Have a Personal Finance Question?

Dear Terry,

I am 62 years old and I plan to retire in two years. I have a mortgage of $200,000 and a 401k of 225,000. I want to pay off my mortgage now. I also have income of $3,000 per month. If I pay off my mortgage, I'll have the 3,000 to live on. Should I do that?
SAVAGE SAYS: All I can say is: read my book -- The NEW Savage Number! It is designed for people like you. Go to my website and order it for $11.50 plus shipping. This is NOT a blatant commercial. It is the cheapest way I know to tell you why you're dreaming!
First, you do NOT have a 40lk worth $225,000. You have a 40lk worth $225k LESS
income taxes on that money! In other words, your retirement plan is worth at least a third less than the face value when you consider taxes!!!
If that doesn't make you realize how far astray your thinking is, consider this: AT only 3 percent inflation, the spending power of that $3,000 a month will be cut in half in just over 20 years. But your life expectancy is probably 30 years. It's all in the book. READ IT before doing something silly.

We have been getting the run around from HSBC. They won't give us the modification rate for more than 6 months. I haven't been working steadily, but my wife is now working 1 full-time job and a part-time job. Is there someone who can work with us and with HSBC to get a permanent rate? We have a first and second mortgage, been in our house 11 years.
SAVAGE SAYS: You put yourself in a box with your second mortgage. The first mortgage cannot be permanently modified without the consent of the second lender. That's why they are doing temporary changes. And, you're right -- you should be locking in a fixed rate now. But the second mtg makes that impossible from a paperwork standpoint. Can you pay off the second mortgage?? I'm afraid that's the only way out of this box. You won't be able to refi both unless there is still equity in the home, and even that will be complicated.

Hi Terry,

How do I find a great buy on a foreclosed house "without" paying for a list through the Internet? Can't I get a free listing from HUD or a Realtor who specializes in foreclosed properties?

Thanks for your help,

SAVAGE SAYS: Go to www.HomePath.com -- where you'll find a list of FHA foreclosed homes for sale through brokers.

I worked for a year abroad, and my contract was terminated almost a year earlier effective December 31st 2009.
The bank paid the full year of salary, and deducted taxes, social security, etc.
The bank is giving me a severance package of US$75K. Do I have to declare that money in my Income Tax return in 2009 as an income?(Even though it was not an "income", I did not earn it, it was a compensation for an early termination of my services. Also, should I request a wire transfer and simply put the money into my checking account? Is someone going to ask me "where did you take those $130K from?
I please ask you for your advice.
Note: I was not taxed for the 75K in the country where I am located, they gave me an "ex-gratia payment"

SAVAGE SAYS: While I don't pretend to be a tax advisor, I can tell you that if you are a U.S. citizen, even a severance or early termination "payment" will be considered income in the year in which it is received. It will be added on to the income you received as salary, and taxed at the marginal rate! You should contact a CPA or tax advisor now, before year-end, to determine (assuming you have a choice) whether it would be better to "receive" this income in 2009, or possibly delay till 2010. There is a possibility that tax rates will be higher in 2010 --which would argue for taking it now. But if you're going to be unemployed next year, then maybe you'll be in a lower tax bracket. Also make sure your tax advisor understands the implications of any taxation that occurs in the country where you receive the payment. (Taxes paid there may be a credit against taxes owed here.) And, above all, save some of that severance money to pay the taxes when they come due!

(LONG TERM CARE INS. PREMIUM INCREASE)
DEAR TERRY;
I know your'e a fan of LTC,so here goes;
I am a retired postal clk,age 61,with a policy with the FEDERAL LONG TERM CARE INSURANCE PROGRAM since 2003.The coverage was for $150 per day,a 5yr. benefit period ,90 day waiting period,and a 5% COLA which increased it it $1400 a wk.The premium at $142mo.has been raised to $182.
Should I pay the increased premium or reduce the benefit period to 2-3yrs or even increase the daily coverage? I presume that the current coverage won't pay all my LTC bills in an expensive area like SAN FRANCISCO where I reside.THANKS and miss you since I haven't heard you on BOB BRINKER.
SAVAGE SAYS: Well, you have one of the plans with the most "clout" against higher premiums, but that is definitely a trend. I suggest that if you can, you keep paying the new, higher premium. Save the option of reducing coverage for later years, in case premiums go up again. I hope this is a huge waste of money -- and that you never need to use this policy. But if you DO need it, you'll be glad you have it. There is no way the govt can keep supporting state-funded Medicaid nursing homes, and I truly fear what will happen to our elderly in 15-20 years if they don't have a LTC insurance policy.

Terry,

We are on the verge of filing for bankruptcy with $150,000 in unsecured debt. My husband's business costs are co-mingled with our personal finances and equipment repair, gas prices and the economy are the main reasons we ended up knee deep in credit card debt. We have all of the paperwork in with an attorney for a Chapter 7 filing by the end of November. Now the creditors - or rather the collectors - are calling us directly and offering settlements. Is it worth trying to figure out if we can settle with the creditors? What are the pros and cons to settling? The credit cards have been charged off and the collection agencies are offering between 15-25 cents on the dollar. Is it worth settling if the credit card has been charged off already?

My husband is an owner-operator truck driver, so his income is not stable, which does not help us as we consider the option of settling. Everyone we talk to is very anti-filing BK. We think we will be able to keep our home and business equipment. Will we be able to re-establish ourselves? How long do you think that will take?

We are struggling with this decision.

Thanks.
SAVAGE SAYS: Well, first, I'm going to give you my thoughts. But don't be afraid to go back to CCCS (MMI) to get their opinion. They have lawyers on staff who can also give you free or inexpensive advice.
Ultimately, the bankruptcy will stay on your credit report for 10 years, while chargeoffs and other issues like that will stay on your credit report fo 7 years. I thinkthe difference is minimal. But you might be wise to file for bankruptcy instead of settling, because from your email it seems that you'd still be deeply in debt. The money you use to settle with a few creditors might be challenged if it comes within 90 days of a bankruptcy filing. And yes, once a charge off is recorded to your credit report by a merchant, it remains there for the same 7 years. These "collectors" buy the debts at a huge discount, and any settlements they make are a profit to them!
So my advice is to listen carefully to your attorney, and get him to write it down -- his estimate of what you would pay, what you would have left, etc. Then take that back to MMI and get their opinion.
Neither alternative is pleasant -- but you might as well do the sensible thing that lets you get back on your feet and start over. That's why we have bankruptcy laws in America instead of debtors prisons!

I am a 63 year old widow. I have a bunch of stocks but no cash available currently. The Current Holdings percentages are: US Equity 18%, Non-US Equity 11%, Global Equity 3%, US Fixed Income 53.5% and Non-US Fixed Income 14.5% I need to borrow from one of my stock accounts.

1. Can I do that?
2. If so, what penalty do I pay?
SAVAGE SAYS: Wait a minute. Is this money inside a retirement account, such as a 40lk or IRA? If so, you can sell some of the stocks and withdraw the money without penalty -- But you will have to pay ordinary income taxes on the money you withdraw, so be sure to set aside some money for taxes. In fact, if you can, you'd want to wait until next year to withdraw, so the taxes wouldn't be due till the following year, April 2011.
But your naivete about this issue leads me to believe that you need some more financial counseling. Withdrawing from a retirement plan -- or selling stocks you own outside a retirement plan -- at age 63 means you haven't done the proper planning for the rest of your life! After all, it's likely that you'll live at least 25 years longer.
Pls excuse me if this is a one-time need for a unique expense. But if not, you need to seek advice from a fee-only planner -- one who will not be motivated by commissions. Go to www.feeonly.org to find a fee-only planner in your area.

Terry,
Oppenheimer blew up their Core Bond fund and left 529 savers in Illinois and other states high and dry. But clearly part of the accountability rests with the Illinois State Treasurer's office. Why did they change advisors to Oppenheimer? And why did they not exercise proper oversight, to see that Oppenheimer was investing what should have been the most conservative of funds (core bond holdings of college savers, many of whose children are actually in college right now) into collateralized mortgage securities. Yet both Giannoulias and Krishnamoorthi (former Deputy Treasurer) are bailing on us, running for higher offices prior to cleaning up the mess they've created in the Treasurer's office. Where's the accountability???
SAVAGE SAYS: OK, this is a tough one. I'll answer honestly --as I always do -- and to the best of my ability. And you should understand that I am totally a-political on this. And you should also know that I HAVE NOT GIVEN UP on pressing Oppenheimer Funds, and the AG, and the Treasurer's office for RESULTS on the proposed "settlement.'
That said, the switch to Oppenheimer funds was actually not made by this Treasurer -- Giannoulias -- but by his predecessor Judy Baar Topinka. And it was done for good reason: Oppenheimer offered lower fees, and a better choice of funds, and it had a stellar reputation. As to your second question, I actually do not believe that ANYONE -- even Oppenheimer MANAGEMENT executives -- realized what this fund manager was doing that caused all the losses! Finally, I understand why they're stalling: HUGE money is involved, because this particular fund was part of 5 state 539 programs. But I agree that this delay in resolving the issue is TOTALLY RIDICULOUS. I have spoken directly with Oppenheimer Management on several occasions -- and been totally stonewalled. I sent another message just last week. And I have not given up on this issue. Hope this explains -- Terry

Greetings Terry: Today, while listening to a renowned noontime business radio show here in Chicagoland, I was introduced to the term "mortgage accelerator program", where supposedly one can pay off a 30 year mortgage in as little as 7 years. Specifically, the radio guest used the website "Truth In Equity.com" as an example. The premise is intriguing, however I find myself VERY skeptical, as it seems to be one of those proverbial "If it sounds too good too good to be true...". Terri, are "mortgage accelerator programs" such as this completely legitimate and legal; and if they are, why would they remain such a guarded, well-kept secret? Any insight you can provide would be greatly appreciated.
SAVAGE SAYS: I don't know about this company, but the Savage Truth is that YOU can "accelerate" your own mortgage -- without buying into any program. It's something I did long ago to pay off my own mortgage. You simply add a regular extra amount toward principal -- For example, if your monthly payment is $1525, you can "round up" to pay, say $2,000 per month -- and designate the additional amount to go toward principal. You should inform your lender/servicer and make sure they are set up to handle this extra monthly payment (and credit it correctly against principal.) You can even ask your lender -- or use one of the many online calculators -- how much more quickly you'll pay off your mortgage, and how much money you'll save in interest, if you do this every month. (But since this is your own idea, you don't have to continue with the plan if your income changes through job loss.) I've advocated paying down your mortgage for years. People laughed then -- but not now. There's nothing like the feeling of financial freedom that comes from living in a fully-paid home!

Hi Terry,

I live in Alabama and I've been unemployed since October ,2008. During this time, I've been taking care of my twin boys who have autism and have been making slow, but good progress becaue I refuse to "medicate" them and everyone has commended me for sticking with unconventional treatments. Anyway, my grandmother had been assisting me with paying my capitalone accounts in the hopes that I'll get a job, but I haven't and she died 4 weeks ago! To my surprise, she left me $12000 to use towards my capitalone accounts (I owe $22100 and $22900 on each account). I've called capitalone to explain that I can't make anymore payments and offered to settle both accounts with $6000 one lump sum payments. They said they were sympathetic but there's nothing they can do for me. what should I do? I am current and if I don't make my "minimum payment" buy next Monday, I will be late etc. Should I waite till I'm 60 days late or 120 days? Should I continue to call? I'm afraid of being sued. These accounts are now closed and under my name only. I am married, but my husband is in no financial sheape to help. Pls. I need your advice...what should I do and most of all, will they come after assets my husband has to his name...remember, I live in Alabama. God bless!
SAVAGE SAYS: That is a terrible situation. Make the next payment so you aren't charged hefty late fees -- but I am trying to make contact with them to see if they will make a settlement.

Terry,

If I cosign for my child's student loan, will this count as debt if I apply for a mortgage?
SAVAGE SAYS: To the best of my knowledge, and I did some research on this, most student loans are not reported to the credit bureau until they enter the repayment period. Even then, the payment record is noted only on the student borrower's file. It does not appear that a parent co-signer would in any way be reported -- unless the loan goes into default. I know that your question implies you are wondering if you'd have too much debt to get a good rate on a mortgage if you co-sign the student loan. But it is not primarily your obligation. That's the best I can do by way of reassurance!

Can you suggest a good book or handbook dealing with wills, trusts, estate planning, estate executors, guardians and trustees etc.? Are these topics included in your books? Thanks
SAVAGE SAYS: Go online to Amazon.com and search "estate planning" -- and you'll find dozens of them! The most basic, of course, is Estate Planning for Dummies. But let me say that while it's important to research the subject and understand the terms, this is NOT a do-it-yourself project. If you make a mistake, you won't be around to fix it when it is discovered! So be sure to use an attorney who is a specialist in this area. And yes, The NEW Savage Number does have a section on these issues, and it is available, signed, in paperback on my website -- www.TerrySavage.com --

Why should a couple that makes $150,000 to $225,ooo qualify for the $8000.00 tax credit when buying first home and a couple that makes $75,000 and less doesn't? There again the more you make the more the government gives you back and the less you have it's screw you ?
SAVAGE SAYS: You may have misconstrued my article. It's "up to $150,000 or $225,000 per couple" that qualifies you for the first-time homebuyer credit. But I couldn't agree more with your conclusion!

I do I determine the financial strength of a home builder?
SAVAGE SAYS: That's a good question! Many people use an escrow account to dole out payments to the builder on completion of certain stages of construction. But there is no way that I know of to check on the builder's financial situation.

We are both retired and living off of our SS checks and husband's pension. We have an EJones Financial Advisor for one 401K and some stocks that we have and have another 401K with C Schwab. We just got a letter from EJ wanting us to consider EJ Advisory Solutions. It states that the advisory program uses mutual funds, exchange-traded funds (ETFs) and index funds to provide us with a long-term investment strategy. It uses the knowledge of a a team of EJ professionals, including their Investment Policy Committee, their Mutual Fund Research Team and our Financial Advisor to tailor an investment strategy to match our unique investing needs.
We are 64 and 65 years old and draw $500 per month from the EJ 401k (tax taken out at withdrawal)to suppliment our income. Can you shed any light on this 'new' program. I thought this is why we were paying the Financial Advisor, to make these decisions. Thanks for your help.
SAVAGE SAYS: OK, let me explain. First Edward Jones is a fine firm. The broker (financial advisor) gets paid on commissions -- every time you buy or sell. They are not necessarily trained to "manage" retirement scenarios that involve independent advice regarding appropriate withdrawal scenarios.
I will tell you what I would do if I were in your position -- and I highlight this service in my new book. I would contact T. Rowe Price (800-638-5660) and ask about their Retirement Income Advisory service, using Monte Carlo modeling. (You'll understand completely if you read The NEW Savage Number.) They charge a one-time $250 fee for creating the scenarios for you. You'll work with a financial planner. Their funds have no "load" or commission should you decide to use them. And even if you decide to stick with your current broker, you'll have a much better perspective on the range of possibilities and probabilities for retirement investing and withdrawing. This is the centerpiece of my new book -- and everyone in your situation has the same questions. No, I have no relationship with T. Rowe Price -- I just think they do a great job at a low price!!

