working 3 jobs, my husband is working two and we are still not making ends meet. Fortunately, we have a strong family support that is helping us with the kids while we work.

Can you help guide us in the right direction to get aligned so we don't feel so stressed and have to work as much.

Thank you SAVAGE SAYS: OK, take a deep breath. That's a long story. First, forget about refinancing. I doubt you will qualify. It is scary to have an adjustable rate mortgage, but even if rates rise, there are limits to how much your monthly payment can increase. Second, you need some outside, professional help with your budget. I suggest you call 800-388-2227, which will put you in touch with the nearest local office of the NationalFoundation for Consumer Credit. You can trust them -- and it is free, or very low cost. Go over your income and spending plan with them. This is not just for people who are buried in debt. They can help you re-organize. As a last resort only, will you touch that profit sharing plan.

I'm 62 and bought a fixed anniuitie my money is tied up for 10yrs. With American Equity investment life insurance company. 20,000 did I make a bad mistake? 5 per cent guarentee -- SAVAGE SAYS: Probably you did make a mistake, but only time will tell. If you need the money before 10 years, or if rates move higher, you'll be sorry you did that. How long ago did you make the investment? You may have a short period under your state law to contact them and get your money back without penalty. And your contract should have a provision allowing you to withdraw 10% of your money each year, without penalty. Check on that, too.

Hi Terry
I read your article about, refinancing a mortgage.

I will be 65 this year, and I am retired. I owe $49,848.11 on my home. I have 20 yrs and 11 mo's left on my contract. It is a VA loan, and I am the sole owner after divorce.

My current interest rate is 5.375%. I am on social security and I have a pension. My question is, would it be beneficial to refinance, or would it be better, to pay a extra mortgage payment, once a year.

I have very good credit, and I always pay all my balances on all credit. I don't want to miss a better option!!

Thanks for your advice
SAVAGE SAYS: I hate to disappoint you, but with only Social Security as income it is unlikely that you will qualify to refi your mortgage, even though you have good credit. Do keep paying extra on your mortgage though, as it will save you a lot of interest over the years.

What do you suggest.....with three children approaching college age with very little college savings.? a 20 year or 30 year mortgage? Our ages are 48 and 51? Not much to go on I realize but should we be taking advantage of these low rates for the long haul to free up some money for college? or shorten the term with a lower rate? SAVAGE SAYS: This is a tough call. The "flip" answer is not tao take out a mortgage at all, but to tell your children to live at home in your fully paid house, and attend community college at least for the first two years. Then they can take out student loans. There are programs to defer and reduce student loan payments -- but no programs to help retired seniors pay off their mortgage. Yes, rates may be at their lowest in your lifetime, but taking out a mortgage at your age will still be a big burden. Think carefully about alternatives.

Terry, if we are trying to care for my elderly father at home and we have a gap between his income and expenses, how would you suggest we plug the gap? If we annuitize his savings to avoid all the fees, we are still short and running very tight. Should we look at the reverse mortgage options? He is in his early 80s. His assets are too great to qualify for much from the VA. These historic low mortgage rates have me wondering.......about using his home to help us help him. What about borrowing against his savings? Does that make any sense whatsoever? SAVAGE SAYS: A reverse mortgage makes a LOT of sense -- and I put my money where my mouth is! I did that more than 10 years ago for my father, who is now 91 and still living at home. So if you think your father can manage to live in his house for at least five years (to overcome the fees involved) by all means go to www.ReverseMortgage.org to learn more. My Dad knows the loan and interest are piling up -- and by now probably total more than his condo is worth (leaving nothing for his children, which is fine with us). But I till him if he lives to 100 there, he'll beat the bank out of a lot of money! Remember, when he moves out or passes away, the bank can never collect more than the value of the home from the heirs.

In January I refinanced my GMAC mortgage, who apparently uses Ally
Bank for whatever... Dont understand the connection there....
Given the events related with Ally Bank lately, is it prudent to be using Ally Bank for financial transactions? SAVAGE SAYS: Ally Bank is the new name of the GMAC retail bank. They are lending to YOU -- so you don' t have to worry about their future. And deposits in their bank are FDIC insured, so depositors (up to the limits) don't have to worry either!

My mom past away in 2010 can I distroy her papers and medical papers? SAVAGE SAYS: Yes, if the estate has "settled" -- gone through probate -- you can dump the paperwork. You are not liable for her debts once the estate is closed (unless you co-signed!)

I now can afford to buy a house for cash. My credit is not good I can now afford to pay off my de bts . Will I have a problem getting utilities turned on in the house? If so any suggestions? SAVAGE SAYS: Oh, interesting question contact the utility company and see if you can pay an estimated three months in advance, and also arrange for an auto debit of your monthy bill. That should do the trick!

My parents were inappropriatly sold annuities while in their 70s and pushing 80. These insurance companies lure the vulnerable seniors in with free lunches and dinners at nice restaurants, offer rates of return that many times the seniors will never see and get these seniors to sign contracts they have no business signing. Now, my dad requires a significant amount of care yet his money, that he worked for and saved all his life, is tied up.These companies do not want to budge on freeing up my dad's money. In fact, they just want to keep it via penalties I would consider criminal. Yet, I know for a fact, they rewarded their sales reps with outrageous commissions, ipods and God knows what other rewards. Beware seniors of these crooks. They wear expensive suits and cuff links and carry the latest gadgets that they win for selling you a bill of goods. Take my advice and eat at home or at your local coffee shop among folks you can trust. Terry, do we have any recourse for my poor dad?

SAVAGE SAYS: I've heard this sad story too many times. It sounds great -- higher interest rates than they would earn in a bank. But these annuities carry huge fees. Please write back with the name of the insurance company, and the sales agent or company. Maybe I can give this issue some more publicity and a very public warning. And if you give me a contact number for the insurer, I will definitely call the company. You can also contact the state insurance regulator -- though I doubt that will get you far, because they are not protecting consumers from these annuity ripoffs in their state.

ONLY 2 WEEKS TO ACT.............
SAVAGE SAYS: Under "Read Recent Columns" you'll see that Genworth is no longer issuing 10-pay policies, or giving 40% spousal discoounts, for policies applied for after July 29th. Hurry.

My wife and I both are on SSDI, we have 1st and second mortage on our home, total 59,000, total monthly payment is $705.00 we do not have a lot of retiretment monies, but we get by, I am 63, my wife is 60 would it be wise to refiance to one mortage or leave as is. Our first mortatge is $530. per month, which will be paid up in around 8--9 years. SAVAGE SAYS: I'm sorry to tell you this, but once you're on SSDI, it will be difficult for you to refinance. I don't know how much your home is worth, or what the current interest rate on your loans is, but you can try going to your bank and asking about a re-fi. Let me know what happens -- please write back BEFORE you do anything that could get you into a bigger jam.

I am 56, retired military, earning about 52K a year, that includes my pension. I have 90K in a T-IRA, owne two properties (rentals) that I owe about 200K on.

My goal is to use these properties (sale) to complete my retirement, providing the real estate markets ever recovers.

Do you think it is wise to wait, say, three years, or continue to rent them for ever?Although I've been able to make payments on time, I am losing money every year so far - since 2009.

SAVAGE SAYS: You're asking me to forecast the direction ofthe real estate market! Just as with all markets, it's hard to tell when/whether there will be a rebound. But there is one good thing about this -- at least your units are rented. It's just hard to raise the rents to cover your costs. And you're not alone. So it depends on how long you can afford to operate at a loss. It could be at least a few years before rental properties rebound in price.

What should I do if I have a thriving private high school and I want to create a trust or a foundation where the assets of the school cannot be sold for distribution after my demise?. also, I want each beneficiary to be enttled a an annual portion of the profit of such school.
SAVAGE SAYS: I'm sure you have a good attorney who helped you set up this business. Now it's time to do some estate planning -- and that requires a specialist in that topic. This is a big project, and it must be done right -- because you won't be around to fix any mistakes by the time they are discovered! I suggest that you contact your bankerfor some recommendations for estate planning attorneys who are famliar with issues related to closely-held businesses.

My mom has been on section 8 housing for years. My aunt just passed away and left my mom around $100,000.
She told me to put the money in a checking in my name only. She really needs to go into assisted living, what can I do?
SAVAGE SAYS: OK, this is a serious issue -- but a perfect time to make the move. You need an attorney who specializes in elder law issues, so that you can make the most of this money. It will allow your mother to move into assisted living -- a place where she can stay, even after the money runs out. Contact Janna Dutton, an elder-law specialist in Chicago at 312-899-0950 -- or go to www.NAELA.org (National Assoc of Elder Law Attorneys) to find a specialist nearby. If the money was left to your mother, she can't just "gift" it to you and let the state pay for her care. So you might as well do it right. Start searching for an assisted living facility that you, and she, like. Then make sure that when her moneyruns out, they will apply for Medicaid on her behalf so she can remain there -- or in a nursing care facility affiliated with them. You do that because you want her in a placethat will give a continued kind of care -- and you aren't looking for a nursing home at a time when you don't have money to "buy your way in."

I recently started a new job and am now eligible for their 4O1K. I am 40 years old. Should I use the Roth 4O1K or the traditional tax deferred 4O1K?
SAVAGE SAYS: Use the Roth -- You won't get a deduction, but if the government keeps its promise, all the money you put in, and any gains, will come out tax-free at retirement. With tax rates likely to rise, that will be a big benefit!


My husband will be 70 1/2 in December and has a very large retirement account still with his prior employer. (FYI he retired at 69) Can you give us advice as to how to go about either moving his money without paying a large tax bill. As well what we need to do as he is 70 plus years.

Thanks so much,
SAVAGE SAYS: It's good to start planning now. If you want my specific advice, I'd call T. Rowe Price, the no-load mutual fund company, and ask about their Retirement Income Planning service. It costs $500 -- and that is refunded ifyou move money there. It will give you advice about how to invest -- and how much you MUST withdraw every year, as well as how much you can expect to withdraw so your money will last as long as you do.
The first step will be letting them help you do a DIRECT ROLLOVER to the funds they recommend. You can read all about this process in The Savage Number (available in paperback on my website) but I have also written many articles about this, which you can read in past columns at TerrySavage.com. It will explain rollovers, required minimum withdrawals, and planning for withdrawals. Go to www.TROWEPRICE.com or call them at 800-638-5660.

Terry, my son is 35 and single, makes $150K a year. He max out his 401K contributions(matching and non-matching) and is not eligible to contribute to his Roth IRA. Where else he should invest the extra money he has every month? He doesn't think he needs life insurance because he is single, but will purchase if he has family later. Thank you.
SAVAGE SAYS: There is no reason he can't continue to invest OUTSIDE his 40l(k) account -- in a mutual fund at Fidelity or Vanguard or T. Rowe Price. And if he is planningto have a family, he might consider a whole life policy (universal life) that allows him to invest extra money to grow on a tax-free basis. Believe me, all that "extra" money will disappear the minute he marries, buys a house, and has children. So be sure he puts some away in a "chicken money" bank account -- earning next to nothing -- but giving him flexibility for the future Good thing you raised a "saver."

My husband is 63 and took social security at 62. He does not work and has had some serious health issues in the past 1-1/2 years. I also took social security at 62 and will turn 63 next month. I was unemployed at the time I took social security but recently started a new job making about $90k a year which is in my top 35 earning years. My monthly soc sec pmt is $1650. Should I take advantage of the one-tine payback feature of soc sec? I don't know for sure how long I'll continue to work--but I'd like to continue to 65 when we can take advantage of Medicare. The job has full medical coverage which costs much less than Cobra did. I would have to work at least until February 2013 in order for Cobra to take me through to 65. We have the savings to do the payback but I'm not sure if it makes sense to payback if I only work for one or two more years. Can you please give us your perspective on this? Thanks, Terry.
SAVAGE SAYS: OK, I think I understand the real concern about having health insurance -- and if you don't work until Feb 2013, you're stuck in the middle gap like so many others. But that's a separate question -- you either have the cobra or Medicare at 65 -- and that has nothing to do with whether you pay back Social Security and then defer it until full retirement age, which in your case is probably close to 67. The answer to that depends on whether doing the payback will use up allor most of your savings. You don't want to life without some kind of cushion. But if you plan to live for a while, you'll want the larger Social Security check. In fact, there is a calculator at www.SocialSecurity.gov that will show you how much larger your check will be. The main reason you'll want the larger SS check is because you can be sure that the monthly Medicare premium will increase sharply over your remaining lifetime. So you'd like to have it taken out of your larger SS check! Bottom line: if you can afford it, do pay back the early amounts and wait for the larger check. Over a period of years (see calcualtor), you'll be glad you did. For more info use this link: http://www.socialsecurity.gov/pubs/10147.pdf

My son in law has significant school loans. He's interested in refinancing these loans from his present 15 years to 30 years. If he makes all the scheduled payments, he won't pay off the loans until he's 63. The advantage is that it would cut his monthly obligation from $1500/month to around $700/month. He has asked me my advice on this, and I don't feel qualified to give him an accurate answer. Does the reduce payments make the refinancing a good idea? What is your advice?
SAVAGE SAYS: First of all, he would need to qualify (basedon income) to refinance his student loans if they are Federal student loans. If they are private student loans, it will behard to refinance unless he pays a much higher interest rate. And in either case it is a TERRIBLE idea beause he will pay MUCH larger amount of interest over the long run! Have him go to www.PayBackSmarter.com and run the calculator and he will clearly see that for himself.

