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.

Terry

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.

Thanks

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!

Leigh

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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.

Thanks,
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!

Terry:

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,

Rudy
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.
Thankyou
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!

Terry
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.

Terry,

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!

Terry,
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.

Terry,
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.

Terry,
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>
Thanks,
K
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???

Thanks,

Susan

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.
Sincerely,
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.

jTerry,

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.

Terry,

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.

thanks

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).

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!

WHAT ARE THE PROS AND CONS ABOUT GOING BANKRUPT? MY DAUGHTER IS CONSIDERING IT AND I DON'T THINK SHE SHOULD DO IT --

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.
Paul

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.

Hi

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Terry,

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

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

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

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

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

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

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

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

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

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

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

Hi Terry -

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

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

BD

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

Terry,

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

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

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

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

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

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

Terry,

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

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

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

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

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

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

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

Good Day Terry,

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

I am 57 / wife 53

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

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

or

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

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

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

Which choice seems best?

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

Hi Terry,

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

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

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

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

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

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

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

Terry:

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

I have found your web site and newsletter very helpful.

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

Harry

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

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

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

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

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

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

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

Would have appreciated your input on that.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Terry,

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

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

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

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

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

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

Please continue with your great work.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Whew....

Merry Christmas, dear Terry.

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

Hi Terry,

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

Thank you

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

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

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

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

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

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

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

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

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

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

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

Terry,

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Dear Terry,

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Good Day Terry,

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

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

Dear Terry,

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Hi Terry,

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

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

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

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

Terry,

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

Thanks!

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

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

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

I love your new "Savage Truth on Money"

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

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

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

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

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

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

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

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

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

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

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

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

Hi Terry,

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Dear Terry,

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

Thanks so much,

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

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

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

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

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

A couple of things to consider:

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

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

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

I hope this helps!

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

Hi Terry,

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Hi Terry,

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

Hi Terry

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Hi Terry,

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

Thanks,

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

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

Terry,

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

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

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

Terry:

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

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

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

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

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

Hi, Terry,

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Hi Terry,

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

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

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

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

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

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

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

My 403 b is -9% ,I am putting $450.00 a month into this account ,and I see only loss not gain what can I do? SAVAGE SAYS: After the close on Monday, August 15th, the Dow Jones Industrial Average was down less than 1 percent year-to-date, and teh S&P 500 was down just a bit more. So if your investment in the 403B plan is down that much THIS YEAR, then you're invested in some very speculative things! Stick with the S&P 500 fund, which I am sure is in your plan. And put 20% of your monthly contribution into something more conservative, like the short-term money market or very short-term bond fund alternative. (I'm assuming you have at least 15 years until retirement, if you're older then make the mix 50/50.) That way you can keep contributing and sleep better at night!

I have two credit cards with a balance on the discover is 1,314.00 and American express of 6,497.00 i pay discover 27.00 a month and i pay American express 242.00 a month. discover has a interest rate of 6.49% American express 10.99 on Balance transfer and 7.49 purchase. Nationwide card monitor want to charge me 549.00 to put all the debt on one card including the charge of 549.00 that i use on my new discover card with a 21.99% they want to see if they could get me a card with no interest rate. Do you think i ought to let them do that are dispute the charge they got on my account? SAVAGE SAYS: I think you should avoid this ripoff and concentrate on paying down your existing balances. Did you know that if you DOUBLE the current monthly payment on each card -- and keep paying that same amount every month (despite the minimum they say you must pay) and never charge another penny -- you will pay off those balances in less than 3 years! That's the way to get it done!

How can buying gold really be a good investment? don't you pay a commission when you buy? and don't you pay commission when you sell? SAVAGE SAYS: That depends on where you buy and sell! If you're talking about gold bullion coins, if you deal with a reputable dealer you should pay only about 3% over the current "spot" price of gold. If you buy a no-load mutual fund that buys stocks of gold mining companies, you pay no commission, and very low annual managment fees (consider Vanguard, American Century, US Global Investors). If you buy the gold exchange traded fund (ETF -- symbol: GLD) you can pay low commissions on it if you buy through a discount broker. Like everything else, you have to be a smart shopper!

I have 250K in an old 401K. Should I open a rollover IRA with an online brokerage or should I go with a more managemed option. I do not much investing experience and I am worried about losing my nest egg. Please advise. SAVAGE SAYS: I definitely suggest rolling it over so you can have a wider choice of investment options. And my suggestion is have the paperwork done by Fidelity, Vanguard or T. Rowe Price -- so you won't make a mistake and find you have a taxable event. Each of these "no-load, no commission" fund companies offers personalized investment advice for an account your size.

We owe $110,000 over 7 more years left on our mortgage at 5.0%. Should we refinance at 3.625% through our credit union? I did not think most credit unions would allow financing/refinancing for a home mortgage below 10 years---so wondering if we should refinance at 10 years or 15 years and pay it off early. What do you recommend? Hoping to save some money - as we have 3 hitting college in 5 years. SAVAGE SAYS: Definitely refinance if you qualify, as it will free up some money every month. Then if you can still afford it, pay extra to get the mortgage paid off as soon as possible.

Hi Terry,
My dad wants me to purchase my first home in Portland, Oregon (because I plan to move there in two years) since the market is a seller's market and the interest rates are relatively low right now (my credit score is >720). He has volunteered to give me 20% down payment as a gift (so I don't need to pay him back for it). But I am currently renting and working in Pennsylvania. I have been working at my current job for three years now and make about $40,000. I currently have student loans and credit card debt. Those debt total up to $710/month. My dad has also volunteered to pay off my 7% government loan, which drops my monthly debt payment to $410. I plan on getting a managing company and renting out the house, until I move out there in 2013. When I input my information into a general mortgage calculator, it says that I can afford about $120,000 house. I plan on applying for a pre-approval in November and purchasing the house in December. My question: will the house in Oregon be considered a second home? Does the category (primary residence, second home, investment property) affect my loan? I pay $650 per month for rent for my apartment in Pennsylvania. Will my rent be considered when I apply for a pre-approval/mortgage? Thanks for your help. SAVAGE SAYS: Well, first of all, give your Dad a big hug for me! He's doing you a bunch of big favors, especially paying down your student loan debt. If you are not living in the property, it will definitely impact your ability to get a mortgage loan. In fact, I doubt you will be able to get a loan at all! I think your Dad should either wait to find out where you will ultimately want to live (a lot can happen in two years) -- or buy the property himself and rent it out, if he thinks that will cover his monthly costs. He can always gift it to you at a later date. I'm sure he's being generous, but you shouldn't have the burden of a mortgage at this stage -- and I'm sure all lenders will agree!

My question is...my Mother has a reverse mortgage with wells fargo. She took it as a line of credit and only used 20% of it. She moved in with me due to failing health. She got the reverse mtg when market prices were high. Now the house isnt worth much of anything. Can she still draw on her line of credit after she notifies them she has moved out? SAVAGE SAYS: No, that would constitute fraud! Under the terms of a reverse mortgage, when the owner moves out permanently, the loan must be repaid within 6 months. Typically, the house is sold-- unless the children want to keep the property and repay the loan. They do have that option.

If you have a US savings bond for a $100.00 dated February 2011 how much is it worth now SAVAGE SAYS: As a practical matter it is worth just what you paid into it -- or maybe less - -because there is a huge penalty, 3 months loss of interest, if you sell before holding it for 5 years.

I am 61 and plan to take a small amount per month of my 457 plan. I am married with 1 dependent. I am trying to choose the best plan for tax purposes. SAVAGE SAYS: That depends on your goals. You know that you don't have to take money out until you're 70-1/2. And if you do take money out, you're losing all that tax-deferred growth. And you must pay ordinary income taxes on any month withdrawn. You should talk to an accountant about your personal situation, to make sure that withdrawals do not put you into a higher tax bracket. And if you decide to take Social Security early, your withdrawals could cause taxes on your SS benefit. So check with your accountant, who will know your personal tax situation.

Hi Terry:my Question is,if I choose not to get benefits from my company and get more moneyin my salary ,how much money should he be paying me in place of the benefits. Thanks fran SAVAGE SAYS: That depends on what benefits you are talking about. Ify ou are an employee, they must still withhold taxes and FICA. If you are talking about health insurance, think twice before declining this benefit. It could be very "penny wise and pound foolish" -- unless you have a spouse whose health insurance will cover you. Are you talking about a "definited benefit" pension plan? That's something you definitely want to hang on to! So it's hard to comment without knowing more about your situation.

I am 60 years old and just started receiving SSDI benefits. we were divorced in 1991 after a ten year marriage.

Am I entitled to any SS or SSDI benefits from the income he received while we were married?

Also, am I entitled to any of the IRA or 401K money he owned/earned while we were married? SAVAGE SAYS: Because you were married 10 years, you are entitled to Social Security benefits based on his work record -- and you should take them if they are larger than what you would receive based on your own work record. The Social Security office will help you with that comparison. You are not entitled to his 40l(k) or IRA unless your divorce decree specifically contained that order -- called a QDRO -- qualified domestic relations order -- covering that issue.

Hi Terry. Enjoy your Sun Times column. My question is I have some GENERAL OBLIGATION COLLEGE SAVINGS BONDS (5K) coming up for maturity. I'll not be ready to use them for a few years yet ,if ever. Should I cash them in or leave them until needed?? Thank You SAVAGE SAYS: When they mature, present them to the transfer agent (written on the back of the bond) and get your cash, and put it in the bank! Those banks are not paying the promised "bonus' if used for college anyway. And I'm assuming you're talking about Illinois bonds. Given the state's financial condition, you'll be better off with the money in the bank!

Iam a retired 78 y.o. female, plan to sell my home to live in Senior apt. to make life easier.
I lost approx. & 75,000. property value in the past 3 yrs.
I have an IRA $160,000, EE bonds $40,000.
I will clear approx. $150,000. from sale of home.
What & where should I do with this money that won't require any hassle on my part as I'm not money savy & lack patience?
I have followed your columns for years & have taken advantage of some of your advice given to others.
You are a gift to so many of us, Thank you! SAVAGE SAYS: Thank you for your nice comment. ALL that money belongs in the bank, in a money market deposit account or CDs of 2 year maturity or less. It will all be insured because the iRA is insured separately from teh other money. Also, it is time for you to make sure you have a current will (or revocable lviing trust) and a healthcare power of attorney. Have you taken care of that? It's very important that you do so now -- while you are competent and no one can challenge your decisions., If you live in the Chicago area, here is the name of my favorite elder law/ estate planning attorney:
Janna Dutton, and her phone number is 312-899-0950. I had her do my own mother's estate plan! And I'm giving out her number publicly because I think it's so very important for women who are alone to get all of this done properly!

I want my 3 kids to only be able to take X% interest income per year from the funds they will get from out revocable trust once we both die. I want this proviso to be in effect until they are each 62 years of age.

that way they can not "blow" the money, but can have some income to help them out until they are 62.

Once they are 62, I want that proviso to stop and they are free then to access all of the money.

any suggestions ?? SAVAGE SAYS: Well, this is truly "the hand from the grave!" Consult your estate planning attorney re this provision. But also consider who will invest these funds over the years -- and whether it will be done in the best interests of your adult children.

We are about 4 yrs away from retirement, we have invested wisely with our financial adviser. Just wondering what if anything than buy and hold we should be doing. We have guaranteed annuities, and IRA's, plus a commercial bldg and house. Thanks SAVAGE SAYS: I wrote the book: The New Savage Number in order to answer exactly that question! Check my website where the bookseller will send you an autographed copy at a discounted price! www.TerrySavage.com

we are both 75 years old and have lost most of our invested money. we are down to $40,000. and that is all we have anyplace. Most of the money is invested in bonds. should be just leave it or take it out and put it under our mattress. Either one of us actually understands the investment know how. the little we have left - I need to put towards our monthly expenses sometimes. please help...Thank you, Geraldine SAVAGE SAYS: Please write back with details of how much money you lost, and what you owned, and your phone number. I won't post it publicly, I promise. But if you were "ripped off" I want to try to help. And I need to know the names of the bonds you hold, and the name of the broker who sold them to you.

We owe $75,000 over 7 more years left on our mortgage at 5.5% through our credit union. Should we refinance at 3.5%? I did not think most credit unions would allow financing/refinancing for a home mortgage below 10 years---so wondering if we should refinance at 10 years and pay it off early. What do you recommend? Hoping to save some money - as we have 3 in college. SAVAGE SAYS : Yes, definitely refinance, and ask for a 7 year note which will get you an even lower rate. Or if you will still be working, take a 10year loan (which you can always pay off faster, without penalty) and use the extra money for tuition!

I have a 401(K) with my employer which is a mutual company. So my 401(k) options are limited to bond, balanced, large cap and lifestyle/pre-mix. I have a IRA at Fidelity that I do not deposit anymore money to. My question is if at the age of 59 1/2 can I take money out of my 401(k) and transfer it to Fidelity without be taxed on the withdraw? I think my Fidelity account (which I have in dividend stocks) will return more than the 401(k). SAVAGE SAYS: It's a shame that your company 40l(k) doesn't have a better set of options. I'm betting it might also have very high costs. You might want to point that out to the HR department -- or if you value your job, you might not! But you can't transfer or roll your 40l(k) while you are still employed. Keep adding to your IRA!

how long does it take to get an answer to a person's question? SAVAGE SAYS: Is this quick enough? I have been jammed in recent days because of market volatility. But I'm catching up this afternoon!

I am thinking about buying 150000.00 New York Life annuity which to be paying round 9.75 % for 10 years but my dughter thinks I should just leave it in cash and tke out some each month for the extra income I would like. What do you think? The payments would be more than I would need to the extra aunt I would put tht back in my Saving Account SAVAGE SAYS: I have no idea what kind of deal you're talking about! This doesn' tmake any sense. I asked my annuity expert (|Jeffrey.Oster@raymondjames.com) and here's what he wrote: There is no such thing...not in a fixed deferred annuity. Maybe it's a payback of their own money in a 10 year certain immediate annuity, but that real rate of actual return would be less than 1% over the 10 yrs in this environment.
They can get 6% annual income now on a Metlife living benefit....and that would be a real rate.
Feel free to contact Jeff directly if you want more info.

My Husband was purchasing Series EE $100.00 Savings Bonds through the Post Office some time back. They no longer do that but he was wondering if it would be wise to cash the bonds and invest the money somewhere else? Do the Bonds still have their value at the time of maturity?
SAVAGE SAYS: Older Series EE bonds are VERY valuable today (and keep on earning interest for 40 years from the date of issue. Those older bonds have a much higher interest rate "floor" than bonds today are paying, and they adjust the interest rates every 6 months. So if you don't need the money, and the bonds are less than 40 years old, hang on to them. BUT I do not recommend buying new EE bonds (now done electronically) because they will carry a fixed, very low rate of interest for the life of the bond.

Hi Terry, I reside in NJ where the property taxes are very high. My home is paid for. I am totally disabled with a net yearly income of $42,000. I have investments of $430,000 as my nest egg. Is it my best interest to move to a less expensive state or stay put. Would I be exchanging one set of monetary issues for another? Thank you. SAVAGE SAYS: Well, it's hard to give advice on that kind of decision without knowing more about your situation. You are disabled, which means you probably have physicians and other medical relationships you trust. It would take a while to re-establish those in another state. And presumably you also have family or friends around you who can give assistance. Those relationships are priceless. I don't know how high your property taxes can go -- there is a limit, you know, before homeowners like you revolt! So I guess my best advice is to think twice and think hard before making this kind of decision.

Terry~
I'm a 43 year old single female with no children. I lost $38,000 through bad investments, and I'm very hesitant to invest now. I have $15,000 in cash sitting in a safety deposit box because I'm afraid to loose it. If you were me, how would you invest this money. I'd like to be able to access it in case of an emergency and would like to grow it as a down on a house in a few years. I do have some some debt. Two student loans totaling $24,000 (4.5%) and one credit card $4,000 (4%). I'm paying the credit card down $200 a week to have it paid off by the end of the year.

Please advise me the best place to place my $15,000 so it's not just sitting in a box.
SAVAGE SAYS: Well, right now the only place to keep that money safely is in a money market deposit account at your bank. You don't want to keep it "under your mattress" because if there's a fire, you'll lose all of it. And it makes you vulnerable to theft, as well. But bring in just half of it to open your money market account, because banks must report transactions of $10,000 or more. That will get you entangled in a lot of unnecessary paperwork (I'm sure you're not a drug dealer!) Then a few mnths later you can deposit the balance. You won't earn interest these days, but the money wll be safe and insured -- But stick with a money market deposit account, not longer term bank CDs.

My husband & I helped our daughter buy a townhome 7 years ago. The mortgage & deed is in our name as she could not qualify at the time. She pays the payments. We now have a living trust stating the house goes to her. My questions:

-After our death, will she have tax consequences with the house going to her?

-What will happen to the mortgage when it goes to her? Can she inform the mortgage company that she will continue making payments and will they change it to her name or will she have to refinance? What if she does not qualify for some unknown future reason?

-Or is it better to refinance with all 3 of us on the loan (I think she would qualify now but at a higher rate than if we were on loan). What are the tax consequences if any? If she is on the refi loan we can get a better interest rate because it is considered a second home for us alone & rates are higher.

-Or is it better for her to have the house & loan in her name alone? How would this be done without a bunch of hassle? Also we now claim the mortgage tax interest because we benefit & she doesn't at this time.

FYI - she is a single Mom. Her mortgage is down to $252,000 & she has an annual salary of $53,000

Thanks. SAVAGE SAYS: Wow, that is a complicated question. And before I get all involved in the legalities, let me ask you a return question that is very practical. If she inherits the house through being beneficiary of your revocable living trust, will she also inherit enough money from your estate to pay off the balance of the loan? Maybe the smartest thing is for you to take out a life insurance policy, and make her the beneficiary! Then she would inherit the home and could pay off the mortgage. The kink in this is what happens if you and your spouse do not die at the same time? Where would the surviving spouse live, and is there enough money to take care of the survivor? You could consider a "first-to-die" policy on both you and your spouse, so the surviving spouse would get a payout on the first death. That might create enough liquidity for the survivor to make decisions about where to live -- and postpone the issue facing your daughter! Then, at the death of the second surviving spouse, the balance of your assets would go to your daughter (assuming no other children). Again, since the survivor woudl have been living on life insurance benefits, there might be enough assets in the estate to pay off the mortgage at that time??? Basically, I don't hve enough details of this situation to help -- it's not just a question of paying off the mortgage, it's an estate planning situation that maybe can be improved by having life insurance, the correct policy and owner, assuming you are insurable. Please write back with more details.

Terry,
How would the debt crisis be affected if we changed the tax
Code to a 20 percent flat tax for everyone?
This would be both corporate and individual
with no deductions.
We would also make lobbying illegal.

SAVAGE SAYS: I've written about that before, and agree in principle. Of course, we'd have to make a big deduction for low income people (who currently don't pay taxes anyway) or they couldn't buy food and shelter. The only REAL problem with the idea of a flat tax is that it could so easily be raised! On the plus side, we'd save so much money filing tax forms! And I'm sure all those tax lawyers and accountants could find other jobs!

I made the mistake of getting out of gold about two months ago. Would you suggest getting back into it at this point. I have up to $200k that I am willing to put into gold...or should I keep it in cash. SAVAGE SAYS: As of this writing, around $1750 an ounce, I suggest that you'll get another chance in the 1600s or lower -- although I'm a long-term bull.

My fiance is trying to refinace his ex wife off of his 1st and second mortgages and was most recently told that his debt to income ratio was too high. My credit is terrible, just filed for bankrupcy through my own terrible divorce, so even though I have a very stable income, I cannot be a cosigner at this time for him.
I pay him money each month for rent/utilities/living expenses, could we formalize this agreement in a lease/notarized statement and have it count towards his income? As we are getting married in October I wasn't sure if there were rules pertaining to a husband renting to his wife. Thanks for all of your help! SAVAGE SAYS: I suggest a visit to the nearest local office of Consumer Credit Counseling Services. You'll be immediately connected to the nearest office by calling 800-388-2227. You can trust them. In answer to your specific question, no -- the bank won't accept "rental income" from a spouse. And they might not even accept rental income from a boarder in his home, without verification of a lease etc. But I don't think this is your bigget problem. You didn't ask, but when you marry, your horrible credit rating will affect him as well. That means he won't be able to refinance his home, even if his income is higher! Religious reasons aside, you'll be much better off financially just living together in his home with you contributing to the expenses -- until he gets a better income and refinances, and until you pay off your debt. I'll bet that's exactly what the credit counselors suggest!

Hi, Terry,
I have a tax question. if I receive money to babysit my granddaughter, do I have to pay federal and state income tax on the money received? We are talking approximately $30.00 a day for 15 days a month. I am not employed anywhere else. Thank you for your advice. SAVAGE SAYS: The minimum income required to file a tax return for last year was $9350 if you are single and under age 65, or $10,750 if you are over age 65. I don't know what other income you have, presumably Social Security. But as a practical matter, if you are paid in cash -- and if your children are not deducting these payments on their tax return -- I think you can probably consider this amount as a "gift" from your children, and that would not require you to pay taxes on the money you receive.