Should I pay down my mortgage and home equity loan or put the money toward my 401K?
SAVAGE SAYS: The simple answer is BOTH! The specific answer depends on your age, situation, how much "extra" money you have each month, and lots of other individual issues. I think both are important And if you have a home equity loan or credit card debt, make those a priority because they are subject to rising rates. Similarly, if you don't have a fixed rate mortgage, take this opportunity to lock in a fixed low rate for 15 or 30 years, whichever you can afford.

Terry
Re: your fear of sending money overseas for imported oil, I have a simple solution. The US should phase in an increased federal gasoline tax. By phasing it in motorists will have time to adjust their driving habits (more fuel efficient cars, less driving). If they still complain they should be reminded that we've known since the first oil crisis in 1973 that there is alimited supply of oil and its price would be increasing.

Gas prices will not increase as much as the tax as the higher fuel price will decrease demand. less demand means less money will go overseas. Higher taxes means more money goes to the federal government and the federal deficit decreases.

Hello Terry!
I am finally funding my 2009 IRA. (I know the best thing is to fund as early in the year as possible, but I receive a large lump sum every November that I use for my IRA.) Protecting the principal is the top priority for me right now. I can get a 3 year CD for 3.4% at my bank (US Bank). It is so difficult to make good decisions right now. I just want to keep it safe for awhile (3 years?) until the economy and my head clears. I will not need this money before it matures. Do you have any other suggestions?
SAVAGE SAYS: That sounds like a pretty good rate -- make sure there are no annual "custodian" charges for this IRA before you sign up. I've run an experiment now, over 30 years(!) with two different kinds of IRAs -- my own, real money. One I kept in CDs -- started many years ago when rates were really high, and just rolled automatically to whatever rate was offered at the time. The other has been in an index fund -- S&P 500 -- just kept it going. I figured I'd really know --in the end, whenever that is -- whether safety outweighed investing. I must say, my "chicken money" IRA is way, way behind -- just rolled over at less than 1 percent! (The bank even called me wondering why I would do this, told them it was part of a very long term experiment!!!)
I don't know how old you are, or how much other money you have saved, just thought it might be interesting for you to hear this from me.

My widowed aunt, age 83, will be receiving the proceeds (original investment aprx $94K & ending value aprx $174K) from a 10 year fixed annuity this month. She is very concerned about her tax liability. Is there another investment into which she can move these funds to accomplish the followiing (she does not want another annuity due to her age):
1) Defer taxes until she withdraws funds
2) Is relatively safe (she is risk-averse)
3) Makes funds available in part or whole without penalty should she need them
4) Offers a reasonable (perhaps fixed?) rate of interest
Thank you
SAVAGE SAYS: I consulted with my annuity expert Jeffrey Oster (Jeffrey.Oster@raymondjames.com) because I couldn't quite understand your question. Turns out he had the same question: Why is she "receiving" the proceeds of the annuity? There are many ways to delay, stretch out, or spread out the withdrawals, if you just mean that the 10 -year guaranteed term of the original annuity has expired. But let me quote from Jeff's response:

If this is a death benefit situation., and .iff she was primary beneficiary, and the owner annuitant was not her spouse, in many cases she can keep the annuity where it is, use the non qualified stretch distribution rules based on her life expectancy and take annual payouts until she is gone.

And

If she is inheriting the annuity from her spouse she doesn't have to take anything out because the IRS allows spouses to defer and keep annuities with no required withdrawals if they are the primary beneficiary and their spouse was owner and annuitant.

When they say "receiving the proceeds", why do they assume she has to take them out? She could roll the annuity into another one -- which might create a new surrender charge period -- or just stay in the current annuity at current rates, withdrawing taxable cash as she needs it."

Obviously, there are a lot of variables. Feel free to contact Jeff directly at the email posted above. I trust him completely.

Hi Terry,

My wife and I are both in our mid forties and trying to buy another home. We were previous home owners but had to sell when I lost my job. Unfortunately, I was out of work for over a year so any money we made off the sale was spent on everyday expenses. Now we're starting over again at age 45. Could you please recommend what type of mortgage we should go with, and should we stay with a small downpayment or borrow from a 401k to increase equity?Starting over at 45.
SAVAGE SAYS: Well the good news is that you made it through your problems without ruining your credit -- and now you can buy a house at a bargain price. Check into FHA loans, where you must put only 3 percent down! That's the way most loans are made today, although there are limits on the purchase price. If you're in the Chicago area, contact my personal friend Daniel Chookaszian at AmericanStreet.com [dchooks@americanstreet.com] or call him at 312.376.3760 Ext: 215 for more info. He specializes in FHA and VA loans. (By the way, if you're a vet you can get an even better deal on a mortgage. Ask Dan.)

So I'm a recent college grad and I have $70,000 in student loans. I mostly used credit cards to pay for expenses while I was in school and I owe $17,000.
I envisioned 4 years ago that when I graduated jobs would be available everywhere. But the economy took a fall right when I got out of school and I haven't been able to get any jobs for the past year and a half.
I have $4,500 in my checking account. 0 in my savings. I can't afford my credit card payments anymore. My student loans are going to kick in soon for payment as well. Should I file bankruptcy?
What happens to my Sallie Mae loans if I file bankruptcy?

And what happens to my Credit card debt? and my cards?

I have a 2002 car worth $7,000. Would that be taken from me?
SAVAGE SAYS: Ugh! You're not alone. First thing you should know is that there is now a hardship deferral program for repaying student loans. It's the new "income based repayment plan" and here's a link to the column I wrote a few months ago explaining it: http://www.suntimes.com/business/savage/1579144,terry-savage-hope-grads-debt-051809.article
You should know that even in bankruptcy you would still be required to pay your student loans. They are not dischargeable in bankruptcy!
As for your credit cards, I suggest that you immediately call Consumer Credit Counseling at 800-388-2227. That will connect you to the nearest local office. You can trust their advice. I hate to see a young person start out with a bankruptcy, but that may be your only alternative -- unless they can negotiate a repayment plan with your creditors. Talk to them about it.

Would you say that a Fidelity Deferred fixed annuity for 5 years is a good investment for a 56 yr old widow looking to invest money from CD? Do not need the money right away but can withdraw 10% a year without penalty.
Thank you, Terry
SAVAGE SAYS: As long as that fixed rate is guaranteed for the same length of time as the surrender charges, and as long as you're sure that you won't need the money, this is an OK investment. Just remember a fixed-rate annuity works like a fixed-rate CD: that is, if rates go up in the next 5 years, you might be sorry you're stuck with a low fixed rate. One other thing to consider -- the whole point of this type of annuity is to defer taxes. But when the CD matures, you'll get one big lump of taxable interest income when you withdraw the money (if you decide to do that instead of rolling it over). At that point, tax rates might be higher, or that hunk of income might impact other issues. For example, when you're older and on Medicare, the Medicare premium you pay is based on your income level! That won't impact you yet, but you might consider how that tax situation will play out in five years.

#1 Will I be able to withdraw funds from my employers 401(K) that include funds from a Rollover IRA? I had heard that after I turn 55 I won't have to pay a penalty if I make a withdraw from my employers 401(K)?
#2 If I do have to pay a penalty would it be better to take a loan from the employer 401(K)and if I did take a loan would the amount I pay back each month through payroll deduction come off my annual salary just like regular a 401(k) deduction. Will the amount I pay back on the loan be taxed?
SAVAGE SAYS: I'll try to answer your questions, but first I'd like you to stop thinking about the entire idea of withdrawing money from your 40l(k) plan! The whole idea of having a 40l(k) is to keep your savings growing, tax-deferred, for retirement. You can't tell the company to stop taking out money for Social Security -- it's out of your hands (and you won't see much from it anyway down the road). So think of your 40l(k) in the same way -- money out of reach, set aside for retirement.
OK, as to question #1 -- you're referring, I think, to a clause that lets you start taking "substantially equal" payments from a 40l(k) plan at age 55 without penalty. The amoutn of those payments is determined by your life expectancy. And you do pay ordinary income tax on the stream of income. This is designed to "beat" the penalty for withdrawals made from a qualified retirement plan before you reach age 59-1/2. It is designed for hardship cases -- not for your use of your IRA as a "piggybank."
As to Question #2 -- Each plan determines whether loans are allowed, how they are repaid, and the interest rates. Again -- a bad idea, borrowing from your 40lk -- except in desperation. You lose all the tax-deferred growth and compounding for the money that is out of your plan. Worse, if you lose your job and don't/cant repay the loan, it is considered a "withdrawal" and if you're under age 59-1/2 it is subject to the 10 percent penalty AND ordinary income taxes.
Bottom line: Forget about yoru 40lk, except for making sure you have a diversifed investment program within the plan.

(my 3rd, and last, try to get this message to you.)

Do you have any suggestions regarding the pluses and minuses... the pitfalls...etc.. of Reverse Mortgages?

Any suggestions about reliable, trustworthy institutions that write them?

I am 86... wife 76... retired, fairly low fixed income. We own our townhome of 180 to 200 thousand dollars.

Thanks a million.

Savage Says: Sorry you had so much trouble getting through! I think very highly of the reverse mortgage product -- in fact, so highly that I arranged one for my father! The plus, of course, is tax-free month that you get in the form of a monthly check as long as you live in the home -- and you can never be forced out, or "run out" of money. The minus is the fees, which are pretty high-- and standardized. So you don't want to do a RM unless you're planning to live in the house for at least three years or preferably longer. There is an entire chapter on them in my new book: The New Savage Number, available in paperback on my website www.TerrySavage.com -- Or when you're on my website, look under "columns" and then scroll down to "search by date" and you'll see my latest column on the subject written this past summer. As for finding a good person to work with, please send an email to Terry@TerrySavage.com and let me know what state you live in.

With the current debacle regarding the mismanagement of Illinois Bright Start I am concerned about the safety of my children's college funds at College Illinois. I know this is a 529 plan, but what prevents what has happened to Bright Start from happening to this plan? Is it "safe" for me to leave my money there? I have paid for 2 four year college plans for my children ages 12 & 8.
SAVAGE SAYS: Good question, and I can understand your anxiety. First, you should realize the underlying difference between the two programs. And second, you should realize that the losses in Bright Start were a result of outright fraud and mismanagement -- and yes, I'm ready to be quoted on that -- as well as some losses that can be attributed to the actions of the market.
So let's get back to point #1: The College Illnois program is prepaid tuition -- purchased now at a discount, to be "redeemed" at full value for one or more semesters of tuition when your child is ready for college. The only way this program could fail is if the State of Illinois does not make good on this promise. This is a general obligation of the state, and while Illinois has many financial problems, I'm reasonably sure they will come up with a way to make good on these promises when the time comes. That is not to say that the education you receive at a school that might have had big cuts in financial support from the state will be the same education you get there today! But that is not the same as financial risk.

As for Bright Start, I have not given up on the possibility that some of the money lost in the Core Bond fund through mismanagement by OppenheimerFunds will in some way be replaced. The State Treasurer and Attorney General keep telling me that negotiations are underway -- and that is as of mid-October.

My 54 yr old brother has lived with my Mom his whole life.She lives in a trailer in a senior park.In the past year she has become ill from time to time.My brother is concerned, if Mom goes into a nursing home that he could lose his place to live, if we need funds to pay for Moms care? He feels that the state will take Moms home to help pay for her care? Is this possible? And is there any way we could stop this from happening??
SAVAGE SAYS: Yes, at some point if your mother needs to go into a state-funded nursing home, they will look to her assets for repayment. They're getting more aggressive about this. On the other hand, if your brother's name is on the deed, and if he has contributed a certain amount toward the upkeep of the home and the monthly payments, he may have an "interest" in the property that the state could not take. If the community defines "senior" as age 55, that might be possible next year. However, protecting his interest might require that the deeds or leases are changed -- and lately that may trigger a new "deal" for the land lease that could raise the monthly price dramatically. Bottom line: You need an elder-law attorney who understands both the Medicaid rules and real estate law (or trailer park law). If you're in Chicago, contact Janna Dutton for advice.

I have a question regarding a recent test.
If $700,000 is to be saved over 15 years, how much should be deposited monthly if the investment earns 5.25% interest compounded monthly?

A) $2564.64 my answer
B) $1833.39
C) $2040.12
D) $2281.01

Savage Says: I'll post this and let our readers -- certainly there's a math whiz out there-- come up with the answer!

My current mortgage payment is $808 on a 30 year mortgage with about 24 years left to pay at 5.8% interest rate. We are not planning on moving anytime soon. I have around 35K to apply toward this mortgage assuming they will accept a large principle payment. Would it better me to apply this payment keeping this oringinal loan or refinance at 4.5% for 15 years. I am not looking to lower the payment just the best route to speed up the payoff.
Currently saving 15% income and I have money in bank.
Thanks Joey
SAVAGE SAYS: Well, the decision really depends on the rest of your financial situation. A 5.8 percent rate is a good one, and you could always add an extra $200 or so per month, on a regular basis, and not hve the hassle of refinancing! that way you are not locked into a higher payment if things change. If you can refi to a 4.5 percent rate, that would certainly be a good option -- providing you can make the higher monthly payments. I wouldn't dump all your cash into the mortgage. I don't know how much money you have saved, but you certainly should have some liquid assets "chicken money" in the bank, not earning much, but giving you flexibility in an emergency.

HELP-------MY COMPANY IS TERMINATING OUR PROFIT SHARING AS OF THIS MONTH AND I AM A FINANCIAL MORON I DON'T HAVE A CLUE ABOUT HOW TO HANDLE THIS ROLLOVER----PLEASE ADVISE
($48,000.00) AND THIS IS ALL I HAVE OTHER THAT
MY S.S. FOR MY RETIREMENT, I CAN'T AFFORD TO LOSE IT OR TO HAVE SOME FINANCIAL ADVISOR LOSE IT FOR ME HELP-------------ASAP
SAVAGE SAYS: Call Fidelity (1-800-FIDELITY) and they'll handle it for you at no cost, and they'll advise you of an appropriate fund to move the money into. DO NOT TAKE A CHECK!!! It must be a direct rollover to a new custodian, or you'll owe taxes. Again, Fidelity is used to handling these rollovers and can handle it for you.