My wife and I have credit card debt of $17K and to cut down that debt, we not only have stopped using the cards but being that I only work parttime as a crossing guard at the age of 59 having retired from my job at AT&T after 30 years, I have begun to take out from my 401K 4% per year to make up somewhat the shortfall. I also have 15K in stocks in which I have been getting my dividends sent to me monthly instead of reinvesting as before. Needless to say, our credit cards are not going down all that much what with our everyday living expenses, etc and our 2 kids in college, even though 1 is thru now and is on his own. I haven't considered it up till now but would you recommend me selling a majority of my $15K worth of stock and cut back the withdrawals from my 401K/IRAs? I've also heard the pros and cons of taking my social security at 62 (2 more years) and that may help some also since my wife since plans on working as RN till 70. She pays the mortgage which has 14 years left at 4.875%..
SAVAGE SAYS: Well, too late to go back now, but what on earth were you thinking when you "retired" at age 59??? Especially with all those ongoing obligations such as college and a mortgage! That's financial suicide -- and I'm hoping that you really had no choice in this "retirement" decision -- eithr because of corporate layoffs or health reasons. But now, you need to try to find a full-time job with benefits -- not a job as a crossing guard (though we need good crossing guards)! How unfair is it that you retire early and your wife must work til 70? If you can physically work, you should be doing that and continuing to contribute to your retirement plan.
The answer to your "sell the stock" question is easy -- SELL THE STOCK!! I don't care what the potential is for the stock, when you are likely paying above 15% interest on your credit cardes. But put EVERY PENNY into paying off, then closing all but one card. And do it this year, if you have gains -- because remember that next April you'll have to pay a small amount of capital gains tax on the sale if it was sold as a profit.
Then I suggest you call NFCC -- the National Foundation for Credit Counseling -- go in with your wife and work out a budget -- one that includes you earning more money!

Hi Terry. Thanks for all your advice. I have a question on a subject I know little about. Annuity's. I'm 58 and just retired after 37 years. My wife is 50 and still working; probably for another 2-5 years. We are wondering if taking some of our money that is now in the market would be better off in some annuity's. We have about $800,000 in IRA's/401-k's (all in the market), another $300,000 in a taxable account in the market and cash of $500,000. We have three properties, no mortgages, valued at $900,000, which we will sell once we both retire and buy a retirement home; so no mortgage on the retirement home. We have small pensions (age 65), me about $1,200/month; her $900/month. Social security I may take at age 66 and she may not take until age 70. This is our situation. Now, would we be wise to take $3-500,000 and buy annuity's for use after age 66 (me) to gurantee an income stream? I hope this is enough info for you to advise us wisely. Thank you in advance for your answer.
SAVAGE SAYS: No, this is not enough for me to advise you at a distance. I have nothing against annuities -- but there are many different types. I suspect that you are thinking about an Immediate Annuity -- which will give you a check a month for life. But given the likelihood of future inflation, you won't want to do that with a large portion of your money. And most likely, you will run into someone who wants to sell you a tax-deferred annuity, complete witih big fees -- and a link to the stock market. Those also may have their place. BUT, this kind of purchase should only be made in context of a complete retirement plan. I suggest with that amount of assets you might need a financial planner. Go to www.feeonly.org -- to find a certified financial planner in your area who does not make commissions on selling products, for some advice. Or even better, contact T. Rowe Price for their Retirement Income Advisory service. This no-load, no-commission mutual fund company has a fabulous service for a one-time fee of $500 (waived if you have assets with them) that will do an overall investment and WITHDRAWAL plan for your assets. That's really where you should start. Call them at 800-638-5660.

Hi Terry,
I'm contemplating purchasing a home in Las Vegas. The single family home will be used as an investment and would be rented out. My question is would it be a good time to do it now or would it be better to wait?

Thank you,
SAVAGE SAYS: That depends on how long you are willing to pay taxes and expenses on an empty house! Las Vegas is one of the most overbuilt places in the country. And the economy is not booming enought to create jobs there in the gaming industry. Bottom line: you may have a long time to wait to find a renter. And if you don't live there, you will have expenses traveling there to maintain a house you don't live in -- and may very well remain empty for a long time.

Hi Terry, I emigrated to Ilinois from England, UK in 2004. My Grandfather is seriously ill and has not long to live. I am one of his beneficiaries. Can you give any guidance on the tax implications of bringing the money over to the US? SAVAGE SAYS: As far as I know, there is no tax implication to bringing your money to the US -- and in fact, no tax implication for US citizens who take their money out of the US (at this time). US citizens who have accounts abroad must file a form with the Treasury every year,disclosing the account. And they must pay income taxes on money earned abroad. But if you bring money into the US, all you have to do is open an account at a bank and then pay taxes on the interest you earn -- or any gains if you invest in the stock market or mutual funds. The amount and rate and WHERE you will owe taxes will partially depend on whether you are a US or UK citizen -- so you should check with a US based CPA or tax attorney to make sure you cover all your bases.
BUT you should make sure that any estate tax obligations are taken care of in the UK, and that you get a release from the estate lawyers to that effect. An expert in this field is Bryan Hancock at www.timberchase.net.

I am eligible for my company's 401 K plan. The funds available are all front end loaded at 5.25% and are rated average or below average. Does it make sense to participate? I don't think the company matches any contributions. If it does, would that make a difference?
Thanks. SAVAGE SAYS: Wow, that's horrible. Smart of you to take notice. I think you should contact the HR department (maybe anonymously) on behalf of ALL the employees and suggest that the Labor Department ERISA rules frown upon such types of investments in the plan -- far too costly. Just three weeks ago Kraft Foods settled a huge case alleging the same kind of mismanagement -- excessive fees in the company 40l(k) plan. That's bound to make management sit up and take notice. Here's a link to the story in Pensions & Investments: http://www.pionline.com/article/20120627/REG/120629887

And in answer to your specific question, unless they give you a match, I'd suggest you invest in a Roth IRA that you can control.

I am trying to consolidate information for my parents' investments at various brokerages and in individual stocks and bonds. While I can create a spreadsheet that captures all the information, including cost basis, I don't know how to pull in live feeds of each stock in order to calculate real-time gains and losses for each investment. Can you please recommend a product that accompishes this (free or otherwise)? Thanks for your help.
SAVAGE SAYS: I really like Quicken -- which cost $49 at www.Quicken.com -- and I think it will suit yoru purpose. You set up a "pin vault" witih passwords to each account. Then whenever you log on, it will scurry around the Internet getting you the latest closing prices. So it does far more than a spreadsheet.
If you have accounts at Fidelity or Vanguard or other major fund companies or brokerage firms, they will also let you "import" data to track investments -- even at other brokerage firms. But Quicken sits on your desktop and allows you to work with the data.

Hi Terry,
I have 3 young daughters (5, 3, new) that I pray all go to college some day (and graduate!!!!). What do you recommend as a primary savings tool? Do you recommend a 529 plan such as Illinois' Bright Start Savings plan or an IRA. I'm not sure I qualify for a Roth IRA as my wife and I may make too much (but it's close).

I've heard that the IRA is probably a better choice since it gives you flexibility on what the money can be used for in case one or more do not go to college. It can be used for my retirement as well. I've also heard that the Illinois 529 is under funded, but that doesn't really make sense, since it's your own money that either grows or shrinks based on your choice of investments.

Is this true, and what are the other pros and cons between any options? Does each of them offer a low risk investment choice for when the economy plunges?


SAVAGE SAYS: Well this will require a long answer. First as to the IRA vs 529 plans in general: the money comes out of the 529 tax-FREE if used for college. That's a big benefit. If you need college money before you are age 59-1/2 you can take money out of your IRA without penalty -- but must still pay ordinary income taxes (which might be very high in a few years!). So I tend to recommend the 529 plan vs the IRA -- despite the fact that many 529 plans have limited investment choices and limited chances to change your choices. Most people go with the age-based plan -- which is always more aggressively invested for younger children.
I DO NOT RECOMMEND THE ILLINOIS BRIGHT START PROGRAM. Ever since the allowed one of their asset managers to get away with losing a lot of money and settling for pennies on the dollar with plan investors, I do not trust the management of the Illinois Bright Start plan. However, you can go to Vanguard or Fidelity and open a 529 account there, since it doesn't matter which state's plan you use -- and since you can use the money for college in any state. The only thing you're giving up by using an out-of-state plan is a limited Illinois tax deduction on your contributions.

Hi, I am a newly employed CPS teacher. I have 3 student loans to pay off, paying rent, and have a car loan. I want to start saving money, but am confused on which direction;
IRAs, annuities, stock investments, etc. Can you give me some suggestions.
Thank you
SAVAGE SAYS: Welcome to the real world. First, max out your student loan repayments. Then find out about your retirement benefits from the school system. Then, you'll qualify for a ROTH IRA with less than $100,000 income. (You don't get a tax
deduction for your contribution, but one day all the money comes out tax-free, including gains). Go to Fidelity.com or Vanguard.com and open that Roth IRA and ask them to take a small amount out of your checking account every month to contribute. Invest it in the S&P 500 stock market index fund. Keep doing it --forever -- and if America continues to grow, so will your account. If you cant afford the minimums at Vanguard and Fidelity, go to www.TRowePrice.com and do it there, where the minimum is $50/month. But FIRST, do a budget and make sure you can afford all this.

Hi Terry,

How do I find out which mutual funds are ones that pay a commission to the broker?

Thank you,

SAVAGE SAYS: Go to www.Morningstar.com and search for the fund. It will tell you the "load" or upfront commission. Or just ask the person who is trying to sell the fund to you. Chances are, if someone is telling you about it, there is a commission or "load" in it for them. Or just go directly to well-known no-load companies, such as Fidelity, Vanguard, T. Rowe Price, American Century.

I haven't been using my credit cards since the collapse of our economy. My goal has been to break my dependence. Now that I've begun to realize that goal of paying off the cards, is it best to cancel the card or leave it active ?
SAVAGE SAYS: First, congratulations! Credit card dependence can be as debilitating as addictions to drugs and alcohol! Do keep one or two credit cards active -- the ones you have held longest. That will show you have a long credit history, important to your credit score if you should need to buy a car, or a new home. Then, every once in a while, make a purchase on the card -- and pay it PROMPTLY and in FULL! That will keep your credit in good standing. Check back and get your credit report at www.AnnualCreditReport.com. Make sure the report shows the card is closed at the request of the cardholder.

unclaimd property of fla.has cashiers checks of my grandmothers ,she died in 1989.they want a copy of a document that ties the original owner to the holder who reported the property to that office of unclaimed property.the reporting institution is sun trust bank of tampa bay,prior to 1987,she must of had an account prior,i was thinking she was one of the original accst, she died at 97!.i went to the local bank of sun trust and they dont go back that far,she said call floridas bank where she held the account, the account #didnt come up on her computer .my thought on this is if they could go back that far,just give me a letter saying they had the cashiers checks(only in the amount of $360.00) i have her death certificate,my dads death certificate,my birth certificate to show she is my grandmother,unclaimed property has that information already.could you suggest something?being that it was so long ago,i dont think i could find anything that was hers of a document tying her to that bank.

SAVAGE SAYS: Contact the Florida state treasurer's office again, and give them the details. So many banks have been merged in that state over the years, andgiven the documentation you have, a little pressure might move this along. Get back to me with the name/number of the person you spoke to if your effort fails.

need your website link to accessing the document forms for adding insurance,and inheritance information for spouse. you wrote column on this subject around end of May or first week in June. thanks
SAVAGE SAYS: The only way to access my Personal Financial Organizer form is to go to www.TerrySavage.com, and fill in the little yellow box. You'll get a return email confirming your "subscription" (it's my free, occasional newsletter) and then another response with the link. You can print out as many as you want, and save the link for the future if you want more copies!