The Dow has been down or up (mostly down) by more than 400 points the last five days. The market seems to take wild swings based on the fear or joy of the day. Your columns caution readers not to do anything rash when the market is unstable, but to stick to a plan of long term investment and periodically review the plans goals and status. But the so-called experts seem to panic or enthuse daily. Are these market traders really experts? Investment banks and other financial institutions claim they must pay the big salaries and bonuses that they do so as to attract the top people. The "top people" don't seem to know what they are doing though. Just how expert are the "experts"?

Thank you, SAVAGE SAYS: I don't have an answer for you in print, but I am posting your comment becuase it really made me smile!!

I have 2 children headed to college in a year. I'm putting about $500 a piece into each childs 529 plan each month. Should I be putting that money into a savings plan with the market behaving so erratically? I can afford to pay for the 1st year or two with other funds to give the money that is already in their accounts a chance to rebound (let's hope) but I'm not sure if it makes sense to continue to add to the amount that is already in the market. SAVAGE SAYS : I agree with your analysis. The true benefit of a college savings plan is tax-free growth. But you have such a short-time left, that I think the money is better put in a savings account in the bank at this point -- And you might want to switch to the most conservative option within your 529 plan for the money you have there, since you have such a short-term time horizon.

I would like to pay off my credit card, in in order for me to do this i would have to take 4000 out of my Ira account was wondering if you thought this would be a good idea. Thank you, Eileen SAVAGE SAYS : Don't do that. If you're under age 59-1/2, you'll pay a 10% penalty, PLUS ordianry income taxes! And you'll lose the future growth of that money. Instead, simply double the minimum
monthly payment this month -- and keep paying that same amount every month-- and it will be paid off in less than 3 years!

I lost my job almost two years ago when my employer closed bouncing my paychecks and owing me about 15k in commissions. I had to short sale my house and had a rental property foreclosed on during the last two years. My credit is in the tank (below 550). I still have about 40k in CC debt owed and past due or in collections(some show as charged off). Should i file for bankruptcy at this point? it cant hurt my credit much more and maybe it will help me improve my credit overall and scores more quickly? I don't see being able to settle or pay any of these debts off in the next year or so. I also show a judgement from a lawsuit of a company I owned from 2008 , The judgement was just issued June 2011.
I am feel buried and don't know what to do at this point.At what point does one throw in the towel and take drastic measures? I will be 50 years old next week.
Thanks -Mark
I live in CA, USA. SAVAGE SAYS: We have bankruptcy laws in the United States -- not debtors prisons. I think you should definitely contact a bankruptcy attorney in your state.

Dear Terry,

I have been in the process of refiancing my home loan from a 20 year 5.75% fixed rate (13.8 years remaining) to a 10 year loan with 3.25% fixed rate. I was so excited to save close to $70,000 in interest and to cut out over 3 years off my mortgage. Today I read about the feds dropping the interest rate to 0 on new mortgage rates until 2013. What would you do? SAVAGE SAYS: They are dropping rates on Treasuries -- NOT on mortgages. Go inand close -- but ask if they'll drop the rate another quarter of a point If not, go ahead and close at 3.25%!

I close tomorrow afternoon.

Thank you for your advice.

Audrey O'Brien
Lutz, Florida

My 89 year old mother, has over 600,000. invested mostly with bonds with a large brokerage and a personal financial manager that has done well for her for over 30 years. She gets a monthly interest check and social security and has no debt. Her monthly income is more than sufficient for her to do whatever she wants/enjoys doing. She is going to sell her paid in full condo and move to an assisted living facility near me soon. She will have a little over 100,000. in proceeds from her sale. What would be a good choice for this money as an investment for her. She has heard of an annuity from AARP that will pay a monthly amount and still preserve her investment that seems pretty risk free. She is asking my oppinion and I don't really have an answer for her. SAVAGE SAYS: Well, I ws going to suggest that you just put the money in the bank and withdraw as necessary for her care. If you buy an annuity on her life, it will pay as long as she lives -- but at death the insurance company keeps the balance. (Yes, there are annuities over two lives, but that would give her far less income -- and be unnecessarily locking you into low payments during what could be an inflationary era. I vote for money in the bank!

can I sell my stock an put the money into an annunity so I don't have to pay federal tax? SAVAGE SAYS: If you sell your stock at a profit, you will still owe taxes on the gain (depending on how long you've held the stock, and your tax bracket). If you sell at a loss, you can deduct $3,000 of losses against ordinary income (and carry forward any remaining losses to be used the following years). Then, if you buy an annuity -- a tax-deferred annuity -- which pays either a fixed rate or a variable rate based on the investments inside the annuity, you can DEFER taxes until you withdraw the money. When you do withdraw, the gains will be taxed as ordinary income, not at the lower long-term capital gains rates. If you elect to invest the money in an IMMEDIATE annuity, you'll pay ordinary income taxes on a portion of your monthly withdrawals. Still confused? Read The Savage Truth on Money, where I explain annuities at length.

Terry, based on the current market, do you suggest taking your savings out of your 401K and putting it in a bank account to ride
out the storm? SAVAGE SAYS: You CANT take money out of your 40l(k) while you are still employed. If you are worried about the stock market, just switch to the most conservative, short-term money market type investment offered by your plan. Every plan has one.

If my home is foreclosed on can the bank attach my TSP (401) retirement account, social security or my retirement from the Federal government? SAVAGE SAYS: NO! The home loan is secured by the home and nothing else. In some states, lenders can come after you for other assets if they sell your home and lose mney on the mortgage. In practice, that almost never happens. And it could NOT happen with a retirement plan because that money is protected against creditors. (Example: That is how O.J. Simpson was living the good life -- before he went to jail -- he was living on a monthly payout from his protected retirement plan!)

62 still working and can't get ready to retire because of my 401k getting hit twice now in the last couple of years. What do people like me do? It isn't like I am young and have 30 years to make this up. Thanks SAVAGE SAYS: The market has bounced back a bit. Switch to more conservative investments within your plan. And keep working. And I don't mean that facetiously. All Americans will have to work longer, because we live longer. That's the basis ofmy book -- The New Savage Number, out last year in paperback and updated. So get a copy at my website -- www.TerrySavage.com -- and learn how much longer you'll have to work, and how to plan for retirement.

Hi Terry. My husband is 59, will be 60 next month. I am 51. We have 45,000.00 in a checking account, getting very little interest. We have 40,000.00 in Vanguard star account, and 6000.00 in a Roth IRA in a money market, getting very little interest.
He works fulltime, but going on short term disability in a month, for hip replacement, I am a housewife.
We contribute nothing right now to the Roth or Star Fund. We are just not savvy, when it comes to this. We want to start contributing, but need an advisor. We know we should get a fee only one, but should we get one that does all the work or just one that advises and we do the work?
We are not sure we could do the work, but at the same time, don't want to give all our money that we make to one that does the work.
Thank you for any suggestions. SAVAGE SAYS: First of all, be glad you had money safely stashed, though earning no interest. It is "chicken money" and shouldn't be in the stock market in the first place. The Vanguard Star fund is a great idea. And it gives you access to Vanguard advisors for free. So ask THEM!

I'm thinking about taking some money out of a CD to pay off my mortgage that has a balance of $40,000. Does this make sense in today's economy? SAVAGE SAYS: Only if you can't refinance your mortgage down to under 4%!

Terry, given the recent drops in the market, do you recommend re-balancing at this point or is it better to wait until things become more setteled? Thank you. SAVAGE SAYS: In markets like these, you can become "unbalanced" very quickly. Are you asking if today, any day, is the bottom and you should add more to your stock holdings? I have no answer for that!

Ms Savage.
I am 58 1/2 years old. I have been self employed for 32 years in the building industry. Everyone knows that story these days. Long story, short. We have been out of work now for 8 months. I'm running out of cash next month. At that time I will not have means to pay our personal bills. Being self employed, I'm not elligible for unemployment. The only money that I will have available is my IRA. There isn't a lot and to make it worse, the Dow is getting a good chunk of it. I do not see that I have a choice but to get some of it to make it through the end of the year. How this got started was, we were supposse to start 2 projects earlier in the year, but
they did not happen. They had been reliable in the past, but the economy has caught them also. Anyway, I know that the IRA funds will cost me 10% for withdrawal and I'm not sure that I can replace the money in 60 days to avoid tax implications. Someone said that I could possibly invest into a new company start up and avoid penalties. If so, I could restart an old woodworking company that I once had and maybe help pay my reoccurring expenses also.
Is any of this feasible? I have been trying all year to find employment, but I guess 58 years old is a serious problem. I have a BS degree, licensed gen. contractor, licensed real estate broker, and have been a high school teacher (license long expired).
I need a direction. Can you offer any advice to this old man? SAVAGE SAYS: You're not old -- and you're not alone. Don't take the money out of the IRA -- you'll never be able to replace it and you'll owe taxes and penalty. Pretend it's Social Security and you can't get at it. Starting another business may or may not be a good idea, but it won't absolve you of withdrawal lpenalties and taxes. Now, put an ad on Craigs List -- and every other place you can find to offer your services as a remodeler, handyman, etc. Start with any friends or former contacts in wealthy areas. Many people are not hit by this recession and are looking for repair work to be done. You could earn some real money this way -- though not a career, it can pay your bills. Don't give up. At least you have very real skills -- And the economy will rebound eventually -- so for now it's day to day, month to month. You can do it!

I am 62 years old and know little regarding money matters. Where do I start?

Thanks SAVAGE SAYS: Start by paying down all your debt. Then start saving money in your bank. Then spend $11 and buy my book -- The Savage Truth on Money available at Amazon.com or at my website --www.TerrySavage.com -- It was written for you!

Hello Terry

I have recently come into a large amount of money but I have no idea what I should do next and what would be the best way to protect it. What advice would you give me. SAVAGE SAYS: I can't answer this question out of context -- I don't know anything about you, or the sum of money, or your current financial situation. Pls write back -- I don't post names --and give more details. Then I can point you in the right direction.

Okay, stocks plunged, so my question is... I have not funded my Roth IRA for 2011 yet. Would it be smart to put the whole $5,000 in now? I use Vanguard, so my next question, is what do I invest it in? My husband's needs to be funded as well. Do you think we should do it now? SAVAGE SAYS: Wow, I'm not a market timer! I have no idea what will be the bottom. If it were me, I'd put in about $500/month on the same date every month, automatically. Depending on your other investments, and your age, you might want to be a bit conservative --perhaps in an equity-income fund, or Star fund at Vanguard.

Hi Terry,

My husband (56) and I (55) would like to purchase long-term care insurance. I've heard you speak of this in the past as an important purchase. At present, we're quite healthy, but I'd like to plan for future possibilities.

Our children are raised, my husband's a small business owner and I work at a school. For the past several years, our joint income has been quite modest.

I've heard people purchasing LTC insurance from State Farm or Genworth. What is your recommendation of where and how to purchase LTC insurance for both of us?

Thanks so much,

A mature IL couple

P.S. Some years ago, I heard you speak at Elmhurst Memorial Hospital. You communicated very clearly, and you were just adorable! SAVAGE SAYS: Well, your compliment went right to my heart! Call MAGA Ltd - the long term care insurance experts at 800-533-6242 and ask them for quotes from various companies. Ask for Murray or Brian. Since your husband is a small business owner, the premiums may be all or partially deductible. And there is typically a 40% lower premium for a spouse. So check into it -- You can trust their advice, and you can mention my name or not, as I get nothng out of this --

what would my monthly payments (ballpark) be if I bought a $1.3 million boat with a $700,000 down payment with a 10 year loan. SAVAGE SAYS: A lender can do the exact calculation for you -- but based on experience, I'd say that you'll quickly be "underwater"! It's not the purchase expense, it's the fuel and upkeep!

I'm 67, retired at 5800.00 net per month, I have one bill, my mortgage of 135,000. I have 150,000 in savings, 300,000 in a 457. Should I payoff my mortgage and with which funds? SAVAGE SAYS: Better to keep the cash and refinance, if you still qualify. Today you can get a 10 year loan at under 4%. That will give you flexibility.

MY MOTHER IS PAYING A MORTGAGE BUT IT IS NOT ON FIXED RATE WANT DO I NEED TO DO FOR HER AND SHE IS 65YEARS OLD ON A FIXED INCOME .THANK YOU ---- SAVAGE SAYS: You need to get that loan refinanced into a fixed rate loan NOW -- even if you have to go on the mortgage with her to qualify her for the loan! And if your bank won' t do it, check with Quickenloans.com.

I turn 66 December 2012. When can I retire and still earn as much as I want and not effect my Social Security? SAVAGE SAYS: Here's the answer, direct from the Social Security website: (Note: if you were born between 1943 and 1954, your full retirement age is 66).

How much can I earn while receiving Social Security retirement benefits?In 2011, the annual limit is $14,160 if you are below full retirement age. In the year you reach full retirement age, the annual limit is $37,680.

If you are below full retirement age:

•$1 in benefits will be deducted for every $2 you earn above the annual limit.
In the year you reach full retirement age:

•$1 in benefits will be deducted for each $3 you earn above the annual limit; and
•Starting with the month you reach full retirement age, there are no limits on the money you can earn.

Hi Terry,
I am in the process of selling my mother in laws home in San Francisco. She is 95 and in poor health in a nursing home. She has a reverse mortgage of 650k. The home was purchased in 1932 by her parents. Her mom passed in 1972 and she and her husband purchased the home for an amount that was never disclosed.
Will there be a problem with the sale? We are paying 3000 a month for a nursing home for her to stay in and frankly are running out of money.
Thanks for any insight.
Luci S.
SAVAGE SAYS: Will you be able to sell the home for more than the $650,000 balance on the reverse mortgage? If so, how much more? She can take a gain of $250,000 tax-free. (Of course, if she died owning the home, and gave it to you, there would be no taxes owed -- assuming an estate under $5 million -- and you could pay off the RM.) Not knowing the numbers it's hard to advise. But I'm assuming that if you need the money for her care, whatever is left after the RM) then there might not be any tax liability given the debt paydown-- But do check with a CPA in your state to be sure, and to find out exactly what forms are required to report this sale.

I have just retired and I have 18% of my 403B in stocks. Should I move them to a safer place until the stock market gets better? I'm afraid of losing a lot of money with this downturn. I don't have a lot of money to start with and am very concerned. Thanks, Carol
SAVAGE SAYS: If you have "just retired" then hopefully you will have many years to live, and will need % doesn't seem like too much of a stock market exposure -- if you have the self-discipline to ride out the ups and downs. 25 years from now, the market will be much higher if we have the same America. If not, your stock portfolio will be the least of your -- our -- problems!

I am retiring August 31, 2011. Would you recommend leaving my 457(b) and 401(a) where they are or roll them over into an existing IRA due to the market as it is today? SAVAGE SAYS: Roll them over into an IRA -- where you wil have a choice of more suitable investments for a retiree. If you roll to one of the major mutual fund companies they will give you free investment advice (Vanguard, T. Rowe Price, Fidelty, etc).

Why would the opposing lawyer call mine and say "she is off the mortgage note".

Background:
Trying to enforce marriage settlement agreement.
(1)
She wants me to sell the house (at a loss of 50%).
(2)
I want her to pay (Appendix A) the funds due to me. (the money to be used to refiance the house).

Clearly, her father, a real estate agent for over 20 years, knows that while you can remove a name from the mortgage, you can not remove a name from the promisary note without refinancing.

So what game is her lawyer up to?
SAVAGE SAYS: Good catch! I would suggest you contact your lawyer. And also ask the mortgage lender for a current copy of the note.

I would like to find an annuity that would be a good investment in that it would pay more than current cds, give a good death benefit for my heirs, give monthly payouts that don't run out, and have reasonable surrender conditions after a few years. Do such products exist? If not, what are some alternatives. Thanks so much from a longtime fan. SAVAGE SAYS: Go to www.immediateannuities.com and check out what you can get for the amount you have to invest. Then check on surrender periods, guarantee periods, and recognize that you are locked into this payout for life -- even if inflation comes. If you are talking about a tax-deferred annuity, you want to read that big chapter in The Savage Truth on Money -- written to explain all this to you! It's out in paperback, available on Amazon or at my website -- www.TerrySavage.com

I have a 403B account that is currently losing money...lost $1700 in past week. I am considering taking it out, paying the taxes and using the funds to pay off current debt. what is best option. If I pay off debt I will free up to $400 per month back in my pocket. SAVAGE SAYS: Don't forget you will owe ordinary income taxes on that money next April 15th -- PLUS a 10% penalty if you are under age 59-1/2. Where wll you get the money to do that?? If you have to borrow to do that, then you'll be back in the same place -- without the future tax-free growth of your retirement fund!

Hello Ms. Savage,

I am in debts for many years and I would like to find out what other options I have to get out of debts. Is bnakruptcy is my option? I would like to be out of debt within 5 years.

Thanks in advance,
Becky SAVAGE SAYS: Pick up the phone and call 800-388-2227, and you'll be connected to the nearest local office of Consumer Credit Counseling Services. They will give you good advice you can trust.

I am 21 years old and would like to know where I could invest $10,000 SAVAGE SAYS: How much are you willing to lose? Seriously, write back with the answer. But don't bother if you have credit card debt. Then your best investment is to pay down the card balance.

Terry,

In my non-retirement account I own and rely on fixed income vehicles to live on. I am entirely in closed-ended municipal bond funds; average ranking AA/AAA--all from reliable large firms (Putman, Nuveen, etc.) These are traded on the NYSE. As you know, each and every share represents about 100 municipalities.

Are these still safe investments given the concern that municipalities could default due to dropping revenue/excess spending?
SAVAGE SAYS: They will be safe -- until they aren't. I'd recommend a bit of diversification out of muni bonds.

I opened a roth ira for my 18 year old granddaughter. She was put in the 2055 target fund. Would it be more practical to have her in a balanced fund rather than an aggressive one with our economy so unpredictable? SAVAGE SAYS: You CANT open a Roth IRA for your granddaugher -- unless she has EARNED INCOME! Check back with your custodian for that IRA, or this could be a costly mistake -- unless she is a child model and has earned income. Instead you probably want to open a 529 College Saving Plan to grow the money tax-free for college. Check with Fidelity or Vanguard to open that kind of account.

Hi Terry, It's that awful time of year again when parents are contemplating how to deal with the cost of college for their children.
My husband and I live in MA, and he makes around $83,000 a year. I do not work due to Meniere's Disease and do not receive disability. We currently have one son in his 3rd year of college, a daughter starting college this month, and a 9 year old. We have given my son $5000 per year for college these past 2 years and have co-signed a couple of loans for him, of which we currently pay the interest only while he is in school. I will probably pay this loan off over the years ($10,000).

We are now having a hard time putting money forth for my daughter who will need to pay $20,500 per year after her merit/grant aid that at least this year will give her $23,000. After this year we know that at least a $15,000 per year merit aid will apply as long as the grades are kept up. She will take the Federal Stafford Loan amount of $5,500. Currently, we are trying to figure out the best way to put $10,000 towards her education, without having the cash to do so. My husband's pay goes towards our mortgage for which we owe roughly $48,000 on a home worth $226,000, food, clothing, small car payment, insurance and gas on 2 cars, homeowners ins., and heating oil and very little to his 401K. I do not know how else we can cut back other than to give up our cell phones, and with college children, that $130 per month seems necessary.

So, in trying to decide how to help my daughter out this year. I have spent hours trying to decide the best route to take. I'm leaning against (for the minute anyway)of taking out a home equity line of credit at 6.25% and $189 fee. I'm thinking we will need new shingles on the roof, new front and rear decks and a new water filtration system, so there will be some major expenses. I do not know if it would be best to take out a Parent Plus Loan, or co-sign a loan for her in hopes that we will pay it off. I'm afraid of tying up our credit, and do not know if this will benefit our tax return or hurt it. I think my husband has co-signed $15,000 total for my son, and still have to find out how he will come up with his $22,000 for this year. One at a time though. Any advice that you could give us would be appreciated, because after many hours of online research, I just can't figure what to do. We currently only have $15,000 in savings and just under $100,000 in a 401K at the age of 45, so we are not financial doing very well. SAVAGE SAYS: Actually, you are doing very well -- and I hope your children appreciate your sacrifice. The first step is to assess where your daughter will go to school. If you can't afford to send her away to school, she should live at home and go to a community college for a few years -- at least until her older brother graduates. Yes, it's not "fair" -- but life has changed and she is old enough to understand that. Then in two years, it will be her turn to go off to college. And if that is an issue, then tell her that you will go with her to the college financial aid office. BUT, I warn you against co-signing any more parental loans. PLUS loans carry a very high rate of interest -- 7.9% -- totally ridiculous. And you will never dig out from this debt. Better your children understand now -- than believe that there is a free ride waiting for them -- becuase they will also be faced with debt repayment upon graduation. I think you wanted me to tell you this. Please show it to your entire family.