Terry: I have a Heloc on my house (which was paid off) for $24K. I have the same amount in some mutual funds that are half of what they were before. I am thinking of paying off the Heloc with the mutual funds money, and then doing a Reverse Mortgage. I am retired, 68 yrs. old and my total monthly income is $1950 per month which is SS and a small pension. I am running my budget pretty close to the bone, which is why I did the Heloc to cover my house taxes which are $6K annually and I don't have enough income to save for them. I used to pay them with interest earned from CD's -- but interest is too low now. I have $57K in CD and $80K in variable annuity which will start paying out when I am over 70. Do you think the Reverse Mortgage is a good idea? I plan to stay in this house. I sell Avon which really only brings in "lunch with the girls" money ...I appreciate your advice.
SAVAGE SAYS -- First, sorry for the delay in responding -- I've been on the road on a book tour. You're in a tough position. I really don't want you to fall behind on your taxes. But if you take out a reverse mortgage now, you'll get a much lower fixed monthly amount than if you wait another 5 or 10 years. I like reverse mortgages, did one for my dad. But you have such a long life expectancy that the monthly check will be low. (To see what I mean, use the online calculator at www.reversemortgage.org.) And if inflation returns that monthly check might not go far enough to compensate for other rising costs. If we werent' in a terrible housing recession, I might suggest you consider selling. But now that' s impossible. So you need to figure out how to keep going for at least 5 years in your house, paying the taxes and expenses.
I'm going to make a different suggestion. Call Consumer Credit Counseling SErvices at 800-388-2227. That will connect you to the nearest local office. These are professionals you can trust. Have them look over your budget and see if they can help you set aside money for taxes, insurance etc. They can take a look at the whole picture. Then get back to me and let me know what they say. Terry

Well it has happened with the second bank....they went bankrupt and are giving me 1.5 for a 5 year Cd that I had previously locked in at 5.5%. So much for locking in rates.

Now my financial adviser is telling me to put some money in ETD's which is a CD locked in for 5 years in the S&P 500. He says if you put in 10,000, at the end of 5 years you will always have your 10,000 and possibly much more if the S&P does well. What do you think of this investment.
SAVAGE SAYS: First of all, now you know that banks can renege on CD rates when they purchase failed banks. The reason you got such high rates in the first place, was that they were desperate to raise money. The reason they failed is that they paid such high rates that they (the banks)couldn't make money!
As to your "financial advisor's throught I think it will make HIM rich, not you, through the commission! Keep your money in a short-term CD at today's low rates -- and if inflation returns, you'll be able to take advantage of higher rates. If inflation is zero, then any interest you earn, even if low, is a bonus. At least your money will be safe.

If you want to invest in the stock market, do it separately. And then you'll get ALL the return of the market, not just the typical returns of these CDs which do not include dividences (historically 40% of the stock market's return).

When will you learn that you can't get something for nothing -- that anyone who offers you a higher return is including higher risk, or some cost that you just don't see on the face of it.

My husband and I have a new 3 month old granddaughter. What would you suggest we give our granddaughter for her baptism, Christmas, birthday...from an investment standpoint? Would it make sense to buy her some stock, or a whole life insurance policy? Please give us some advise.
Thank you!
Excited Grandparents
SAVAGE SAYS: Well, don't buy life insurance!! Why pay mortality charges, when the money could go toward an investment?? (And if, God forbid, she dies -- what would anyone do with the proceeds?)
Instead open a 529 tax-free college savings account. My suggestion: Go to Fidelity.com and look into their 529 program. You can always add more and it will grow tax-free to pay for college.

I read with great interest your recent article about considering long-term care insurance now. My father is currently in a nursing home and in relatively good health other than dementia - which means he's likely to live another 10-20 years. Fortunately for my mom, his retirement income currently covers the cost of his care.

This (and your article) scared me enough that I started shopping around and I was SHOCKED at how much even the minimal policies cost. Quite a gamble for something you may never use. I discovered that Consumer Reports recommend you not purchase LTC insurance unless you're at age 65 as long as you're in good health - i.e. no chronic conditions.

The URL for the consumer reports article I'm talking about is:
http://www.consumerreports.org/cro/money/insurance/longterm-care-insurance-1103/overview/

They make many very good points and I wanted to know if you agree with them - that I should wait until age 65 to make this decision?

SAVAGE SAYS: Well, in your case I would suggest that you only wait until age 65 to buy your LTC insurance if you are pretty sure that you will not inherit your father's dementia!
I personally think the Consumer Reports people are all young researchers who consider this a theoretical issue, and who haven't seen the true cost -- both financial and emotional -- of caring for a parent.
In fact, I'm surprised that having come face to face with the issue, you're willing to be exposed to the risk of winding up in a Medicaid-funded nursing home one day.
And if you'll read the four chapters on the subject in my latest book: The NEW Savage Number, you'll see that there are some neat ways for younger buyers to get around the issue of paying premiums for years, notably by purchasing a 10-pay policy that will be paid up with no worries about future premiums.

I am a 66-year-old who took a buy-out last November and retired. I have about $200,000 in a 401K account and don't plan to use any of it in the foreseeable future. I understand that I will have to start withdrawing from the account at age 70. Is there any way of avoiding income tax on the withdrawals by moving them into a tax-sheltered account? If not, can I put it in account(s) that shelter the income on the money?
SAVAGE SAYS: In a word, NO. The government is gong to take its cut -- sooner or later. But you might want to consider doing a "rollover" from your company 40l(k) plan to an IRA. That will give you a wider choice of conservative funds -- unless you are invested in a "stable value" fund inside your 40l(k). You may have few good choices for income in your 40l(k), which happens in many company plans that are built for younger workers who are tryingto build assets.
But if you contact Fidelity, or Vanguard, or T. Rowe Price, they'll not only handle the rollover, but will advise you on a wise choice of funds, and help you decide how much you should withdraw to make your money last your lifetime. You're correct that you don't have to withdraw till age 70-1/2. Leaving it inside either the IRA or401(k) is the ony way to defer taxes. Even if you leave a balance to your heirs, they will pay ordinary income taxes when they withdraw. And depending on the size ofyour estate, and anychanges in estate tax law, there might be an estate tax as well!
By the way, the things I have suggested are moves you can make yourself, by calling the fund companies I mentioned. If you ask someone else, I'll bet you they'll try to sell you an annuity -- and earn a big commission! And it won't change your tax picture!! You can handle this -- Terry

Hi
I am a 47 year old single mom with no savings. Does your new book have a retirement plan for people like me who are just starting to save ?
Thanks Sandra
SAVAGE SAYS: Absolutely, and Ill give you the info here, and it's always on my home page at www.TerrySavage.com. Simply open an account with www.usfunds.com in their All-American Fund. They let you start with only $100-- if you agree to let them take at least $30/month out of your checking or savings account to add to your fund account. You can always contribute more -- If you're working you can make it an Individual Retirement Acct or a Roth IRA -- where your money will grow tax free. Call them at 800-US-FUNDS and they'll explain how to get started.

Can a reverse mortgage be taken on a condo unit that is part of a living trust? The trustee lives in the condo unit.
SAVAGE SAYS: Yes, no problem with that. The owner retains title to the house. The RM just has a claim against the equity withdrawn -- but only when the OWNER decides to sell, or dies. The living trust will be required to sell the condo -- OR the beneficiaries can refinance the condo and pay off the loan, and keep the condo. This is exactly what I did for my own father!

I found your article on LTC very interesting and I hope really helpful; kindly name a few companies with whom I may discuss this possible purchas. My husband and I are elderly and without any life threatening illnesses. If there is a reasonable insurance company, we are very interested. Thank you very much.
SAVAGE SAYS: Call MAGA Ltd at 800-533-6242. Ask for Brian or Murray. They are independent LTC agents,a nd will find the best possible deal for you. You can use my name, or not, as I get nothing from this. But I trust them completely.

We have stocks in several companies that were aquired by inheritance. Where and what would be best way to sell these stocks
SAVAGE SAYS: Assuming you have the stock certificates, you can contact any brokerage firm -- such as a discount broker -- and bring them the certificates to sell. If they haven't been changed into your name, then you'll also need a certified copy of the death certificate. BUT selling is the least of the issues. You need to establish the COST basis for tax purposes. That is the value of the stock on the day the person dies. The brokerage firm should be able to get that for you if it isn't too far back. Or go to www.BigCharts.com to get a long term chart of the stock, and estimate the price on the date of death. If you've held the stock for more than one year since the death, you'll have a long term capital gain on the increase in value since the date of death. (Or a capital loss that yhou can write off against other gains, or up to $3,000 against ordinary income, if the stock is trading lower than it was on the date of death.) That's the current rule -- but it may change next year. If you're going to sell, I'd suggest doing it before year end while tax rates are low, and easy to understand!

I have $51,000 in a federal goverment Thrift Savings Plan that I think that I have to take out or do something with soon. I turned 70 this year, but am undecided what to do with it. A financial advisor recommended an annuity plan with a rider since we mentioned that we want it available if medically we need it and also want it put into something safe.

Do we pay taxes on this if we roll it over into something or if we roll it over into an insurance type annuity. American Equity's Gold Standard of a Minimum Guarantee over either 5 or 10 years time is what we are been given to look at as a possibility. My main desire is for it to be there for my wife if she needs it if I die first. I do need the money to live on nor does she because she has some social security and I paid for her two pensions. We want the $51,000 to be safe but grow reasonably. Any suggestions or comments about this.
SAVAGE SAYS: Well, there is no real need to roll out of the TSP; you could just choose the most conservative, money market alternative within the plan to keep your money safe. Then you will be required to start withdrawing some of it every year -- starting (not this year) but the year after you reach age 70-1/2.

The money you WITHDRAW will be taxed at ordinary income rates. Given your lowlevel of income, even if rates rise that shouldn't be too much of an issue. And what I have just described would be the most conservative option.

If you want to make sure that some money will be there for your spouse, you could purchase a joint annuity --a monthly payment that would start NOW -- and continue over both of your lifetimes. To find out how much you should get, based on the amount you put in -- go to www.immediateannuities.com -- and just enter your ages and the dollar amount you'd want to invest -- and you can see what various insurance companies will offer as a monthly payment. You don't need a broker for this!

You would want to roll your TSP into this annuity contract, so you don't pay taxes now -- only when the checks come.

The big issue with taking an immediate annuity is that fixed monthly check cannot change over your lifetime(s). So if inflation returns your money won't have as much buying power.

You could also buy a DEFERRED annuity with your rollover -- BUT typically these have penalties if you take money out in the first 5 or 6 years. Be sure that the salesman has explained all early withdrawal penalties toyou. These penalties are what helps pay the salesman's commission on this product!

For a better explanation of various kinds of annuities, see my latest book: The NEW Savage Number.

I am now unemployed and looking for ways to cut expenses further. My question is my spouse does not want or feel the need to budget at all! Over the years I have had to cover 'over spending'. Is this a hopeless situation?
SAVAGE SAYS: The situation isn't hopeless -- but the marriage might be! Seriously, different people meet challenges in different ways. Your spouse is not alone in being unwilling to face reality. Quick, call 800-388-2227. That will put you in touch with the nearest local office of Consumer Credit Counselng SErvices -- the national, non-profit you can trust.
DEMAND that your spouse attend a meeting with you. It will take a trained counselor, looking atyour entire financial picture (so be sure to bring your documents, make a list of bills, etc) to point out the reality facing you.

DEAR TERRY:

IN A 9-24 ARTICLE YOU SAY"IF GOLD SOARS,YOUR BUYING POWER WILL BE LESS AND THE VALUE OF YOUR DOLLAR HAS DIMINISHED". CAN YOU PLEASE EXPLAIN THAT MECHANISM. I ALWAYS THOUGHT THE OPPOSITE WOULD BE TRUE
SAVAGE SAYS: Think of it this way: Gold is priced in dollars. If the price of gold is higher, it means the dollar will buy fewer ounces of gold -- or anything else, whether soybeans, or coffee, or oil -- anything that is globally traded. The government can print dollars -- but they can't "create" gold out of thin air. That's why gold keeps its value. All the gold ever mind remains in existence -- but no alchemy can create more.

My wife lost her job and has a decent amount in her 401k. Wells Fargo manages the 401k. She is not being forced to close the 401k or transfer it out; she is just not allowed to add more to it. At least for the foreseeable future, she is not going to be working. Potentially she will not go back to work. Is there any reason to do anything with the 401k? Is there a down side to just letting it continue?

SAVAGE SAYS: If you like the funds that are available in the company 401k plan, there is little reason to move. But if you want to do a direct rollover, to a place like Fidelity, or Vanguard, or T. Rowe Price, you're likely to have a wider choice of funds. And, if you die with an IRA Rollover account, it will be easier for your designated beneficiaries to roll that account into their own IRA -- and keep the money growing tax-deferred. Some corporate plans insist on an immediate payout to beneficiaries.

Terry:

If I have stock in a company that files chapter 11 Bankruptcy, are my shares of stock now worthless?

SAVAGE SAYS: Yes! But you can take a tax writeoff against any gains you have taken in the same year, and if you have no gains you can write off the loss against $3,000 of ordinary income (and carry forward any remaining loss).

Our Investment Club is interested in purchasing some rental property and placing it in a REIT.

What are the "Pros" and "Cons" of a REIT.
SAVAGE SAYS: Your investment club needs to do a lot of homework before it does ANYTHING with its money! You can't just "create" a Real Estate Investment Trust! These are publicly traded companies with millions/billions of dollars worth of real estate assets. They pass their income on to shareholders, making them an attractive investment for those who want to "own" real estate, but don't want the hassle of managing it personally. Go to www. REIT.com to learn more.

I recently heard you in a segment on the Jonathan Brandmeier show and didn’t know if you could offer any advice in reference to my credit card issue. My car broke down and needed about a $3000 fix. I had to purchase their credit card since they didn't take American Express, so here I am!

I currently have a Chase credit card that has an interest rate of 14.99% and they sent me a letter (looked more like junk mail because it was on such a tiny sheet with my statement) that indicates effective September 25th, they will be raising my rates to 20.99%. My current balance is $2832.86 and my minimum payment is $64.83 and my finance charges are $39.48. I normally try to give $200 per month if I can swing it. Other times I only can afford $100-$150. The statement I received says that I can call and choose not to have my rates increased but doing so will permanently close the account. I’m not planning on using the card ever again but I cannot afford to give them more money than I’m already giving.

A friend told me to try and call to speak to the “hardship department” and see if they can lower my rates for a year. I haven’t heard of this before and did not know if people are actually successful with this option. I also don’t know if closing the account and continuing to make payments will affect my credit score, or if the hardship option also hurts my score.

I was thinking if the hardship is not a way to go, perhaps I could go to a credit union or my local banking branch to see if they could offer a lower interest rate on a loan under $3000 to pay off the account in full. I thought of using the title to my vehicle (paid off) as the collateral. I thought about either a loan or possibly a CD loan to pay my debt off with the creditors as long as the interest rate is lower than what I’m currently paying.