Ms. Savage:

My wife and I really enjoyed meeting you in Birmingham, AL. I would like to give my niece some Walgreen Stock as a gift who is 13 years old. What is the best way to do give her this gift.



SAVAGE SAYS: There is one efficient way to buy small amounts of stock. The only drawback is that you don't get an actual certificate -- which is really a good thing because certificates can be lost over the years. Go to www.Sharebuilder.com and open an account. There is even a booklet aimed at young people, which explains stock ownership. The shares are kept by them, and she can check out the value online. And you can easily add more shares -- or set up a program of regular purcases of stock with a small monthly amount.


What advice would you have for me? My situation is dire...I'm 61 years old, haven't worked full time for five years (I've been working off and on in contract assignments), broke as a result of a recent divorce and years of withdrawing from the 401 funds.

I find myself having to declare bankruptcy and starting all over again. Up to five years ago, I had a successful career, earning in the low six-figures. I have an undergrad and graduate degree, both in business.

I'm finding job hunting in this market at 61 is brutal.

Any suggestions would be appreciated.

SAVAGE SAYS: I hope there is comfort in the fact that this is not your fault -- and you are not alone. That said, yes you do have to start over --and it may take a re-appraisal of your true skills and value. For the financial restart, even if you have already filed for bankruptcy, I suggest you contact NFCC -- the national credit counselors you can trust at 800-388-2227. That will put you in touch with the nearest local agency.
You didn't say anything about family or other responsibilities. If you are truly on your own, then you should also seek counseling at your church or a community based organization. This is not just a piece of "pablum" advice. It truly can help you get perspective on your situation -- and your needs.
Don't give up! That's the most important thing. Persistence and optimism are the key to starting over. And one last piece of general advice that has worked for me over the years. Do something for others every day -- even though you are busy searching for work, volunteer at an organization that needs your help. You might be amazed at the doors it will open.

Terry - My husband and I have been customers of Fifth Third Bank for many years. We purchased 3 Jackson National Life annuity products (using deferred 401k balances) several years ago through the bank. These will be "maturing" - finally no withdrawal penalties - one will be later this year and the other 2 over the next 2-3 years. We also use a separate financial advisor (fee only) for 5 Fidelity investments: 1 after-tax mutual fund, 2 deferred traditional IRA and 2 Roth. Our Fidelity investments are a conservative blend as we are very near to being retired (I already am). I met recently with the bank representative to learn about other options. The Fifth Third investment specialist has discussed principal protected notes and Franklin funds as an alternative to staying with the Fidelity family and financial advisor and eliminating the .5% fee charged on our 5 accounts. I am not sure about Franklin as I am more familiar with Fidelity. I don't like seeing statements with the fee deducted along with the negative returns when the market is down. The PP notes are supposedly solid backed by large corporations and have minimum returns of 1% for 7 year terms or .25% for 4 year. They cap at 8.5% and 7% respectively. Do you have any thoughts on these? Or CD's? I realize you have a "relationship" with Fifth Third but feel you would still be objective as to whether it is a good move to go from Fidelity to the bank financial management team and have everything centrally located and avoid the advisor fees. The JNL annuities locked us up for the contracts' durations, my advisor said he would never have gone that route for us. The Fifth Third agent has been getting a commission on these. I have a meeting upcoming with the advisor - I want to discuss what is going on and also changing the fee arrangement to perhaps an hourly fee since he does not do too much in the way of changes witin our accounts. I tried researching PP notes and Franklin without learning too much to make a decision either way. We obviously would like to see some returns instead of negatives and the advisor fee would be eliminated at the bank but there are likely some hidden fees I'm not aware of or some other reasons to use caution. Can you please share some of your advice on what might be in our best interest?
Thank you for your consideration.

SAVAGE SAYS: Well, you certainly are comparing apples to oranges -- and peaches and grapes -- when it comes to comparing these alternatives. Any advice I give is independent. That said, there is no comparison between these kinds of corporate notes with CDs. The products you are being sold -- and you're right, despite the fact that they are being sold inside a bank, there is a commission to the person doing the selling (the investment specialist) -- are always more risky than a bank CD. But so many people are seeking higher yield these days, that I fear they don't understand the risks.

My suggestion would be to sort out your real "chicken" money and leave it in a low-yielding one-year max CD at the bank (or break it into a one-year and a six-month) CD for easier access should you need it.

Then since you are paying an advisor a fee for an overall strategy, maximize the benefit from that fee by letting him/her coordinate your other investments in a variety of funds. At Fidelity those funds have low annual charges.

It will still be up to you to understand and approve the total risk/reward scenario., But at least you'll understand the true risks you are taking.

My daughter is paying off a student loan after graduating two years ago in 2010.
Will her loan payoff remain at the current rate of interest or will that go up with the
new rates of payoff? Thank you for taking the time to answer my question.
SAVAGE SAYS: If she has a 3.4 percent Stafford loan, it will likely rise to 6.8 percent unless Congress acts to stop the increase. If she has a current 6.8% rate, it will remain the same.

I've been out of school for a couple years and thankfully with no debt. My fiance is still in school for another couple years and when she is done she will have around 300,000. What steps should I take to prepare for this? I'm a saver, so I am saving a good part of my check each month, but what can I do to be ready for these loans? She should come out making 45-70k a year when she graduates. Thanks

SAVAGE SAYS: If you want my REAL advice, postpone your marriage! I don't understand how your fiance could owe $300,000 -- and qualify for a job making less than $70,000. This kind of college debt is extreme -- and should only be the result of getting a professional degree such as a doctor or even a lawyer. But most important it is HER responsibility -- and you don't have to "get ready"!!
There is something wrong with this picture! And as a practical matter, if she is single, she may qualify for an income-based repayment plan -- resulting in lower monthly payments.
Maybe I'm missing something here, but I hate to see you step into this without some counseling. And if you don't like what I've said, call Consumer Credit Counseling Services at 800-388-2227, and be connected to the nearest local office. Both of you should go in and review your combined situation with them. And do let me know what they say!

I am 66 years old and have just received a settlement after my divorce. The amount is over $150K. I would like to know the best way to invest or save my money but still have it available in the event I want to take a trip or something else. I am debt free and rent an apartment. I draw social security and have a pension. I really don't want to tie my money up for a long term .

SAVAGE SAYS: This is what I call "chicken money" -- and it belongs in the bank in either a money market deposit account of perhaps half in Certificates of Deposit for no more than one year. You won't earn anything on this money given today's low interest rates -- but it won't be at risk.


With the situation in Greece continuing to worsen, I believe the dollar is going to gain value relative to the euro. How can I invest to take advantage of this situation?


SAVAGE SAYS: Well, for a while I've owned the Pro Shares Ultra Short Euro Fund (EUO) -- an exchange traded fund, that has already had a nice move. There are other closed end funds that let you short the Euro -- Check them out at Morningstar.com. But remember these are volatile investments and not without risk.

I am receiving half of my ex-husband's 401K and Jackson IRA annuity (?). My attorney hasn't been helpful with guidance in the least and I need to make a decision in the next week on what to do with these funds.
Do you think I should leave the Jackson IRA where it is (in my own name?) Then on the other account, where should I consider moving the 401K money?
I was awarded $24K per year of his annual $108K (ridiculous, after 28 yrs, 4 kids and working part time) and I earn about $20K a year. I'll be getting $35K from the house equity soon also.
Can you suggest some wise ways to handle these decisions? (I'll be 59 this July, am in excellent health, self employed, have my own insurance and rent a condo.)
Thank you very much for any advice you can provide me!
SAVAGE SAYS: I can give you general information, but in this case I'm going to direct you to a financial planner. If you live in the Chicago area, call Ellen Rogin at 847-716-7792 or email her at Ellen@begreatwithmoney.com.
You have a lot of decisions to make, and a long way to go -- so it should be part of an overall plan that will take you through your retirement years. If you don't live in the Chicago area, go to either www.cfpboard.org or www.feeonly.org to find a financial planner in your city.


I am a summer intern at John Deere & Co. in Moline, Il. I am allowed to participate in a 401k plan. I am 21. Can you recommend a strategy for me to follow? The Co. Matches up to 6 per cent of my salary dollar for dollar. I need advice on how to direct my contributions.

Thank you.

SAVAGE SAYS: Double check to make sure they let interns participate in their retirement plan. Usually they are available only to full-time employees. If you can contribute,pick the stock market index fund that tracks the Standard & Poors 500 stock index. Over the long run, this should make your money grow. And if you don't come back to work at the company, you might want to roll it over to Vanguard or Fidelity at the end of your internship and let it keep growing in an IRA in a similar index fund.

Dear Terry,

Eight years ago, my wife and I refinanced our home with a 15 year, fixed rate mortgage with our lender at 4.5%. Last year, we tried to refinance with our lender at a lower rate, and a longer term. Even with excellent credit and my wife's very stable job, we were turned down because my income history was inconsistent. I figured that they would want to reduce their risk, but I was advised by the loan officer that BofA was just servicing the loan. Are there any loan programs available for people like us? Thank you. SAVAGE SAYS: You can certainly try to refi with another lender. Start at QuickenLoans.com. Current rates on a 15 year mortgage are well under 4 percent. So if your income hasn't changed, and you still have a good credit history, you should be able to find another lender. It's certainly worth a try.

I have a question regarding identity theft. I am a recent college graduate who has 0 luck getting credit. It turns out that while I was far away at school, my mother was opening up credit cards in my name, running up the balance, and not paying them off. Since then I have been completely unable to secure any kind of car loan, mortgage, major credit card, or even your standard retail store credit card. I had perfect credit before this happened, and the only dept that I personally have is school loan debt.

I sought legal help from my attorney who has been working for the past year to clear my name. He has informed me that he has done everything that he can legally do. He told me there is nothing more that can be done regarding this matter.

However, I am still unable to obtain any kind of credit. Not only that, but the creditors continue to call me! When they do call, I don't answer any questions and instead refer them to my attorney. Its incredibly frustrating being told there is really nothing else I can do to salvage my financial future, and not even be able to get a Target credit card is really annoying!

What else can I do? Thanks -Creditless in Chicago

SAVAGE SAYS: This is a terrible story. You already have an attorney, so I presume your attorney told you that this is actually a case of fraud. As such, you could report it to the police, and they would have to take this report and investigate it. And then they could file charges against your mother. Now, I realize I'm stepping into something pretty deep here -- and I'm not sure whether this is something you really want to do. Or if a judge orders her to pay restitution if she could, in fact, actually do that. But it was the first thing that comes to my mind. At least her conviction for fraud (with all specific accounts named in the indictment) would get those creditors off your back.
And I'd like to be able to come up with something else for you to do -- but it's going to take a little research -- which I will do in the coming days, and promise to add to my response.

I have been unemployed as long as Obama has been president. Since losing my job in 2008, I have not put any money into my traditional IRA. It lost substantial during the height of the recession and the account has come back now. I have found a contract grant funded job that pays $9000 for the year. My question is should I put money into my IRA even though I have mounting credit card debt. I have been using the credit cards to live off of since my unemployment. The company that I worked for provided no 401K or pension. The IRA is my only source of retirement income. SAVAGE SAYS: At this point I would be payiing down credit card debt as fast as possible. If you double the current minimum monthly payment, pay that SAME AMOUNT every month (NOT double the NEW minimum), and don't charge another penny, your credit card balance will be paid off inless than 3 years. THEN you can start saving in your IRA again. The reason for doing this is that you're likely paying a much higher interest rate on your debt than you could reasonable earn on your investments!

I enjoy your column in the Chicago Sun Times. Can you advise on a contact to discuss my questions on reverse mortgages? Thank you. SAVAGE SAYS: I'm generally a big fan of reverse mortgages -- and I guess it's time to write an update column. But you should know that EVERYONE who takes out a reverse mortgage MUST get independent counseling. So if you have questions, one of the largest of those counseling services is run by AARP --

Is this advice column still active.?
I check it every day hoping to find it updated. It is of great interest & educational for many of us Seniors.
Thank you. SAVAGE SAYS: Sorry, I've been on a speaking tour. I'm back in action now, and will try to do better! Thanks for checking back!

I am interested in becoming a first time homebuyer. I have $10k in a 457b account and $10k in a 401k account, both from a previous job. I currently have a great job (past 3 months) which matched 6% in my 401k, so I am saving 12% a year. I would not be touching this account at all. I am looking to spend about $210k on a house, and have been told that I am a good candidate for an FHA loan.