Hi Terry, I've been conditionally approved by my credit union for a 300k conventional home loan. They require 5% down. I don't have it. I'm considering borrowing against my deferred comp plan(457) to the tune of about 17k (which is half of what's in there) to use towards the home purchase.
I have about 28k in consumer debt, no emergency fund, and I'm growing tired of paying someone else's mortgage with my rent,( $2350 a month). Rob, I'm sorry to break the news to you, but you cannot afford a home. It's not just the cost of the home, but upkeep, utilities,a nd future rising property taxes. Keep renting -- and pay down your consumer debt as fast as possible.

I want to pay off the consumer debt, and think that it would be easier if I was paying less in monthly housing expenses ( mortgage would be cheaper than my current rent). Finding a cheaper place to rent is not easy around here. Should I try to hunt down cheaper rent and try and pay down my debt first, then save the money for the down? That would take YEARS...

I'm 40 years old and have about another 15-20 years left before retirement and 90% civil service pension.

Thoughts ?

Thanks, ~Rob

Hi Terry,
I am trying desperately to rebuild my credit. The "good" side is that my credit report shows several credit union loans, paid as agreed (and paid off)satisfactory over the past 7 years, along with a 16,000 car loan, paid as agreed ( paid off) along with a mortgage same situation. The BAD part is that within the past 5-6 years I have acquired a few small credit cards in which because of lack of money due to a " dead beat" spouse, I could not pay. I was the sole income for 5 people. There are about 3 cards that I did not open and did not even know about. Since my EX sat home all day, must have opened these cards online with my information and of course now that I think back, also grabbed the mail before I got home from work. I'm sure the phone calls went right to his phone. :( Anyway, I am remarried to a great person with great credit and I am trying to fix MY credit. I have read a million things about how to just leave them alone and let them fall off. The Statute of Limitations in Tennessee is 6 yrs. I understand that that only means that the company can't sue you after that time, but I still owe that money. I also know that IF I call them to try to pay it, it will start that limitation all over again. I was told NOT to pay them, or pay a little or just settle for less. What am I to do? My credit union told me to pay all my past bills and open a new credit card. Of course I know it's going to take some time. But I don't know what to do. I have my current credit reports and I have already had a few things corrected with all 3 bureaus. I have the money to just pay almost all of them off, but again. I'm told that it won't help my credit score because they are so OLD. I have NO other credit at all. Nothing in my name. Please, do you have ANY advice! Thank you.. SAVAGE SAYS: Immediately pick up the phone and contact Consumer Credit Counseling Services. Call 800-388-2227 to be connected to the nearest local office. They are a national, non-profit organization you can trust -- and charge little or nothing to give you this good advice.

Terry, I will be 62 this month and plan on retiring. I am burned out and worn out. I have 33K in a 401K, and have lost 3K in the last few weeks. If I were younger I know I would ride it out, but at this age should I take the money out immediately before I lose anymore? All the years I worked at the same job, but there was no pension plan at this local county job. I can't afford to lose a dime. SAVAGE SAYS: If you can't afford to lose a dime, you should be in the most conservative option your 40l(k) plan offers. You can't take money OUT of the plan -- or roll it over -- while you are still employed.

Hi Terry, The Dow was over 14,000 and it crashed. I think you were recommending stocks back then as you are now. If your defense is that everyone else was recommending stocks too and no one ould have foreseen the collapse. Now the Dow is back up to 11,300 from q low of around 6,500.

Everyone is now saying how high the Dow has risen from 6,500 BUT.....it is still well below 14,300 and then factor in the real rate of Inflation which is really over 10% right now including food and transportation and with no seasonal adgustment.

So you might ask what I have been investing in since 2001? I have been buying US silver coins (Pre-1965) for the last 10 years. Silver has gone from $4.25/oz. in 2001 to %39/oz. today. That puts the entire stock market to shame with little to no risk.

Some day.....possibly soon, Silver will be $250/oz. or even much much more. How do you feel about the recent AAA down grade to AA+? . . . .

Our Fiat money system will likely be replaced with a backing using Silver and Gold.......so please consider advising your followers to put at least 20% of their portfolio into physical Silver and Gold not paper related products.

I have not met anyone who has made more than myself, on a percentage basis, over the last 10 years. (No one is even close.) Peter SAVAGE SAYS: I had to edit your post a bit for space, but I think I got most of your commentary in. If you've been reading my columns (check the archives at www.TerrySavage.com and search the word "gold") you know that I have long been recommending a hedge position in gold. I'm personally not a silver investor because it is just too volatile for me! but I respect your opinion -- and your profits!

In 1991 I took out a mortgage on the family home that was repossessed from my mother and father. I did this to save the house. My dad died. I lived there with my mother till 2001 November. I moved out to start a family of my own, my mother still paid the mortgage so she could stay in the house. I saw this as rent, and very low rent at that. Now I have came to think of the £130,000 profit that the house could get me if sold. My mother now thinks its her house as she has paid the mortgage since I have been gone. Her name is not on the mortgage or deeds, just mine and only my name is on the mortgage. She has now stopped talking to me and so has my whole family. I wasn’t going to throw her out on the streets, I was going to buy her and smaller place to live in. She has now got a solicitor involved and he says I have no claim to the house. Where do I stand? All help is gratefully received. Many thanks for taking time to read this. SAVAGE SAYS : Oh my goodness, this is a classic example of the term "no good deed goes unpunished." I am so sorry for your situation. If the title (deed) and mortgage are in your name, it is likely that a court would rule in your favor. But do you want to take this all the way to court? I see from your email that you live in the UK -- Is there an arbitor there who could discuss this with all of you and come up with a solution? If you lived here, I would arrange a conference call with all parties and try to come up with a solution. Since that's probably not possible, the first thing you need to do is get good legal advice to determine whether you do, indeed, under your law OWN the property, and have all rights to sell it (even though you'll probably decide not to). That's the first step. The next is a tax question. If you do indeed own the property, and she paid the mortgage, do you have a tax liability to declare those payments as income (perhaps in the form of rent)? Maybe your qualified real estate attorney can help you answer that. You need to know your rights -- so you know where you will stand in any negotiation. But you don't have to tell your family that you have a lawyer -- at least not just yet. Then you have to think about possible solutions -- and this will be tough. If you're sure you truly OWN the house, you can just decide to let your mother live there, forever or for 10 years, or for as long as she can pay the mortgage. But any such deal should be accompanied by a SIGNED AGREEMENT, which her lawyer must agree upon. so you aren't fighting this fight with your siblings after her death. This is very important -- any decision to let her stay MUST be accompanied by a signed deal (which you probably should have had in the first place, but I completely understand how no one thought of it). And if you do decide to sell the home, and if you do then decide to buy a condo for her (and don't be surprised if instead she moves in with one of your siblings), make sure everyone in the family understands that the condo is in YOUR name -- and that (assuming she is not paying anything for it) the "rental" is a gift from you to her. And make a written agreement to that effect, as well. It doesn't look like there will be much of an estate to settle after her death, but this time get it in writing. And finally, you are a very good son to have come to her rescue during the foreclosure. Don't forget that -- and don't let your siblings forget that either!

Thank You. Your blog for today, and settled my jitters a little. Now, if we could only do something about Washington DC, and those block heads. bob SAVAGE SAYS: Thanks for your note!!

Dear Ms. Savage,

I just read that the unfunded liability for federal entitlements is around $115 trillion. I have three children (teens and early 20's) and want to help them plan for their future. Should I counsel them to begin saving for their retirement as though there will be no Social Security and no Medicare?

This will require them to save much more aggressively than I had to. I just want to help them as much as I can.
SAVAGE SAYS: That is EXACTLY what I have been advising publicly for the past 25 years. In fact, some 20+ years ago, Social Security officials called me to task for saying that in a speech.-- Yes, teach then to save, and invest, best through a Roth IRA when they start earning money.

Dear Ms. Savage:

In an effort to avoid higher taxes in the future, I was planning to convert some of my savings into a ROTH IRA. These monies are currently held in a 401K and IRA.

In light of the current global financial situation, is this still a good strategy?

Thank you
SAVAGE SAYS: The decision to convert to a Roth has nothing to do with the global financial situation. If you're scared, you can put your retirement assets in a CD or secure investment within any plan. But you need to understand how retirement accounts work. You CANT CONVERT A 40l(k) TO A ROTH. This is money in your employer's 40l(k) plan -- and until you roll it over to an IRA when you leave employment, you can only invest in the alternatives provided by the plan. But if you do have an existing IRA, you can convert it to a Roth by paying the taxes with money you hold OUTSIDE the IRA. (Otherwise, considering taxes, it probably isn't worth doing the conversion.) Your plan custodian for your current IRA (expecially large fund companies like Fidelity or Vanguard) will help you calculate in advance how much you'd pay in taxes so you can make an informed decision.

Second request on this question. Original request in early July.

Hi Terry,
After reading your column on Universal Life Insurance I took a close
look at my current policy and sent for a current values projection. My
policy is called "flexible premium adjustable life" This policy is with
Great American/Manhattan Life. The current interest rate is 4% and my
yearly premium is currently being paid from the account value on the policy.
Each year my death benefit does increase, but will start decreasing in
another 10 years. When it starts decreasing wouldn't it be wise to cash out
the policy? Unfortunately I don't know how long I'm going to live and if I
outlive the policy it will be worth nothing. I'm 72 and at age 89 the
benefit will be 0, unless I start paying into it again. what are your
thoughts?

Thanks,
G
SAVAGE SAYS: Oh sorry, I set this aside to double check my advice (which my insurance 'guru' said was correct -- then forgot to post the answer -- which is complicated. My first question is: Do you still need life insurance? Who is it intended to benefit? Do you have a dependent child? Who is -- and will be -- the beneficiary of this policy? If you no longer need it, then maybe you should just cash it in and take whatever value is left in the policy (that's assuming it is not owned by a life insurance trust). That's the first big question. Once you have that perspective you can decide whether you need to keep it in force until you die, for someone's benefit. Now, I don't know if you're still in touch with the agent who sold you this policy -- but he/she is NOT your best friend if they didn't warn you this could happen. So you might want to contact the insurance company directly and ask how much extra money you would have to add every month to keep the policy in force until age 95 -- assuming you will still need it. Ask the insurer about any "catch up" provisions they may offer. Then you can write back to me with all the facts, plus you'll have re-considered your need to maintain this policy.

I ahev approx. $500-600 dollars in my 401k currently. I gradated a from college 6 months ago and have found a better position elsewhere. Only problem is they do not have a 401k because they are non-profit and they have a 403B i believe she said. Either way... with such a small sum of money should i just cash it out and start fresh?
SAVAGE SAYS: Well, here's the thing -- throughout your life you will change jobs, and it will always be tempting to cash it in because it's a realtively small amount! I checked with T. Rowe Price, one of the fund companies that has had low minimums. They won't take a rollover with less than $1,000. So, okay. Cash it in -- save money for the taxes and 10% penalty you'll have to pay on that next April -- which together will be about half of the amount you cash in! And then get back into saving in the new 403(B) plan at your new job.

Hi Terry
My husband turns 60 this month. I know he can withdraw from his IRA if he would like to without penalty and so wonder if we can put it into a bank CD instead. Since its not a large sum at all I am concerned it will be eaten away if left in the IRA. Thanks SAVAGE SAYS: DONT take the money out of your IRA, paying taxes and losing all future tax-deferred gains. Instead, ROLL THE IRA INTO A BANK IRA CD! Your bank will handle that for you -- and do a direct rollover, so you won't be exposed to taxes.

I quit my job and want to with draw my 401k. Do I have to pay a penalty at 58 years old? SAVAGE SAYS: Don't quit your job -- where will you find another one? And DONT withdraw your 40l(k) -- when you're under age 59-1/2 there is a 10% penalty, plus taxes. If you're angry enough to consider this you need to talk to someone with a calmer, cooler head about your entire life situation!

I am 58 and my husband is 57. We have about $100,000 left on our 15 year, 4% mortgage. We refinanced last year from 5.25% to 4% and currently paying an extra $1325 on principal. I have about $78,000 in a taxable money market earning 1.3% and about $80,000 in taxable stock account. I also have IRA's and SEP plan through work which I regularly contribute. Does it make sense to withdraw funds from my taxable accounts to pay off my mortgage? I would save about $9000 on interest if I pay off now. SAVAGE SAYS: I'm all for paying off a mortgage, especially if you plan to keep your house in retirement. But you don't "save" $9,000 in interest when you take into consideration the tax deduction. And you lose all the future growth (or losses) of your investment dollars. I like your current plan of continuing to pay off the mortgage more quickly. It gives you more flexibility. Of course, if the market keeps falling you'll look back and say that "lost"money could have paid off partof your mortgage. That's a tough choice to make, and I can't make it for you -- Just make sure you have enough cash for flexibility. And look into long term care insurance, too.

Hi Terry:

Do you recommend reverse mortgage - heard good things about - any bad things to know about it - when would a reverse mortgage be a bad idea? SAVAGE SAYS: Under the right circumstances, they can be a terrific idea. But you need to understand how they work. There's a chapter in my new book: The Savage Truth on Money, and I've written articles which you can search in my column archives. I did one for my dad about 10 years ago. He hates the fact that they keep charging interest. And by now the balance of the mortgage is greater than the value of his condo! He's 90, and in good health! And I keep telling him the only way to "beat" the RM lender is to keep living, if possible to 100, and that will cost THEM a lot of money!

Who is respnsible for paying,when a Bank mergers and a $75000 20 year Automatically renewable CD is lost and I have the original CD. SAVAGE SAYS: When a bank is taken over by another bank, they have the right to change the terms of exisiting deposits. Sorry.

Terry:

I have two Discover credit cards. One I pay off monthly and the other has a balance of $6,000.00, which I can now pay off. Should I keep this card open or close it? I have read that closing credit cards can hurt one's credit. Please advise. Thanks.
SAVAGE SAYS: Pay it off, but don't close it. And don't be tempted to build a balance again, so take it out of your wallet! Just let them send you a bill every month with a zero balance.

Dear Ms. Savage,
Now that the Debt Ceiling fight in Washington appears to be over, how do you view the outcome? Do you believe it is a "catastrophe to cut Govt. spending in tough economic times like a popular NY Times columnist does? Is it a step in the right direction? Or is the result somewhere in the middle?
SAVAGE SAYS: Good question. If government spending is efficient -- directly to build roads, public works, I'd be ok with it. But it is so blatantly inefficient that I think people can do better things if left with their own money. If I were "in charge" I don't know how at this point I could determine which projects are "efficient" -- That old term "shovel ready" certainly didn't ring true. And I hate to see things like Medicaid reimbursements cut -- because that means "little old ladies" in public aid nursing homes don't get good help when they are forced to stop paying nurses salaries. So this is a very tough question -- but one thing is sure: If we keep going with government spending the way we have been this past 2 years, we will ruin our country.

If a 75 year 0ld father qualifies for a $200,000 mortage loan and purchases a $300,000 house with a down payment of $100,000, then
adds his 50 year old daughter as co-owner of the property, what happens to the mortage upon the fathers death if the daughter cannot
qualify for a $200,000 loan?
SAVAGE SAYS: This is a very good question. First, the answer depends on whether you are co-owners or owners with Joint Tenancy. It's a fine point in the law -- but it may determine whether at death your father's share of the house goes into his estate, or whether his share of ownership goes directly to you, outside probate. You should check with your bank and ask a local real estate attorney exactly how this title was arranged. If you are a joint tenant, the resonsibility for paying the mortgage will be your responsibility. BUT -- and here's where the ambiguity lies -- it is not clear whether the lender can force you to refinance on the death of one of the joint tenants. You need to go to your lender, have them look a the mortgage documents, and give you an answer in writing. Or your real estate attorney should do this for you. Then you'll know what is going to happen when he dies. If there is a refinancing required, and if you don't qualify, or if the property is not worth the amount of the loan needed, they you may have to sell it. So don't procrastinate. Find out what the documents say about the form of ownership, and the surviving owners mortgage rights.

i have a mortgage balance of 175000.00 with a monthly payment of 1535.00 on a 6% fixed rate and 22 years 8 months left

how would an extra 100.00 per month change the amount of time left to pay off???? SAVAGE SAYS: Your bank will create an illustration for you if you ask them. Also ask them about refinancing -- if you qualify -- to a lower rate!

My husband and I filed chapter 7 bankruptcy in ohio march 30,2011. It is now discharged as of July 27,2011. They state if you come into an inheritance or a windfall you must let trustee know. If i take money out of my 457 government deffered 457 plan because I have been laid off will this be considered a windfall and will trustee want this money. thank you for your time Karen SAVAGE SAYS: I doubt it, but you could contact your bankruptcy attorney to make sure. Of course, I want to warn hyou against doing this, because you will owe taxes on the money you withdraw, as well as a 10% penalty if you are under age 59-1/2. And that tax bill will come due next April, so if you don't have a job you'll have to take more money out -- a vicious cycle. See if you can avoid that.

Have some very old coins which were left to me. What's the best way to cash them in and find out their value? Thank you!
SAVAGE SAYS: That's always a tough question -- because likely you don't know enough to know if a dealer is giving you an honest appraisal -- or if he/she is going to tell you that they're all "junk" when you have one very valuable coin! So you can start doing it yourself -- or ask for a recommendation of a trusted dealer. In the Chicago area I always recommend Harlan J. Berkeon Clark St downtown. (www.harlanjberk.com).

Loved your column on gold. Would now be the time to sell a Rolex? How do I locate a reputable buyer? Would a downtown Chicago jeweler be my best route? How do I ascertain its value? And,how do I guard against "switching"? Thank you. SAVAGE SAYS: You could take it to a jeweler for an appraisal -- which he/she could do without leaving your sight. In Chicago there is always "Howard Frum" (HowardFrum.com)-- the guy who advertises that he buys watches. Also check eBay for current prices on auctions. Remember, the buyer is always going to give you a low price that allows him to sell it at a profit.

Terry, my wife and I are looking for a financial advisor. It seems most companies are focused solely on investment advice. We are looking for an organization that focuses also on money management, budgeting, etc. Is there a website or organization that you would recommend for someone looking to get their financial house in order? John SAVAGE SAYS: Yes, absolutely. Contact the nearest local agency of the National Foundation for Consumer Credit by calling 800-388-2227. They are NOT just for people who are buried in debt. Their specialty is helping people get organized, set up a budget, plan for savings etc. And they are very low cost or free. If that doesn't do it for you, get back to me after you've met with them. Be sure to bring all the info you have about your after-tax income, current debts etc. They can guide you to financial security.

Our child is just beginning four years of grad school (vet-med) and has already secured gov. loans for the first year. As we reviewed the loan package, we shudder to think what his total loan cost will be when he graduates. We are advising him to be aggressively searching for scholarships, grants, lower cost loans etc. Our question: is there a way that we can contribute to his tuition, and gain any tax savings/benefit? We are still working, in our 50s, have no debt, and contribute fully to our retirement accounts. He is 26, not classified as a dependant anymore, but will not be working except part-time during the next 4 years. He also has NO debt on his undergrad schooling.
SAVAGE SAYS: Well, how fortunate that he has no existing debt. Yes, it's a good idea that he seek out all possible loans and grants -- and the best place to start is at the grad school, which may have some special programs for entering students. YOu can each give him up to $15,000 a year so that shouldn't be a problem. And if you pay his tution directly to the school you can give more without any gift tax implications. But these "gifts" will not be deductible to you.

My husband is constantly worrying me about this.Our son just finished college. He is smart, and a hard worker. he has not been able to find a job in this horrible economic time. if something were to happen to him are we responsible to pay his loans since we co signed for him? My husband says we should take out a life insurance policy on him to cover his loans. I cannot even think of something happening to him. He is the kind of son every parent dreams of having. What can I tell my husband to cool his jets ? SAVAGE SAYS: Yes, if he dies -- and if you co-signed his loans, you are responsible. But instead of spending money on a life insurance policy on him and expecting the worst, you and your husband should spend your time helping him find a job, making contact with all your business friends, family, and associates to see if something, anything, opens up. In the meantime, if they were Federal student loans, he should go to www.IBRinfo.org (the income-based repayment plan) and start dealing with those loans. And if they were private loans he must contact his lenders within 6 months of graduation about arranging some kind of repayment plan. Since you're on the line, you should be bugging him to get started on this project NOW.

would like your article o n purchasing gold SAVAGE SAYS: Go to www.TerrySavage.com, click on Read Recent Columns, which takes you to the Sun-Times archives. Scroll down to the "Search" box -- then input the word GOLD.