I know I have a few questions, but if you could, could you please advise whether any of the options I am thinking of are any good in your opinion? We have a baby coming next month and need to see what options we have so we can save a couple extra dollars in the long run. Thank you for your time.
SAVAGE SAYS: Well, you've got it exactly right. First, I'd go to the credit union and see if you can get a "used" car loan. That would be cheapest since you have no other loans, if your credit is good. Then you can easily pay off the credit card, and they may close it anyway. To be pre-emptive you can pay it off and ask them to close it -- and put it in your credit report that it was closed at the request of the CARDHOLDER. Then check your credit report (www.annualcreditreport.com) to make sure they do it that way.

Second choice, especially since you do not want or need the card, is to accept their deal -- current rates till the card is paid off. Won't matter much that they then close the card. YOu didn't want it anyway. Believe me, that's not the worst thing on credit reports these days! A lot of people are doing that just because they're angry at the card issuers!

Most important, pay down that loan asap. Terry

Hi,
I am 51 years old with a 12 yr old child. My husband passed away recently and
I have his insurance money to invest. I want to have college money for my child,
and be sure that I have enough money to live on for my lifetime.
I am employed (full time - with a decent job - nothing great) & have health benefits, so I plan to work for at least the next 10 years (until my child is out of college). My home is paid for, I have no car payment, only my utilities and day to day living expenses. What type of investment should I consider?

I am looking into annuities thru the Croation Fraternal Union (CFU) - 3 choices:
(All single premium tax-deferred annuitites - minimum $3,000)

1) Annuity/IRA Interest Rate on the 8 yr surrender charge contract is 4.75%
2) Annuity/IRA Interest Rate on the 5 yr surrender charge contrct is 4.25%
3) Annuity/IRA Interest Rate on the zero surrender charge contract is 4.00%

My Questions:
1) The CFU is not FDIC insured, so would this be a safe investment?
2) Is the CFU insured by the State - (by the State Guaranty Assn - up to $100,000 or
$300,000??

Would it be smart for me to put the maximum into a Roth IRA each year for myself?

Are there any other investments that I should look into?

Thank you for your help.
SAVAGE SAYS: I think, without exception, that those are TERRIBLE ideas! Please contact me directly by writing to Terry@TerrySavage.com and I will try to point you in the right direction!

hello terry.I currently have sum of money I would like to invest for income. The current cd rates are not much above 1% . I am considering buying a stock like the Dow jones diamonds and simultaneously selling an equal amount short to lock in the 4% current dividend. If the dividend changes in the future i thought i could exit this position when necessary without risking the original principal. What are the risks involved in a transaction like this ..
SAVAGE SAYS: This is a sophisticated, complicated strategy -- and not without risk. Go to www.CBOE.com and click on the education tab to learn more. This is NOT for chicken money, which is money you can't afford to lose!

Terry,
It's good of you to anwser our questions. Throuh your writings, I learned of Bob Prechter. He thinks the dollar has bottomed. How specifically does he say to play that, buying treasury bills (if so, the kind of treasury) or how else? Thanks.
Steve
SAVAGE SAYS -- Well, I missed answering your question the day it was posted -- crazy week after Labor Day -- and I hope you didn't place your bet that the dollar had bottomed out. Obviously, it made new lows earlier this week! And I would have suggested that possibility, because I hate to disagree with Prechter, but I think the dollar will be trashed longer term.
If you believe me -- you buy gold -- coins or stocks. (A bit late now, with gold over $1,000 -- so wait for a pullback, but I think it is going much,much higher.) But if you want to stick with Bob's advice, do it conservatively, by purchasing a short-term bond fund or Treasury bills. If the dollar is to be stronger, it will be through economic growth, which could push interest rates slightly higher.
Now you can make your decision -- tough one, because that kind of disagreement is what makes markets!

Terry
My 23 yr old has just entered the working world ya!!!!. I told her she should invest in a Roth Ira. Am I right in this assumption. She has no tax write off's. I thought you wrote an article about the benifits of the Roth but i can't seem to find it.
SAVAGE SAYS: The Roth IRA is the perfect choice for a retirement plan -- if she earns less than $100,000! The money she puts into the IRA won't qualify for a tax deduction -- but it will grow over the years to be withdrawn tax-FREE -- unlike traditional retirement plans on which you pay ordinary income taxes on withdrawals.
She can open her Roth IRA at any place. My suggestion for those with small amounts to invest is to go to www.USFUNDS.com and open the IRA in their All-American Stock Fund. She can start with as little as $100 -- if she agrees to a miniumum automatic contribution out of her checking account of $30 a month. And she can always add more, up to the IRA contribution limit each year, currently $5,000.

Hi Terry,

My wife and I have socked away cash for some time and continue to build up money to eventually buy a house. It's being storied in ING's 2% savings account at this moment.

But I also dabble in stocks and continue to hold DRY Bulk shipping stocks with hopes for a healthy recovery (moreso in China).

Is this a risky strategy, as I'm only using a mere 3% of our holdings in individual stocks?
SAVAGE SAYS: It will only look "risky" if you lose money in your "dabbling!"

Dear Terry.
My daughter will be going to college next year and i am planning to apply for FAFSA in Jan 2010. I was told that if you have big mortgage on your house and have no money on your kids name than i have fair chances to get a Financial aid and not a loan and that i do not have to pay it back. Is it true. Please advice. Thank you.
SAVAGE SAYS: Well, your email is a good reminder to me of why I write a column every year explaining the student loan process. You can find them in the archives of my column at www.TerrySavage.com.
But to answer your question -- you're smart to think ahead -- but you need facts, not misinformation from friends. Yes, there is a lot you can do to reduce the assets, and perhaps income, that must be reported on the FAFSA form you will complete in January. For some great tips go not only to my columns, but to www.paylessforcollege.com, where Reecy Aresty guides you through the process of rearranging your financial situation to qualify for more aid. For example, any money in your child's name should be spent this fall, perhaps on a new computer, so that it is not in "savings" in a child's name. Money in a 529 plan does not count as a child's asset. Contributing more to a retirement account could lower your 2009 income, and impact financial aid.
BUT -- most financial aid comes in the form of student loans -- either subsidized (meaning they don't accrue interest while the student is in college) -- or unsubsidized. BUT THE LOANS MUST BE REPAID after graduation. There may also be some grants, scholarships or work-study programs that do not have to be repaid. But only students from very low income families tend to get those. YOu can search for "free money" -- scholarships -- at www. fastweb.com -- That should give you a good head start.

Hi Terry,

I have a question about the 'Making Home Affordable' program. I met every single one of the qualifications, but my lender would still not let me refinance because my loan did not originate with them (I used a mortgage broker when I applied for a loan). Why does this matter? I feel like this is just more unnecessary red tape, and yet something else keeping more people from taking advantage of this program.

SAVAGE SAYS: The Making Home Affordable Program is a CRUEL JOKE. I wish I could give you better advice. The only thing I can say is get the name and phone number of the person who said this to you. I'm working on a new report on the situation and I think I'll turn one of my columns into a headline called: " Idiotic Statements from Stupid Bank Employees"! Seriously, send me the name, phone number and I'll keep your name private, but I need your info to contact the bank.

Hi Terry,

My wife and I are looking for a financial adviser, any suggestions?
SAVAGE SAYS: First, define "financial advisor." If you mean someone just to give you investment advise, you might want to go to a mutual fund company such as Fidelity or Vanguard, where they offer low-cost, no commission mutual funds AND free investment advice, depending on the size of your account.

But if you want someone to evaluate your entire financial picture -- investments, insurance, tax situation, retirement planning, estate planning, etc -- then you should go to www.CFPboard.org - That's the website of the institute of Certified Financial Planners. You can search geographically. There should be no charge for a meeting, and you can ask for, and should check references. MAny of these planners charge a flat fee, but might also charge commissions on products they sell. If you only want a flat-fee advisor, go to www.feeonly.org and search their roster of financial planners.

Terry I have been looking at Cd rates for a short term CD 12 months to put my wife's severence since she lost her job in June. I came across an internet bank called Ally. Since I am old school and like a brick and mortar institution, what is your opinion of this type, especially Ally as far as safety and credulbility?
SAVAGE SAYS: Ally bank is the new name for the old GMAC (which was the financial arm of General Motors.) This is an FDIC insured bank, so you have the same safety guarantee as with a bricks and mortar bank.

I have been with a new employer for about a year and I am eligible for retirement in about 11 years. I have about 60K in a Rollover IRA at Fidelity, would I be better keeping the money where its at or moving it to the new employer? Does investing in Mutual Funds cost more than investing in stocks?
SAVAGE SAYS: Leave your existing account at Fidelity, where you no doubt have a wider choice of investment alternatives. But do start contributing the max at your new employer. Separately, the answer to your question depends on where you do your investing! You can buy stocks through a discount brokerage firm (with no advice given) far more cheaply than buying mutual funds through an advisor. And you can also buy mutual funds with no commission/load through a place like Fidelity or Vanguard -- much less expensively than buying stocks through a tradiotinal brokerage firm. I suggest you do some homework before buying any stocks OR mutual funds outside your retirement plan.

My wife and I are in our mid 40's, we finally purchased our first house in 2006. a small townhome that we love. we only had 10k to put down and followed our lenders advice (Wells Fargo)we took a mortgage for 80% on a 10yr arm @ 6.25% and a 20% home equity loan @ 8%. 3 years later we are finding we can afford to pay less and less on the home equity loan to the point we are only able to pay the interest.We contacted Wells Fargo about refinancing and were told we could only re finance the original 10 yr ARM to todays rates for 30 years; but we are stuck with the home equity loan and the high enterest.

Are we stuck? Do we have any options?
SAVAGE SAYS: Well, is the second loan, the home equity loan, also with Wells Fargo? That's pretty nasty to only refi the first loan -- although lower rates might make for a lower monthly payment, and allow you to pay off the home equity loan.
But Wells Fargo is not the only game in town. If you still have equity in your home, and good credit, you should try another lender -but quickly before you fall behind on either of these loans.

My husband and I are just about ready to file for Chapter 13. We have tried to work with Chase on numerous occasions trying to get the interest rate decreased based on hardship. We were told last night by Chase representatives that our dept to income ration was TOO BAD for them to help us, if we had less dept then they could help us. Our answer was that if we had less dept we would not need the help.
We have 3 homes, our main home, one in DeKalb IL, where our children live when they attend NIU and a vacation home in WI (without a mortgage that we built over the years when things were better). We have 4 children in college, one will complete her studies this semester. Summers are difficult without renters in the DeKalb home otherwise the roommates cover the mortgage.
We have loans on insurance policies and a second mortgage on our home. There are medical bills that we have been unable to attempt to pay with creditors calling almost daily.
I have a professional job, I just changed jobs to increase my salary which should help. My husband is building his business and it has been lending us money to keep our heads above water but can not any longer.
We really thought that Chase would help us out, we are willing to pay just asking for a lower interest rate, paying the minimum shaves a whole $150 off the $22,000 balance.
What do we do next? People have recommended Credit Counselors but then we hear they are not trustworthy so we do not know if we can use them. Do you have any suggestions. Thanks for your time.
SAVAGE SAYS: Ugh -- you're caught in the "upwardly mobile" trap. Have you tried to sell either of the other homes? It's a tough market, but things are picking up. Have you contacted a bankruptcy attorney to find out what will happen with these properties ifyou file? Your main home might have a degree of protection in a bankruptcy -- but probably not those other homes!
Let me give you the one number I trust for credit counseling -- Call Consumer Credit Counseling Services at 800-388-2227. That will connect you to the nearest local office. In Chicago, it's called Money Management, Inc. You can explain your situation over the phone and get an independent assessment of whether bankruptcy is the best option for you.

I read your article the other day in the Sun-Times about the changes coming for charge card companies and that most companies are making changes now before the changes take effect. It seems like all of the charge card companies are doing it, companies that previous to this were known for their low interest rates. I have a Capital One that raised the interest rate, as well as a Discover and American Express that have done this also. But the worst came from Chase. They sent a notice about a raise in monthly minimum payments, that I don't remember receiving, and even if I did remember I probably wouldn't have figured out exactly what the raise would be. Unfortunately, when I received the invoice it was raised over 50%. My minimum payment was $200 and was now raised to over $500. When I questioned it, they said it would be hard to come up with the extra $300 but I would get used to it and would be able to pay off this card faster. These kind of changes are ridiculous. There will be a lot more people defaulting on credit cards with the changes they are instituting. Thanks for your articles in the newspaper, they are always very informative.
SAVAGE SAYS: You make a good point!

Hi Terry, Do you have an opinion of Doug Casey and Casey Research? I have searched the internet and cannot find any reviews of his books or newsletters or the man himself. Thanks for your help.
SAVAGE SAYS: Doug Casey has been around a long time, and has some truly interesting viewpoints. But my favorite is Bert Dohmen, who writes the Wellington Letter (www.dohmencapital.com)

I am active military and have recently started investing in the TSP. I overheard a radio individual state his percentages he would invest in regards to the different funds. It was like 40% in the C fund, 20% in the G fund, 20% in the F fund and 20% in the S fund. Would you happen to know who it was and/or know what those percentages and funds were?? If not, what would your strategy be to invest to gain the most return in the long run.
SAVAGE SAYS: For those who are not in the military, I should point out that those labels (typical govt talk!) are for different fund choices within the government's "40l(k)-type" retirement plan. Now let me point out that each individual should have a balance between the funds, but that every individual's allocation should vary -- because we all have different situations. So if you're still contributing, you might want to have more inthe C Fund, which is for large company stocks. Over the years, that should outperform the more conservative options. But just to make your job easier, the government has recently added the LIFECYCLE funds, where they'll do the asset allocation (fund choices) for you -- based on your age. IF you don't want to become involved with watching, and changing allocation over the years, this fund will be your answer!

dear terry,

i've read your article regarding us savings bonds. what would you suggest as an alternative to buying ee or i bonds?

thanks for your time
SAVAGE SAYS: Well Series I bonds are a pretty good deal, especially if inflation returns. If you want inflation-protection AND safety, they're the way to go. Or if you have an IRA type account, you could buy a TIPS (inflation protected securities) mutual fund. The problem is that if you hold them outside a tax-sheltered account you owe taxes on them every year (a complicated explanation, so take my word for it!)
You could also buy a short-term money market mutual fund. Because it invests in short-term securities, the rates will climb to match inflation, if it returns. Most require $2500 to start, though some have lower minimums. Or you can go to www.TreasuryDirect.gov and buy T-bills directly, in minimum amounts of $100.

Hello!

Enjoyed your article on "Cost of credit card debt soaring".