My question is that my banks says that I would need about $5k in escrow for reserve/emergency funds. Should I cash out one of these accounts to have that money at the ready? Or should I put down extra towards down payment and closing costs and just try to save up the reserve separately? I think that it will take about another year to save up the escrow separately and don't want to miss a good market and low rates. SAVAGE SAYS: What you didn't tell me was how much you have outside your retirement accounts for a down payment. Do you have at least 10 percent -- about $21000-- for the down payment? They're right that you should also have a cash cushion for emergencies before you buy a house. I agree this is a good time to buy, with low rates and low prices. But you don't want to use every last penny to do it! Don' tcash out of your retirement plans before it is absolutely necessary. You'll pay ordinary income taxes, plus a 105 penalty if under age 59-1/2 -- and you'll lose all future tax-deferred growth of that money. So a lot depends on the rest of your situation, which you didn't tell me, and on your age, and future income prospects.


I want to buy a business (thrift store) they are selling $18000 , they gross $6000 a month, overhead expenses is $1800 monthly without payroll. great location . What is a fair offer for terms , they want to sell fast and terms are negotiable, is there asking price fair or?

thanks SAVAGE SAYS: You didn't tell me the most important number of all: what is their annual profit?!! Businesses are typically valued at a multiple of their earnings. If you pay 2x earnings, it means you will start making a profit free and clear after two years. So the "multiple" depends on what kind of business it is, how desperate they are to sell, what you see in their balance sheet and income statements (you need a CPA to look it over) -- AND how long you can wait to get your money back, OR how much MORE money you think you can make on thebusiness by improving it than they are making -- and what that would cost (ie more advertising, new signs, etc). It's tough to value a business -- but always remember that you want to value it based on their profits, not on your expectations! Hope this helps. If its a lot of money, you might want to get a consultant who deals in small businesses to help you evaluate the situation.

Hi Terry, I am a 51 year old who has a great job (over $85K a year), however abput 5 years ago i was laid off for almost a year and incurred thousands in Medical and Credit Card debot of which I am now in over $50K. Do you have any recommendations on how i could consolidate this w/o claiming bankruptcy? My credit is not good enough for a regular loan and there is not enough equity in my home to do a re-fi or home equity loan. Any thought would be appreciated. SAVAGE SAYS: I rarely advise this, but you might be a good candidate for bankruptcy, since your credit is already ruined. But there is one place you can get advice you can trust. Call 800-388-2227 --- the National Foundation for Credit Counseling. It will automatically connect you to the nearest local office. They do counseling, as well as helping you deal with your creditors to repay debt. And in the worst case, they will help you find a good bankruptcy attorney. You can do this on the phone, or go in to see them. But don't make a bad situation worse by calling any other type of debt consolidation program.


I have an Ira cd in a local bank which is coming due. I was told by the bank that if I renew this, I'm locked in for whatever term I choose and cannot take money out until maturity.. I thought that since it is an Ira, I could take it out at any time (I'm over 65)' but the bank people told me thats not true. I thought if I wanted to withdraw money, i could take it out as part, or all, of my required annual distribution. Can't find find the answer to this easily.

Thanks for any help you can give me.
SAVAGE SAYS: Many banks do give seniors a penalty-free withdrawal from a CD if it is needed for mandatory distributions. If your bank doesn't do that, you could switch to another bank. If you choose that route, do a direct custodian to custodian transfer -- the other bank will help you do that, so you don't make an unintended and taxable withdrawal. Or you could break up the IRA into a CD (no more than 2 years) and a money market deposit account -- both titled as IRAs -- so that you can write a check on the MM account for your annual required withdrawal.

We just refinanced from a 30 year to a 15 year loan on a single family home assessed at 430,000. We owe 134,000 and received a 3.625 rate. SAVAGE SAYS: You didn't tell me "why" you would consider doing this! Do you NEED a larger home? Is your family still growing? If you're in a good housing situation right now, why would you consider this -- strictly as an investment? Here's the risk; you'd have a lot of money tied up in two houses! Can you always rent the smaller house for what you think you need to get? Will you have costly repairs to one or the other? How close to retirement are you? What age are your children - -and will you need money for college? Here's the thing: I do believe housing prices will rise. And I know this is a good time to buy with low prices and low rates. BUT if you are totally invested in houses, with little left over for emergencies, you could find yourself in big trouble in an emergency. Consider that before making a move.

Our neighbor 2 houses from us is selling their much larger house (ours is the smallest in the neighborhood) for 538,000 and we would ask for a reduced price of $530,000. We have no debt other than our mortgage.

Would it make sense to rent our house-- we think we could get $2000 per month which would give us about $600 extra each month (our mortgage payment with taxes is $1,363.55) and buy their house?

Our combined income is around $110,000 and we have $20,000 in cash that we could put down. We also have retirement savings in a 401k and my husband will get a pension.

Thanks for your advice!



Hi Terry...My Dad Has two insurance policies coming due, worth 35,000. He has this through a "financial advisor"..and Dad has asked us to attend the meeting where it is decided where next to place this money. My Dad has expressed interest in not wanting to pay taxes on the money if he cashes out. Of course, the FA wants him to purchase another product through him. Is there anything that you can suggest to help? Dad is 84..and doesn't listen to us when we tell him how we take care of our investments on-line through various companies that charge low fees...as our IRA's mutual funds, etc. He trusts this guy and thinks he is getting great advice. Any words of wisdom for us boomers out here who have elderly parents to help them not get scammed? I have even tried to tell him to go to a "one fee only" person, not one that gets paid through what they sell, but he is stubborn! Love him..he is a great saver, but just too trusting. Thanks!!! Linda SAVAGE SAYS: Gosh this is a tough situation. Your Dad is still smart enough to believe he can handle his own affairs -- but old enough to be missing out on the newer, less expensive ways of doing it! First, let me ask about "insurance policies coming due." What does that mean? Does his FA want him to withdraw the cash to make another investment? (In that case the agent would earn another commission!) Doesn't he want to maintain his life insurance, with you kids as the beneficiary? Something is left out -- or at least this is a messy situation. I have some ideas for you. First go to my website: www.TerrySavage.com -- sign up on the little yellow box,and by return email you'll get a link to my Personal Financial Organizer form. You can print out as many as you want. Then walk your Dad through the form -- which will ask about his will, living trust, powers of attorney for healthcare, living will, etc. That could be a start to getting him to think about -- and do somethng about -- all these issues. Then he should go to an elder law attorney. In Chicago, I always recommend Janna Dutton. But if you livein another city, go to www.NAELA.org (National Assoc of Elder Law Attorneys) for a list. This attorney will represent your Dad, not you. Maybe by going through this process you can then get on to the business of helping him organize his investments -- andavoid ripoffs. Let me know how this works!

Hi Terry,
I have a couple of questions for you. When I turned 21, my parents informed me that my life insurnace policy was now in my name and that my daughter was the benificery of the policy. This was 8 years ago, and I recently asked about the life insurance policy and was told that they cashed it out years ago. My question is, if it was legally in my name now, how did they cash the life insurance policy out? I did not sign any forms or was notified that they did this? I feel bad for even asking this, but I could have used that money to pay off some debt that I have acquired.

Brandi SAVAGE SAYS: I understand your annoyance, even anger, but do you want to start a family war over this? There's no way to find out what happened unless you know the insurance company and policy number. And I'm assuming you'd have to ask one of your parents to get that information. And that will trigger a battle. My best advice is to forget it -- and get on with your life. If they paid into a policy, and cashed it in because they owned it (and you were the beneficiary), there is no way to go after them for the money. Sorry -- but move on. Your determination to "get even" will probably help you "get ahead"!

I cannot find your "personal financial organizer" on your website. Can you tell me where to find it? SAVAGE SAYS: When you go to TerrySavage.com a little yellow box should pop up on screen. ((If not look for a yellow line at the top of your browser that says "popups blocked" and click on it to temporarily allow popups - Then fill in your name and email address in the yellow box and by return email you'll get a thank you note from me -- and then another with a link to the organizer. Keep the link -- You can print out as many copies as you like, now and in the future.

I viewed your meeting at our Home Office. I have my 401k in a stable fund. I am 60 years old and plan on retiring in the next 4 years. Here is my concern and I have been unable to hear anyone speak of my biggest fear, the deficit. I want to diversify. but how can i when I know that the deficit is still growing, our leaders?..can not stop spending, eventually they will have to raise taxes, personal and business, and deal with this issue which is out of control. In my uneducated opinion, this iwll have a major impact on the stock market, ( as will the next Presidential election).What is your opinion on the issue of the deficit and it's impact on the Stock Market.
Thank you SAVAGE SAYS: You're absolutely right to put your finger on the deficit as a key to our future. But you heard me say that in my very first slide, didn't you? Go to www.TruthinAccounting.org to see the magnitude of our debt. Now, if America is destroyed/crushed by the debt, then you don't want to be in stocks. But we've overcome larger obstacles before -- and you heard me say that going back to 1926, no one has lost money in a diversified portfolio of large cap American stocks with dividends reinvested, even adjusted for inflation, over any 20-year period since 1926. You probably received a copy of The Savage Truth -- that graphic is in the book. So while I don't suggest you must put ALL your money in stock funds -- especially as you get close to retirement-- you definitely should have a significant portion in stocks. It's your only chance to make your money grow, andhistorically stocks have beaten inflation -- which is what we'll get if the govt decides to "print" our way out of this debt situation.

First, Thank you for your column and this blog.
Where can I find a reliable and honest financial adviser?
What should I look for
How much does it usually cost?
Thank You. SAVAGE SAYS: That is the most difficult question for me to answer. Here are two places to start, for sure. Go to www.feeonly.org for financial planners who charge a flat fee and donot make money on products they sell to you. Go to www.cfpboard.org to make sure you have a Certified Financial Planner, who has signed a code of honor and has taken rigorous tests to get that degree. Ask friends for references. And then TRUST YOUR INSTINCTS! You can read more about the questions you should ask the planner at your first interview -- and the questions the planner should ask you -- inThe Savage Truth on Money.

Hello Terry,
My son and daughter-in-law are dealing with student loan debt. They both hold Master's degrees and both teach middle school. They also have a child with special needs and the care, therapy and medical costs have buried them.
Is it possible that they may qualify for any type of help with their student loans? I appreciate your support and admire your knowledge. Thank you SAVAGE SAYS: Oh, what a tough situation. The only real way to deal with the loans is to spread them out, lower the current payment -- which actually leads to paying more in the long run. If they qualify based on low income, they might try the Income Based Repayment Plan (www.IBRinfo.org), which will lower their monthly payment -- but extend the loan. Also, you can find info at www.PayBackSmarter.com. And there is a special program, very complicated, designed to help teachers with Federal student loans. Here's a link: http://studentaid.ed.gov/PORTALSWebApp/students/english/cancelstaff.jsp
Here's a description: "The Teacher Loan Forgiveness Program is intended to encourage individuals to enter and continue in the teaching profession. Under this program, individuals who teach full time for five consecutive, complete academic years in certain elementary and secondary schools that serve low-income families and meet other qualifications may be eligible for forgiveness of up to a combined total of $17,500 in principal and interest on their FFEL and/or Direct Loan program loans."

If they qualify,maybe this will help.

Hi, Terry.
I'm 62, retired, divorced with a 21 year-old daughter. I want to make a will so that if I pass my daughter and sister get my assets. Are those do-it-yourself online wills a good idea for me? Or, should I see a lawyer, and if so, how can I find a good one? I have around $170 altogether among a Roth IRA, a TSA, 5-year CD, Treasury Direct I-bonds, and a money market account.
Thanks SAVAGE SAYS: I'm going to recommend that you see an attorney, because as I always say in my speeches: "If you use one of those do-it-yourself online forms, and if you make a mistake, you won't be around to correct it by they time it becomes apparent!"
A couple of thinngs to keep in mind. First, most of your account shoudl have a named beneficiary, which means (now that your daughter is 21) that the money will go directly to her anyway. Second, you probably want a revocable living trust instead of a will, because you can retitle all assets that don't have a beneficiary in the name of the trust (very easy to do) and then if you are incapacitated before you die, your daughter can take over a successor trustee. And third, as well as a will you need a healthcare power of attorney (incase you can't make decisions) and a "living will" -- the "pull the plug" document! A good estate planning attorney will help you do all that, and it shouldn't cost much -- and will give you priceless peace of mind. Do you live in Chicago? If so contact attorney Janna Dutton, my longtime friend. If in another state, ask your banker for a reference for an estate planning specialist.