Terry, thank you for taking my question. I am 58 and have a tidy sum in my IRA and 401-k. My broker would like to manage this portfolio and my "taxable" portfolio for a 1.5% annual fee. The broker is with Morgan Stanley and we have been with her for 10+ years, so some trust has been built up. I am not sure I want to continue to have the burden of investing and repositioning these portfolios on a quarterly or semi annual basis. The fundementals in the market are getting difficult to follow. Do you have a recommendation for me? Thank you.
SAVAGE SAYS: I would never want to disrupt a long-time successful relationship with a broker. But let me ask you a question: How has she been managing it for the lasta 10 years, without a 1.5% fee, and how has she been so successful to give you this confidence? Why change now? I'm not sure of what she's offering, but in most cases these "managed accounts' leave the direct hands of the broker and are parceled out to money managers. The broker merely becomes the contact person and conduit for explaining the actions of the manager. (It's known as "asset-gathering.") So, you really wouldn't be continuing on the same basis as was previously successful. I may be wrong about what's being offered, so check on this.
And you might want to check on alternatives: Both Fidelity and Vanguard have free money management services in their low-cost funds -- depending on your level of assets. I wouldn't suggest that you liquidate your successful portfolio, given all the costs. But they do have brokerage divisions, too. Bottom line: I think I'm reading that you no longer want the resonsibility of making, approving decisions with your broker. But it's your money -- and you never give up that resonsibility -- no matter what the structure you set. In the end, it's up to you. These are just things to think about before making a move.

My husband and I would like to take money out of our IRA that keeps losing money and transfer it to something else like a cd? What would you suggest were we would not have to pay a penalty? SAVAGE SAYS: You need to do a DIRECT ROLLOVER. You can walk into any bank, show them your latest IRA statement, and they will handle the whole process, so you are in no danger of paying taxes or penalties. Or, check with your current "custodian" and simply direct them to put it all into a money market fund, if available, with them.

I WANT TO PAY OFF 5 CREDIT CARD WHICH TOTAL 2800. MY PROBLEM IN GETTING A CREDIT CARD IS NOT FOR A BAD CREDIT. IT'S DUE TO A STUDENT LOAN THAT I CO-SIGNED WITH MY GRANDAUGHTER, 5 YRS AGO. SHE DID PAY ON IT FOR 4 MOS. WELLS FARGO CALLED ME. I STARTED TO PAY THE LOAN WHICH TOOK ME ABOUT 4 MOS TO GET CAUGHT UP. NOW I'M CAUGHT UP AND PAY THE $316.63 EA MO. TROUBLE IS I HAVE A CREDIT CARD WHICH I HAVE HAD FOR A LONG TIME AND BECAUSE I SOMETIMES HAD TO USE IT FOR THE STUDEN LOAN TO GET CAUGHT. I ALSO HAVE 5 OTHER SMALL CREDIT CARD WITH A BAL OF 2800. I WOULD LIKE TO HAVE A CREDIT CARD TO PAY OFF THOSE 5 CARDS IN FULL. THEN I WOULD HAVE NO TROUBLE PAYING ON MY CREDIT CARDS. I'M 83 YRS OLD ON PENSIONS WHICH TOTAL 1800. A MO. MY CREDIT HAS ALWAYS BEEN VERY GOOD BEFORE THE STUDENT LOAN. NOW I CAN'T SEEM TO GET A CARD DUE TO A HIGH AMOUNT OF DEBT. WHAT CAN I DO. JEANNETTE. PLEASE ADVISE. ***** SAVAGE SAYS: WARNING TO ALL WHO CO-SIGN STUDENT LOANS**** This is SHAMEFUL -- and where are your granddaughter's parents??? How can they put this burden on you? Contact them immediately -- and please write back and let me know more about this situation. Unfortunately there is no way you can now get a new credit card at a reasonable rate -- because you have too much debt. This is "elder-abuse" -- and if I were related to you I would contact an attorney and chase down this girl and her parents. As you can tell, I'm absolutely fuming over this. Please write back and let me know what happens when you have a show-down with the parents.

Heard you on WGN today. The 51% who don't pay taxes? Is that 51% of taxpayers? Of those working? Of total population? SAVAGE SAYS: That is 51% of the tax returns filed, either pay no tax or actually get back more money from the government than they paid in in taxes!!

My mother's house that I live in is in a trust. When she passed there was a paragraph in the will that stated I could stay in the house as long as my brother believed I could maintain the house. This pass year I had to take personal bankruptcy which did not effect the house. Now 5 months later my brother has decied that I am not able to maintain the house and is planning to sale it! I have a good job and I will be basically debt free in 6 months once my car is paid in full. I have paid all the taxes for this year and for all the upkeep. I know since I filed bankruptcy I more than likely can not get a loan to purchase the house but leagally does he have the right since I am keeping up my half of the agreement in the will? SAVAGE SAYS -- I'm assuming the house is titled in a trust, and your brother is the sole trustee. My personal opinion is that he is an ******* (couldn't bring myself to use the word in print! But what a jerk. However, if what I've described is the case, then you need an ATTORNEY right now to get you out of this mess. First call Consumer Credit Cousneling at 800-388-2227 and see if they can recommend a legal aid attorney. Given your recent bankruptcy you might have an uphill fight. Only a lawyer who can see the entire picture can advise you. Or send me your brother's email and I'll tell him that I plan to post his name on my website as part of a new section which I will label: Financial Idiot of the Day!

Terry, in light of the government's current budget problems and what's been said about money running out on social security benefits, can you advise if the Series EE Bonds that I have for my children's education would be better cashed in now. Some of the bonds have not yet reached full maturity. I'm afraid that the government will default on payment and what bonds I have won't be worth the paper they are printed on. Could that be a possibility? Thank you. SAVAGE SAYS: Stop and think. If you are going to cash in the bonds, what will you get? Dollar bills. And why would they be any "safer" than the EE bonds? DONT CASH IN YOUR EE Bonds! If they were purchased more than 5 years ago, they carry a floating rate of interest, and a high floor base rate, which is far better than you can get if you take the cash and put it in a bank.

I am currently in a 457(b) at work. I am invested in three Vanguard Mutual Funds. (Small, medium, & large cap) With the debt crisis near, am I better off transferring to the fixed accoount (3.87% return) in order to offset some potential big losses if an agreement is not reached? SAVAGE SAYS: Don't make that mistake. Locking in a low return is a sure loser if they print -- create -- more money to get us out of this mess. And that's a pretty sure thing, since they're not likely to cut spending enough. More money = inflation -- and that brings higher rates.

In this troubling economy - any advice for investors that have all their money in target retirement accounts...specifically 2015? SAVAGE SAYS: Exhale. You bought a target retirement fund. It's the porffolio manager's job to worry.

How can I take money out of the fully paidup home?
SAVAGE SAYS: Are you sure you want to do that? Is it for a temporary use, and do you plan to repay it quickly?
If your credit is good, you can till get a home equity loan -- but these tend to carry floating rates, and are often "interest-only" payments -- so you could have a tough time repaying it. Or you could simply take out a 15 year fixed rate mortgage. But think twice before borrowing on your home.

My wife and I are have been in foreclosure limbo on our Chicago home since our lender stopped proceedins in 2009. We originally paid 400K for the house in 2005, but it is now worth 149, and I have been unable to find a shortsale buyer, and my lender is refusing a deed in lieu of foreclosure.

From 2008-2009 I've tried unsuccessfully 4 times to get a loan modification, but not before the bank told me to miss 3 payments. Now they refuse to waive their right to foreclose, even if I brought my payments current. That's when I decided to stop paying, altogether.

My question, is it wrong to walk away, or should I continue to stay without paying? Some of my neighbors think I'm a thief for squatting, but unless the bank get the final order of possession signed by a judge, I am still responsible for the property. My attorney suggested that if I fought the foreclosure I could probably get 5 free years of rent. SAVAGE SAYS: If you have an attorney, I would defer to him or her because your attorney knows your situation. And there's absolutely no reason to share your situation with your neighbors!

My former employer did not send my 401k loan money to the plan, I was deducted the amount every pay period until the loan was paid in full.
Now they are out of business and if I roll over my money it will be deemed a distribution and it will be considered a distribution. I guess my question is ? will the IRS be satisfied with me providing proof from stubs that I was unaware they did not pay the loan back and will they go after them for the unpaid tax consequence? SAVAGE SAYS: Wow -- this is a huge legal issue, and you might need an attorney to represent you to the IRS. Having proof through your pay stubs that you were (or thought you were) repaying the loan is the first step. The second step is to contact the plan administrator to see if those payments were ever recorded. (That would be the bank or mutual fund company that handled the plan. And they might know of others in your situation at the company.) And this is also a Labor Department issue since they regulate retirement plans. If the company went bankrupt, you are actually an unsecured creditor. Really, you need an attorney familiar with these issues. My source for legal info on all things related to investing is Andrew Stoltmann, and you can reach him at Andrew@stoltlaw.com. He can probably point you in the right direction.

My stockbroker advises me to refinance my loan of $95,000 to take advantage of a lower interest rate; this is an interest-only loan, the interest paid monthly. My CPA advises me to sell some stock/bond holdings and use the proceeds to pay off the mortgage outright. He believes I’m losing money with the investments I have. Can you suggest what I should do? Thanks for your help. SAVAGE SAYS: I can't diagnose your situation without more information -- but for sure, if you're going to keep the loan, this is the time to refi (assuming your credit is still good, and you have 20% equity in your home) to refi to a FIXED RATE, 15 year mortgage and start paying it off. I don't know what stock/bond holdings you have -- and you certainly wouldn't want to pull money out of a retirement account to pay down your mortgage. but I can tell you it's a great moment when you own your home free and clear! If you have other retirement savings, it's certainly worth consideraing a payoff (although I can see why your stockbroker wouldn't like this idea!).

I am age 64 and have had my attorney draw up a trust agreement however, I am embarassed to say that I have not followed through and placed my assets in the trust! I am hearing mixed reviews about doing this and the tax ramifications (apparently I did not understand fully what I was doing!). Please provide some clarity for me about the pros/cons of a trust. Thank you. SAVAGE SAYS: Are you talking about a Revocable Living Trust -- created as part of your estate plan? If so, start the process of changing title to your major assets immediately. There is no cost, no tax consequence -- all you need is a copy of the main portions of the trust document to give to your lender (assuming you have mortgage on your home) or to your bank where you have CDs, or to any investment firm whereyou have assets that arenot part of a retirement plan. Ask your lawyer for help if it seems too complicated. Assuming this is a Revocable Living Trust, it is worthless unless you re-title your assets in the name of the trust!

My wife and I are retired City of Chicago Employees that have a modest sum of money in our deferred compensation accounts. My daughter is getting married next year. We are going to pay for half of the wedding cost. My question is, "If we take a portion of the wedding cost($12,000.00) this year and a portion of the cost next year ($12,000.00. The reason why we are thinking about taking out a portion from our deferred compensation is we do not want to go into a higher tax bracket. Our combined retirement income is approximately $120,000.00. Do you believe we are doing this the right way, or should we just take it all out at once? What type of investment should we make with the money withdrawn?
SAVAGE SAYS: I can't resist saying that two retirees with a "modest" deferred comp plan should NOT be spending $24,000 on a wedding for their daughter -- even if it is "only" half the cost! Will your daughter and your son-in-law be there to take care of you in your older years??? If you need a way to tell her you "can't afford it", then please show her this posting!
At least, cut your contribution in half -- for a TOTAL of $12000 -- then it iprobably won't change your tax bracket. I know you'll feel better if you handle it this way.

We have recently retired debt free except for a $400.00 car payment for another two years. We want to sell our existing home here in illinois and buy in Florida. Should we buy and take out a mortgage or sell the home in Illinois first and then take the money to buy in Florida? Our retiremnt income should make the required mortgage payments.
Thanks. Always enjoyed your shows.
SAVAGE SAYS: That depends on how long you can maintain the costs of having TWO homes! Yes, there are bargains to be had in Florida right now -- BUT it could take a long time to sell your Illinois home, and it might not be at a price that you expect. Only you know that big picture. And that hesitation is what's stalling the housing market AND the economy. PS Be sure to find out how much homeowners insurance will cost in Florida, and if you can get it!

I am a college student and am covered under my father's insurance. I went to the doctor with a problem that I have been having for some time because my mom thought I should have it checked out. When the insurance company received the bill, they refused to pay it because it was coded as a well-being physical, which is not covered under our plan. They only pay for diagnostic physicals and told me to contact the doctor's office to have the billing code corrected. I made several calls to the doctor's billing department and they said they would have the doctor review the bill and recode it. The doctor refused to recode the bill. I wrote her a letter and explained why I came and asked that the billing code reflect the truth. I sent the letter certified mail, but it was ignored and I received another bill with the incorrect code. I called again and never received a call back, just another bill. This bill had more charges on it. I received a prescription from the first visit and when I needed it to be refilled the doctor was on vacation and I was told that I had to come into the office and see a doctor to get the refill, which I did. I was charged under the original billing code for this visit too, so the insurance rejected this bill as well. The doctor and her billing department are not going to change the billing code, so I wrote to the Better Business Bureau hoping I could get some help. The doctor replied to them that the billing code was correct. Before I could respond to the Better Business Bureau, the doctor sent my bill to a collection agency. How can I clear up this mess. My Dad pays each month for insurance and I should be covered for the doctor visit I went to but I have no way make the billing reflect this and the doctor won't budge, which I don't understand. When I started college last year, I got a credit card and have been careful using it and paying for it each month. I was trying to build a good credit rating. Now what? SAVAGE SAYS: Send me a personal email to Terry@TerrySavage.com, with details on how to contact you and I will see if either I or Stephanie (the "fixer") at the Sun-Times can make some headway on this.

Terry,

Will interest rates on CD's at Banks increase if the U.S. defaults on August 2, 2011? If so, explain why. SAVAGE SAYS: The U.S. is NOT going to default on August 2nd!
But if they resort to a compromise -- likely -- that continues more spending, then the Fed may be encouraged to create more money (inflation) or the world may be skeptical of holding dollars. And either way, since we would be borrowing more, we would have to entice buyers of our debt with higher interest rates. That's why rates are likely to rise in the months ahead -- unless the tax increases are so huge that the economy tanks and no businesses want to borrow.

Dear Terry,
We have been attempting to buy foreclosure properties - a multi-unit in Chicago and a home in southwestern Michigan. We currently own a home in Wisconsin. Our question has to do with the very difficult process to buy short sales or foreclosures, and the mysterious methods the banks are employing to control what is available for purchase and when. I painstakingly seek out properties located in areas I know and which are in the condition we can afford to repair. First, we have not been able to get an offer accepted despite our making full-price cash offers. The identities of the subsequent winning purchasers are more carefully guarded than witnesses in a protection program. Second, I am suspecting there are "insiders" of banks and/or real estate firms who are controlling the sales of the more desirable properties and picking them off for themselves. I believe in a couple of years we will read expose articles about who became rich (or disgustingly richer) as a result of amassing bargain properties for pennies on the dollar, and the unethical (illegal?) bank and real estate factions who helped them do so. Even auctions are conducted using suspicious methods. If you look at auction.com, for example, you will see property after property offered at miniscule prices - some as low as $9,000 - which then show current bids of $189,000 with the message that the "reserve" has not been met. What on earth is the point of starting the bidding so low when the reserve has been set so high?? Auctions used to be a desirable opportunity when the buyers set the price, rather than the odious banks. I think unscrupulous bankers and realtors should be included with the crooked governmental entities who need to be ousted and prosecuted. If you disagree that the current crisis is another pathway for these thieves, can you please advise how an everyday law-abiding couple can purchase what is supposedly out there to purchase? Thank you in advance!
A reader and fan. SAVAGE SAYS: I can't disagree. Banks are overwhelmed -- and you may be correct in your suspicions that they delay on purpose or allow insiders the best shot at foreclosed properties and short sales. When you venture into this world, you have very little power as the financial institutions are not being monitored closely in this respect. However, there are a number of ongoing investigations. YOu can threaten to contact the state attorney general if you suspect you are being misled or mistreated. That might light a fire!

Hi Terry My in-laws are in their 80's. They live on their social security and one small pension. My mother in law was just diagnosed with alzheimers. My father in law has had open heart surgery but is in relatively good health. They live in a home in a very bad area. They have kept their home up to date but they still owe $70,000 on it. In this soft economy, there is no way they are going to sell their home. In addition to this, they owe about $40,000 in credit card debt. My husband is an only child and we are not in a financial position to be able to help them. My questions are 1. Should they/ can they declare bankruptcy for their credit card debt. 2. What can they do to get out from under their house? Short sale?
I'm trying to get them into a low income co-op apartment because eventually my mother in law will have to go into a nursing home for care.
The bottom line question is "Where would you recommend that we start?" Thanks for this opportunity to ask questions. Everywhere you turn is some advertisement to tell you what to do but I don't trust any of them and can't afford to lose any money on scams.

Thank You so much SAVAGE SAYS: I'm pretty sure they have no choice but to file for bankruptcy re the credit card debt. And if they live in a "bad area" they might also simply have to "walk away" from their home. BUT, you can get very good,trusted advice by calling an agency affiliated with the National Foundation for Consumer Credit. You'll get connected to the nearest local agency by calling 800-388-2227. They'll even guide them to a bankruptcy attorney who can be trusted -- if they determine that is the best option.
If your mother-in-law needs nursing home care, it might be best to make sure she has enough money set aside to pay for the first 3 months of care in a better nursing home than if she runs out of money and must immediately go on state Medicaid to get into a nursing home. That's another story. Maybe both could move together into some kind of assisted living facility, now -- while they can "buy their way in." P.S. And this is the reason you and your husband should purchase long term care insurance -- so your kids won't have this problem for YOU!

my husband and i are recently retired. If he co-signs an $18,000.00 graduate school student loan for his daughter (my step daughter), am i liable for payments if something happens to him and does this affect his current credit score? thank you, SAVAGE SAYS: Do NOT sign a student loan agreement for graduate school for his daughter. If she was smart enough to get through college, she can figure out a way to get through grad school on her own -- either as a teaching assistant, or through fellowships, grants -- or by getting a job and saving the money for grad school. Show this to your husband -- and your stepdaughter. If they want to argue about this -- it should be with ME, not you!!

Hi Terry,

My first grandchild was born about 3 months ago. I would like to start a savings account or college fund for him. What is the best route to take?

Thanks,
SAVAGE SAYS: Go to Fidelity.com or Vanguard.com -- and use either of their 529 college savings plans. They are affiliated with certain states -- but since you can invest in any state's plan -- and use the money tax-free for college in ANY state -- you might as well use one of these low-cost, well-run plans.l

Hi Terry,

I inherited $150K from a parent passing away and wanted your advise on what to do with this money.
I am married with 2 adult children living at home no debt other than $350K 30 year mortgage at 4.37%. I wanted to apply the $150K to the principle,is this a good idea. Thank you. SAVAGE SAYS: That's like asking a doctor to do a physical but giving only your temperature, height and weight! I don't have enough information -- especially about why you still have 2 adult children living at home! Do they pay rent?? I think this is the perfect time to do an overall checkup -- financial plan. If your kids are disabled, you might need to set up a trust for them (if not, maybe it's time to kick them out!!) Do you have long-term care insurance? (Will this at-home kids be your caregivers in your old age???) -- You have a nice low mortgage rate -- no need to pay it down -- especially if you plan to continue to work -- But how long do you plan to keep working? I'm not trying to be "cute" here -- how on earth can I give you an answer based on the info you gave me???

Hii Terry,

I am an international graduate student with F1 visa, residing in US. Most of my excess stipend is in a Savings bank account. With the interest rate much below the inflation rate, I was thinking of investing/trading in some international/domestic securities. Is that allowed? If so how much and how frequently can I invest/trade?

If allowed, how would you recommend I invest/trade? Just some details. I am 26 years old, dont have any debt, and single, so probably I have a high appetite for risk.

SAVAGE SAYS: I don't know of any legal reason why you cannot establish a trading account at a brokerage firm. If you have an account in a bank, then you must have some sort of Social Security number on which your interest is reported. But perhaps you should double-check anonymously with the IRS at 800-435-1040.

There is a big difference between investing and trading. I suggest you do neither until you understand that difference! My latest book -- The Savage Truth on Money -- should be a good starting point for you!

Hi Terry:

Thank You for taking my question. I undersdtand you have some reservations with the College Illinois pre_paid tuiton program.
Your stateing it is not properly funded....My son is not due to start college until 2020 what 529 plans do you recommend ? There would be many advantages, especially since College Illinois does not cover room and board.

SAVAGE SAYS: See the answer above. Just contact Fidelity or Vanguard and use theiir 529 investment plans. They are low-cost and well run. You give up the tax deduction for Illinois residents on up to $10000 of contributions each year -- but you'll probably get it back in the form of lower fees along the way!

what is the best place to get a student loan for college?
SAVAGE SAYS: Start at either of these websites to understand how student loans work: www.studentloans.ed.gov or SimpleTuition.com. These days all federal student loans come direct from the government, but to qualify you must first fill out the FAFSA form, detailing family assets and income. Learn more by searching these sites, reading my columns or from the extensive chapter in The Savage Truth on Money.