This is a truly horrible financial system that does this to people.
SAVAGE SAYS: No, people do this to themselves!

Thank you so much for this cogent look at the specifics of the new law. I intend to print it out and use it for reference if I think a company is violating provisions of the statute. Who would you recommend I contact if I find either of my credit card companies are breaking the rules?

SAVAGE SAYS: They won't violate the law. They havent been violating the law -- because the law was so loose. Now it's tightened up and all major banks and card issuers will obey. They have too much to lose! Dont' worry about it. They have huge staffs of lawyers to figure out just how close they can get to the line, without going over! Terry

Thank you so much for this cogent look at the specifics of the new law. I intend to print it out and use it for reference if I think a company is violating provisions of the statute. Who would you recommend I contact if I find either of my credit card companies are breaking the rules?

SAVAGE SAYS: They won't violate the law. They havent been violating the law -- because the law was so loose. Now it's tightened up and all major banks and card issuers will obey. They have too much to lose! Dont' worry about it. They have huge staffs of lawyers to figure out just how close they can get to the line, without going over! Terry

Terry,

Can you please tell me if Preferred Debt solutions pfsdebtsolutions.com is a reputable company?
SAVAGE SAYS: This is one of a myriad of "debt negotiation" companies that has sprung up to prey on people who are already buried in debt. Here's what's wrong with most of these companies:
Unless you have cash to offer in settlement (not likely), they tell you to stop paying your credit card bills every month, and instead set hte money aside in a special "escrow" account. When you've accumulated enough money -- they'll take their fees. THEN, they'l lcontact the card issuer to offer a settlement. BUT, in the meantime you've really ruined your credit, by not paying -- and the creditor may even try to attach your wages. You've jumped from the frying pan right into the fire! Avoid these companies!!

Dear Terry,

I have a 30 year mortgage with a first and second mortgage. Interest is over 6% on the first, and 9% on the second mortgage. attached to that there is a balloon payment in 2016 of over 26,000 dollars. I owe more on the house than what the market will offer me. Can you give some advice as if you where in my situation? I'm thinking maybe it's better to sell now, and take the lost.

SAVAGE SAYS: Well, this is a tough one. You could walk away -- as long as the mortgage is "non-recourse" -- that is, as long as they can't put a lien against your income or any other assets for the amount of the loss. That's something that should appear in either of your mortgage documents.
I can't say when the house might be worth as much as your mortgage -- that depends on the economy and the mortgage market. But if you walk away it will ruin your credit, because it will result in a foreclosure. And that might make it difficult to even rent a new place. Of course, if you simply stop paying, it could take months for that foreclosure to take place, so you'd be living there for nothing -- and could possibly save enough money to move when the foreclosure happens. That would probably guarantee a rental, because you could pay 6 months in advance, even if you have bad credit.
But the real question is whether you can "afford" to keep living there, paying both mortgages, and waiting it out. If you can't, you should deal with this sooner rather than later. IFyou want unbiased advice, and a personal look at your budget to help you with this decision, contact CCCS at 800-388-2227, which will connect you to thenearest local office of a member agency of Consumer Credit Counselng Services.

Dear Terry,

I have a 30 year mortgage with a first and second mortgage. Interest is over 6% on the first, and 9% on the second mortgage. attached to that there is a balloon payment in 2016 of over 26,000 dollars. I owe more on the house than what the market will offer me. Can you give some advice as if you where in my situation? I'm thinking maybe it's better to sell now, and take the lost.

SAVAGE SAYS: You're in a tough spot -- but you're not alone. And don't think you will be able to sell this house and get out of trouble. If you sell at a loss, you'll still owe the balance to the lender(s). Call Consumer Credit Counseling SErvices at 800-388-2227 and let them go through the options with you. None are good.

I am 66 years old and recently retired. What are my options for money in my 401(k) account. I don't have plans to use that money in the foreseeable future. Should I leave it there until I face mandatory withdrawals? Is it possible to roll it into another tax-deferred instrument, either now or when it must be withdrawn?
SAVAGE SAYS: You SHOULD roll it over into a different custodian -- one with lower costs and more suitable investment choices (ie more conservative) now that you're retired. I suggest contacting Vanguard or Fidelity (go to their websites or call 1-800-Vanguard, or 1-800-Fidelity) and ask them for help doing the rollover (so you don't make a mistake and get taxed) and also they'll offer help with investment choices. And they're both very low cost! Also, don't forget to name a beneficiary for this IRA rollover account.

I want to pay less interest on a 15-year mortgage and
accelerate the full payment of it.

If I pay 6 months of principal payment in one payment,
will this payment eliminate the interest to be paid for
the following 6 months?

Will paying the interest only and the insurance in my payments
in an accelerated manner also eliminate the interest to be paid?
SAVAGE SAYS: It's not a bad idea to "accelerate" your mortgage -- BUT you can't do it in the manner you suggest. First, contact your lender and make sure there is no penalty for prepayments. Then, if you can make one large lump payment, perhaps because you get a bonus, or an inheritance, they will apply it to PRINCIPAL. That's what you want to do, because that's the way to get your balance lowered -- and eventually pay less total interest. If you want to make extra payments on a monthly basis, make sure their computers can handle that. Try to pay the same "extra" amount every month, so things don' t get complicated. Then specify that the extra payment be applied to PRINCIPAL. It's a long complicated explanation -- so just trust me that this is the way to do it!

Hello Terry,

I have mutal bond funds. I have heard if interest rates stay low bond funds usually do well is that true or false? explain please..

SAVAGE SAYS: When interest rates rise, bond prices fall! That's the basic principle. Think about it. If you have a 30-year bond paying 4 percent, and inflation returns, then any company (or govt) selling new bonds wil lhave to pay a higher interest rate. Maybe they'll offer new bonds at 6 percent. Then anyone with $1,000 could get a 6% rate. So what's your old 4% bond worh? LESS!!
That's the danger of buying long term bonds. Even if the company is good, and can pay its interest on time -- the MARKET for the bonds values them currently at less than "face value" because rates in the market have moved higher.

Terry, I bought my home 2 years ago at the height of the market with 0% down. I took a combo 75/25 loan - $180k and $60k at 5.875% and 9.125%, respectively, both with the same lender. I did this so I would not have to pay PMI. Now, 2 years later, I am underwater as the home is now worth $200-$215k according to Zillow and other internet estimates.

In my current state, I believe I may qualify for a refinance under the HARP initiative. Ideally, I would refi my 1st mortgage up to the max allowable LTV of 105%, $210k on the low end, and refi my 2nd mortgage for the remaining balance, which is about $25k. This would save me $150-$200 a month because even though my 1st mortgage rate may increase to around 6%, my blended rate would decrease significantly.

I had this all figured out and was ready to ask for a refi when my lender burst my bubble by saying that they would not refi my 2nd mortgage. Further, they said no other lenders participating in the program were refinancing 2nd mortgages in cases similar to mine.

So my question is - Is this true? Are people like me who have 2 loans with negative equity up the river without a paddle? Or are they just trying to brush me aside? Please let me know if I have any hope of bettering my situation.
SAVAGE SAYS: You're in a tough situation, but I have heard that many lenders will not refi a second into a new modified first -- especially when the home is underwater. They just don't want any more exposure to loans on homes that are worth less than the totaal owed! I don't have any good advice for you.

Hi Terry I was wondering if you heard of any companies hiring people to be virtual assistants? Do you know of any legitimate work at home customer service based jobs?
SAVAGE SAYS: It's a realistic concept, but I have no idea which companies are legit -- or wheter you need a company behind you to do this. Read this article:
http://www.entrepreneur.com/startingabusiness/businessideas/article71516.html

I was very interested in your recent article about life insurance. BUT I HAVE A QUESTION.. could you PLEASE PLEASE help me.

My brother died of a heart attack 5 years ago and NEVER told me the name of his life insurance policy that he had in my name and my godson's .. he always said we'd be taken care of if he ever died.. i never wanted to talk about that so NOW i have been trying to get that life insurance policy.. HOW DO I DO IT? why don't THEY contact me?
If they have tried to contact me.. I have moved since my brother probably listed my old address and old phone number.. and i'm sure the insurance people, WHO EVER THEY ARE since I do NOT have a name.. are HAPPY that they do NOT have to pay it out.

Will that policy somehow in 7 years go to unclaimed property cashdash with the state treasurer's office? he died dec. 19, 2003.

I just don't know who to call, where to look.. i'm sure all his paperwork is with his wife and she hasn't spoken to us since he died... probably because she doesn't want me to get the money. she just tore up his paperwork .. he also being a lawyer had told me he had a will and ALWAYS nagged at ME TO get one too.. AGAIN his wife denies he had a will. She is lying and i have no recorse.

SAVAGE SAYS: Wow -- this is a horrible story. And a good reason for everyone to fill out my Personal Financial Organizer form. Anyone can get a copy by filling out the popup box at my website, www.TerrySavage.com. By return email, you'll receive a link to the organizer. You can print out as many as you want. Fill it out and leave it with someone you trust.
Now, as for any life insurance proceeds, you can check with the State Treasurer's office -- they have a division that holds on to money that has "escheated" to the State. You should ask them to look both under your brother's name, and YOURS, (and your godson's) since you were the potential beneficaries.

I don't know if you'd be able to get his bank records at this late date, if you knew the bank he used. That would reveal his checks used to pay for any insurance policy.

But without a shred of proof -- except his words to you -- that he was paying on a policy, there's really no place to start.

As for the will, you should check the probate court, under his name, in the county in which he resided and/or died. A will would have been probated after his death to pass his assets to his spouse, anything that wasn't in joint name. So it would be a matter of public record if there was a will, and you could see its provisions. (And you could see the attorney's name who created the will, and who might know something about whether he said he left insurance to you -- outside the will.)

Sorry, but that's about all I can think of to help you out

Hi Terry - My parents have have wrestled with putting their assets in a trust - the largest of which is their home worth $300K. They also have CD's and annuities - probably less than $100K. Instead they have put the assets in their 3 childrens names. What are your thoughts about that relative to estate planning since they don't have a sophisticated portfolio?
SAVAGE SAYS: Well, that doesn't solve their problems -- and may already have created some estate problems. We won't know until we see how the estate tax law changes.
But what I mean is that by putting assets in childrens' names, they have in effect "gifted" those assets to their children. They should keep good records of the value of the gift at the time it was made! And if they put assets such as a certificat of deposit in JOINT NAME with children, then they have gifted half the value of the asset.
Even worse -- by not creating a revocable living trust (and retitling assets in the name of the trust, at no cost and with no tax consequences) they haven't solved the problem of what you kids can do with the assets while they are alive, but perhaps incapable of handling their own affairs. A revocable living trust lets the named successor trustee take over if they are incapaciatated -- without getting a court order.
Finally, they may have been advised to transfer assets to their children to "impoverish" them in case they need long term custodial care. That would allow them to qualify for Medicaid care -- if they need it more than 5 years after the asset transfer. But take a look at Medicaid-funded nursing homes. That's not where you want them to be -- now or in the future!
Getting professional estate planning advice would have solved these issues -- perhaps including the purchase of long term care insurance. But they won't be around -- or might be too incapacitated to act to change things -- when the potentially expensive and tragic consequences of their decisions are apparent.

No, not everyone needs a revocable living trust -- But they cost so little compared to a simple will, and provide so much in the way of benefits (privacy, flexibility, immediacy) that I recommend a consultation with an estate planning attorney for everyone with the level of assets you describe.

I am collecting Soc. Sec. Disability and private disability insurance payments. Can I collect monthly annuity payments without it affecting the amount of my private ins. payment? Does this fall under the category of "other income"?
SAVAGE SAYS: I'm guessing that it does -- BUT I can't be sure. The SS website says their definition of income, besides wages, is: "Unearned Income is all income that is not earned, such as Social Security benefits, pensions, State disability payments, unemployment benefits, interest income, and cash from friends and relatives."
So why don't you contact Social Security anonymously and ask them directly.

Dear Terry

Could you tell me if We could set up something that the Master card
are going strait to our bank for payments.
SAVAGE SAYS: If you have a checking account with your card-issuing bank, you can arrange for a monthly transfer from your checking to cover the balance. Otherwise, the easiest way to handle this is to sign up for online banking with your own bank. Then they'll show you how to link to each of your payees -- whether your mortgage, credit card issuer, utility -- or even a family member to whom you want to write a check. Then you can do that when the bills arrive, with just a click of your mouse. Ask your bank -- It's easy, safe, secure, FAST -- and it saves postage! And you can even set up regular monthly automatic payments so you don't get late fees.

My husband and I both make enough money to cover our bills, however, we were not about a year and a half ago. So for this time we have been behind on payments and cant catch up. We only owe 6800.00 for everythig (except house and car but that seems so impossible with our neccessary daycare expenses. How can I just pay off such a small amount? It would really help us to be rid of this debt.
SAVAGE SAYS: Let's just keep this simple. One of you has to go out and earn extra money!

Thinking about putting around $500k out of a $3 million portfolio into a fixed insurance annuity,however,with Obama style healthcare looming, i am concerned about the sustainability of the private insurance companies. Could you comment please ?
SAVAGE SAYS: Well, that's a double question. The first thing I'd say is, why a "fixed" rate annuity -- especially with all this money creation. You realize that you're locking in a fixed rate for a period of years, and if inflation returns then you're likely to be sorry because inflation would push other rates higher? (That's not to say there aren't some interesting variable annuities, with guranteed minimum income benefits, that might be interesting for those nearing retirement. See my recent columns.
Then you mention Obama-style healthcare. That carries its own set of problems -- but none that I see impacting the life insurance companies (not health) which typically underwrite fixed annuities. So a lot depends on the company whose annuity you choose. I always recommend sticking with top-rated insurance companies.

Dear Terry,

I am a student of Pastor Benny Hinn's school of Signs and Wonders on Monday nights. You spoke in our class giving very good information and advice, me being the first person to ask you a question.

We're starting to begin the process of qualifing for a house and two things you told me was;
1. buy only 'banked' owned homes and
2. at a fixed rate.

A. When you say banked owned, do we have to apply for the loan from a bank or can it be where we could get the best loan? I have banked with B of A now for 23 years.
B. My parents left 4 siblings a house with no will but my brothers put the deed in their names only (I have a copy). According to the deed, it's states that they are the only living heirs and that's a flat out lie from the devil! There's an older sister and myself. I would like to get my part of the inheritance that's due me so we can either pay off debt or put it towards a down payment on our house but I don't know what I need to do to get it. It's now 22 years since my mom passes away and my younger brother and his family have been living there free all this time.
If you can give me any kind of direction or suggestion as to where should I begin, I would be forever grateful.

Again, thank you for your information the night of the class.