Excuse me, but do you have any information on selling gold? How to-where to go? Or could you refer me to someone who could help me? Thank you. SAVAGE SAYS: It is so easy to get ripped off selling gold. That's because all gold is not make of the same purity -- ie 14 karat, 18 karat -- etc if you're talking about gold jewelry So simply weighing the gold is not enough. And you must be aware of the daily price of gold -- especially if you're selling gold bullion coins.. Most gold buying operations don't really pay enough. In Chicago, go to Harlan J. Berk on Clark Street to sell gold.

i do not belive that nursing home insurance is a good idea for most people,
companies dropping out, rates rising, benefits decreasing, does not the average
person who is at critical mass

better off putting money aside in a roth and let it build up
or save monies on the side account
do not most people
a.) never use the insurance
b.) use it for less than 90 days
c.) who knows how ins companies will do AIG almost went under

is seesm like a real bad "investment" SAVAGE SAYS: Sorry, but I disagree. You could hardly build up enough in an IRA to cover the current,and rising, costs of $7,000 month for full-time care. But how about we "split the difference"! Instead of buying a LTC insurance policy-- buy one of the new "combo" policies -- life AND LTC insurance. See my recent column on that in the archives at my website. Ifyou need the care, you get a big benefit. If you don't, then your heirs get the life insurance payout!


I need your opinnion very badly. As you know retired people want to rise cash

for living. So, What is your opininon on Immideate "Anninuity"

I am thinking of buying Immideate annuite from "Vanguard" since I am 70 Years old

Please answer me.

Thank You,

SAVAGE SAYS: Vanguard is a great place to purchase an immediate annuity, because they have low costs and offer a good deal. BUT when you buy an immediate annuity you are giving money to the insurance company in exchange for a monthly check as long as you live. (Or a smaller check if the annuity covers the life of you and yoru spouse.) You can never get out of this deal. When you die (or your spouse dies) the insurance company keeps the balance. If inflation comes, then today's monthly check might not cover your future expenses. These are all things you should think about before buyng an immediate annuity. It's nice to have guaranteed income -- But certainly do this with only a portion ofyour cash.

where can elderly seniors put money that will generate little or no taxes in the future ?
My senior apartment requires an income under $22,000. & with my interest on investments it's very close so I need to invest into something that prevents generating too much tax expense in order to keep my apartment.
SAVAGE SAYS: Isn't that a tough position. Well, one thing that comes to mind is to buy gold coins! But be sure to keep them in a bank safe deposit box -- and then tell only your trusted adult child where the key is! Also, if you have an individual retirement account, and are required to make annual withdrawals at this age, you could convert it to a Roth IRA (which would increase your income for one year) and then in the future you wouldn't be required to make annual withdrawals to add to your income. But you would have to pay the taxes on the conversion inthe year after you make the switch. nd these days, just having your money in a bank account with current low interest rates, will keep it safe and not create a lot of extra income for you!

In your colum 4/26/2012 - dividend paying stocks, can you clear up an issuse I have regarding these stocks invested in our IRA,s. I'am I wrong in assuming any tax code changes will not affect them? SAVAGE SAYS: Since ALL withdrawals come out of a traditional IRA as ordinary income, you don't get the benefit of special tax rates on dividends.

I recently became a widow and have approx $75,000 in life insurance money just sitting in my checking account. You had reccommended finding a money market or savings acct. We know the interest is low, but I really can't afford to lose any of my assets. Is there a class I can take that will help me understand finance l0l. With my own finanacial advisor, the only one earning money was him. SAVAGE SAYS: Well, at least you figured it out before you made your advisor rich! Look, depending on your age, you probably don't need a financial advisor for this money (unless you are a very young widow). Keep it in the bank, yes -- earning very little -- but not exposed to any loss. YOu can take some of it and put it in a one-year certificate of deposit, and the balance in a money market fund. That will keep it safe and liquid-- true chicken money! (And for the cheapest "finance 101" course, I recommend my book -- The Savage Truth on Money -- available from the bookseller at TerrySavage.com in paperback at a very low price. And I'll give you my personal money-back guarantee that it will answer all your questions!

We now have a mortgage of $80K approx. 15 years at 5.75% it costs us $695/mo. how could we get it under $500/mo?
SAVAGE SAYS: Refinance to the current rates of about 3.5 percent on a 15 year mortgage.

I have a funds from a pension that I will be rolling over into an IRA. The brokerage makes a point that all funds in all accounts for a particular individual are rolled into one total which is then protected by the Feds for an amount up to $250K. My IRA would be larger that this amount. Should I consider splitting the IRA across multiple brokerages or am I good placing the larger amount with one brokerage?
SAVAGE SAYS: Are you talking about doinga rollover to a BANK-- or to a brokerage firm?? I ask because accounts in a brokerage firm are insured up to $500,000 by SIPC. Bank accounts have a $250,000 limit. So I think you need to do some investigating before you do a rollover. And if you are confused contact Fidelity or Vanguard or T. Rowe Price, and let them handle the rollover. They're pros -- and you won't have this confusion. With that size account they will give you free advice on how to invest -- and how much you can withdraw -- to make your money last your litime.


I'm 57 years old and have a significant amount in my 401K and traditional IRA ($2 million) such that I'm concerned about the size of my RMDs when I reach 70 and 1/2. My employer offers a Roth 401K option. Does it make sense to contribute $22K to my Roth 401K over the next 8 years to retirement, since i won't be required to have required distributions? SAVAGE SAYS: Absolutely start contributing to the Roth 40l(k). AND, you might want to consider converting a portin of your traditional IRA to a Roth IRA THIS YEAR -- when taxes are at the lowest they're likely to be in our lifetime! That way you won't be forced to distribute that IRA. Of course, it means writing a big check to the govt next April 15th -- with money you have OUTSIDE your IRA!

A good number of your columns and the Q&A here relate to issues regarding Long Term Care insurance. As an agent with 39 years experience, I'm not surprised. Boomers need to face the reality that a LTC event could decimate their retirement nest egg. As they say, "Denial is not a river in Egypt!" I tell all my clients that I'm convinced that LTC insurance will be the most important and valuable protection they'll ever own. Thank you for being such a strong advocate.

James Hunt is a former insurance commissioner of Vermont, actuary, and advisor for the Consumer Federation of America. When cautioning people about what to look for when selecting a company from which to purchase life insurance, Mr. Hunt has said that the three most important factors were the company, the company, and the company. I submit that the same holds true when selecting a carrier from which to buy LTC insurance.

More than 25 carriers have discontinued selling individual LTCi since 1996. In recent years, some of the "major players" have also called it quits, including Met [2010], Guardian/Berkshire [2011], UNUM [2012], and just a few weeks ago Prudential [2012]. Of the few remaining carriers, only two [a] are mutual companies paying dividends that reduce costs, [b] have never increased premium rates on existing policyowners, and [c] maintain the highest financial strength ratings awarded to any life insurer by all four of the major credit ratings agencies. Those two companies have been around for more than 150 years: New York Life and Northwestern Mutal Life.
SAVAGE SAYS: Your letter is not a question -- but it is so well-written AND makes such a good point, that I am going to post it on my blog! Thanks for writing.

I'm 33, single, no children, debt, or mortgage, with a salary in the low 50s. I am contributing 6% to a 401k. My financial planner advised the next investment step would be to max out a Roth IRA. From there, the next investment plan would be to contribute more to the 401k. Beyond that, there are other investments to explore. What do you think of this investment plan? I have 15K in savings and plan to buy my own home within the next few years. SAVAGE SAYS: I think you're on the right track! A Roth IRA is a good idea, because although you don't get a current deduction, the gains come out tax-free for retirement. And if you can max out that Roth (at $5,000/year), then keep saving outside your 40l(k) plan so you'll have the down payment for the house. Also, when you open your Roth IRA make sure it is in a place where you don't pay commissions to get in, or high annual maintenance fees. Suggest you go directly to Vanguard or Fidelity or T. Rowe Price and pick an "equity-income" fund for your Roth.

When getting pre-approved to buy a house, is pre-approval from a broker enough or should one get pre-approval from a bank, as well? I was advised by a broker when I made an offer on a property to not go to the bank for pre-approval. She said that would lower my credit score. Please advise. (The property sale did not go through). SAVAGE SAYS: Are you talking about getting pre-approved by a mortgage broker? Believe me, they have to make the same credit inquiries as a bank -- so no difference. But no matter which you use to get a pre-approval (and you might just want to check to see who has the best rates/terms), make sure you get the amount and RATE in writing -- and the time limit for this pre-approval.

I am a single 79 Y.O. female.
approximate yearly income with Soc Sec., pension, IRA RMD etc. is $30,000 which keeps me in the 15 % bracket.
I would like to withdraw an additional $15,000 this year from my traditional IRA (worth approx. $ 140,000. ) to upgrade my home, auto, etc.
I am told that it would be extremely costly & not wise if the amount of my income goes over $ 34,500.placing me in a much higher tax bracket.
This scares me, any comments / suggestions ?
Thank you SAVAGE SAYS: Who told you that? It's just the amount above the 15% bracket that would be taxed at a slightly higher rate. And better to do it this year than next, when rates are likely to move higher. And if you need the money now, while you are able to enjoy and use it, that is what it is for! At your age, you might not want to upgrade your house -- but instead think of moving somewhere more affordable that requires less upkeep. Think about that -- but this small difference in taxes is not the reason to make this decision.

I need to borrow $20,000 to complete my Master's degree on a part time basis. I own my house and carry no debt. Woud it be smarter to get an actual student loan or get a home equity loan? I am employed and have excellent credit. Thank you. SAVAGE SAYS: Well, a home equity loan is a lot less expensive these days, than a student loan. Just remember that a home equity loan carries a floating rate of interest -- so that could jump much higher. And you are likely to be paying "interest only" when you make the payments (which will start immediately), so make sure the Masters Degree will give you a bump in income and when you graduate you can start making larger payments.

What do you know about equity indexed insurance plans? I recently met with a wealth management advisor and he suggested that I move my money into one.
I am 60 years old have no debt and app. $500,000 in my IRA and savings. I plan to work until I am 62>
SAVAGE SAYS: I think you will make your advisor rich -- not YOU! There is no reason from what you say that you need more life insurance. Do you? Who would you leave the money to? If you don't need life insurance, then why pay for it? Second, I have written extensively about the fact that MOST, but not all, equity-linked products don't give the full benefits to the investor -- ie, most don't pay out based on dividends on the S&P, which have contributed more than 40% of total return over the years.
If your money is in a low-cost (Vanguard, Fidelity, T. Rowe Price) IRA, well diversified, there is no reason to do anything else with it! Contact one of those companies and ask for their investment advice -- with that amount of money you'll get their full attention. And they'll help you set up a withdrawal plan at retirement designed to make your money last as long as you do! My best advice here is: GET A NEW FINANCIAL ADVISOR!!

While filling out my 2011 taxes I read this statement in the 1040 booklet - "If you made any nondeductible contributions to a traditional IRA for 2011, you must report them on Form 8606". What is the definition of a "nondeductible contribution" to a traditional IRA? Is that any IRA that is not a Roth IRA?

Are contributions made to a regular IRA partially deductible on your federal taxes? SAVAGE SAYS: Contributions to a traditional IRA are fully deductible on your tax return -- EXCEPT if you are contributing to a non-deductible IRA, which might be the case if you are also covered by company retirement plan. So these days, most people who want to -- and are eligible based on income level -- make additional IRA contributions to a Roth IRA. But higher income people don't have that option, so might want to contribute to a NON-DEDUCTIBLE, traditional IRA! If you do that, be sure to keep the non-deductible IRA separate from all your other IRAs!!! Gosh our govt makes it complex to save for our retirement!! And it's OUR money!

I am 57 yrs old and I do not have a retirement invested. I am losing my ability to do the job I have been doing because of diebetes complication, namely neurapathy in my legs and feet. what are some possible options I have for my future financially? SAVAGE SAYS: Oh, this is a tough position. I'm sure you need your job to keep your current health insurance. And if you go to the HR department, and explain your disabiity, you will fall under certain regulations(depending on the state) so that they cannot fire you. (I understand you might want to wait as long as possible to claims this disability at work). But they may be able to provide another job that does not require you to stand or walk? So first, check online with your state to see what the rules are that companies must follow when dealing with a disabled employee. Second, if the neuropathy can be traced to a work condition, you may be entitled to some compensation from workers comp. Check on that too. Then you can turn to Social Security disability -- but that takes a VERY long time to get, and you will probably need an attorney to help you in that process. They advertise all over, but don't pay a big fee until you get results!
Finally, I know how terrible the pain of neuropathy is -- a friend has this horrible disease and is funding extensive research into it. But you might start getting creative about what you can do with your brain in the way of earning a living -- It won't be easy -- but you have to do this for at least 45 years until you can get Social Security benefits based on your work record.