Hi Terry,
I hope you can help me. My parents are in their eighties and i have been trying to convince them to move their money into cd's.
They have a planner and he has their holdings in 87% bonds and 13% stocks. Also the planner suggested they update their will (which i am not against) and he has a guy who can help them. Also their investor suggested they invest half of their savings account in their portfolio. They are getting 4% this year so far, and my father doesn't think 1 to 1-1/2 % in banks is good enough.
Thank you,
Tim
SAVAGE SAYS: Oh gosh, your Dad should remember the "chicken money" mantra: I'm not so concerned about the return ON my money, as I am about the return OF my money!
The bond portfolio has worked so far -- because interest rates have fallen. But if inflation returns -- and that is likely given money creation, fears for the future value of the dollar with all this new debt -- then the market value (price) of older, low-yielding bonds will fall. Even the best bonds. After all, who would want a 30 year bond yielding 4 percent if a return of inflation causes interest rates to rise to 6 percent, or higher.
Separately, I suggest your father NOT use an attorney recommended by his broker to make his estate plan. You can find a competent attorney in your state by searching at www.Naela.org -- that's the national assoc of elder law attorneys -- or checking with your local bar association for an estate planning specialist.
Make sure he creates a revocable livng trust -- naming you or your siblings as successor trustees if he cannot act. And make sure you have a healthcare power of attorney for each of them.
My "suspicious" hackles are raised by your letter. Check into this "planner" at FINRA.org or SEC.gov -- Details on how to do this are in The Savage Truth on Money -- available at my website, and written in depth for questions like yours.

Hello Terry. I'm currently renting an apartment after selling my home 4 years ago. I'm 58 years old. I'd like to buy a house but I'm not sure if I should wait for home prices to fall further or not. Also, I'm concerned that interest rates may rise. I can afford a 125,000 home and have 25,000. as a down payment. Any advice? SAVAGE SAYS: It's hard to pick tops -- and bottoms -- in any market. You could consider renting forever! And how will you make those mortgage paymetns in 20 years if you're 58 now? Do you plan to keep working? Will you have a job? Things to consider even though prices may seem like a bargain now.

TERRY:

ROGER SIMON DID AN ARTICLE ON CURRENT U.S.DEBT......"IF THE U.S. DEFAULTS....YOUR SAVINGS COULD BE WIPED OUT......"

OKAY, WHAT IS THE COURSE OF ACTION FOR INDIVIDUALS? PAY OFF MORTGAGES NOW, WITH CURRENT DOLLARS. INCURRED MORE DEBT AND PAY WITH FUTURE DOLLARS? WHAT HAPPENS TO "CASH IN THE MATRESS?"

THANKS

SAVAGE SAYS: The U.S is NOT going to default -- It is going to slowly print more money, causing our dollar to be worht less. At just 3% inflation, the spending power of your money will be cut in half in 25 years. That's how your savings will be "wiped out"! So don't have cash in the mattress. You could have gold coins in a safe deposit box as an alternative.

Dear Terry,
My daughter will be attending a major design college this year. The school will cost approximately $20000 a year for 3+ years. Unfortunately WE did not qualify for any Grants so everything will be coming from loans and parent + loans. Can you give me any alternatives as to how else we could get free money. Thank You
Sincerely,
Remarried and destined to be broke to pay for daughters dream!
SAVAGE SAYS: OK, let's go through this again. You're reading the headlines that say there is more student loan debt than credit card debt out there. Your daughter will graduate with a $60,000 "mortgage" on her life -- And what kind of money will she earn in this dream job??There is very little "free money" out there -- although you can search at Scholarships.com. Learn more about what you're taking on at SimpleTuition.com. Maybe you want to use the "loan payback" tool to show her how large her monthly payment will be. Then check with the school to see how many graduates landed jobs this year -- and at what average paycheck. Time for a reality check -- before you take on this burden.

i would like to build a house on my mothers plot,where can i get this type of finance? SAVAGE SAYS: Sorry for the giggle here, but when someone says "plot" it typically means in a cemetery! I'm assuming that your mother owned some vacant land. Contact a reputable builder and they may have access to construction loan financing. It's not easy to get these days.

Dear Terry,

Will Bank CD rates go up if Congress fails to raise the debt ceiling and the U.S. defaults.
SAVAGE SAYS: Despite the headlines, the U.S. is NOT going to default -- even for a minute! BUT eventually, since we owe so much money, they will resort to printing more money (creating more credit) and that is the very definition of inflation And when everyone realizes that their dollars will be worth less in the future, they will demand a higher interest rate to compensate. So the market will push rates higher on our debt -- and that will impact all rates -- including CDs. It's a good argument to stay short-term in your CDs currently, so that you can take advantage of higher rates when they come.

Terry,
I am going to be 62 years old & plan to retire by the end of this year. I have a large sum in my 401k plan & need advise on whether it would make sense to withdraw & use as down payment for a house. If so, how much would I be taxed on since I'm currently working? Or would it make any sense to go this way or wait til I'm retired? Appreciate your help...Tnx! SAVAGE SAYS: Oh, NO! You might withdraw some money for a down payment (and pay current income taxes on the money) but how will you pay your monthly mortgage (not to mention other expenses) if you're RETIRED??? You're probably better off rolling that 40l(k) to a place like Vanguard or T. Rowe Price where you'll get advice on which funds to invest in conservatively. But even more important, it doesn't sound like you're at all ready to retire, in a financial sense. Go to my website and get my book: The Savage Number. Do it before you retire! It will help give you perspective on how much money you need to have before you retire now -- since you're likely to live another 35 years!

Hi Terry!
Forgot to mention that I also have a retirement plan & social security I will be receiving when I retire & have worked for 35 years. Appreciate your advise... :)
SAVAGE SAYS: My original advice stands!

Hi, I’m trying to get out of a financial mess and looking for opinions and options. Basically, we refinanced our house several times over the last few years to consolidate debt, but we continued to incur debt and now we have a large mortgage PLUS large credit card bills.
A few bits of information:
My rough estimate of our house’s current value is about $575K - $600K
We owe about $500K on the house
We owe about $45K in credit card debt (all at high rates, 20% and up)
Our combined (gross) family income is a little over $200K
If it were a smart financial decision, we actually would like to move about a mile away to be in a different neighborhood within walking distance t our child’s school.
As I see it, our options are:
• Continue struggling like we are, barely making it and sending thousands of dollars a month to high interest credit cards
• Sell the house, pay off the credit cards with the currently small profit we’d make, move into a rental and start over with better/smarter habits
• Try to consolidate our bills and mortgage one last time to bring the payments down, rent our house out so a renter would cover the mortgage, and move to a rental in our desired neighborhood for a few years to save some money without losing the house and equity.
What are your thoughts?
Thanks in advance,
East Coast
SAVAGE SAYS: The snowball of debt, and interest, that you built up is rolling downhill faster than you can stay ahead of it. I'm going to suggest that you contact Consumer Credit Counseling Services. Call 800-388-2227 to be automatically connected to the nearest local affiliated agency. They are experienced, and you can trust them. Do it now while you still have some room to maneuver. And pls post again after your meeting and tell me about your experience. (If you want to know MY opinion, I'm going to say that there's no way you can now refinance or consolidate, given the debt you already have. And it's doubtful that you could sell your house and have enough left over to pay down your credit card debt in this market. However, you'd be starting over with zero assets -- but a good credit rating if you could actually sell your house for what you think you can get. But that could take months. First, get a closer, more personal analysis from CCCS.

Thank you Terry for having this column - Do you feel any concern that our banking systems could fail and the FDIC for what it's worth will fail as well. I'm always concerned that I will lose my savings. I have a few accounts in regional independent banks in Illinois & Wisconsin, which have some strong ratings, (Glenview State, Peoples & Johnson. But nonetheless.....I'm still worried. Your thoughts on our country's banking system and its future. Thank you again..... SAVAGE SAYS: Banks may fail, but not the system. As they proved three years ago, the FEDwill create all the liquidity necessary to keep the system going. But "creating liquidity" is another word for "printing money." That is the very definition of inflation -- devaluing the money you have saved, because there is so much more of it around.

I was told by my 401K company that I did not have to pay a penalty when I withdrew $20,000 and $24,000 from my account after I retired at age 56. I did claim it and pay taxes on it. I am receiving a pension from my employer. I did not get any sort of notice from the IRS when I filed my taxes with Turbo or Tax Slayer that there was an error. Where can I find accurate information on this as I do not want to be charged wrong doing by the IRS. Thanks, Cheryl SAVAGE SAYS: I checked with IRA expert Ed Slott (www.IRAhelp.com) and he agreed with my advice that there is no penalty if you "retire" after age 55 -- although I would have advised that you roll the entire amount to an IRA. He had some thoughts on that advice, too, so here is what he said:

"She owes the tax , but no penalty . But she has to show that when she files her taxes for the year she took the distributions. Either the 1099-R form she receives will show that the exception applies, or, if it does not, then she would attach Form 5329 to her return and claim the age 55 exception to the 10 % early withdrawal penalty. It's exception 1 on the form.

She qualifies under the age 55 exception for plans which applies if you left the company in the year you turned 55 or older...and that was the case here. She actually did better not doing the IRA rollover because it appears she needed the money---since she took the two withdrawals. If she had rolled the funds over to the IRA and needed to withdraw at age 56, then she would have been hit with the 10% penalty, because for IRAs the exception is age 59 1/2, not age 55. By withdrawing from the plan, she avoids the 10% early withdrawal penalty because of the age 55 exception.

Everything looks good here for her.
Ed"

Hello Ms. Savage,
If a person retires @ 75 and does not know what to do with his money, he is advised by someone to invest in an IRA with Edward T. Jones. He has no idea how his money is being invested and takes someone else with him to help him understand. I am sure the investor/custodian can see that this person doesn't understand what they are talking about. He has a relative who has become his power of attorney after finding out what is going on.
How should she handle this? She is concerned if she discusses this with the E T Jones agent, the agent and the person who has been handling his money will confuse him.
He has been advised to roll his IRA from an investment IRA to an IRA that may draw less interest but will not allow him to lose any money.
He says he made this person his beneficiary and the person said that is not true. The 75 year old said when he selected a beneficiary, he told the personal advisor that if he didn't want to be the beneficiary to give it to his niece. When the "personal advisor" was informed of this, he said he is not the beneficiary.
You would have to understand this 75 year old man and his vulnerability. He has been mislead by this person and his niece has been always there for him and monitoring his medical care for many years. He retired and that is how all of this got started.
It's kind of a long story. But the gist of the story is, he was advised to use a "personal advisor" (not with ETJ) to tell him about his money. He has no clue about his investments. He was informed that he should always know what's going on with HIS money and not trust someone else to handle his money. It looks like this investment company also established a will and I am not sure what else they did under their umbrella. If he should decide to roll it to another IRA @ the bank, what might his ramifications be?

One more question. Why would you advise a 75 year old to invest in the stock market? Are ETJ's agents paid a commission? His relatives would have never know anything about this until he had an episode where the discussion of a living will was involved. This is when the information was revealed and the questions began on what to do.
SAVAGE SAYS: The real issue is whether there is financial "elder abuse" going on here, and whether this 75-year old person is competent to understand and manage his money.l
Sounds like a you, and maybe others in his family, are not so sure about that. But you have no legal standing, unless he is declared incompetent by the state --Still, you could try to convince him with the facts that he is, or may be, being "used" by the person he trusts with his money.
Sounds like you want me to prescribe medicine without even seeing the patient! I can't do that. Answers to a few of your questions: Yes, the brokerage firm rep makes money on these transactions. No, there would be no consequences re the IRA if it were simply rolled to a bank CD. But, depending on his longevity outlook and his financial needs, that might not be the right investment choice for his IRA.
So, you've cracked the door open to a situation that requires some real analysis. If there's a significant amount of money involved, you might want a fee-only financial advisor to look at this situation and give an independent analysis. Go to fee-only.org to find one in your area, or if you live in the Chicago area I'll give you a recommendation or two.
But remember, this is not YOUR money. It belongs to the "75-year-old" in question and you'll have to convince him/her that another set of eyes would be helpful.

Hi Terry,
I graduate in 1 year and I have roughly 15,000 dollars in students loans once I graduate. Is it a good idea if I start paying off my student loan to avoid extra interest or should I keep saving my money and pay it after I graduate like most people? SAVAGE SAYS: Well, that's a nice "problem" to have! You don't need to pay early if you have "subsidized federal student loans" -- where the interest doesn't start accruing til after you graduate. But if these are un-subsidized loans, and you are accumulating interest already, and you have "extra" money you can definitely pay down some of it early. Just leave yourself enough money to start your life after graduation. And congratulations on being so responsible. I'm betting you'll have a very successful financial life.

Our daughter graduated from college spring 2009. She is paying over $500 a month to repay 7 different college loans. Her total college debt is close to $60,000. She needs to consolidate. We need your expert advice b/c there is so much info out there, so many choices and so many institutions advertising help, it's overwhelming to us. We want to avoid pitfalls and leading our daughter in the wrong direction b/c we are not savy re. finances. She needs the financial pressure lifted and the payments made more do-able. Plus she wants to get them paid off ASAP. Please share with us the best solution to her problem. Thank you so much!! SAVAGE SAYS: Because your question is so timely, and so universal, I'm going to use it as the basis for a column that will appear in the Chicago Sun -Times on Thursday, July 14th, and will also be posted on my website that day, and in syndication across the country in the days following.

I am retired and drive a school bus for two sources. One source allows me to invest a sizable amount of my pay into a 403 plan. Another source pats me under a 1099 form. I pay the FICA, etc myself. Is there any way I can defer my taxes similar to the 403 plan thereby reducing my reportable income to the limit (about $22,000 per year)? SAVAGE SAYS: No, not really. You can't have a deductible IRA because you're covered by the 403 b plan. BUT, you could open a Roth IRA if your total income is below about $107,000 (or roughly $169,000 if married). You won't get a deduction on your tax return -- but you will get tax free growth of all the money you put into the Roth.

I have heard that reverse mortgages are not as expensive to set up. My resources are such that my wife and I do not need to do this. However, the savings in mortgage payments would be significant. If the pluses outweigh the negatives, would you suggest a particular source? I am also a Vietnam vet. Any sources for vets? Thank you. SAVAGE SAYS: A reverse mortgage is for someone who wants to take money OUT of their fully paid up, or mostly paid up, home. Sounds like you still have a mortgage and want help to refinance to make lower payments. If that's the case, there are VA refinancing loans designed especially for those who served our country in the military -- no matter how long ago. I'll send you directly to my expert on that subject -- Daniel Chookaszian. His email is: Daniel Chookaszian [dchooks@americanstreet.com]

Terry,
I am going to be 62 years old & plan to retire by the end of this year. I have a large sum in my 401k plan & need advise on whether it would make sense to withdraw & use as down payment for a house. If so, how much would I be taxed on since I'm currently working? Or would it make any sense to go this way or wait til I'm retired? Appreciate your help...Tnx! SAVAGE SAYS: Oh, NO! You might withdraw some money for a down payment (and pay current income taxes on the money) but how will you pay your monthly mortgage (not to mention other expenses) if you're RETIRED??? You're probably better off rolling that 40l(k) to a place like Vanguard or T. Rowe Price where you'll get advice on which funds to invest in conservatively. But even more important, it doesn't sound like you're at all ready to retire, in a financial sense. Go to my website and get my book: The Savage Number. Do it before you retire! It will help give you perspective on how much money you need to have before you retire now -- since you're likely to live another 35 years!

In 2009 my home was foreclosed in North Carolina. The house is still on the market for 248K. The unpaid loan amount at the time of foreclosure was 278K. My mother just passed away and I stand to inherit about 250K from her estate thru her trust in California.

Can the bank come after this money to satify the unpaid debt?

SAVAGE SAYS: The mortgage loan was secured by the property -- the home. BUT it really depends on state law -- in the state where the home is located, and also where you live now. In some states, the bank can get a "default judgment" in the amount of their loss. Then that judgment could be enforced against any assets you have! So you need a real estate lawyer, probably in the state where the home is located, to give you a definitive answer on that.

This question has to do with a former article about someone else's website that connected people with each other for support and encouragement on their goals/dreams. I can't remember what the article's name was or what the web site was.

SAVAGE SAYS: The website is Payoff.com -- And you can read the entire article by going to TerrySavage.com and clicking on Search Terry's columns. The most recent ones -- and this is one -- are posted with links to the full column.

Dear Terry,

My wife and I feel that we've been good stewards of our hard earned income. We're 35, have two young children, and luckily, we've in a good financial position, but now I'm not sure where to go next with our financial plan. We a) both annually max out our 401K contributions at work, b) have life insurance c) have a mortgage at 4.875% d) no credit card debt e) some student loan debt f) a small rainy day money market fund, and two mutual funds which we've recently stopped contributing to. We have been maxing out our Roth IRA contributions every year, but 2011 will mark the first year we exceed the income restrictions for the Roth IRA. My question is -- where do we now put that money we were contributing towards the Roth IRA? In your opinion, what's the pecking order of building our financial plan and what are we missing? What's next Terry?

Thanks! SAVAGE SAYS: WOW! I'm posting your letter because -- if what you claim is true -- you're a living example of the fact that it IS POSSIBLE to be financially responsible even in today's tough times! As for advice for further saving . . . well, it wouldn't hurt to pay down the remaining student loans, which are probably at a higher rate of interest that you can safely earn today. And I noticed that you didn't mention college savings for your children. You could open a 529 college savings plan -- where all the money grows tax-free for college and could be used at any school for either of your children. The easiest way to do that is to go to Fidelityor Vanguard and click on their "college savings" tab. (Some states do offer a tax deduction if you invest in their state plan, but if the plan is not well-managed it might be better to use one of the plans mentioned above. YOu can invest in any state's plan and still use the money at any school.)
Those would be my starting ideas. Some would suggest that you might want to buy a rental property-- but that depends on whether you have the time/skills/energy to "manage" that kind of situation (ie calls about plumbing in the middle of the night!). But beyond the two suggestions above, keep saving and just put it in a Money Market fund right now if you still have some excess. The rates are low, but you'll be glad you have some extra cash on the side one day.

I just bought a new car. Will I loose my car when the bank forclosure my house ?
Please and thank you for your help ! SAVAGE SAYS:
Your house is the only direct security for your mortgage, so unless they get a judgment for defaulton the difference between the loan and what they eventually sell the house for, it's unlikely that the lender will come after your other assets. But the use of default judgments varies by state, so it's best to contact a lawyer, or legal aid, in your state.

My wife and I are very concerned about the upcoming political talks regarding the debt ceiling and our governments ability to work together and resolve this problem. We believe that the republicans and democrats will not agree on a solution by August 3rd which will result in a default. This may cause the stock market to drop considerably. We were thinking of moving all of our funds in our retirement accounts( 401,403, two Roth IRA's and on traditional IRA ) out of stocks, bonds and mutual funds and into cash. We would do this as we are expecting a huge drop in the markets until the issue with the debt ceiling is resolved. Once it gets resolved, then we would move all of our funds out of cash and back into the same funds they were in. We are losing faith in our elected officials to work together for the good of our country. Thoughts? SAVAGE SAYS: Well, I can understand why you're losing faith in our elected officials. We'll have to elect new ones -- both parties! I personally think it's a little extreme to go all to cash -- And what makes you think you'll know when to get in, or get a chance to get in if everyone stampedes to buy when a deal is announced?!

I am a single woman, 61 1/2 years old. I can afford my house payment, as the only other debt I have is a car payment. My townhome is underwater by about $70,000 and I only have $33,000 saved for retirement (I lost all of my previous retirement savings in a bad marriage a few years ago). I am considering a short sale so that I can save more aggressively to be able to retire some day. My main concern is that I will be denied a short sale because I currently have the income to make my house payment. My annual income is $76,000 and my total monthly debt is app. $2,000.

Do you have any suggestions?

SAVAGE SAYS: Don't panic! Stick with your townhome. Why ruin your credit with a short sale, when it will make everything else you buy -- from a new house to insurance -- more expensive. You can afford to keep paying the mortgage, live there for a few more years and see what happens. I think you'll be glad you stayed.

Terry,

I have a ROTH IRA that was a rollover from a previous employer. I am currently employed as a firefighter and have an eligible retirement date for my state pension when I am 55 years old. I additionally contribute to my state’s optional 457 plan. I have been recently informed that my employer will offer a ROTH option on a 457 plan. My retirement date is 16+ years away so the 5 year requirement is not an issue. Should I utilize the new 457 ROTH instead of the current pre-tax 457, or should I use my already established ROTH. My concern is that I may not be financially able to retire at 55 at my pension alone, but I do not want to have to pay the 10% for early withdrawal from my IRA.

SAVAGE SAYS: So the real question is whether you think tax rates weill be higher f16 years from now! That's the "bet" when you use a Roth -- that the deduction then will be more valuable than the deduction now -- that, plus the tax-free withdrawal of all your investment gains. You do know to keep that old Roth separate from the new one your employer allows you to set up via the Roth 40l(k) -- Keep them separate even if you leave your job, and do a rollover to a Roth IRA.
Now, you have only one more question to ask yourself: If you do a Roth 40l(k) option, do you REALLY think the govt will keep its promise to let you withdraw all that money tax free??? Just something to keep you awake at night!

I am 66 years old, my son is 16 and going to be a senior in high school this fall. His mother passed away a few years ago and he has been recieving ssi. I was also on disability for 11 years prior to turning 65. What benefits are available to him for college, if any? also, can he cont to recieve ssi while in college? our totla monthly income from ssi is appx. 1850.00 per month. SAVAGE SAYS: I'm going to advise you to go directly to your Social Security office to get a firm answer on this. But unless your son is disabled, it appears that he cannot collect benefits in college. Here's what my online research at SocialSecurity.gov came up with:

"At one time, SSA did pay benefits to eligible college students, but the law changed in 1981. We now pay benefits only to students taking courses at grade 12 or below.