In His Unfailing Love,
Sylvia

am writing you again for advice. I want to thank you for the help you have given me in the past. If you remember I was the person with a large investment in USAA. I have additional fund to invest and my broker advises us, my husband and myself, to invest in municipal tax free bonds. We are 80 and 82 years of age. Do you think this is wise since it might interfere with the inheritance going to our children in the case of our deaths? What length should we consider or doesn't it matter?
SAVAGE SAYS: You have a broker -- NOT a financial advisor. There is a big difference. The broker only makes money when you DO something, BUY something! Now you know his incentive. And there's a lot of commission hidden in municipal bonds -- for him, and HIS retirement!!!
Leave the money in the bank in insured CDs, while you sort out your estate plan, financial strategy, and keep enough money in the bank to cover future medical issues, etc.

I am currently in a 30 yr bi-saver plan at 7.75% and have another 20 yrs to go. I have about $6,000.00 to refiance with. Should I refiance through a local bank for 20 years or just pay the amount on my bi-saver.
SAVAGE SAYS: First, if you can refi down from 7.75 you should definitely do that! Second, take a 15 year mortgage and get this thing done. And third, if you have extra money you can always add it to principal -- better done on a regular basis, an extra $100 each month really adds up. You don't nee dto "sign up" for a program to do this.

Terry, a few years ago I lost my job and had to rely on credit cards. I have now been working for 3 yrs & cannot catch up on paying down these cards. I now have a job but paying half of what I was making. I have $51,000 in my 401K from my previous job. I have a mortgage that we are only able to make because we use my husband's disability and soc sec for our son. I am really desperate and considering withdrawing from my 401K to pay down some of these cards (over $30,000) to at least make the payments manageable. I can't refinance because our current income doesn't support a refinance. I also already have a HELOC. Any advice? Thank you.
SAVAGE SAYS: Immediately contact Consumer Credit Counseling Services at 800-388-2227. That will connect you to the nearest local office. (In the Chgo area it will answer Money Management, Inc.) Go in, or do counseling over the phone -- It is excellent, private, non-profit --and you can trust them.
Bankruptcy may be your onlyoption, and they will tell you that. At some point you may lose the house, but maybe if that's inevitable you should stop paying the mtg and put that money aside for savings for rent in the future, after a foreclosure goes through. But these are things they will discuss with you, and they can give you more specific and legal advice. One consolation -- you're not alone in this. Get back to me and let me know what you decide.

Hey Terry,

My credit score isn't the worse but it isn't the best. I wondering if you could guide me in the right direction on clearing it up and making it right so that I can someday purchase a home are there any agencies out there that can help me?
SAVAGE SAYS: The only way to "clean up" your credit report is to start paying in a responsible manner. Then, eventually -- over about 7 years -- the negative things on your credit report will disappear, and only the more recent on-time payments will be reported.

does it make sense to borrow $6,000. form my credit union at 12.22 % or lower to pay off credit card that was just raised on a super high and one other large bill, like my vehicle. the payment would be about 158.00 saving me close to 300.00 a month?
SAVAGE SAYS: Sure, you wantto pay a lower rate. But your ultimate goal is to PAY DOWN that balance. So make sure you pay extra every month. In fact, if you double the current minimum monthly payment , and pay that same amount every month, it will be paid in full in less than 3 years.

Hi Terry,
I've read many times that one should not use the entire credit line on a credit card, even if it is paid off each month, because it will negatively impact your credit rating. I would like to pay for our son't college tuition using a card. I will pay off the balance by the due date. Is this going to affect my credit rating? We never carry balances but would like to benefit from the card's "points" that are contributed to our son's 529 plan. Thank you!
SAVAGE SAYS: I think that's a great idea! I did it myself, got lots of airline miles on my card, and gave him miles for a trip to Australia for a graduation present! I wouldn't worry about going up to your credit limit for this. But do check to make sure the school doesn't charge extra for using a credit card to pay tution bills! Since I did this, they've caught on and some schools are charging (because you know they get a "haircut" from the card processing company.)

Ms. Savage, I read your tax rate article in the Gartman Letter. The evidence is strong regarding regarding lower tax rates and increasing economic activity. However, the Clinton marginal rate increase set off one of the biggest grwth spurts we've ever seen. Agreed, lots of exogenous factors were at work, but the nineties results were impressive. This leads me to the notion that we do not pay enough attention to a balanced budget as an engine for growth.
SAVAGE SAYS: Well, maybe you're starting from mistaken assumptions. I believe the economy overrode the Clinton tax increase with a huge tax CUT -- from the productivity increase brought on by technology. That productivity benefit cut costs for individuals and compannies, making the tax increase not so onerous. Can you contemplate that idea?
And I completely agree that a balanced budget is important to growth. The issue is HOW to balance the budget! Cutting taxes, creating growth, and increasing tax revenues is the best way to do that!

I read your "Tax Cuts" article (a reprint of it)
with interest and agree completely. However, I want to comment on what you said about the "Heroes'
Act", which, in fact, is only the 4th or 5th enactment since the 1993 Clinton tax increases to
punish Americans who expatriate--even those who
expatriate to lie on an Australian Beach in their
retirement rather than for tax or financial reasons.

In all of our hubris about how we are the greatest
"land of the free", Americans fail to notice that
we are doing to our own citizens what we used to
criticize the USSR and the Soviet Bloc for doing to their citizens when they expatriated--confiscating their property without due process.
No other civilized country confiscates the property of expatriating citizens, and very few tax the overseas assets of their citizens.
America's tax and "patriot" laws are moving us
in the direction of becoming the new "Gulag",
mere decades after we helped to dismantle the
old ones. What a shame! And no one notices the hypocrisy of our leaders in adopting laws that are more appropriate for a totalitarian society.

The 15% tax rate you propose for the top 40% of
earners would result in a massive INFLUX of millionaires and billionaires into the USA, and a cascade of resulting tax revenues,
provided we repealed laws which are intended
to imprison them here, and those which confiscate
their wealth upon departure or death.

Look at Hong Kong for a paradigmatic example of
how a small City-state with no natural resources
boomed for decades with low tax rates.

My husband and I just purchased a new home and we are going to rent our current home. Should we have a seperate account for rental expenses and income, separate from our personal finances?
SAVAGE SAYS: That would be a good idea if you are going to use the rental house as an income, take deprectiation, etc. There are several books telling you how to handle record-keeping if you becomea "landlord." Do a little research, and of course consult your own tax advisor.

If someone adds my name on to their account as an authorized user and I receive a card with my name on it can I be responsible if the account becomes delinquint-I was added as an authorized user but never signed any agreement with the credit card company,and never received a bill or notice-I have not used the card in over 4 years because I was a teenager when my name was added but now I have my own credit cards.I was not aware that the acct had become delinquint until It showed up as the only negative item on my credit report-What recourse if any do I have to remove this from my credit report??
SAVAGE SAYS: This is a tough one -- and it isn't the first story I've heard about parents taking out cards in their children's name -- destroying their credit. It is a horrible thing to do to anyone, much less your own child. BUT -- this is going to be tough to dispute. First, I'd suggest you contact the card issuer. Point out that they do not have a signed authorization (from you) on file, and that the bills do not come to your address, and that you didn't even know of its existence. Then you have to keep speaking with a supervisor, when the person says they can't help --just ask for a higher level of authority.
Next -- if that doesn't get you anywhere, you must go to the media. (I think it's a great/terrible story -- and if you're in the Chicago area, write to me separately after you've tried to get this resolved. I'd use it as a Chicago Sun-Times feature -- which would involve calling the card issuer!) Tell the highest level person that you're going to report this as Identity Theft -- which it is -- to the police and to the media.
That should get them to think twice. (And you really may have to file an Identity Theft complaint with the police -- even if itwas your parents, or a friend, who did this.) Let me know what happens.

Dear Terry,
I am 56 years old and have been diagnosed with liver cancer I have two 403b annuities one is valued at $29k with an $11k loan. I have been awarded SSDI and my long term care insurance will begin payments in September. What is he value of the above annuity given the circumstances.
Thank You
SAVAGE SAYS: Well, first, let me say how sorry I am to hear about your health situation. Now, given that you are getting SSDI, and thank goodness, have long term care insurance -- A WORD OF WARNING TO OTHERS! -- the question seems to be whether you should take the remaining money out of your retirement plans.

That all depends on whether you need the cash now, whether you want to leave something to your heirs -- and whether there is some sort of true disability or hardship withdrawal that would not cause a tax penalty for a withdrawal under age 59-1/2. For that, you'd have to turn to the HR department at the agency that provided the retirement plan. (Since it's a 40c(b), I know it's a non-profit group, and I'm assuming you didn't roll it over into an IRA.) Ask them, and if you can't get an answer or have rolled it over to an IRA, I'll contact the IRA Guru -- Ed Slott -- at www.IRAHelp.com and see if there are some special rules for people in your situation.
And at the result of going beyond your implied question, maybe you will have a far longer survival rate -- and want to continue letting those accounts grow for your future! Very best, Terry

I lost my home in a flood last year. I sold it as is for 40,000.00, and it was originally worth 100,000.00. I had a loan of 32,000.00. What would be my equity be?
SAVAGE SAYS: Frankly I don't understand your question, and I'm not sure how to answer. If you're looking for tax "basis" -- you should know that losses on primary residences cannot be deducted from your income taxes on sale. But the flood loss might very well be deductible, so consult your tax advisor.
And you don't say whether you received any insurance, which would impact your catastrophic loss from the flood.
So to get back to your basic question -- Ifyou sold it for $40k, and paid off the $32k mortgage, the remaining $8,000 would have been your "equity" -- And now it's your money in the bank.

I am a stay-at-home mom and I would like to make some extra cash. I was wondering if you can recommend any legitimate websites that pay for taking surveys. There are so many websites out there, but I don't know if they are scams or not.
SAVAGE SAYS: Most of those offers are scams -- or at best, they get you to buy "supplies" or "inventory" or something that is far overpriced, and you rarely get your money out of the venture. So you must be careful -- and I can't give you better advice than that. That said, just google "work for stay at home moms" and you'll find lots of websites with ideas!

I have an IRA with Ameritrade that consists of many stocks. The total value of this account now is around $2000 less than all of the money I invested into it over the past 15 years.
I would like to convert this IRA into a ROTH IRA.

My late husband's IRA and SEP-IRA were combined into my account three years ago. I also have other IRA account.

My question is: Can I convert this account into a ROTH without incurring any penalties? I have no idea if or how much of the invested money might have been deductible.
SAVAGE SAYS: If nothing else, this situation should convince others of the importance of keeping good records. I would guess that all of these accounts were made with pre-tax money. That means that upon withdrawal, you'll be paying taxes.
You have an interesting opportunity to convert these IRAs to Roth IRAs in 2010 -- when there will be no income limit (currently $100,000) to allow conversion. BUT-- and let me say this again, BUT -- you MUST pay all income taxes owed on this money. You'll have two years to do it if you do the conversion in 2010-- You can spread the tax payment over the next two years. BUT again, another BUT -- if you use money from the IRA to pay the taxes, it will be considered a withdrawal -- and so you'll pay taxes on the money you take out to pay the taxes!!

Yes, it's complicated and expensive. And I'm assuming that youre over age 59-12 so you don't get hit with any penalties for early withdrawal if you take money out to pay the taxes.
Who is the custodian for the largest amount? If it's a mutual fund company or bank, they'll probably have experts on hand to guide you through this process.
Note that the real advantages of doing the conversion are 1) you don't have required minimum withdrawals from a Roth, and 2) tax rates might be higher in future years. Wait, let me say it correctly: Tax rates are VERY LIKELY to be higher in future years, so you might want to pay the taxes now, and then take tax-free withdrwawals from your Roth conversion after it has grown larger in the future.

Hey Terry,
I just turned 58 and plan on retiring in 4 years.
My home is paid for and I have no debt.
I have over $250,000 sitting in a money market account and about the same tied up in stocks and bonds.
Where is the best place to put my cash or should I leave it where it is?
Thanks
SAVAGE SAYS: Sounds like you're pretty well balanced. But I'm not sure about being able to retire in 4 years! You need an overall assessment of your finances, a look at how you're going to handle health insurance coverage if you retire before reaching 65, and getting Medicare. And you need a projection of income. I've been working on a new edition of The Savage Number, due out this fall. Don't retire before reading it!

I am interested in Long Term Care Insurance ...But... I have NO idea what company is reputable .... Since I am now 63 won't the coverage be quite expensive?
SAVAGE SAYS: Great -- I'm glad you got my message. And it's definitely not too late to buy as long as you are still in good health. I recommend major companies such as John Hancock, Met Life, Genworth, and Mass Mutual. The first three are sold through independent agents. You need to deal with an agency that specializes in LTC policies. I always recommend MAGA LTC at 800-533-6242. That's where I bought my own, and my parents, policies. You can use my name, or not, as I get nothing from this recommendatoin -- But I know you can trust them to help you find the right policy.

Dear Terry,

I have $10,000 in chicken money and would like to invest in something secure with a reasonable rate of return. Cd's and treasury bills are offering crappy rates. I know you've covered this in the past, but I hope you can lead me toward financial serenity.

SAVAGE SAYS: First thing, get it out of your mind that there's anything called "financial serenity." Even people with millions worry about money! (They just worry about different aspects of money!)
Second, the whole point of "chicken money" is that rates are "crappy." That's the idea. You trade off risk for return. Or as the chicken money mantra goes: I'm not so concerned about the return ON my money, as I am about the return OF my money! STick with t-bills, short term insured CDs, and own a little gold as a way to hedge inflation bets. But Gold is NOT chicken money, as it has downside risk.

Hi,

My husband has credit card debt. The cards are only in his name. I have my own credit cards, in my own name, and never carry a balance. They are always paid off in full at the end of each month. I sometimes receive the 0% interest credit cards promotions - not my husband -(for 6 months) and was wondering if:

1 - I could transfer one of his balances to my card?
2 - Would this be wise? Meaning since its 0%, the balance could be taken care of within the 6 month period.

Or is this just a stupid suggestion that would impact my credit? Would it be better to try and pay it off while keeping the balance in my husbands name, on his original credit card?
SAVAGE SAYS: This is more than a personal finance question, it is a "personal" question. So let me ask you: WHY does your husband have so much credit card debt? Is there a legitimate reason, or is he just a "spender?" If the latter, then by paying off his credit card debt, you become an "enabler" -- just as you would buying a bottle for an alcoholic!! That's something to think about. You already have some feelings on that, because I note that you keep your own credit separate. So it's hard for me to judge, not knowing how long you've been married or the reason he has debt.
If you determine you want to go into debt to bail him out -- the way to do it would be to take a cash advance on your card-- and use it to pay off his. I DON"T RECOMMEND THAT - -because surely the rate on your credit card will rise when you start carrying a balance! You'll be back in the same spot in no time! Only YOU will be on the line.
IF he's a spender, and you're the saver, I recommend counseling -- seriously. Just call Consumer CreditCounseling at 800-388-2227 -- and go in for a session on your budget and spending habits. They will be able to show him - -and you two as a couple -- how to reorganize your lives, before this becomes a HUGE problem for BOTH of you!