Hi, how do I stop credit inquiries on my credit report? It is hurting my credit. Thanks!
SAVAGE SAYS: Unsolicited inquires do not hurt your credit score. But if you are applying for loans, then lenders will of course check your credit. If you think you've gotten on some kind of fraudulent loan request list, then contact each bureau and fax them a statement requesting a "credit freeze" which will keep the bureaus from responding to credit requests. Of course, make sure you lift the freeze if you are going to apply for a mortgage, car loan, or new credit card!

How and how often do I have to contact stock companies to prevent the State of Illinois from seizing the account as "lost property"? One transfer agent company said I just have to access my account on line annually. Another company said that this would not work and I had to call. Which answer is correct? How can your account be "inactive" if you are cashing the dividend checks? I am a buy & hold investor.

Also why is Chase charging a $50 exit fee when rolling over money from an IRA money market account directly to an IRA vehicle at another bank???



SAVAGE SAYS: Working backwards, Chase is charging this fee "because they can." There is nothiing that prevents them from levying a charge for departure -- and since they don't want to lose your money, you must pay. (It's similar to annual maintenance fees -- just a way for them to make money!)
Now, as for an account being inactive -- I had that happen to me a few years ago, with a mutual fund in my IRA. I was just "letting it ride" with dividends reinvested. I received my statements, opened them, and filed them away. Then I heard that the account was going to be escheated (returned) to the state as "unclaimed property"! You can imagine how furious I was.
I would think that the act of cashing a dividend check (as opposed to a passive reinvestment) would certainly qualify as an act that shows the account is not forgotten. Must companies certainly don't want to receive calls from investors -- and there would be no record of the call anyway. The other thing you could do -- if these are dividends from individual companies -- is to make sure you vote your proxy statement every year. That's real proof that you're still around!

After reading in a number of your columns and hearing you speak about your vigorous advocacy of long term care insurance I finally plowed through all the endless language of several such policies and ultimately bought one, at a price of thousands of dollars each year. In the terms of these policies it is always stated that the insurer cannot increase the premium on you alone, so relax: they can only increase your premium if they increase everyone's premium. Nowhere in these policies do they ever state: We may increase your premium by 40% or 90% on the grounds that we simply decide we have to. Perhaps you should have spent a little more time advising on that aspect of LTC policies, rather than simply carping about how great they are. And that's the savage truth.

SAVAGE SAYS: I hope you read my column today -- I couldn't agree more that these premium increases are outrageous -- but they are within the law. I certainly expected some price increases along the way. But since John Hancock sold competively with companies like Genworth, it's shocking that the JH increases are 5x those Genworth is instituting. Personally, I think it is because Canadian insurer Manulife purchased John Hancock, and really doesn't care much about the market in the US -- although they vigorously denied that to me and I put their statement in the column.
Please read Tuesday's column for advice on how to handle this -- and Thursday's column for some alternatives to LTC policies.

My husband (police) and I (teacher)will benefit from public retirements. We have no debt, have budgeted and saved all our lives. We would like your opinion on taking the maximum PLOP and still receive a monthly pay check. Would you recommend this? We are Ohio residents. SAVAGE SAYS: I'm sorry, but I'm not familiar with the term PLOP -- So I can't give you any advice unless you give me more details.

I have written to you before and have always received great insight! Now I am writing to you about a subject that while is so talked abut these days, is still very confusing as to what action to take. My son, has not worked in 2 1/2 yrs, He has cotinued paying his mortage while watching the value of his home lessen every day. He took his 401K and soon he will have gone through that. No job on the horizon yet. I feel he is pouring this much needed money into a hole and will never recoup it. He hates the idea of a foreclosure. What are his options? His mortage was sold off to a company not very highly thought of, so he feels it would be senseless to talk with them. Can anyone predict how a forclosure will go? How much time he would have? If he got a job would they garrnish his wages?
Where can we get anwsers for questions like these? He has no money for a lawyer. Any help you can provde would be appreciated.
worried mother
SAVAGE SAYS: I can understand your concern. The first thing I would do is have him call the National Foundation for Consumer Credit -- If he calls 800-388-2227, it wil connect him to the nearest local agency. They can look at his situation in detail and advise. But to answer a few of your concerns, no, they can't come after his wages in most states. The most he can lose is any equity -- if there is any -- in the home, and his credit rating, if he goes through foreclosure. And that process could take at least six months after he stops paying his mortgage. But there are some new programs for getting certain homes refinanced -- if the homeowner is current on payments. So before dumping out, he should talk to the credit counselors and see if they have some refinancing alternatives for which he might qualify.

Hi Terry,
I am switching jobs and can either leave my retirement account where it is (and still generate about 7% interest per year), pull it out and put it somewhere else, or take a lump sum. I know that if I take the lump sum, a large percentage of it will go to taxes since I would be withdrawing before retirement. However mounting bills from credit cards and student loans is making the lump sum look really tempting. Is there any type of account that I could put the money in where I could borrow against it without having to pay any extra taxes?

SAVAGE SAYS: Oh gosh, please avoid that temptation to withdraw from your retirement account. At least you are going to a new job -- and will be earning money, and have a chance of paying down those student loans and credit cards. To answer specifically -- NO, there is no way to borrow against a retirement account. Are you really earning 7% in your current investments? If so, leave the money there, at least for a while.

Have a home eq. Loan for 15,000 at 2.99 daily. How much interest rate is that? I understand credit card interest at 6 or whatever percent. But don't get the daily rate. Should I pay it off quick or keep it for the tax break even though it is not much? Or concentrate on my car loan at 3 percent SAVAGE SAYS: It's the interest rate that matters most, and most loans compound daily anyway. You have two loans at very low rates. The home equity loan could rise quickly, though, if interest rates rise. And you may be paying interest only on this loan, which means there will still be a big balance. I'd concentrate on getting that paid off as soon as possible, even though the current rate is low.

Hello Ms. Savage,
We had LaSalle bank for 20 years with our mortgage, Roth IRA, and 401K (rollover from past employers).
In 2009 we left BOA for Harris Bank my question is can I shred all the old 401K and IRA statment we have from LaSalle/BOA or do we have to keep them?
Also we are turning 60 should we go to Fidelity or Vanguard to rollover are IRA and 401K or leave it with Harris bank?
Thank you,

SAVAGE SAYS: Well some things you need to keep for a long time. You should have a file with your mortgage documents, and keep it even after the mortgage is paid off.
And you've picked the wrong person to ask about shredding, because I keep EVERYTHING! (Thank goodness I have a large basement!)
As for rollovers, yes, I'd move everything to one of the larger fund companies, such as those you've named -- That will simplify record-keeping, required withdrawals -- and with enough assets they will even give you retirement income modeling advice. Just be sure that they handle the rollover direct from your current custodian. Do not take a check to redeposit -- or everything could become taxable.

My son is going off to college in the Fall. What is the most important bit of financial information he should have at this point in his life? SAVAGE SAYS: Give him a copy of The Savage Truth on Money (on my website, TerrySavage.com, in paperback) --and I'll give you a personal money-back guarantee that if he reads at least the first two sections about money management he will learn ALL the important bits of financial information that will keep him out of trouble and set him on the right path!

I saw one of your videos and need clarification on what you said about combining

long term care with insurance and getting the money back if you don't use it. I wonder if you could explain that more to me. I have long term care and have for a few years, I am 68 now. I have considered lowering my daily amount paid from $160
per day to a lower amount.
Do you have any input for me?

Thank you

SAVAGE SAYS: I am working on a 3-part series on that very subject. Keep watching the Sun-Times and your questions will be answered!

I have a consolidated student loan with Salli Mae. When I consolidated the loans in 1998 I didn't know that the 6% interest rate was compounded daily. Now 14 years later I'm still paying. I've contacted Sallie Mae to determine how much I would need to pay monthly to pay this off sooner but have gotten the run around without any clear answers. Their web site won't even tell me what the pay off date is. Any ideas on what I can do? Do I have any options at this point?

Thank you.
SAVAGE SAYS: Well, under the old rules you could consolidate Federal Student Loans -- but only once! Then the rate was fixed forever. If it makes you feel better, 6% is high -- but lower than the 6.8% on current Stafford loan repayments. I'm thinking that yours are Federal loans, since you consolidated. Sallie Mae MUST give you the payoff date, under the current repayment plan, as well as the current balance. And, of course, there is no penalty for additional payments each month, or just paying it off. You can see the impact by using the calculator at www.paybacksmarter.com. And you can probably find your total loan amount/balance/and other info at www.nslds.ed.gov -- that's the government's website database for student loans outstanding.

Can I start a Roth even if I'm retired? My wife still working has one we max out every yr. I have a 457 with 65,000 and receive 3,000 a month pension. We have a home equity loan for 15,000 at 2.99 daily interest. What per cent is that in real interest. Should I pay that off or my real mor. At 55,000 at 4.75?

SAVAGE SAYS: No, you can't fund a Roth IRA, or any IRA, unless you have "earned income" -- not interest, dividends, or a pension or Social Security. I'd need to know more about your entire financial situation before advising you to pay off your entire mortgage. You don't want to leave yourself short of cash for emergencies --and since you're retired you probably can never qualify for another mortgage, except a reverse mortgage, if you need cash.


My husband (73) and I (67) have $164,386 to live on plus our monthly social security, we have a $33,000 CD which will mature in July 2012, have $126,000 in Windsor II Fund, $4600 in Total Bond Mkt Index Inv and $786 in Prime Money Mkt Fund. We have to take a RDM from our IRA in amt of $6,133.58 by the end of this year. We need a monthly draw of $3000 for living expenses and I need to know if there is a way to set up account that could accomplish this and give us a sense of security.
SAVAGE SAYS: Well, this is not a matter for guesswork. Let me deal with the numbers first, then the investments. If you need to draw $3,000 a month, in additin to Social Security, I think you are going to run out of money before you run out of time! There's a great calculator to help you figure this out at www.choosetosave.org. Go there and click on the "ballpark estimator" and see -- based on your total savings, investment returns (use 4%, no more), inflation estimtes (use 3% at least) and life expectancy, exactly how long a $3,000 monthy withdrawal will last.
Your second questin revolves around investments. I don't know the Windsor Fund -- so I really can't comment. It looks like you are fairly well balanced between stocks, bonds and cash, although this portfolio does have a certain amount of risk -- both from a decline in the stock market, and an increase in rates if those should come. But you are not well balanced in the area of income and outflow. My second recommendation would be to contact T. Rowe Price (800-638-5660) and ask for their $500 Monte Carlo modeling process for retirement income. That fee is waived if you have money n their funds. But even if you dont, this service is well worth it -- designed to answer your question exactly.

I am a 54 yr old divorced single mother of a 17 yr old, starting thinking about college. my daughter recieves 600 dollars a month for another 9 months in a savings accoint where I am the representative Payee for her name. there is just over 10,000 in that account. I have been trying to save most of it for a ca for her r, or whatever. will this assess hurt her chances for financial aid for college.

SAVAGE SAYS: Sadly, YES, money in a child's name weighs 7x more heavily against you in the financial aid formula. I'm hoping this is her junior year. If so, move the money out of her name, legitimately by "spending" it on something for her benefit -- such as food, housing, computer, etc. Then maybe you have other money that can be set aside to make up for that money you have moved? Also, how does she "receive" $600 a month? Is it child support? If so, the father will also be required to fill out the FAFSA form to determine aid eligibility. Talk to your high school guidance counselor now -- so you can make appropriate changes before year-end. And go to www.SimpleTuition.com and FINAID.com to learn a ot more about the financial aid process. But do it now, while you can still change things to qualify for more aid, if possible.

I was wondering, my husband took out $170,000 out of his canadian divdends, to purchase a house, how much will he have to pay for taxes, we live in British Columbia Canada.

Thank you

SAVAGE SAYS: Gosh, sorry I can't give tax advice -- especially Canadian tax advice. I actually happen to know a lot about the subject. But you haven't told me if you are American citizens, or Canadian, or one of each! That will impact your tax situation in different ways. I suggest you get an accountant who is familiar with the tax laws of both countries.

My husband and I recently received a $13,000 bonus (after taxes) from our work, and a $4500 tax refund, and we're trying to figure out the best way to utilize this money. We have a $229,000 first mortgage at 5.75% and a $66,000 second mortgage at 7.09%. We tried to combine the two and refinance at a lower rate but our appraisal came in at $305,000 so we were denied the loan. We have good credit and no credit card balances. The only other loan is a car loan with a $2200 balance at 5.29%. We have children to put through college but we've been saving in 529 accounts since they were born, and hope that between the 529 accounts and student loans, we should be able to swing it. We save the maximum into our retirement accounts at work. So our main goal is to somehow refinance our home loan. We feel that we are draining ourselves in interest every month. Thank you for your help - we value your advice!