Normally, benefits stop when a child reaches age 18 unless he or she is disabled. However, if the child is still a full-time student at a secondary (or elementary) school at age 18, benefits generally can continue until he or she graduates or until two months after he or she reaches age 19, whichever is first."

We have a timeshare condo that is paid off with a $71 monthly maintenance fee and have never used it. How can we unload it? I can't tell which of the timeshare resellers are legit. All seem to want money upfront to sell it. Thanks. SAVAGE SAYS: Sorry, but you're pretty much on your own on this one. The largest seems to be at www.sellmytimesharenow.com -- but that's not an endorsement. They do not list all their fees on the website, but you should ask for full disclosure of all fees in advance, should you decide to list your timeshare. Personally, I've never gotten involved in a timeshare -- perhaps because it's such an opaque marketplace. But now, just as Leasetrader.com does for cars, the Internet is giving you a chance to exposure your timeshare to more potential buyers. Of course, the website companies that offer this exposure want to get paid!

Hi, Terry. I am 58 yrs old and this past March, I was retired by the company I worked for and given a package, as well as a small monthly pension that will end with my death. I have a 401K worth approx. $112K with my former employer and because I HAVE NO IDEA how to reinvest it and don't understand the mechanics of investing, I just left it there. Is this a wise choice, or should I go to an investment firm and have them initiate an IRA rollover? I don't want to lose this money; it's all I have. What type of low risk product can I have them invest my money in safely and collect a monthly annuity, which will supplement my small pension and eventually social security benefit?

Thanks for your response!
SAVAGE SAYS: Yes you should roll it over. And no, you shouldn't just go to an "investment firm" and take the next salesperson, as you would in a shoe store! Instead, contact Fidelity (800-FIDELITY) and TRowe Price (800-638-5660) and talk to an investment rep there (they don't get paid commissions) about how they would suggest you invest the money. They will ask you questions about your situation, other assets and then give you advice. Get a suggeted investment plan from each of them, then write back to me and let me know what they said! Meanwhile leave it with your employer, but in the most conservative, short-term investment option at your employer.

Do you know of any web sites or anywhere else where people share their experiences (positive and negative) about their brokerage house? SAVAGE SAYS: Just Google "I hate my broker" and you'll find a lot of hits on that topic!!! It seems many people want to share their (bad) experiences.

Im 54 and my husband is 46 should we buy a house at our age ? SAVAGE SAYS: There is no age limit for buying a home - -and there are some bargains out there now. Just make sure you will continue to work long enough to pay off the mortgage before you retire. And that might be easier if you take out a 15 year mortgage. So go to your bank and see how much you qualify to borrow on a 15 year mortgage loan, given your income and current assets and liabilities. Do that before you go shopping -- so you'll know your price limit!

My question is what are the self-directed brokerages that are usually mentioned as used by investors who focus primarily on shorting and below $5 a share? Thanks. SAVAGE SAYS: Well, I doubt anyone is "shorting" stocks trading below $5/share! I think you just want to speculate -- and if you can afford to lose, that's OK. Most online brokerage firms will be more than happy accomodae you.l

Hi Terry

I am single, make less than $95,000 and currently contribute 15% of my salary into my 401K. My employer matches 4%. Is it better to only contribute the 4 % that my company will match and put the other 11% into a Traditional Roth, Roth IRA or a little into both? Or is it better to continue to contribute as much as I can into my 401K until I reach the max of $16,500 and then open Traditional Roth, Roth IRA and/or both? Thanks SAVAGE SAYS: Tough question to answer. For sure, you have to contribute enough to get the full match. Then if you believe (as I do) that tax rates will be higher in the future, you might want to open a Roth. But you can only contribute $5,000 to that. And you'll need a lot of discipline to make that contribution, whereas a 40l(k) is an automatic deduction from your paycheck -- But if you can discipline yourself to make those Roth contributions, then I think it would be a good idea to divide your money, hedge your bet on tax rates. (Assuming the govt keeps its promise that Roth withdrawals will come out tax-free!)

I am retired. I worked for CUNY as a Stationery Engineer and retired in 2005. I am 70 and receive my pension every month but I am wondering if I can be eligible for a loan on my pension now? I chose Tier 1 which means my pension dies with me. Please reply asap. SAVAGE SAYS: You might ask at the company HR department-- but it is highly doubtful that you could get any kind of advance payment. Once you make a pension decision like that it is irrevocable. And beware of scams offering you cash no for the assignment of future pension benefits. That's always a ripoff.

You wrote a column the week of June 19, 2011, giving a website on bankruptcy information. What was that website? Thank you. SAVAGE SAYS: It was the website of the National Foundation for Consumer Credit -- www.NFCC.org.

I bought a $40,000 C.D. paying 1.3% (1 year). I will be paying income tax on the dividends, so I'm wondering if I might be further ahead by putting the money in a safe deposit box and waiting for interest rates to improve.After I pay tax on the interest will I have less than the $40,000 I started with? Thank you.
Gerry
SAVAGE SAYS: You seem concerned that inflation and taxes will eat away at the buying power of your money. If you leave the money in cash, inflation will impact it the same as if it were in a CD. But with a CD, even after taxes on the interest, you'l still be -- slightl -- ahead! (Unless inflation soars this year, which doesn't look like it's going to happen -- and which would still impact your cash holdings.) If you're simply asking whether I think interest rates will be higher later this year, the answer is that I can't forecast that on a short term basis -

I just received my yearly credit reports (and I paid for the scores). My credit scores are 782 and up so that's good. But, in one box is says "key factors that adversely affect your credit score." Those factors are too many acts. with balances; too many accounts recently opened, length of time accounts have been established (I'm not sure what that means, etc. I'm 77 so I've had a lot of credit cards in my lifetime. Would it be in my best interest for me to close all my high-interest store accounts and only use my regular visa accounts? Should I close other inactive credit cards? Thanks for your help SAVAGE SAYS: Well, at age 77, I'm not sure how important your score is since you're unlikely to be applying for any NEW credit, are you? I always advise closing unused accounts -- except for perhaps the oldest, which demonstrates your long credit history. I'm sure you can't use all of them, so close the ones that are unnecessary -- and pay down the balances on the rest, and your score will remain high-- while you become more secure.

Terry

I was laid off last year from my job and was able to get a small severence package. While I was able to find work at about half the salary I did overuse my credit card and would like to try and pay it off with the severence money. I recall last year in an article, you followed a person who paid off his credit card and was able to do so through a company that specializes in this type of reduced pay off. Please let me know what the company was called? I understand that my credit will take a hit but I just need a little help. SAVAGE SAYS: Yes, I just mentioned that again in a column earlier this week. The company was New Era Debt Solutions, and I wrote about its service and its president Alex Viecco. Again, there are steep fees (though not charged until there are results) AND you have to have enough money to make a reasonable offer. There is no charge for a consultation.

Dear Terry,

You've often expressed strong optimism in America's future and have encouraged readers to invest in the stock market. I have many concerns about our nation's future including growing federal and state deficits, an aging population with significant entitlements, a weaker dollar, international competition, looming inflation and our educational system to name a few. Why do you feel our nation's future is so positive?

Thanks.

Jim
SAVAGE SAYS: That's a good question -- and one I balance every day, and with every financial decision. I am not Pollyanna! I agree that these problems are huge. My optimism is based on history -- on the knowledge that we've faced tough times before, and always rallied to surmount them - - whether the Great Depression, WWII, the "Sputnik" era of space exploration, even the 1973 energy crisis. Looking back, no one ever got rich betting against America. That said, I have suggested that everyone "hedge" their financial bets against the ineptitude of the people we elect to Congress. That's why I've been bullish on gold for many years -- as a hedge against debasement of our currency in an attempt to pay off our debt. I don't think those two positions are inconsistent. Thanks for asking -- because I'm sure others have those same concerns.

Just saw this in your column:
"America does not have debtors’ prisons, but many lenders and collection agencies are going to court to get warrants to arrest borrowers who default on loans and ignore court orders."

Please clarify--you're not saying creditors can actually have debtors arrested, are you? Seriously?

Thank you.
Mike
SAVAGE SAYS: Yes -- that is exactly what's happening -- when debtors ignore court orders for repayment. They don't stay in jail too long -- but I'm sure it's not a pleasant experience. Just as "deadbeat Dads" are often hauled off to jail if they ignore court orders, many lenders and collection agencies are getting judgments, then having warrants served to bring the debtors into court -- which involves a stop in jail!

Hi Terry,

I am 55 my wife is 50. We owe around 140K on our house and have a number of years left on the mortgage. I was unemployed for one year in 2009 - 2010. We got a home modification loan. It appears we will never be able to pay off the mortgage before we hit old age. Should we stay in the house. Or should we try and sell it an go for a rental.

Thanks
SAVAGE SAYS: I'm assuming that you can afford the current monthly payment, AND that it is now at a fixed, low rate (below 6%). And, that you like the house. And since you had to do a modification, I'm assuming that if you sell the house you won't have any equity money left over.
If all those assumptions are true -- then continuing to live in your house, and making mortgage payments, is JUST LIKE PAYING RENT -- only to yourself! At least, if you stay in your house it could rise in value down the road. And you have the security of knowing that your "rent" payment -- the monthly mortgage payment can never go up! Yes, you'llo have upkeep issues, and the possibility of rising taxes. But you'll also have the possibility that one day it will be worth more than it is now. That's something to consider!

My mother inherited a mutual growth fund after my sister's death and she added my name on to this account as jointly owned. Since I feel this is my mother's money do I have to report this on my child's college FAFSA application as parental assests when filling out the income statement? SAVAGE SAYS: If her Social Security number is on the mutual fund account, and if she declares all the dividends, gains distributions etc on her own taxes, then I think you can consider this HER money and not part of your assets for FAFSA.

can my 19 and 17 year old children be beneficiaries to my stocks, bonds, mutual funds and IRA? SAVAGE SAYS: You can name anyone as beneficiary. But, depending on the state, the age of majority is typically 18, but may be 21. If you should die before they reach the age of majority, then the state probate department would be obligated to name a custodian for the funds until they reach that age.

Hey Terry I have 2 questions. What do you think about, Hi-speed trading? Also, hedge funds- Goldman sachs group, Chicago Hedge fund investment group & a few others. Are these companies just for people with a lot of money or are they open to the public? SAVAGE SAYS: I think you'd better be pretty fast if you want to do "high-speed" trading and compete againt the pros! Actually this kind of trading takes a HUGE investment in hardware and software -- and only the most successful firms can afford to set up these trading systems. So if you're serious about becoming a trader, I suggest you contact a trading firm and see if they have an internship program. Or you could just offer to get coffee for the traders! Being there -- even if not on the trading desk -- will teach you a lot about the risks as well as the rewards of trading, and it will show you how much you don't know!

Hello Terry, I was terminated from my job of 31 years. I received a pension packet from my employer. Do I just go to any bank and rollover my pension into an IRA? Do I leave it with the company? Do I go to Fidelity and reopen a 401(k) What is your advice on where to put my pension?
SAVAGE SAYS: Shame on your company's HR department for not making this clear. If they give you a choice of taking a lump sum -- or a monthly payment for life, it is almost always wisest to take the lump sum. BUT DO NOT TAKE A CHECK! That could trigger taxes and possibly penalties if you are under age 59-1/2.
You can do a "rollover IRA" -- and I'd suggest you contact Fidelity, Vanguard, or T. Rowe Price. Talk to a "retirement rollover specialist" -- and they will take care of the transfer so it is not a taxable event. AND they wilol give you advice on appropriate investment for this money, plus advice on when (after age 70-1/2) you must start a regular program of withdrawals.

Ms Savage, I am a retired teacher and i am concerned about the possible collaspe of the U.S.economy. Do you recommend converting cash into gold or silver to offset the fall of the dollar? Along with my pension I have a small savings account to work with. Thank you in advance for any suggestions.

C.C.
SAVAGE SAYS: Well, I've written many columns over the years about investing in Gold (I'm not such a big fan of Silver -- because it is also an industrial metal.) YOu can search those columns at TerrySavage.com. But I wouldn't advise putting EVERYTHING into gold - -either bullion or stocks or mutual funds. Gold is like insurance against disaster -- but it is also a volatile investment.

hi, my wife and i are both 60 years old . we are both retired and receive no entitlements or pensions. at 62 i would receive $1069 a month and my wife would receive $1331 a month. i would like to take social security for both of us at age 62. i know there are formulas for determining the optimum age to receive social security but i feel since neither my wife nor i work it would be to our advantage to start receiving at age 62. waiting until age 66 would increase our monthly social security by $800. i would like your opinion on this situation. thank you, larry SAVAGE SAYS: That's a personal decision -- and if you need the money to live on now, go ahead and take it. Just know that if you live into your eighties you would have come out better waiting. There is a calculator at www.SocialSecurity.gov that will graphically show you the impact of taking early SS.

hi, my wife and i are both 60 years old . we are both retired and receive no entitlements or pensions. at 62 i would receive $1069 a month and my wife would receive $1331 a month. i would like to take social security for both of us at age 62. i know there are formulas for determining the optimum age to receive social security but i feel since neither my wife nor i work it would be to our advantage to start receiving at age 62. waiting until age 66 would increase our monthly social security by $800. i would like your opinion on this situation. thank you, larry SAVAGE SAYS: That's a decision that only YOU can make. You've obviously used the calculator at www.SocialSecurity.gov. And you know the difference in payments. Now, if you can get along without taking it yet, and if you think you will live to a ripe old age, it's worth it to wait as long as possible. but if you're strapped and this will make all the difference, then go ahead and take it. Just remember, you're not eligible for Medicare yet (so I have no idea what you're doing for health insurance now) but when you reach age 65, you can sign up for Medicare. The premiums are steep, plus you'll need a Medicare supplement policy and a Part D drug program. You could use your SS benefit check to pay for those things (in fact they'll deduct Medicare Part B from your SS check). Maybe you can hold out until you're at least 65.

What's the best life insurance for me? I am 57 SAVAGE SAYS: That all depends on why you need life insurance! Is it just to provide for college for your children, and thus a short -term project? Is it to provide liquidity for your estate? Do you need life insurance at all (hint, probably not if no one is depending on your income for their suppport).

Hi, Terry. I am creating an emergency fund for my family (family of four with two small children ages 5 and 3) and I am leaning towards using a Roth IRA as the vehicle. I've had a Roth IRA that I've really been ignoring and I figured this would be a good choice. It is currently invested in the Vanguard GNMA fund. This fund seems to be stable and safe and has a healthy yield. I have about 5k in the fund currently and I hope to contribute about $250/month. My wife and I already have 401k's, so this would not be the only retirement account we have. We also have 529 plans for our kids so we are covered there. My question is whether a Roth IRA is the best choice for an emergency fund. I am also wondering whether my fund choice is either too conservative or just right for my goal. I appreciate your time.

Thanks! SAVAGE SAYS: Well, I'm sure you know that while you can withdraw your after-tax contributions from a Roth, earnings withdrawals made from a Roth within 5 years of the contribution are taxable, and may be subject to the 10% penalty if you are under age 59-1/2.. If you use a Roth for an emergency fund, let's just hope your emergencies are far down the road. And emergency funds should be invested conservatively, while the goal with a Roth is to invest for growth -- so the gains eventually come out tax-free for retirement. Maybe you should have two different accounts -- the Roth for retirement, and just a MM fund for emergencies?? PS Here's a link to the IRS page with Roth withdrawal tax rules, scroll down to the appropriate section: http://www.irs.gov/publications/p590/ch02.html#en_US_2010_publink1000231057

Dear Terry,

I have a 13 year old son who has obtained a summer job cutting grass. I would like to use the as an opportunity to teach my son about a Roth IRA. I was planning on offering him a match for every dollar he adds to a Roth IRA. I understand that he can not contribute more than he earns, but I am having a hard time finding what documentation is required to prove he has earned income. Can you help me with this?
SAVAGE SAYS : What a wonderful idea. I checked with an accountant on this -- but you should definitly check with your own to make sure this advice fits with your situation. To qualify for a Roth, the income must be reported to the IRS. I'm assuming the child has no other income. He needs to file his OWN return (as opposed to filing his income on the parents return). If his total self employment income is under $400 he may not owe self employment or income tax- You can learn more on IRS pub 560 to help calculate the amount of the Roth contribution. Also Form 8606 is the form for non deducted Roth that must be attached to his return. I know this seems complicated -- and it might be costly to get your accountant's advice -- but that tax-free growth of money over the years -- PLUS the habit of saving for the future -- are PRICELESS -- So go for it!

I understand bonds outside the U.S. get six to seven percent in Brazil, also Canada, Mexico and Germany have higher yields. How does one go about perchasing these bonds? SAVAGE SAYS: Hey, bonds in Greece pay 20%! But you dont' want to buy those, do you? There are two risks in buying foreign bonds. The first is obvious: the risk of default. The second is less obvious: the currency exchange risk. Generally, if you're getting higher interest rates, it's because of one or both of these risks. But you can buy International Bond Mutual Funds that hedge away the currency risk (and some funds don't hedge the currency risk). Try T. Rowe Price or Fidelity to learn more about these bond funds.

Hi Ms. Savage. Last year i started collecting social security disability at the age of 45 after dealing with a health issue i have had since birth. I worked for 26 years at the same company. I am married with three young kids at home. I have a little over 100,000 in a ira that was from my 401k that i rolled over. MY wife and i both have roth ira's valued at 25,000 together. My wife has a 401k valued at 15,000. The only debt we have is our mortgage. What would be the best thing i can do with our investments since i am disabled? We have medical insurance from my wifes job also. Any advice on what we should do would be helpful and greatly appreciated.

Thank You SAVAGE SAYS: I'm delighted to post your question, since you have done such a great job of saving under such a challenging situation. The more you can accumulate in retirement accounts, the better your life will be. I think what you're actually asking is how much risk you can/should take with the investments inside these retirement accounts. That's a tough call. If you keep it all in "Chicken Money" such as saving or money market accounts, you might not keep up with inflation. That's what stocks historically do -- but not without some agonizing ups and downs. While I can't give you specific investment advice, if you'll send me an email with your mailing address, I'll send you a copy of The Savage Number, my recent book which is designed to give you perspective on these issues. And, one more idea: you might get lower costs and better advice if you have all your IRAs at one place, such as Fidelity, Vanguard, or T. Rowe Price. At least, at one fund company they'll have your entire situation in perspective. And their advice doesn't cost you, and you don't pay commissions. So that's the place to start.

Hi Terry,
First off let me say how much I miss watching you and the Monsters and Money show. I even got my husband hooked into watching you as well and then the show is taken off the air. Very Sad.
Now my question or story. My son is 26 years old and has put himself through school financially. He has waited a long time to get into the nursing program and the time has finally arrived. We are totally terrified of applying for school loans and not sure which way to go. I saved your article from July 12, 2010 Law changes the rules for getting student loans in the Chicago Sun Times and we read and re-read it.
He applied for FAFSA and was denied which we couldn't believe. He has never been denied before. So they sent him a letter and advised him he needs to apply for a federal loan through the financial aid office at his college. Is that the way we should go or should we go through Sallie Mae. Can you help guide or steer us in the right direction.
I told my son we need to write and ask Terry Savage. This woman is very intelligent and smart when it comes to financial questions. I truly admire you.

Thank you
SAVAGE SAYS: Well, thank you -- and I'll try to live up to your high expectations!
I think you got caught in the switches -- as Federal student loans changed over to a "direct loan" model in the past year and a half. First, yes, your son should immediately contact the admissions office of the schools where he is applying. At his age, he will be considered "emancipated" - -and any loans will be under his name. And he still will have to file a FAFSA form, showing his current assets and income.
But the nursing school admissions office should definitely be your first step. They can advise what kind of loans they can offer, and what the requirements are for applying. (I'm not an expert on graduate school loans, so forgive me for being slightly vague on this.) However, I did search and find out that there are many scholarships available for nursing students. Go to http://www.nsna.org/ -- the national student nurses assocation for more information.
And here's another site that offers resources for financial aid for nursing school:
http://www.nursingschools.com/financial-aid/
I have just one last piece of advice. Figure out the tuition and total costs of the full program before applying for financial aid. Loans can be a huge burden to repay. There are some fascinating repayment calculators at Finaid.org -- just tto give you an idea of the cost. Then very best wishes -- we will always need more nurses. It's a noble profession and a much-needed one.

What is my tax liability when selling stock gained through demutualization? SAVAGE SAYS: You need to contact the company to find out the "cost basis" of the stock on the date of demutualization. Then your tax liability will be determined by your holding period (at least one year to make it a long-term capital gain) and your tax bracket, which will determine your rate if it is a long term capital gain. (If short term, it must be added to your other "ordinary income" to determine your tax liability.)