Does Grainger show a pattern of terminating older, tenured emplyees to reduce costs to their bottom line? Does the current economic condition contribute to those actions? Would you be interested in a current lawsuit filed against WW Grainger for age discrimination?
SAVAGE SAYS: if it doesn't fit my territory, I'm sure the business section would be interested. Since you didn't leave an email, I can't contact you. But why don't you send the info to Dave Roeder (droeder@suntimes.com). I will leave this posting up for two days, then delete as it does not fit my personal finance question and answer format.

What is the difference between a just debt and a long term debt in a will?
SAVAGE SAYS: I've never heard of either of these terms being used -- but you might check with an estate planner. A debt of the decedent can be claimed by the creditors against the estate. In practice, few credit card companies or furniture stores will pursue such claims, when presented with a death certificate! If the debt was taken out in "joint name" on a credit card, for example, the rules of the state would prevail, and the surviving person might be liable for the debt. But a debt is a debt -- whether long or short term. And if it is a longer-term debt, such as a mortgage, and there is an asset, such as a house, then the debt must be repaid by the estate, or the house or other real property (unlike furniture, clothing) could be forced to sale by the creditors. Again, for specifics, seek the advice of an estate planning attorney.

I was recently let go from the U of C and have a supplemental pension/fund which I will like to roll over to an IRA. I was wondering if I should roll over to and IRA with Vanguard. I also have an IRA with Janus and was not sure who I should go with. What do you recommend? Thanks,
SAVAGE SAYS: I highly recommend Vanguard, not only because of their significantly lower costs than most fund companies, but because they (as well as Fidelity, T. Rowe Price and others) also offer advice, depending on the size of the rollover to help you choose appropriate funds.

Terry, I am interested if purchasing gold (probably coins). I have checked El Dorado Gold. They recommend Francs and some other foreign coins, and not US coins. How can I be sure a seller is reputable? Should I buy coins or is there some other way to purchase gold?
Thank You, Jerry
SAVAGE SAYS: If you're going to buy GOLD coins, stick with the well-known, currently minted coins (for sure not French francs, since those are just old junk coins not made out of gold, no longer in use since the Euro came in). You want to buy American Eagles, or American Buffalos, or Canadian Maple Leafs, or Austrian Philharmonics.
Do NOT buy these "gold plated" collector "thiings" now being offered in the media!!
And buy from a reputable dealer -- one registered with the American Numismatic Association -- website is www.money.org -- then do a search.
(Unless your dealer was recommending antique coins left over from the French revolution, I'd say either you got it wrong or they're a ripoff!)

I am 150K upside down in my home. I am returning to grad school. If I take out enough student loans to cover my mortgage will my house ever regain all that I have paid into it. I would be interested in using the home as a rental after I am done with school. Between rental income (which would be 400 or so short of my mortgage) and tax benefits and appreciation over the next 5-10 years will I ever break even (or make money) or should I short sale now take the credit damage and try again in a few years???
SAVAGE SAYS: Something about your situation does not compute. How could you be that much upside down on a house -- and even consider borrowing more money to go back to graduate school? Who would lend to you unless you can keep paying the mortgage, which would be difficult if you're in school. And who would lend to you if you default -- which is essentially what a short sale is? What are you leaving out of this story??

Terry,
Question, do I refinance? I have a 1st mortgage of $100K @ 4.87% and a second HELOC of $360K @2.24%. My first will be paid off in four years. Do I take advantage of the fixed low interest rates now to prevent future rate increases on the HELOC? I have 15 years till retirement and my home is now valued at 1.2 million.
Thank you,
Tom
SAVAGE SAYS: Oh gosh, that's a tough question. You're playing "russian roulette" with interest rates! Look, my general principle --- and I've found it pays to stick to principle when confused by the facts -- is that you do not want to have your home, your primary residence, exposed to the volatility of interest rates. Period. I have always advocated taking a fixed-rate mortgage, and paying it down as fast as possible. As you might imagine, over the past decade I've been attacked for that stance. But now I feel mightily vindicated.
So now let's look at the facts of your situation. Your main mortgage, which will be paid off in four years is for $100k principal, but your home equity loan, on which you may be paying ONLY interest, is open-ended. That means you have open exposure to interest rates moving higher! (And there is no doubt that in the inflation/deflation battle out there, there is a true possibility that rates could move higher in coming years as we continue to destroy the value of the dollar, talking even today about "creating more stimulus.") So the question is whether you want to be "exposed" to rising rates on $360,000 of variable debt that is probably indexed to something like LIBOR, which will rise quickly if inflation returns??
I don't know the limitations or the caps or other terms of your home equity loan. But if there is no ultimate "cap" -- perhaps 5 percent higher than the current rate -- then I'd go back to principles -- and lock it all in now, or soon.

I am refinancing my home at 5% interest rate loan amount $359,000. I have $80,000 that I was thinking of using to buy service credit at my employment which will give me 5% more in my pension each month (additional $496). I would also receive periodic cost of living increases based on the higher pension amount. Would it be better instead to use the $80,000 to pay down my loan to have a smaller house payment for the 30 year loan?
SAVAGE SAYS: Wow, that's a tricky math problem, and it also depends on your outlook for taxes, life expectancy, and even the security of your employer's business! And you didn't give me your age, and expected date of retirement, so it's hard to give a specific answer.
At first glance, it seems that you should take the service credit -- because even if you refi your home for 30 years, you may out live the loan -- and be glad to have the pension (again, depending on your age, planned retirement).
Then, there's the tax issue. Your mortgage gives you a deduction while the pension income is taxable. That argues for the larger mortgage.
But then, you have to consider where your employer's pension plan will be 30years from now, when you expect to be receiving checks! Depending on the size of the annual pension, it may not all be covered by the PBGC.
Lots of "ifs"!! So here's my suggestion - and it's a way of saying "DO BOTH."
That is, instead of taking a 30 year mortgage, take a 15 year mortgage -- especially if you plan to keep working for 15 years. That means you'll be paying it down faster, probably at a lower rate, but at a slightly higher monthly cost. Then you can retire with BOTH -- a paid up home, AND a higher pension check!

Ahmed Mustafa just turned 22 and wants to have $10,000 saved by this thirtieth birthday. Assuming no additional deposits, if he currently has $6,000 in an intermediate-term bond fund earning a 5 percent yield, will he reach his goal? If not, what rate of return is required to meet his goal?
SAVAGE SAYS: I see you've posted two questions -- each requirng a "tool" for easy calculation. You'll find them on my website in the box marked "Quick Calculators." But just for logic's sake, let's do the rough math. Basically you're saying he wants to nearly double his money in the next 8 years, and is earning 5%. Well, by the "rule of 72" we'll divide 5 into 72 and realize that it will take about 14 years to double his money at this earning rate. But if he earns 9 percent a year, the money will double in 8 years, when he's 30. Of course, I can't figure out a way to safely earn 9 percent a year these days -- and certainly there's no chance in CDs!
So if he wants to double his money, he would have to save more If that's an ongoing process -- monthly deductions from a paycheck for example -- you need a more complicated calculator!

Please give me your opinion of investing 100K in the Franklin templeton Class C shares Jun 26: 1.80 0.01 (0.56%) Franklin Income C (FCISX) - i'm 55. Its IRA money (the remains ) after my variable annuity of 7 years took a major hit - I didn'have any principal protection - regardless,let me know what you think - and for tht matter, would their A or B shares be a better idea - thxs
SAVAGE SAYS: Well, I can't comment because I don't know much about your situation. But a couple of common sense things strike me. Sorry you didn't buy an annuity with principal protection as a feature. Are you listening to the SAME advisor, now suggesting you buy the Franklin-Templeton fund? Doesn't that make you think twice about the advice???
And, why would you transfer all your money now -- after the big crash? Yes, the market may go down more. That's why you should have had some "chicken money" investment that would let you ride out the long term -- After all, your life expectancy is at least 30 years, and you don't think the market is going down forever, do you?
And finally, if you want to switch part of your money, why do it through a "LOAD" fund? You obviously realize you're giving your advisor another set of commissions by making the switch! (Probably you're funding HIS/HER retirement!) Why don't you just roll over a portion of your IRA to Fidelity or Vanguard or T. Rowe Price and buy a short-term income fund from them -- thus saving a commission of4% or more, which is twice what you'll earn in the first year!!

Question-

I know you have recommended 'Everbank' in the past. With China and Russia calling for a new reserve currency for the world, I have 2 questions:

1. What would this mean for United States citizens/

2. Would it be advisable to invest in foreign currency? Say the Swiss franc?

Thank you,

SAVAGE SAYS: If you've been reading my columns, you know that I -- and many others -- worry about the excessive creation of dollars, and of government debt. And now the rest of the world is beginning to voice those same concerns -- especially China which holds a trillion dollars in its reserves, as a result of money we've sent over there to buy "stuff." They have been willing to lend us money at very low rates, buying Treasury bills at less than .25 %. But now they're worried that all this money creation will destroy the value of the dollars they own. They've talked this way for a while -- done nothing yet. Actually, they're a bit "stuck" holding those dollars; if they tried to sell them, switch into another currency or gold, those markets would soar! They have, however, talked about creating a NEW reserve currency -- perhaps a "basket' of other currencies.
So it can't hurt to hedge your dollar bets. Everbank lets you buy FDIC insured CDs denominated in foreign currencies. You get the rate as if you had deposited in a foreign bank - and the currency upside or downside. If the dollar "weakens" those currencies become more valuable -- and you get a benefit in addition to the interest you earn. For more details, go to www.Everbank.com

Dear Terry:

I am sure at one time you posted the name of a gold coin dealer (not for rare coins) who you felt was very relaible. I have searched and searched and cannot find that post. Would you pleae re-post that name? Thank you for so much valuable information throughout the years.
SAVAGE SAYS: If you're in the Chicago area, or willing to do it by mail, I recommend Harlan J. Berk, at 31 N. Clark, tel 312.609.0016 --
Or to find a member of the American Numismatic Association in your area go to their website -- www.money.org -- and search.

SAVAGE SAYS: Beware of debt consolidators. I've written about them before -- BUT if you want CREDIT COUNSELING there is only group to trust. Call Consumer Credit Counseling Services at 800-388-2227 and you'll be connected to the nearest local agency.

I have $1,000 I'd like to invest. What are some options?
SAVAGE SAYS: Well, it's tough to give advice, without knowing more about you, your age, your goals, your risk tolerance. For example, let me ask you this question: How much of this money are you willing to lose? If your answer is NONE, then it belongs in a bank! If your answer is you hope you don't but you're also hoping to make money over the long run -- at least 10 years -- then I'd suggest a diversified stock market mutual fund. You can open an account in the All-American Fund for as little as $100 -- if you agree to an automatic monthly deduction of at least $30 from your checking or savings acct. I'd suggest you open the account with $250 -- and have them take $50 a month from a savings account until it's all invested. Then stick with it. If you're working and don't have a retirement plan at your company, then ask them to open the account in your name as a ROTH IRA, where it will grow tax free for your retirement.

Terry,
Can you tell me the pros/cons of debt consolidators?
Does it matter if they're non profits?
Is there a place where they are evaluated?
Thanks for the help!

Re: The latest article on health care.
You tag line should be the "Savage half truth".
People in the US go to India and other foreign lands to save on the cost of operations and other health procedures.
Health costs are high because industry and insurance companies are in collusion.
In 1957 my daily fee for a hospital stay was what I earned as a laborer in a day.
30 years ago it cost a weeks wages as a skilled machinist and the care was no better.
Why? because in those days almost everybody had employer provided health care.
The hospitals reasoned that if the insures would pay X number of dollars they could raise it a few dollars for a day's stay with no complaint. The insurers did the same and it has continued until this day. The result being the unaffordable health care system we have now.
Single payer is the only solution.such as Medicare WHICH works well.
Last year I spent 20 days in the hospital and with medicare and a supplemental health insurance I paid less than 5% of a 100K bill.
Because you aren't common folk you can't know what it is like for most working people when doctoring is needed.

Dear Ms. Savage -

My name is William Luvisi. I have specialized in individual & group health insurance for 26 years. I represent all financially sound insurance carriers that offer comprehensive major medical insurance.

I believe that we as a nation need to address the following issues:

Problem: Many of the "40 Million Uninsured" choose not to purchase health care coverage because they find it to expensive, or they are young and believe that nothing will ever happen to them. Some of the individuals that pay for their health insurance find it very expensive. The rest of us Americans understand the value of our health care system, and understand that there is a price to pay for quality health care without waiting lists.

Suggested Solution: The government needs to require that all Americans purchase a private based health care insurance plan. They need to give each individual and family an above the line tax deduction, or a tax credit for the premiums paid for purchasing the policy.

Problem: Some of the "40 Million uninsured" have health conditions that preclude them from obtaining health Insurance.

Suggested Solution: Expand programs such as ICHIP here in Illinois to all states. Secondly remind consumers that the professional insurance agent they are dealing with may or may not know the market and its underwriting practices. I have found insurance for many people that turned to ICHIP because another agent told them they were uninsurable in the private market, when in fact, they were insurable.

Problem: Medicare Cost Shifting raise under 65 individuals health insurance policies because Medicare does not pay providers at an appropriate rate.

Suggested Solution: Do not expand government run health care into the under 65 market. This will further the problem of cost shifting and will negatively impact health insurance premiums even further.

Problem: Malpractice lawsuits costs everyone big bucks.

Suggested Solution: I have none here, it is quite a dilemma.

Problem: Since the early days of private insurance, most people have kept their deductible levels very low, and do not understand the relative value of the dollar 20 years later.

Suggested Solution: Higher deductibles need to be implemented with the current and even expanded Health Savings Account rules. Insureres can pay first dollar preventative visits under the current H.S.A. rules in place.

Conclusion: All of these are practical matters that can help the current system. They are not drastic changes, yet they would have a significant impact on our current system. Unfortunately, the consumer needs to be educated on these issues, and understand that there are not, nor will there ever be, any free hand outs in life. I do not like paying my health insurance premiums any more than the next person. However, I understand that they are a necessary part of a family's financial plan. If it means that we can not go out to dinner more, or see a movie, that is the way it is. Americans expect much to much in life. We need to go back to the basic financial principles our parents lived with.

BTW Love your column.