SAVAGE SAYS: I think you now may have the leverage to refi your house, if you are willing to put this extra cash into it. At least you're not underwater and with the cash you will have 10% equity. Is your first mortgage insured by Fannie Mae or Freddie Mac? If so, you will surely qualify for a refi that will pay off your home equity loan. Have you talked to your current lender, to a community bank in your area, to your credit union. THIS is the time to push -- now that you can demonstrate that you will have equity. Give it a try and write back to let me know what happens. There are definitely some banks that will make this loan. Oh, and is either of you a veteran? Then, for absolutely sure, you can get a VA loan. Let me know --

53 yr old male ,I have worked 32 yrs with Verizon ,They offered a buy out of $673,000 I can take as Lump Sum or Pension

SAVAGE SAYS: I can absolutely promise you that you cannot retire forever on this amount. BUT, you can retire from this job, move to Florida and find another job! I'd avoid the pension lump sum option and the annuity. Too much inflation could happen in the future to destroy the spending power of that fixed check. Instead, roll it over. Fidelity will help you invest it. Then go to www.choosetosave.org and use the "ballpark estimate" calculator to figure out how much more you will need to save before you can fully retire. Oh, and don't forget that you'll need health insurance for another 13 years!!

my mother dies in 2011. Her home was sold and the cash, $60,000, was distributed to me and my 3 siblings, $15,000 apiece. Am I responsible to pay tax on this money? SAVAGE SAYS: No -- unless it was a distribution from a retirement account.

Terry ,afew months back you wrote apiece about people who had too much debt and you recomended a company who could help with debt problems. Because there are so many get out of debt companies that I DO NOT know who to trust.I would be more comfirtable with someone YOU RECOMEND. Please respond I would be very greatful.
SAVAGE SAYS: Call the National Foundation for Consumer Credit at 800-388-2227, and you will be connected to the nearest local office of a member agency. You can trust them!

Terry a few months ago you gave the name of adebt consouling agency. could you please give it to me again?

SAVAGE SAYS: The National Foundation for Consumer Credit -- 800-388-2227 - That will connect you to the nearest local office of an affiliated agency. You can trust them.

Hi Terry,

My wife and I are both 59 years old. We have about 550k in my 401, 60k in her 403 and 330k in my pension. We also have 70k in a traditional IRA and two Roth IRAs at 40k each. We have 160k in non retirement brokerage accounts. We hope to work until 64 or 65 years old. We are contributing the maximum amount each year to the 401 and 403. My question is tax related. I was thinking about rolling over the traditional IRA to my Roth this year to get in on the 15% capital gains, before it goes to 20%. So I was thinking why not take this a step further and start rolling over my 401 a bit each year to the Roth IRA accounts. Hopefully this will reduce the tax bite when we retire. First, is this a sound financial decision and if yes, what % would you roll over each year? I can't touch the pension until I retire, so we would also be interested in rolling my wife's 403.

SAVAGE SAYS: You'd better do some reading before you make a move. Start with my latest book, The Savage Truth on Money. #1: Any money rolled from a traditional IRA to a Roth IRA is taxed at ORDINARY INCOME TAX RATES, not capital gains rates! So the rollover is added to your taxable income in the year in which it is done. #2: You CANT take money out of a 40l(k) to roll it into an IRA -- unless you leave the company! Then you can roll it into an IRA, and if you want to pay the taxes (ordinary rates) then you can roll it to a Roth. But you can't take out 40l(k) money bit by bit to do a rollover.

You need a tax advisor and/or a financial planner.

55 years old, single, just changed jobs and have 17k in previous employers 401k. Rollover to IRA? No other retirement plan but I am now aggressively saving. Thank you.

SAVAGE SAYS : Do the rollover, to a large fund company like Fidelity or Vanguard or T. Rowe Price. You'll likely have a wider choice of funds, or you can use on of their target date funds. Contact the fund cmpany directly, and have them handle all the paperwork for the rollover, so you never touch the money.

$250.00 placed in a saving in 1973 would be worth how moch in 2012? SAVAGE SAYS: That would depend on the rate of return you earned, and the impact of inflation (ifyou're talking about spending power).

My wife and I are thinking of buying gold coins or bullion with some extra money we have. Maybe $5,000 or $10,000 worth. Assuming gold will appreciate in value, where would I sell it in the future to make a profit? What is your general feeling about buying gold?

SAVAGE SAYS: Buy from a reputable dealer, and they will be around to buy your coins back in the future. I'm assuming you're talking about gold bullion coins (as opposed to collector or numismatic coins). Buy one ounce coins. Check the daily bullion price, and you should pay about 4% over that price to buy your coins. And remember, you'll take a similar "haircut" when you go to sell them. Store them in a safe deposit box, not at home!

Hi Terry,
I am a recent college graduate with several different student loans. I have 3 federal loans ($26k), 2 sallie mae private loans ($28k @ 10% interest), and 1 citibank private loan ($10k @ 6.5% interest). It seems that I will be paying a lot of money per month in payments, and lot of interest is going to accumulate. Do you have any advice for consolidation? Can I consolidate all of the federal loans into 1 account and all of the private into another? These interest rates are worse than my credit cards....

SAVAGE SAYS: Please read my most recent column on Student Loans at www.TerrySavage.com.


I am a sub contractor for a fortune 500 company. I am starting to earn quarterly bonues; Where would you suggest I invest these earning? My wife and I are both 50 year with only 401K savings.


SAVAGE SAYS: That's great that you have decided to "save" the extra money from the bonus. Well, I can't suggest an IRA because you are covered by a 40l(k). But be sure you set enough aside in your 40l(k) plans to get the full match if your employer makes a matching contribution. Next, you should pay down any debt -- credit cards, auto loans. The next moves depend on the rest of your financial situation -- Surely you need some money in the bank, not earning much but as a "chicken money" cushion for emergencies. You might also want to pay down your mortgage, especially if you haven't been able to refinance at a lower rate, and especially if you plan to stay in the house for a while. And you should make sure you and your spouse are well covered with insurance. And from that point on, you're talking about investing the money. I'd suggest one of the major fund companies, such as Vanguard or Fidelity or T. Rowe Price. And my favorite fund for this type of situation (I have owned it for years) just one a big award from Morninstar for its long-term conservative performance. It's the T. Rowe Price Equity-Income fund. Call them at 800-638-5660, talk to a representative, and read the prospectus to see if you feel comfortable with this as an investment. You can always add more, there is no commission, and when you get closer to planning retirement, T. Rowe Price has an excellent retirement modeling service that is free to its clients.

I am 38 years old and plan to retire at age 65 and plan to draw an income of 54,000 a year forever how much do I need to deposit each month with an APR of 6%

SAVAGE SAYS: Go to www.choosetosave.org and use the "ballpark estimate" calculator there to answer your question (and note you will need to input a lot ofother variables).

Well, yes I did retire early, a year early. You see federal law enforcement have a mandatory retirement at 57.
SAVAGE SAYS: I'm quite sure this note is referring to my previous answer. Congratulations for a long career in Federal Law enforcement -- and thank you for your service. But the implication in your email was that you were trying to plan for the future based on the current retirement benefits. My comment is that you are young enough to start a NEW career, and keep adding to your retirement savings along the way. Given your background, it shouldn't be tough to find a job!

My husband and I are selling a business and will get a lump sum for the business and monthly rent. I am still working, but will be getting a pension in two years. We own three properties. The business property is paid for. We have a vacation home and a residence that both have mortgages. Our 401K totals 500,000. We have an emergency fund of six months to cover expenses. Should we use the lump sum payment from the business to pay off the vacation home or reduce the principal on our residence?
Thanks for your help.

SAVAGE SAYS: First, congratulations on your success. Only in America! Second, be sure you get good tax advice on dealing with the proceeds. I think this might -- check with your accountant -- be a capital gain, leaving you with more cash to use for any purpose. (And they say that only "rich" Americans get capital gains!!) Now, as to which mortgage to pay off, that depends on the terms of your mortgages. Of course, you'd want to pay down the higher rate loan first -- BUT you might want to check into a refi, and that might be easier on your principal residence. If you could completely wipe out one mortgage, that might be a good idea. But again, this all has to be done in context. And if you can maintain self-control, it might not be a bad idea to add to your rainy day fund. Or, if you have earned income this year (in addition to the proceeds from the sale), to put some away in a tax-free Roth IRA to grow for the future. And, by the way, if the business gave you your health insurance, what are you going to do about that when the business is sold??? And don't forget to change your estate plan!


SAVAGE SAYS: Well, assuming she's over 21, (or 18 in some states), that's her decision. I can understand your concern. Despite the fact that more than 1.5 million people have been filing for bankruptcy every year (!) for the past decade, it's still repugnant to those who do their best to pay. I suggest that you step back from this argument, because you can't win -- and send her instead to Consumer Credit Counseling Services. Just call 800-388-2227 to be connected to the nearest local office of an agency affiliated with the National Foundation for Consumer Credit. You/She can trust them. Maybe you can even go with her. They'll help her set up a repayment plan, if possible. And they'll teach her how to manage her finances. And if necessary, they will recommend a bankruptcy attorney.

I want to thank you for your help in December....I use Mint and know exactly where money is going and can change habits. EVERYONE that want to know their cash flow will benefit. Thanks, Tom

SAVAGE SAYS: Aha -- thanks for writing. I'm posting this as an inspiration to others!!

Re: Your collum 2-20-12 sun-times. As a 55 y.o. I have some ides about Social Securty in general. First,The Goverment obligation to pay S.S. does NOT have ANYTHING to do with "having" the money, in the "TRUST FUND" the "PROMISE" refers to the fact that S.S. was made INVOLUNTARY to workers. The goverement in EXCHANGE, promised to pay, in the future. NOT IF IT HAD THE MONEY TO! SO yes, in fact, THEY will have to pay for this out of the gereral revenue fund! This is common knowledge,Terry, and AARP knows this also. True?

SAVAGE SAYS: Well, they can always "print" the money to pay the promised benefits! That is called "inflation" - -and it will destroy the value of all your other savings. And it will tellthe rest of the world that when we repay our debts we will do so in "worthless" paper. So they'll stop lending to us. OR, we can honor the promises to retirees -- but stop building roads, defending our nation, helping pay for education, etc. Do you think our children, and grandchildren, will keep paying taxes if they don't get any benefits?? That's what I meant by "Generation Warfare." There will be a lot of seniors -- and if SS gives them all the promised benefits for their long lives, then the younger generation will make "occupy America" look like a quaint gathering!

I'm 39 years old, married, and have two kids (4 and 2). My questions relate to saving/investing for the future (increasing rainy day and retirement funds). My wife has around $160,000 in her work pension. She contributes a small amount each month, and her employer matches a certain amount. My employer doesn't match any amount for a 401(k), so I didn't enroll in it. Our adjusted gross income is too high to contribute to a Roth IRA I opened years ago (around $4500) or to get any tax benefits from contributing to a traditional IRA I have (also around $4500). We currently put money aside on a monthly basis in a money market account (~0.8% APR) and in a mutual fund. We try to leave our checking and savings accounts with a little extra money after the monthly bills are paid, but we currently think we're better off putting the extra savings in the money market and mutual fund. What can you suggest in terms of trying to get the most out of our money? Should I enroll in the 401(k) plan? Should we just continue to regularly put money in the money market account and mutual fund? Are there any other options that could help us from a tax perspective now or when we withdraw the money? We're certainly not rich, so we don't have large amounts of money to invest with, but we are comfortable enough where we would like to add to our savings/retirement. I don't know if this information will affect your response, but we have 529 plans for each child where we contribute $500 a month in the four-year-old's plan and $250 a month in the two-year-old's plan. Please let me know if you need any additional information. Thanks for any help you can provide.

SAVAGE SAYS: It looks like you're off to a great start! I'm delighted to know that you're also setting money aside for college in a 529 plan. But YES, definitely contribute to the 40l(k) even if you don't get a match. (And you might inquire at the HR dept and ask why the company doesn't match!) At least you'll get the current deduction for your contribution -- and a good choice of investments to make your money grow. And do keep saving more outside the plan -- never stop. One day you'll be watching your money make money! And sorry, but there are few options other than that 40l(k) contribution to reduce your taxes. I'm assuming you deduct your mortgage interest and real estate taxes. (If you haven't bought a home, now might be the time to get a bargain-- and the tax deductions!) But those, and charitable contributions, are about all that's left to ordinary Americans in the way of deductions.