My wife and I are in our mid-40's, both work, own our home, have no debt and have about $650,000 in retirement accounts. Combined, we save about $42,000 per year in our 401k's and Roth IRA's. Neither of us has a pension. We'd like to retire from full time employment in about 10 years. We are both willing to live frugally and work part time. What steps should we take to make early retirement a reality? Thanks! SAVAGE SAYS: First, congratulations! You're well on yoru way. I wrote an entire book on this subject -- The Savage Number: How Much Money Do you Really Need to Retire? You can get it on my website, www.TerrySavage.com. Really, I'm not trying to sell books! It's just that I wrote it with people like you in mind -- and there are a lot of issue you need to think about when contemplating "early" retirement. But just to do the "numbers" -- go to www.choosetosave.org -- and use their "ballpark estimator" tool. You need to figure out your retirement lifestyle and costs to decide if you're on the right track.

I am in the process of refinancing my mortgage and my credit score came back as excellent, but two agencies listed key factors of "Proportion of loan balances to loan amounts is too high", "Too many accounts with balances","Too many inquiries in the last 12 months", "Number of inquiries has adversely affected the credit score", and "Number of bank or national revolving accounts with balances". I only have a mortgage (which I pay extra on) and a car payment (which I pay extra on) and the typical credit cards of Kohls, Carsons, Macy's. I have 3 major credit cards which are mostly used in traveling. My accounts are always paid in full; I have never missed a payment nor been late. So how can they say "too many accounts with balances" and "Number of banks or national accounts with balances"? My lender said with an excellent score, they always "have to say something". Is that true, because what they're saying is not true! I'm sure I'm not the only one who received these remarks on a credit report, and I'm hoping you can respond. Thank you very much!! SAVAGE SAYS: Your credit score is based on information in your credit REPORT! So you must immediately get your credit report from all three bureaus and make sure there is no erroneous information on it! The best way to do this is to go to the website created by the government to link you to the totally free report that each bureau must give you. It's at www.AnnualCreditReport.com. If there are errors you must get them corrected, and can post a statement explaining any disputed information. Then check back to make sure the information is corrected.

I am in the process of refinancing my mortgage and my credit score came back as excellent, but two agencies listed key factors of "Proportion of loan balances to loan amounts is too high", "Too many accounts with balances","Too many inquiries in the last 12 months", "Number of inquiries has adversely affected the credit score", and "Number of bank or national revolving accounts with balances". I only have a mortgage (which I pay extra on) and a car payment (which I pay extra on) and the typical credit cards of Kohls, Carsons, Macy's. I have 3 major credit cards which are mostly used in traveling. My accounts are always paid in full; I have never missed a payment nor been late. So how can they say "too many accounts with balances" and "Number of banks or national accounts with balances"? My lender said with an excellent score, they always "have to say something". Is that true, because what they're saying is not true! I'm sure I'm not the only one who received these remarks on a credit report, and I'm hoping you can respond. Thank you very much!! SAVAGE SAYS: What two agencies are you referring to? There are only three credit rating bureaus of any national scope -- Experian, TransUnion, and Equifax. Where did this report "come back" -- as part of your credit "score"?
First check your credit report at each bureau, making sure it is accurate. You can do this for free at www.annualcreditreport.com - -and you don't have to sign up for any credit monitoring services. If everything on your credit report is accurate -- and if these comments came back on your credit "score" -- then ask the lender which credit "score" they used. (There are several -- most frequently it is the FICO score, and you can get that for a fee at www.myFICO.com.) You should find out where/why these comments came up on your score -- and get the agency that did it to FIX IT!

i have 50000 in my vanguard retirement fund. my question is can i get a loan using it as collateral? SAVAGE SAYS: No, you can't pledge a retirement account as collateral for a loan. And don't withdraw the money either, because you'll owe taxes, plus a 10% early withdrawal penalty if you're under age 59-1/2!

hello,
i have $400,000.00 invested with this day trader and i get about 12% on my money. my problem is every time i need to take some money from my account only the interest i take he gives me a very hard time about it, WHY? can you tell me why or what should i tell him. SAVAGE SAYS: You should tell him to give ALL your money back NOW or you'll report him not only to me, but to the CFTC. This is a ripoff, if I've every heard of one. You do NOT have money INVESTED in Day Trading -- for starters. And no one consistently returns 12%! Remember Madoff?
I doubt you'll get ANY of your money back -- and when you don't, come back to me and I'll help you report it to the authorities.

I have a general question that I would like to ask you;
I"m 76 years old, retired, living with my wife ( 75) also retired. We have about half a million in IRA saving, and also some non-qualified money that is just sitting in a few banks drawing the usual 1% or so.
One of my brokers is suggesting that I invest approx. $200,000- in AAA rated munis with a coupon of about 5 %.
The companies are all top grade, ( Santee Cooper,ect,)
I feel that she really has my best interests in mind, but I just wanted your expert opinion as it's a lot of money for us.
Any feedback from you would really be greatly appreciated.

SAVAGE SAYS: Wait -- munis are not "companies" debt -- they are offered by cities and states! Remember, most of those mortgage bonds were rated AAA -- before they collapsed!
I have nothing against munis, or diversification -- but it sounds like you're not quite sure what you're talking about.

AND what city or state debt do you really want to own??
And by the way, just ask for the price you'd pay for ONE particular bond issue -- then check it out at Finra.org (http://cxa.marketwatch.com/finra/BondCenter/Default.aspx
Muni bonds are notoriously "overpriced" by brokers, so they can make more money -- and it doesn't even show up, because unlike the NYSE, there are few places to check actual bond prices!! So in addition to any commission, there can be a "built-in" profit to the broker through over pricing!!\(If you realloy want to buy munis, use a Fidelity or Vanguard muni fund, because they always get the best price when they buy and sell bonds, and you pay no commission to buy their funds).

And, remember muni prices can go up -- and down When interest rates rise, bond prices FALL. And the longer the maturity of the bond, the larger the fall.

So anyway, how's that for a half dozen reasons to question whether your broker really "has your best interests in mind"??

I need options as to how to get more intrest from my 93K IRA which is about 60% Money Market, the rest in Small Caps, International Funds, and Large Caps. Currently I'm earning almost 0% returns.

I am 55 years, and currently unemployed. I anticipate starting to earn about 47K annualy within the next 2 months. Help.
SAVAGE SAYS: How much of that money are you willing to lose? that's the real question here, because getting more reward involves taking more RISK! If your answer is that you can't afford to lose ANY of your money, keep the current allocation (and recognize that your stock funds already expose you to risk of loss.

I have 200K in a target retirement fund 2015. I'm 58 and retiring at 62. I'm very concerned about losing any money in this economy. Can you suggest a safer option for my 200k? SAVAGE SAYS: I know you fear loss -- but think of it this way: if you put all your money in a money market fund and retire at 62, the buying power will be cut in half in onlyh 25 years at 3% inflation if you withdraw only the interest. You need a better perspective on retirement. I wrote The Savage Number just for people in your position. It is a much larger issue than risk/return --it has to do with planning to make your money last as long as you do -- and hold its buying power over your lifetime.

Where can I find your downloadable list to keep with a persons will?
SAVAGE SAYS: Go to my website and fill out the little popup box with your name and email address. You will automatically get the link by return mail. If the box doesn't "pop up" check to see if you have popups blocked by clicking on the small yellow line at the top of your browser to allow popups!

I am a 53 year old City of Chicago employee that is fearful about leaving my pension money in the municipal pension plan. Are there any good alternative pension plans?
SAVAGE SAYS: Until you retire, you cannot move your pension money anywhere else. If you are retired, and you are in the "defined contribtion" (403b) plan, you can roll it over to a place like Fidelity or Vanguard. But if you're talking about the traditional pension plan -- a defined benefit plan -- then you just have to keep your fingers crossed that the city will keep paying your monthly check. If you have a part-time job, start a Roth IRA if you qualify, or a non-deductible traditional IRA at Fidelity or Vanguard to get some extra money saved for retirement.

Thanx for your time. I am single and work 60 hours/wk. I bought a rental property for investment purposes in August 2005 for 250,000. Took a second mortgage on my primary for the down payment , $60,000. The home is now worth $110,000. Mortgage payment is 1390.00, utilities 100.00/mo. I receive $1100.00 month rent.
I don't know what to do. I am current on all mortgages($3500./mo. Primary, second,and primary on rental) I am not getting ahead.
SAVAGE SAYS: No, you're not getting ahead. By my calculations, you're falling behind by about $400 every month! And that doesn't include the cost of any repairs. If you default on the mortgage on your investment property, you'll llose both the property and your good credit. My best advice is to stick it out, and hope that at some point you can raise the rent! If you want someone to look over your situation specifically, contact Consumer Credit Counseling at 800-388-2227 to see if they have any other suggestions. Doing that will get you good advice, and won't impact your credit.

Hello Terry,

Listened to you last night on radio speak about insurance. I have a question please...a policy I have now next May will reduce the principle amount by 1/2 but the dividends will remain. This life policy has been in effect for 25 years as of May 15, 2012. You cut out last night when you started to speak about this subject on the Bohannan Show.

Is your advice to cash surrender this policy and invest in an annunity as I don't have other retirement except social security and a little savings. I will be 65 very soon this year. Due to bad health, I retired recently.

Help if you will and many thanks,
SAVAGE SAYS: Go to my website -- www.TerrySavage.com and read the column on that very subject posted just a week ago. It will give you resources and advice. I fyou still have a question, then please post again.

Hi Terry,
I was listening to you on the Jim Bohanan Show last night and he mentioned he would talk about investing during retirement, but I didn't hear that topic addressed. I am recently retired and concerned about safely investing my 401K and IRA in instruments that provide a decent return but yet have low(er) risk. The dismal state of the US economy makes me very concerned about investing in stocks, but the bond market is also worrisome--the inevitable rise in interest rates will have serious negative repercussions on bond funds. CD's pay little or no interest which doesn't come close to the inflation rate. So where does a retiree invest? I can't afford to take another 35-40% hit on my portfolio like happened in 2008-2009, but 2-3% return on stocks, bonds and other investments doesn't bode well for my purchasing power with runaway inflation looming on the horizon.

I thoroughly enjoyed Jim's show last night with you as a guest. I really like your philosophy and advice--you financial advice is second to none in my opinion.

Thanks.
SAVAGE SAYS: Thanks so much for your kind note. Yes, you describe the dilemma perfectly -- which is why I have my own retirement plan still spread among stocks (because they have historically beaten inflation), chicken money (no return, but no risk!) and gold and precious metals. It's been a good strategy so far -- but like you, I'm getting uneasy about how the insanity in Washington can possibly be good for the economy, or stocks!
I dealt with the philiosophy of this at length in my recent book - The Savage Number: How Much Money Do you Really Need to Retire? You can buy it on my website, and if you do I'll give youa personal money-back guarantee if it doesn't get you started thinking in a more productive way about the alternatives, and how to balance them.

Why are there so many companies advertising free credit checks? What's in it for them?
SAVAGE SAYS: Because they get you to sign up for "protection" or "warning" plans that get you to pay $12-$20/month -- and that is all profit!!

My wife and I are retired and drawing social security; this income totals about $36,000 per year. I still work about 20 hours a week and make another $36,000 per year.
Our primary home is paid off. We have bought a cottage (second home) and still owe about $98,000 on it. Our interest on this loan is about 5.3% which makes our monthly payments about $660 per month.
We have about $600,000 in savings (IRA, all taxable).
We can live right now without having to withdraw much from savings. But I may loose my job and am concerned that we would then have to withdraw money from savings to make payments on the second home.
My question is, "Should I withdraw money now from savings and pay off the second home?" In a way this seems like a good idea because we could avoid all those interest payments. But if I do withdraw this money, I would have to pay taxes on it. Maybe I could pay it off over a two year period?
Is this a good idea?
Thanks!
John
SAVAGE SAYS: My grandmother had the perfect saying for this situation: "Don't build up horrors before they exist!" You have a nice low mortgage rate, and a job that pays for it. Keep going as you are -- untill and unless something changes. I think all your savings are pre-tax in an IRA, in which case you'd have to take out 40% morejust for taxes! And you lose all future tax-deferred growth of the money. Enjoy your cottage, don't let it become a mental burden --and hope you can keep working for a few more years to pay that mortgage. Then contact me again when the issue is upon you, if that happens.

my elderly mom has an ira but it's pay on death...i have power of attorney can i cash it in to pay for her medical expenses....
SAVAGE SAYS : If you have her business power of attorney, you could cash it in to pay her medical expenses. Taxes would be due -- although I'm assuming her income is so limited that there would be no tax liability. If you do not have this power, then I'm afraid you'd have to go to court to get this done. That's why it's so important to have these powers organized in advance. Will she sign something for you now? You know, she is obligated to take a minimum distribution every year -- has she been doing that? You may need an elder law specialist or estate planning attorney to guide you if there is a lot of money involved.

n Dear Terry! I am a very recent widow my 26 year old son died the day of my husbands funeral. My house is in preforclosure I owe less then the value but want to walk away. I beleive it was sold at sherriffs auction. I owe 52000.00 1st mortgage 13000.00 equity loan. they listed it for 72,000. It was apparently sold immediatly. It needs much work they arent aware of but has many things replaced roof, kitchen ,windows . I will be receiving 66000.00 life ins. cost of funerals 22000.00 Car will be paid off from another ins policy. Will have about 40000.00 drs and credit card debt am going to go through debt releif to lower. I work full time my younger son will receive survivor ssi benefits for 2 years. I do beleive I will receive my husband retirement from GM also. I will be solid finacially if I can pay cash for this condo . Is this OK for me to do? I dont want to lose the condo or car!
SAVAGE SAYS: Wow -- what a year, what a set of experiences. First, I'd advise that you rent for a year or two -- just till things settle down. It doesn't look like you'll have to file bankruptcy -- but only a good attorney can tell you that. Before you go to "debt relief" contact Consumer Credit Counseling Services at 800-388-2227. That will connect you to your nearest local office. You can trust them -- and they can advise about your credit card debt, and any other issues regarding your legal situation. And if you feel you need an attorney, you can contact your local bar association for an attorney who specializes in bankruptcy law -- or go to www.naela.org -- for an elderlaw attorney who might be able to help.

When I make a deposit towards the end of the quarter in my savings account at Liberty Bank for Savings, they post the interest before my deposit. For example, on May 22, I made a deposit, when I got my passbook back, the interest dated May 31st was posted before my deposit on May 22. To me, that means they calculated the interest before my deposit. I don't understand why they do that.....I've asked a few times why and the answers I get range from "that's the way we always do it" to "don't worry about it". Can you please explain it to me?
Thank you,
M/S SAVAGE SAYS: If that's the way they do it, and they're "cheating" you out of a few days interest on your latest deposit, I suggest that you go to the Vice-President or Branch Manager and make that point. If you don't get a better answer, move your account!

Three years ago I lost my home to foreclosure because I was out of work for almost two years. I want to build my credit back. I read that a secured card is good place to start? What would you suggest? SAVAGE SAYS: That's an excellent way to start rebuilding your credit. To find one of these cards, which acts like a regular Visa or Mastercard (but with a limit that equals a deposit you make in the bank), go to www.bankrate.com, and search under "secured cards." Not all hve the same fees, or same deposit requirements. Use the card regularly and pay it off IN FULL AND ON TIME EVERY MONTH! That's the best way to start to rebuild your credit.

We have a $18,000.00 mortgage at 4.625% should we withdraw from a CD that is drawing 2.12% to pay off the balance?
SAVAGE SAYS: That all depends on your entire financial picture -- and how much money you'd have left over. I'm generally in favor of paying down a mortgage before retirement. I'm generally in favor of paying off debt. But you have a low, and I'm assuming FIXED, mortgage, with not a large balance. And you will need some cash for liquidity. So again, it all depends on whether this will impact your total financial picture.

I'm a teacher. I have about 6 more years to retirement. What is my best choice for this whole pension issue?
thanks,
Pat SAVAGE SAYS: Do you have a choice??? I'm not quite sure what you're asking. I think that there will be changes in pension plans for younger teachers, much as corporation switched from pensions to defined contribution (40lk) plans a decade or more ago. But not likely much change for those close to retirement. My only comment: Save more!

Hi Ms. Savage. I am retired and my husband is on disability. We owe $140,000 on our house. Does it make sense to withdraw $140,000 from my IRA to pay off the house? Is there a tax free way to do this?
We purchased the house in 2003, 30 yr mortgage at 5.25%. SAVAGE SAYS: Unlike the question I answered earlier, my answer in this case is an unqualified NO! Do NOT withdraw from your IRA to pay down the mortgage. You will pay ordinary income taxes -- and lose all future tax-deferred growth of your IRA investment.

Jonathan invested a total of $10,000 in two certificates of deposit. One pays 5% interest, and the other pays 6% interest. His total interest at the end of one year is $560. How much is invested in the CD that pays 5%? SAVAGE SAYS: Please don't ask me to do your algebra homework for you!

I will soon be getting my monthly annuity pension when I retire. Is it better to take the full payment or have my taxes automatically deducted with a W4-P Withholding Form? SAVAGE SAYS: If you can discipline yourself to set aside money for taxes AND file a quarterly return, then take the full amount. But it will be a lot easier at tax-time if they've withheld the proper amount!

Hi, Terry. I'm retiring at the end of June. I have a 12 month CD with Ally Bank coming due in a few weeks. I will be getting a lump sum payout of 6k - 10k when I retire in addition to my pension. I'd like to put that payout into something that will grow for about 5 years or possibly 10 years. Should I look into a Roth IRA? I understand that money to fund has to come from earned income so I guess that means I should open that before my retirement date if I go that route. Or would a regular IRA be better since (I guess) I could continue to fund it with monthly contributions. What would be a safe fund that would earn more than my Ally CD? Or should I reinvest my current $10,000 CD and extend it to 5 years at 2.39%. My current 12 month CD is earning 1.20%.
Thanks for your advice. SAVAGE SAYS: First you need to talk to your HR department. I'm guessing that the "lump sum" could automatically be rolled into an IRA, so you wouldn't pay taxes until you are required to withdraw it. If that's the case, contact Fidelity or Vanguard or T. Rowe Price and make sure you do not touch that payout, but have it rolled directly into an IRA.
On the other hand, if you MUST take the lump sum and cannot continue to defer it, you need to do a comprehensive plan that coveral all your investments and other retirement issues. You'll need a Certified Financial Planner -- and can find one at www.CFPBoard.org.

Terry, My wife & I are in our mid to late 60s with a combined monthly income of $5200 of which all goes to mortgage, loans and credit card debt (Mort $175,000, loans 48,000 credit cards $35,000). I work & contribute 15% to 401K, my wife draws Social Security & works part time. We have slowly been paying off debt to credit card with interest rates 0-20%. We have 401K, IRA, IRA Roth, small savings, total $250,000. I haave 4 401K accts. & I'm in the process of consolidating them. I was thinking of I should take the money from one 401k ($50,000) & pay off some of the high interest credit card debt & loan or should I move it to one of the better performing 401K. Since I'm age 61 I know there would be penaly/taxes. What do you think? Thanks SAVAGE SAYS: Well, without a complete analysis and specifics, it's hard to advise. I almost never suggest withdrawing from a retirement plan. But paying 20% interest on credit cards is the road to hell. You are over age 59-1/2, so there would be no penalty, only ordinary income taxes on withdrawals. So if you were to pay down the $35,000 in credit card debt, you'd need to withdraw even more money to pay the taxes due next April. That might be your best option, as you'll never get out of debt if you can't double your minimum monthly payment and keep paying that amount every month. If you coudl do that the credit cards -- no matter what rate -- would be paid off in 3 years!
OK, my final suggestion -- call Consumer Credit Counseling Services at 800-388-2227 to get the nearest local office. Show them your entire financial picture, listen to their advice, then get back to me!

Terry,

I have a question about flipping a regular IRA to a ROTH. I have just
started a new ROTH IRA but have about 65 K in a regular IRA, I will be
55 in July and was told by Northern Trust my people that I can do all
or 1/2 the cost about 20,000 in total.

I have been told by a few other people that why give up that $$$
because when I retire I will have no job and and my tax rate will be
much lower than my current 28%.

What say you? Love your latest book & look to hear from you on the radio soon!

Best regards,
SAVAGE SAYS: Well, that's the Trillion dollar question: Will tax rates be higher in the future?? We can't know the answer to that, so hedge your bets. Have some in a Roth, and keep some in a pre-tax, traditional IRA. That way you will be only partially wrong!

Inheritance Question: If we want to leave our investment accounts (taxable) or in a Trust Account....to our children:

Is the tax basis the same? I have one stock that I have had for years....paid $5 for it, it is now $55. If inherited: Does it go to children as $55 or $5.