Are there still limits on gross income for a Roth IRA?
We are over 50.
Thank you, Rose

SAVAGE SAYS: Yes, there are income limits -- but if you qualify you can now each contribute $6,000 to a Roth IRA since you've reached age 50.
For 2012 the income limits are-- if you're married and filing a joint tax return, you can contribute to a Roth ira if your combined income is $173,000 or less. If your earned income is somewhere between $173,001 and $183,000, your 2012 Roth IRA contribution limit phases out.
(For singles, the income limit for a Roth contribution in 2012 is $110,000).

My husband and I (age 90, 71) have various pseudo escrow-type savings accounts,at hardly any interest income, for property taxes, house insurance, etc. which we pay into monthly so there is never a panic when they come due. We also have $20,000 saved up to buy a "new" used vehicle in a couple of years, and I want one with all the electronic bells and whistles or else I will live with our 2001 current car, so I will be saving a few more years for it. We have no debt and live within our modest means. I saw a local ad for one-year 2.6% CD and thought "scam," but still phoned. The seller said he was a CD broker and the CD was from an internet bank in San Francisco and was FDIC insured. I asked him for the bank name (Bank of Internet : www.bofiadvisor.com : , got its FDIC number on the internet, and called the FDIC. They confirmed it was insured in case of trouble. I already deal with an internet bank and have no fear about that, and we have other $ for emergencies and do not have to touch the $20K. However, I do not want to lose that $20K we carefully saved. Is there anything else I should research or know before we deposit the $20,000 into the one-year CD? Thank you very much. Goldie. ...
SAVAGE SAYS: Youre wise to be leery. The bank may be FDIC insured -- but this product certainly has some "hooks" -- probably it's an annuity, offering a high rate for one year, but locking your money up for a much longer period of years. I checked at www.Bankrate.com -- and the top rate for a FDIC insured 1 year security is something like 1% -- offered by Ally Bank, also an internet bank, also FDIC insured.
The very fact that a broker is trying to "sell" you this CD is a word of warning. That means there's a commission in it for her/him! And that means it's an investment product offered by a bank's investment division. BEWARE!

Terry, I've just turned 59 1/2 and while I have more IRA with Jones than I do with Fidelity, they are both Traditional type IRAs. I am thinking about diversifying my (1) IRA with Fidelity into a Roth so that I don't have the big tax bite when I turn 70 1/2 and may need to begin withdrawals then. This would be done through same yearly conversions till I turn 70 1/2 and this would begin at this same time of year now since I'lm sill 59. What do you think of this idea, how much should I convert- with my expected yearly withdrawal beginning at 72 till my expected 92 years of age? Just between you and me, I have $37K currently with Fidelity Traditional IRA.

Note: This prompted me to question you here because I read somewhere that to have all your retirement in one basket when you may be hit with higher taxes in the near future is not good.

SAVAGE SAYS: You probably read that comment about "diversifying tax status in retirement accounts" in something I wrote. Look, what you're implying -- and correctly, I think -- is that never again in your lifetime will you see tax rates this low. Given the size of our federal budget deficit, that is quite likely.
So, it might be wise to start converting a portion annually -- especially since after 2010 there is no longer an income limit for Roth conversions. BUT you will need to pay taxes on the amount converted. AND those taxes should come from money OUTSIDE your IRA, otherwise there is no sense in converting and using IRA money to do it! If you're willing to take on the tax bite sooner rather than later, a regular program of conversions for at least half your savings makes sense to me.

I am 72 years old female. Retired.no pension or SS - dabble in Ebay
Trading in Ebay since 2006 - Earned approx $4500 in that period.. Do I owe and have to pay tax on that and how much if so roughly and how would I set about doing that
Thank you. SAVAGE SAYS: Whether you are required to file depends on your gross income for the year. That would include interest income (I assume you MUST have some other income if you don't have SS or pension!) For 2011, the minimum income required to file is $10,950 -- if you're over age 65 (and not a dependent). I suggest you consult with an accountant to consider all aspects of your situation before making a decision on how to treat your eBay income. But it sounds like a lot of fun!!

I recently retired with a federal pension I am 56 years old. Currently hold a HELOC of $140,000. I have $ 210,000 in a government Thrift Savings Plan (TSP) of which I am currently drawing $2,000. Monthly. My pension is $3,500. Monthly. I'm saving money at the end of the month. My question is should I withdraw $140,000. To pay off my HELOC and pay taxes on my withdraw or leave the money in TSP and pay the debt off monthly? Interest on the loan is about 3% and interest on the saving account is 2% on average.

SAVAGE SAYS: Your real problem is that you retired too early! Well, maybe you had to leave your govt job -- But you need to find a new one so that you can not only postpone withdrawals, but keep contributing to another retirement plan (either from your next job or in an IRA). You should pay off your HELOC from the income from your job -- as soon as possible, before rates rise again. You may be looking forward to retiring from this job -- but the likelihood is that you will live at least 30 more years. And you don't have enough retirement assets to support yourself unless you keep working, and saving, and paying down debt now.

I'm 64, in good health, and plan to work at least 5 or 10 more years. At what point does it make sense for me to start collecting social security so I can maximize my income? I'm thinking that even if applying earlier gives me less each month, I'd be able to save the entire amount and live off my earnings.

SAVAGE SAYS: You forgot that if you earn enough, your Social Security benefits will be taxed! My suggestion is to work until at least FULL retirement age, sometime after 67.

I am 62, wife 65, she is retiring totally in a few months, I earn about $60k, hope to step down to part time in a year or so. She has tiny pension plus Social Security, I will get $40K a year from Civil Service pension after I retire from full time.. I have $130K in 457-B governmental plan. I want to start an IRA now rather than putting much more into 457-B, but I can't decide if I should go with Roth or Traditional.

SAVAGE SAYS: I'd go with the Roth, because then you wont be forced to withdraw if you don't need the money.

I will be turning 65 this year. Could I still continue to contribute to an IRA? Could I sontinue making contributions till I'm 70, is there an age limit? SAVAGE SAYS: Yes, you can keep making contributions as long as you have EARNED INCOME. That is, you must contribute out of payroll or self-employment income, not out of Social Security or dividends or interest earned. I would suggest that if you qualify for a non-deductible Roth IRA you put the money in a Roth, where it will grow tax-free, and you will not be required to take withdrawals from it at age 70-1/2. For 2012, you can contribute to a Roth if you are single with modified adjusted gross income of less than $110,000 and if you are married, filing jointly, the limit is $173,000. Consult with your tax advisor if you are close to those limits.

I'm 39 years old, married, and have two kids (4 and 2). My questions relate to saving/investing for the future (increasing rainy day and retirement funds). My wife has around $160,000 in her work pension. She contributes a small amount each month, and her employer matches a certain amount. My employer doesn't match any amount for a 401(k), so I didn't enroll in it. Our adjusted gross income is too high to contribute to a Roth IRA I opened years ago (around $4500) or to get any tax benefits from contributing to a traditional IRA I have (also around $4500). We currently put money aside on a monthly basis in a money market account (~0.8% APR) and in a mutual fund. We try to leave our checking and savings accounts with a little extra money after the monthly bills are paid, but we currently think we're better off putting the extra savings in the money market and mutual fund. What can you suggest in terms of trying to get the most out of our money? Should I enroll in the 401(k) plan? Should we just continue to regularly put money in the money market account and mutual fund? Are there any other options that could help us from a tax perspective now or when we withdraw the money? We're certainly not rich, so we don't have large amounts of money to invest with, but we are comfortable enough where we would like to add to our savings/retirement. I don't know if this information will affect your response, but we have 529 plans for each child where we contribute $500 a month in the four-year-old's plan and $250 a month in the two-year-old's plan. Please let me know if you need any additional information. Thanks for any help you can provide. SAVAGE SAYS: Wow, first let me say that I am very impressed with your saving/spending plan as it exists now! Either the two of you are making a lot of income -- or you should write a book on how to live and still save money! I mean it!! As for answers to your questions -- you took away my first suggestion with your last sentence. I'm glad you are contributing to 529 plans for your children. And yes, you definitely should contribute to teh 40l(k) plan as it is a tax deduction. Now you didn't say anything about owning a home, and if you dont, this might be a good time to get a good deal on a home. Then there will be lots of new things to do with your money! But at least you will purchase at a good price, and if/when inflation returns down the road, you'll be glad you own your own place. My only other suggestion is to make sure you are EACH well covered with life insurance, and given your excess money you might benefit from a policy that builds some cash on a tax-deferred basis instead of just term insurance. Do your homework first! Also, consider disability insurance. And there's nothing wrong with building cash for emergencies in a money market fund, though you hardly earn a penny of interest. Right now, you could invest also in an equity-income fund, hoping for long term capital gains -- and knowing that under current tax law, the dividend distributions will be taxed at lower rates. But basically you are on the right track -- and an inspiration to others!

How do you find a really good financial advisor? SAVAGE SAYS: Ask someone who is wealthy for a recommendation! Seriously, it's VERY important to pick an advisor based on personal references, just as you would a doctor or dentist. But you can go to two different websites to search, make appointments to discuss and then trust your instincts. The first is www.CFPBoard.org -- the website of Certified Financial Planners. It will let you do a search by zip code. Or goto www.FeeOnly.org. That's the website of planners that do not charge commissions on products they sell, only a flat fee. You can also search there. Be sure to actually talk to the people they provide as references!

HI Terry:
I a, 53 years old, work full time and can't decide what to do about whether to take a lump sum of 301,000, pursuant to a divorce settlement/split of my ex-husband's pension (he is 55 and eligible for retirement) or to take a monthly benefit, starting now (!) for the rest of my life of $1485 per month. I could really use the monthly income - and if I rolled the lump sum over into an IRA I could not touch it until I was 59 and a half.
But the monthly benefit does not allow for a beneficiary - it's just for my life - and it has no cost of living adjustment.
Would I be better off to take the lump sum and purchase a monthly benefit annuity from a reputable insurance company? Or take the monthly pension benefit to supplement my income, even though inflation will decimate the value of that amount over time, because the monthly benefit would be protected by the Pension Guarantee Fund if the company were to default on its pension fund.
Thank you so much.
PS: I have another large amount - 635000 in retirement funds, if that makes a difference in your advice as to what would be best for me to do. SAVAGE SAYS: I'm glad you added that last "ps" -- because it does add weight to my advice. I think it would be a mistake to take that fixed pension, because as you are well aware, inflation would decimate it. But if you want to see whether it is a good deal on a current basis, go to www.immediateannuity.com and see what you could get for a lifetime income with that amount to invest, based on your age and gender. Clearly, you are not in desperate need of the income right now, given your own retirement funds. So you must have been, and hopefully still are, working to build up that account. It is probably a mistake not to try to keep earning enough to live on for the next six years (and adding to your own retirement funds) until you can withdraw from your retirement money without penalty, though still paying taxes.

I'm middle aged and am considering returning to school to pursue a MBA. Would this be a good investment of money?

John SAVAGE SAYS: You'll only know about that in hindsight. Believe me, there are plenty of middle aged people with MBAs who are looking for work. But if you believe this will help you in your chosen field, and you don't have to take on a huge burden of debt to do it, then go right ahead. Improving your mind is always a good investment!

I've heard that the economy is improving. If this is true I imagine that interest rates will rise and bond values will drop. Should I be concerned as I have some money invested in a bond fund? SAVAGE SAYS: Yes, this is a valid concern. Be sure to sell the fund, just before interest rates rise!!

Hi Terry,

I have to credit cards that have very hight interest rates. I was thinking about doing a debt consolidation to get a lower interest rate. The debt consolidation company said they can get my rates lowered from 31.99% to 6%. I'm a little concerned about the effect this will have on my credit score. Do you think this is a good idea.

I do have other credits with little to know balance and much lowered interest rates. SAVAGE SAYS: No debt consolidation company can promise that! Instead, immediately call the National Foundation for Consumer Credit at 800-388-2227. That will connect you to the nearest local office of trusted credit counselors. Take their advice.

Do you have a recommendation for someone to help me learn the Brokeragelink program with Fidelity? I have personality conflict with employers advisor with our 401k.

SAVAGE SAYS: I'm quite sure that if you contact Fidelity directly (800-FIDELITY) and explain your situation, they will provide advice. But if there really is such a bad personality conflict with your company's designated Fidelity rep, perhaps you should mention it to your HR department.


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.


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.


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.


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!


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.

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!

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


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.

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.


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.


Terry thank you for you reply to my note. not only was it very kind but also refreshing for you to take the time to do so. I am now an follower of your comments and will be encouraging others to listen well to your insight. Happy New Year - Tom M.

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!

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
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?
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
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
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.

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?
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.

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
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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!


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...


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.


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!

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

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!

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!


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.

I OWE $110,000
I OWE $110,000.

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
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.


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!


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,

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.

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.