I would not want them to pay large cap gains taxes on the appreciation. I could sell it now, pay the cap gains, and rebuy it in 31 days. What is your advice here?
SAVAGE SAYS: Under current federal tax and estate tax law, there is a "step-up" in "basis" to the date of death. That is, your children would have a new cost basis -- the value of the stock at the date of your death. (You should fill out a lis tof your stocks and remind them to keep the newspaper or check the price on the date of your death.
That coudl change, however. Previous discussins of the estate tax law have suggested they do away with the "step up"! That would require you to keep careful track of the cost of every stock you own. RE putting it in a trust for them, I'd suggest a visit to an attorney who specializes in estate planning in your state.

hi terry. i am 63 and my wife is 64..she recieves social security( $850 per month) and i will be retiring the first of the year recieving appx. $2100 per month. we owe #145,000 on our house and will have about $860,000 in my 401k. if our expenses are appx $6000 per month. would i be best paying off my house to try and get rid of my $1200 per month house payment? thanks SAVAGE SAYS: I've been receiving a number of postings similar to yours. But let me say to you that the REAL answer is that you are too young to retire, or rather that you have too much debt to retire now -- unless you think you will have a very short life span and want to make the most of it. YOu need to do some financial planning. Let me suggest that you go to www.ChoosetoSave.org and use their "ballpark estimate" tool online (it's free, and they're a non-profit organization). That way you will get a better picture of the impact of retiring now with this amount of money.

Can I take a reduced spousal benefit from my husbands benefit which he has filed and deffered until age 70 even though he is not collecting SS right now? If so I know I cannot increase my spousal benefit later. However, can I take my own full benefit at my full retirement age( or even defer my own until age 70) if I was previosely collecting reduced spousal benefits on his since age 62? SAVAGE SAYS: ARe you talking about Social Security or a corporate pension? If Social Security, contact your nearest local office re your situation. If a corporate pension, you need to talk to the HR department, although they will probably only talk to your spouse.

retiring have defered comp can i put money that i have outside from my paycheck deductions for catchup? need to invest win of 1 mil
what kind of lawyer, tax acct or do i need to talk with . . SAVAGE SAYS: Please write back and clarify your situation and your question.

I have paid off a credit card that I do not intend to use again. I have heard that if you close an account it lowers your credit score. Is this correct? SAVAGE SAYS: Yes and no! I've written about this many times. It depends on the balances you have outstanding (and whether closing one card means you are using a higher percentage of your available credit). And it might also negatively impact your score if this is one of your older, long-standing cards that demonstrates a long history of responsible credit use. But if it is just "another card" that you don't use, sure close it.

Many advisers are recommending to increase "cash" positions because QE2 is ending. What is meant by this? Should money be kept in an uninsured brokerage money fund, or would short term certificate of deposits or 3 month treasuries be safer?
SAVAGE SAYS: There is some concern that when the Fed stops adding liquidity to the markets, as it winds down its "quantitative easing" program, that stock prices will fall, and interest rates would rise. So it would make sense to have a larger portion of your asset allocation in what I have always called "chicken money." That is FDIC insured money market deposit accounts, short-term CDs, or Treasury-only money market funds like Capital Preservation Fund (American Century Funds) Or you can buy very short-term Treasury bills directly from the government at www.TreasuryDirect.gov.

If I had 135,000.00 in an IRA how long would I be able to take monthly payments of $400.oo a month?
SAVAGE SAYS: That would depend on how much interest or gains that $135,000 was earning. And if there is even 3% inflation, it would cut the spending power of that $400/month in half in 25 years.

Hi Terry

my mom just passed and she was underwater on her home. We have an irrivocable family trust in which my self and my sister are the benneficiaries. My mom has an annuity that pays her allittle money every month. Will the bank go after mom.s annuitiies if we shortsale the home? SAVAGE SAYS: Well, first I'm not sure you have your terms right. It's more likely that the house was named in a REVOCABLE Living Trust, with you as beneficiaries. The bank will either foreclose or may accept a short sale, allowing you a bit of value from it. But you'll need a lawyer to deal with this. As for the annuity, it is likely that the insurance company will keep the balance after her death -- unless she specificially made it a "joint" annuity that extended over your lifetimes as well. In that case, it would keep paying you -- and/or your sister -- and the bank could not go after that money. Be sure to get an attorney to look into how both the home and the annuity were titled.

My neighbor will soon be turning 70 years old and needs to start withdrawing money from her SEP IRA and Roth IRA and she does not have a financial planner. Can you please provide information as to how to assess what monetary increments she should withdraw or whether or not she should withdraw all of the funds and reinvest in other fianancial tools.

Also, any other information you can provide re this matter; such as reading materials or websites, would be appreciated.

Thank you.

SAVAGE SAYS: Yes, I just wrote about this recently, so check my columns at TerrySavage.com. But basically, she needs a list of all her IRA balances in every account. Then she can go to any "custodian" such as a bank or mutual fund company where she has an IRA and they will easily help her calculate the minimum required withdrawal -- and recalculate every year based on the remaining account balances.

What is the best way to check your credit? Thank you.
SAVAGE SAYS: Go to www.annualcreditreport.com -- the ONLY website where you can get your FREE report, without having to purchase any services such as credit monitoring. This site has links to each of the 3 bureaus. You can get your report from one or all of them (the info should be basically the same) in minutes -- safely and securely -- by answering questions for which only you would have the answers. Try it and you'll see.

My step-daughter is inheriting $50,000 this year. She is collecting welfare in CA plus free Section 8 housing. Does she have to declare the $50,000?tvkcb7
SAVAGE SAYS: Ugh -- unless the money was left in a trust for her, which she cannot touch, it will become a personal asset How will they find out? Well, if she puts it in a bank, she'll earn interest -- and that will trigger an investigation. And she's certainly not going to put it in a mattress! The best thing might be to talk with the attorney who is in charge of handling the inheritance and see if there is some way it could be set up as a trust or monthly annuity payment that would not violate the income limits for receiving benefits. On the other hand, she gets this inheritance tax-free. This might be the perfect opportunity to start life over -- with a bit of financial security. The money could be put in a bank account, and she could get some good advice about reorganizing her life by calling Consumer Credit Counseling Services at 800-388-2227, which will connect her to the nearest local office. They can be trusted to give her the right direction. This is a "gift" that could really be life-changing if handled correctly -- a way out of government assistance. I hope she makes it!

when you are on ssdi and your tax return shows a -2,340.06, but you do have an annuit.Do you have to disclose this as an asset when you can't take pays on because of age,to pay medical bills
SAVAGE SAYS: I'm not sure exactly what youre asking. If you have income from an annuity -- and cannot touch the principal -- then yes, you would have to disclose it to Social Security. But from your situation it doesn't seem that you have enough income to disqualify you from SSDI. But you can call Social Security -- anonymously-- and ask that question, with more specifics about your situation -- without disclosing your name.

My 64 year old father had a stroke about a year ago and lost his job, his car, and his condo as a result of not having insurance and mounting medical bills. The good news is he is stable and living in an assisted living facility (which his Social Security Disability is just enough to cover). When he first got sick he was paying all of his credit cards per the agreements but now, with the his current situation, he has been unable to pay any of his credit cards for nearly a year (and won't be able to in the future). All of the credit card companies but one understands the situation and has basically written his debt off and left him alone. The last remaining card (for which is balance was about $3500) served him papers and is suing him in court! HELP. I am his POA and have tried to explain to them his current situation and that he has no assets and is barely living on Social Security and Medicaid/Medicare...but they are very rude and insist he show up in court. Do you have any advice on what to do, I am 800 miles way from him and cannot leave my job to appear on his behalf and he is not physically able to appear on his own.
SAVAGE SAYS: This is the kind of thing that has smoke coming out my ears! One answer is to contact an attorney and file for bankruptcy. That will stop the collections, but it will cost money. OR, send me a personal email with your phone number and the name and number of the people at the credit card issuer and I'll do my best to contact them (with you on the line) and let them know they're in for some terrible publicity if they pursue this! Email me at Savage@Suntimes.com -- and note in the subject line that this is a result of your blog posting.

My husband and I had been purchasing Series EE Savings Bonds for our childrens education before they were even born. When the maturity date changed (initially 7 years to now 18 years), we stopped buying since they would be out of college before we could even use them. We did not want to have to take out loans to pay for their college education. It was our sole intent to use the bonds for education. We now find that our total income is slightly above the income cut off and must now pay tax on the interest earned by the bond. The bonds are in my husband's name. It is my understanding that we can gift up to $13,000.00 to an individual per year and wonder if it is possible to "gift" the bonds to our children so that they can receive full benefit of the bond. If so, is it best to have the bonds re-issued in their names rather than cash in and gift to them? I haven't found the IRS publications too helpful in addressing my situation. Appreciate receiving your advice. SAVAGE SAYS -- You're out of luck. If you transfer the bonds to your children, the transfer will trigger income taxes and you'll receive a 1099 from the Treasury. Even worse, having the bonds in their names will weigh 7 times more heavily against you in the financial aid formula -- assuming you will fill out the FAFSA form. If only you could "adjust" your earned income for the year in which you cash them in, so you could qualify for this tax-free provision!!

Hi Terry, I am considering buying a condo. There are 261 units in the building. Only $500, 000 in reserves and $200,000 delnquent assessments. The sellers use the unit as a second home . They are trying to retire and are ready to move on. I used to live in the building before it went condo. The are asking $130,000, but have said they are wlling to seriously consider all offers and they won't be offended the unit has been on the market for 6 months what do you think? SAVAGE SAYS: First I'd ask a real estate lawyer to look at the condo documents, and see your exposure to assessments if those other apartment owners default. Then, I'd make an absolutely ridiculous offer -- maybe $75,000 -- and see what happens! (PS -- let me know!)

I want to do the best thing to help my daughter increase her credit score. Does it make a difference if I co-sign or co-buy. She's a teacher for 2 years with only a credit card. She rents with a roommate. SAVAGE SAYS: A large part of her credit SCORE depends on her length of time on the job, and at the same address. You can't do anything about that. But you can make sure that she pays her current credit card on time, and in full. That will do more to build her credit score than anything else at this point. If she wants to buy a condo, you'll have to co-sign, because she likely won't have a high enough score (or income,as a teacher) to qualify for a mortgage.

Hi Terry: We have 2 College IL plans for our children (age 12 and 9. One is fully paid and the other has 15 months until it is paid off. The money invested totals about $53,500. Should we cash out and invest in another fund such as the Fidelity 529 that you suggested? Also, we have some debt from a business venture. Would it be wise to settle the debt using some of the proceeds and invest the remaining balance? SAVAGE SAYS: Since you're so close, I'm going to suggest you stick with the plan. This is the prepaid tuition plan -- and although the state may not have money to give you when your kids go to college, they could simply force the schools to accept them and use this "credit" to pay their tuition. And since this money is for your children, don't even think of using it for business debts.

hi terry what are some money management tips you could give me? SAVAGE SAYS: In June there will be a new edition of The Savage Truth on Money. It contains ALL my tips for you! Check my website, www.TerrySavage.com to order an autographed copy.

Dear Terry,
My husband and I had a Universal Life policy that we made a mistake and neglected to fund regularly. Now to keep the coverage, it has to be rewritten, and the cost is very high. What kind of life insurance do you recommend if you have no real debt, except for 3 more years of college payments. Our other child is grown.
I don't know if I want to do this, but my husband thinks we should.
Thank you.
SAVAGE SAYS: I'm just writing a column about that problem. For sure, don't use the same agent who led you into this policy without appropriate premiums to keep it funded. If you are insurable, go to www.accuquote.com and check out 20 year level term insurance. It will be the least expensive policy -- and maybe you can transfer (using a direct 1035 exchange) any remaining value from the old policy into a new one, to prepay the premiums for a year or two. The specialists at Accuquote can help you through this process.

What does it mean when a Property is listed in the NYC tax rolls as being in Pool Candt Status?
SAVAGE SAYS: I'm sorry, but I don't know the answer to that one. I would suggest contacting your local assessor's office -- QUICKLY!

Hello Ms. Savage. My question is that i am 46 years old and have three children ages 13,10,and 10. I started collecting social security disability last year due to some health issues. My condition is not terminal but will be with me the rest of my life. I am married and have insurance through my wife's employer. My question is what are some of the steps i should be taking financially since i have had to start collecting social security at such a young age. Any advice you can provide would be greatly appreciated since i can't really afford a cfp at this time.
Thank You
Brian SAVAGE SAYS: Well, you're wise to think about plannign ahead. The problem is that if you can't earn more money (without losing your disability benefits) then you have very little to work with. I would suggest calling Consumer Credit Counseling Services. They help people who are not burdened with debt to better arrange their finances so they can save more. The number is 800-388-2227, which will connect you to the nearest local office. I wish I could give you more help, but short of trying to stay out of debt, this is the best I can do.

Terry, My daughter graduated from college in 2008. She is $50,000 in debt. There are so much out there on consolidation and we are not very savvy re. the topic and do not want her to make a mistake that will cost her down the road. She looked into consolidating at 1 time and was told she needed to be employed for a longer period. She is paying around $600 a month which she cannot afford. Right now she is in an hourly paying job and really doesn't make enough to put out $600 a month but she has kept up with the payments. She has federal and private loans (Chase is a big one). We would really appreciate your expertise on the subject and hope to find a solution so our daughter is not so overwhelmed by debt at this point on her life. Thank you so much. SAVAGE SAYS: For starters, she needs to get a list of all her loans. Then go to www.IBRinfo.org -- to learn about the government's new Income Based Repayment plans. That won't wipe out her debt, and interest will still be building, but it will give her a more reasonable payment plan. For more information, and you and she should read everything about student loan repayment, here are a couple of good websites: www.simpletuition.com and www.finaid.org.

Hello Terry. My name is Miguel and I got laid off on the last day of January 2009. Because my position was "outsourced" I qualified for TAA, which is a re-training program while I would collect unemployment. I enrolled in the Culinary Arts progam @ Triton College in this August I will get my Associates Degree. In March I received a letter from the Unemployment Office asking me to RETURN more than $6000.00 they said they overpaid me because I didn't qualify for the extra $25.00 that President Obama gave extra for unemployed people, SINCE I didn't work during 2009, I would not qualify for this extra money. I don't understand, I was laid off in 2009 and went to school for "retraining". I have no money to paid them back, how?. I filled out a petition but have not heard from them and their decision yet. What can I do? Thank you very much.
Miguel D. SAVAGE SAYS: This is insane! If they pursue you for the money, please email me at Savage@Suntimes.com -- Put your name in the subject line and mention it is about this tax. I promise to write a BIG STORY about this, if you are willing to at least let me use your first name. And maybe that will make them think twice!

I recently e-mailed you about my question:, I have a pacific life variable annunity purchased in 2004 for $75k that is now worth $102k+. When the market went sour it dropped to less than $75k and has rebounded. My Edward Jones rep suggests cashing it in and replacine it with an annnunity from Met Life because of hidden cost Pacific has. Does this make sense?
SAVAGE SAYS: I think I responded to your email, but since I'm catching up on blog questions, let me answer you publicly. This makes absolutely NO sense. But then, I don't know the terms of your current annuity -- and any guarantees that it might carry. Nor do I know the surrender charges you might incur, or the new surrender period that a new annuity would start. But I don't like the sound of it!! For an honest evaluation of your annuity, email my expert: Jeffrey.Oster@RaymondJames.com. You can 100% trust any advice he gives you.

Hello Terry,
In your April 28th column, you wrote that "Starting May 1, all new applicants for government benefits such as Social Secuirity, Veterans Affairs or other federal benefits must recieve the money electonically." Note that you used the words "new applicants".

Must existing (not new)recipients of Medicare disability benefits also switch to electonic deposit? I have used electonic depost for some time, but need to close the bank account and may not have another bank account in the future.
Thank you.
SAVAGE SAYS: Eventually all govt payouts will be electronic -- either to a bank account or to a debit card. It's just like how rare it is to get milk delivered to your home these days -- Time marches on!

My husband (70) and I (66) are retired and we both are living on pensions and social security and trying to figure out what to do with a $50,000 account balance Christian Brothers Retirement Savings Plan (403B) thru Vanguard. SAVAGE SAYS: If your money is in Vanguard, and you don't need it right now, you should roll it into an IRA (unless you have already done so, your question isn't clear about that.) If the retirement account is in your husband's name he will have to start taking required minimum distributions this year, assuming he reaches age 70-1/2 during the year. And if it's in his name, make sure he has named YOU as the beneficiary! If the account is in your name, just roll it into a conservative investment at Vanguard (they'll advise) and let it continue to grow tax deferred until you reach age 70-1/2.

Hi Terry
Im a widow 85yrs old. 3 yrs ago I drew up a Revocable Living Trust with Ancillary Documents with a Senior Health & Welfare Consultants (CEA)
I own outright 2 pieces of property Ill & Florida and 2 autos. All paid for.All my money is in CD,s Money Mkts and checking accts and safe acct with Hancock.
I am able to meet all my expenses with my S.S and small pension from my deceased husband.
My question is this Do I need to use my money any other way or just remain as I am? SAVAGE SAYS : I'm glad you're so well organized, and I wish you many years of a happy and healthy life. What you DIDN'T tell me is whether you have children, or other heirs -- and if you've at least given them the basic information about your situation. That's the only thing I can think of, assuming you've also drawn up a healthcare power of attorney and living will.

My husband in in poor health and only 59 yrs old and on SS disability. We have $25,000 in a checking account. We own no property. If my husband went to a nursing home would we have to use all that money for his care or would his nursing home bill be paid by his SS check and medicaid. I don't want to use the $25,000 for his care if we don't have to. I am 65 and will retire in a year and don't want to be left with no funds.

Thank you so much for your help.
SAVAGE SAYS: Each state has it's own rules about how much the "well spouse" can retain for his or her own use, when one spouse goes into a Medicaid-funded nursing home. You need to seek advice from an elder law attorney who practices in your state. Go to www.naela.org (National Assoc of Elder Law Attorneys) to find an attorney who can tell you about your state and how much you could retain.

My question is how much is the oil company's paying you? I just seen and interview on cnn and you said the speculators have now bearing on the oil prices. BS having worked in the fuel industry every time the speculators think some thing is going to happen gas prices rise. It could be a rumor that some thing may and the key work is may happen prices go up. You were talking in circles in your interview, when asked if the dollar goes up will gas prices come down you skirted the issue. AGAIN I ASK HOW MUCH ARE YOU GETTING FROM THE OIL COMPANY'S!!!!!!!
SAVAGE SAYS: Since my appearance on CNN on Friday night, I have received many emails such as yours. I decided to answer only one -- and yours was the least offensive!
Let me make my position clear -- and no, I don't get paid by oil companies. The facts are simple. The demand for oil is growing (not so much in the US, but certainly in China and other parts of Asia. The supply of oil is now in question -- because of fighting in the oil producing regions of the Middle East -- and in Nigeria, a huge supplier of the "best" oil.
In addition, since oil is priced in dollars, no matter where it is traded -- the loss of faith in the dollar (seen in rising prices of gold, silver and other commodities) puts additional upward pressure on oil prices. The world is awash in dollars (the Fed keeps creating them) and dollar-holders are anxious to buy "things, stuff" that will not lose value the way the dollar is losing its purchasing power compared to foreign currencies.
I think Washington -- ALL of Washington, BOTH parties -- are looking for a scapegoat!

They have not created a resonable energy policy -- so we are still importing over 5 B barrels a day -- mostly from our sworn ENEMIES~! This is ridiculous. We shut down Gulf Oil exploration after the horrible BP incident. We have failed to use Natural Gas, which is easily available here and in great supply - and which (go to www.PickensPlan.com) would replace HALF of our imported oil daily if used in transcontinental trucking.

You've heard the old statement "Nero fiddled, while Rome burned"! Well, that's what's going on in the United States. We all vote for American Idol -- and no one is telling Congress that we need an energy policy. It is 40 years since Pres Carter told us our energy policy would be to "turn down the thermostat and wear a sweater." Don't you think America can do better than that????

OK Ms. Savage, the Markets are in some kind of coma and way too scary, nobody trusts them anyway, the greed of banks borders on huberis, nobody EVER trusted them, jobs are gone, housing is in the toilet, pensions devistated! Did I forget anything? Oh yeah, food, drug and gas prices are going through the roof, the trade defecit is a joke and the national debt now is (some-what in the red?) and out of control! So my question Ms. Savage is. Some of us somehow held it together and let's say a married couple had a total of $650,000.00 today to invest from their combined pensions and profit sharing for their pending retirement, one to two years, and both (should?) be getting early retirement Social Security at that time, the house is almost paid for and was recently appraised at $350,000.00. Social Security payments calculate to be about $30,000.00 (combined, per yr.)

What investment stradegies would you advise and how much pre-taxed cash held back. Goal is: need immediate income and long term capitol preservation?
Thank you again, your still one classy lady!
SAVAGE SAYS: Well, thank you for the vote of confidence! Actually, I wrote an entire book directed to people in your situation. If you will order it off my website, from the bookseller there, I will give you a personal money back guarantee that it will answer almost every question you have. As to my current ideas re asset allocation, I think you need to continue to "hedge" your dollar "bet" -- by purchasing either a gold mutual fund, or following other strategies outlined for that purpose in the book. Also, be sure to consider Long Term CAre insurance, because nothing could wipe out your nestegg faster than the need to pay $8,000 a month for nursing care -- which is not covered by Medicare or supplements.