Regards

Bill

visit us at www.seniorconsultantsinc.net

William G. Luvisi, President
Senior Consultants Inc. Brokerage
6300 Murifield Drive
Gurnee, IL 60031-5359
(847) 362-8000 Ext. 1
(847) 362-4370 Fax
isiluv@msn.com
www.seniorconsultantsinc.net

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I am 65 (single)and plan on retirement June 2010 from my job. I have only 80,000 for reitrement invested in mutual funds, stocks, bonds, etc.through a financial planner. I can actually live on my social security of $1900 a month starting Jan 2010. My question is should I invest half of my retirement money into B class guareenteed variable annuity with life time benefits? Or, just stay put. I own a home, have only 29,000 morgage left at 5.75% No other debt.
Thank you.
SAVAGE SAYS: If your planner wants you to invest in a variable annuity, you're probably helping his retirement as much as yours! I have nothing against annuities. Go to my website and read my recent columns. But so many have high fees, long periods for surrender charges, and expensive underlying investment accounts. That wipes out the advantage of tax-deferred growth. With only $80,000 -- and believe me that is not a lot if you're going to live at least 20 years longer, as is likey -- I would be much more conservataive and leave at least half in a money market deposit account in your bank.
And, you didn't ask, bu thave you looked into long term care insurance. Need for this type of care would wipe out your finances --and you'd be stuck in a Medicaid-funded nursing home.
Bottom line: I think you need to take another look at what life will be like if you retire in 2010 -- and plan to work longer, if you can stick with your job. A new edition of The Savage Number will be out this fall (the delay in answering your post is because I'm writing morning, noon and night!). And it gives you some places to get advice on how to invest, how much you'll need, how much you can withdraw.

Can you please inform me. I was told if I paid an extra mortgage payment,my prinicpal balance would be reduced by several years. Is this true? Thank you for your advice.
SAVAGE SAYS: You can definitely reduce the length of your mortgage -- and save a lot of interest -- by paying extra principal every month, or by making one extra mortgage payment every year, which is easiest done by paying bi-weekly. But you DONT have to pay a service to calculate this for you. You can do it on your own. Just make sure you ask the mortgage company to credit your extra payment(s) toward "principal" -- and then at the end of each year ask for a new amortization schedule (showing when it will be fully repaid) which should reflect your extra payments. Or, when you refi -- go to a 15 year mortgage!

Is there any relief in sight for those of us who contributed the full 40 quarters to Social Security, but get only a pittance of our full amount because we receive some kind of US Govt annuity?

My wife's aunt was a cap for her entire life and worked for several major corporations. she contributed incredible amounts to the SS, but because she is married to a retired military officer, she gets only a small fraction of what she deserves.

This isn't just wrong, it's criminal...!
SAVAGE SAYS: I'll admit I'm definitely not the expert on this -- but can't she claim SS on her own record? Did she pursue this question? Now, I understand why I've heard stories about seniors "living together" instead of being married -- because it would cut their benefits. (Of course, you have to take into account medical benefits too -- and maybe her benefits under his VA are better(?) than Medicare??)
Definitely check with the experts at SS.

WE have been traditional low risk investors all our lives and have depended on municipal bonds as the mainstay of our investment (90%). Recently we have seen decay in our values due to the failing of the monoline insurers (NBIA, RADIA, etc). Additionally we are hearing rumblings of city and municipal failures because of the current economic crisis.

We are considering dumping our munis and falling back to CD's even though the return is bad and they are fully taxable. Are we overreacting to the financial environment ? Should we stick with our bonds (mostly AAA and AA) or is the future grim for them.

SAVAGE SAYS: This is a HUGE debate among investment professionals. Watching the states' pension obligations as I do, I would not own a municipal bond. Period. BUT -- I recently heard the top money management guys at one of the most conservative banks in the country explain why this is a good time to buy munis -- top-rated munis -- because the "spread" between yields on T-bills (ultimate safety) and munis is so great. Their thesis is that an economic recovery will bring more tax revenues to the states, solving the big problems. Well, I don't buy that. I live in Illinois -- where the choices are stark: a big increase in state income taxes or cutbacks in services. But they still have obligations to pay into state pension funds.

Now, you'll have to figure out your own opinion of those issues for the muni'syou own. But whenever I'm in a quandry like this by "selling down to the sleeping point." That is, you might want to sell SOME, but not all of the munis -- and put them in Treasury bills (www.treasurydirect.gov) -- You'll earn a lot less, but sleep a lot better!
(And you might want to hedge some of the inflation risk, either in gold stocks, or TIPS -- but that's another long story!
Oh, one more resource: go to www.PensionTsunami.com, which tracks state/municipal pension issues around the country, and you'll see why you're deservedly nervous about being so invested in IOUs from these entities!

I am retiring in November and i am 62 yrs old and so is my wife. We have $3 million and will be visiting with my fidelity rep in a couple of weeks. Just your opinion on fixed annutities. With the little information that you have would you be bothered by my investing $500k from the $3,000,000 into an fixed annuity ?
SAVAGE SAYS: Well, consider this. You're 62. Statistics say you'll live until age 87, but perhaps longer so let's use 90. That means you'll be receiving money from this annuity for the next 28 years. Well, using the "rule of 72" we know that even if inflation runs "only" 4% during those years, the spending power of that fixed check will be cut in half in only 18 years. And it will then be nearly cut in half again by your final years!
So the monthly check that looks good now may not pay your electric bill when you're 80! And that's why I really don't like the concept of a fixed annuity payment when a person has so many years ahead in retirement. Actually, you already do have an annuity -- Social Security -- as long as it lasts!

Which brings me to two things you DIDN'T ask about, but I'll give you answers anyway!
1. Can you REALLY retire now? I'm in the midst of revising the Savage Number book, and I thought most people would realize that (unless you have a terminal illness, or a history in your family) that you'll have to work much longer for a secure retirement.

2. When you meet with your Fidelity advisor, ask about their Monte Carlo modeling, which will give you an idea of how you should invest, and how much you can withdraw to make your money last as long as you do.

And THEN, be sure to buy Long Term Care insurance -- to insure against the most devastating expense that could ruin your plan!

Dear Terry,
I am 69 y.o. and have only about $25,000 per year from Soc. Sec. and pension. I am, therefore, highly dependent on interest generated by $725,000 which is invested mainly in municipal bonds, corporate bonds, CDs, a minimal amount in Citigroup stock Approx. 200,000 of this is sitting in savings accts. because I am afraid to invest in this economy. I have been advised to place about 100,000 of this in a 15 yr. CD at 5%. This seems not a great idea to me because it is a long time to lock into this interest rate. What do you think? What should I do re investing this money?
Thank you so much for your answer.
SAVAGE SAYS: This is "chicken money"! That means, it si money you cannot afford to lose! At only 4 percent inflation, the value of your money would be nearly cut in half in 15 years! Leave the money in shorter term CDs and make sure you are under the FDIC insured limit. And you might want to take a closer look at your bonds. If interest rates rise, bond values fall. And some municipalities/states are going to have trouble paying the interest on their bonds.

Terry,

I am 57, in good health, have no debt.
My IRA's worth about $50,000. Deferred about $250,000. My question is if I just want to receive a monthly check from these monies, how many yrs will they last me, and how much will I get each month, if first w/d begins in the yr 2015? and in the yr 2020?
I don't plan to work so there won't be any income, will I have enough to get by in about 30 more years, considering inflation, insurance premiums and medical expenses.
SAVAGE SAYS: Ah, that's the question at the center of my book: The Savage Number. You can't do those calculations by guess work -- unless you're willing to predict both future inflation and future investment returns!
For starters, go to www.ChoosetoSave.org (the website of the non-profit Employee Benefit Research Institute) and use their "ballpark estimate" tool to see how the number changes, based on your estimates!
Then you'll need "monte carlo" modeling (read the book!) to help you plan for both investing and distributing your money, to see the 'likelihood' that your money will last your projected lifetime.
Honestly, the entire book is devoted to explaining these two processes! You can get it in paperback on my website, www.TerrySavage.com.

I always enjoy your reporting. And thanks in advance.

My husband and I are in our 50's. We have 100,000 to invest. Something safe but a good return. Can you suggest something?
SAVAGE SAYS: I couldn't begin to "suggest" something, without knowing more about your financial situation, goals, risk tolerance,e tc.
For that you need a financial planner. Check for a feeonly planner at www.feeonly.org, and search in your area.
But as a general rule, leave the money in the bank -- even though it now earns only low interest. Pay down debt -- except for a fixed rate mortgage. Check and double check the planner's advice. And even if you do decide to invest -- perhaps through a Roth IRA if you're eligible so your money can grow tax free -- only invest half! Keep the balance in insured CDs in your bank, short-term.

What schools offer training to become a financial advisor, which are the best and how long on average does it take. Do any have on line courses.
SAVAGE SAYS: That depends what you mean by "financial advisor." If you want to become a certified financial planner --a comprehensive designation that covers all aspects of planning, including investments, insurance, taxes, estate planning -- then go to their website: www.CFPBoard.org.
If you're interested in becoming registered as a broker, you can get an overview of the courses, and take them online at http://www.nyif.com/, which is the website of the New York Institute of Finance -- offering all courses related to financial registration of brokers, etc. But to get your "license" you'll have to go through a NASD registered firm.

Hi, what do you think of Energy ETFs??
SAVAGE SAYS: I try to avoid giving opinions on stocks, including ETFs, but I do think energy prices will work higher as this economic recovery develops.

Hello, Terry. We are 3 years into a 15 year mortgage @ 6.25% with a principal balance of $76,000.00. My company is in distress and there is a very good chance I may get laid off soon. At 57 years old, I figure my prospects for getting re-hired in my industry aren't very good.We have just enough in a bank savings account to pay off the loan. We've been trying to sell the house to downsize for about 2 months without success. My wife (who is working) and I originally thought to sell and buy something smaller for cash (about $140,000.00 clear after sale) but now with a layoff looming, do you think it would make sense to pay off the mortgage and then start saving the amount that would have been the monthly principal payment to build the savings account back up?
SAVAGE SAYS: The first thing you should do, while working, is to refinance if you can get a lower rate. And if you might consider a 15 year mortgage, if you're already close to paying it off. But don't compromise your liquidity by using your savings to pay down your mortgage. It may not be easy to get a home equity loan if your job is lost and you don't find another one quickly. And make sure it's a FIXED rate mortgage!

Dear Terry,
My 82 year old mother has seven series E $1000. United States Savings Bonds. They all have an issue date of 1974 and therefore are no longer earning any interest. She wants to do something with them but is concerned abour cashing them in and paying on the interest the bonds have accumulated over the years as well as losing money in any future investments. Can you recommend an investment strategy for her with the goals of capitol preservation and liquidity in mind?
SAVAGE SAYS: Well, they are worth more than the face value, of course, because of the builduip of interest over the years. You need to go to www.TreasuryDirect.gov, then click on "individual" and then on the Savings Bond section to use the calculator to determine their value.
She's not required to cash them in - -and she might not want to cash them all in at one time, because that could impact her income taxes. But, of course, she does not continue to earn interst.
Something kind of ghoulish -- if she anticipates death this year, she wouldn't want to cash them in -- because at death her beneficiary would receive the value of the bond at a "stepped up" basis -- the value at the date of death -- and the beneficiary would not owe taxes! But that portion of the tax code is scheduled to change in 2010.
Bottom line -- these bonds can no longer be exchanged for H bonds, thus deferring taxes. So the best thing to do is to cash them in and deposit them in a money market deposit account at the bank, where she'll have complete safety, and liquidity -- tho earning very low rates right now.

I am very fortunate to own a stable, profitable business, and have accumulated farmland, mutual funds, bonds, and fixed annuities. My wife and I have contributed the maximum to our Simple IRAs for years, and have a year's worth of income in cash reserves. Our mortgages are paid off, and we owe no credit card debt. We are in our late 50s, so we're still a few years away from social security or medicare. We do have two kids in college, so there is an $80,000 yearly expense we have to incur. As long as I keep working and we live frugally, we can get by without taking out any loans to finish off the three years the kids need to complete their advanced college degrees. In case there is a need, we have an untapped $250,000 equity line of credit available on our home, so the kids should be able to finish school regardless. I know the adage that you can get a loan for college, but not for retirement, but my parents sacrificed to put my brother and myself though professional schools, so I feel very strongly that I have to pay this forward. I'm a big believer in Karma!

My main concern is trying to protect our accumulated assets, and not lose any more than we already have in the stock market. Reading Harry Dent's most recent book (The Great Depression Ahead)has me quite scared as I think his demographic analysis is quite logical, and he may have some valid observations. However, his track record with his Demographic Fund was not very stellar, so I am cautious in following his advice completely. I read about your suggestions (the Merk Hard Currency Fund), and was wondering if you have any other tips for those of us that don't need any more longterm capital loss deductions on our taxes. I don't have much confidence in the road that the country is taking, but am wondering if the rest of the planet is in any better shape at this point? Though we have been truly blessed and have saved from day one for our future, I'm still quite nervous about the economy's stability. We all need to be extremely concerned how our country's insatiable appetite for credit to buy cheap goods will affect all our children's futures.

Thanks for your comments and advice.

SAVAGE SAYS: Well, you've said a mouthful! I don't have a crystal ball. I just try to hedge against disaster, and believe in the future. That's worked thoughout America's history.
You've refused to sacrifice any part of your childrens' education for your retirement. I understand -- but you will face the consequences. Be sure to purchase long term care insurance -- as I doubt those kids with advanced degrees will be willing to change your Depends!

Hi Terry,
I have 2 IRA CD accounts with 2 different banks.
I have always been able to take the RMD from the CD with the lowst interest rate paid, therefore just taking it from one bank.
I recently moved one of my matured IRA CD's to a new bank & at the time of opening this new acct. I had also set up the RMD that was required from another bank to be satisfied in Nov. 2009.(this year)
I now recieved a phone call from the new bank telling me that they cannot set up my withdrawal as an RMD from another bank.
They state that the paperwork needs to be changed.
They are telling me that I can take this withdrawal from them but the paperwork will be not be a RMD , just a withdrawal but it will satisfy the IRS & will withhold & report the federal tax that I need to submit.
They state that can only satisfy the RMD amount from the account that I hold with them.
I am sooooo confused to say the least.
Can you please help me to understand this as I do not want to go against any laws.
At my age (76) I fear going thru any wrong doings.
I will greatly appreciate your advice/help !
SAVAGE SAYS: I'm going to have to ask my mother! Honestly! She's the only one who completely understands this process! My feeling is that you aren't earning that much interest in either CD, and you might as well take your entire RMD from one -- And the other bank isn't going to force you to take a distribution.
If you have so much money in IRAs that you MUST keep it in two separate banks, make sure you have a personal banker in one bank contact the other to create an understanding about your plan.

Dear terri:

I am a senior and a recent widow. I need income and have attended several seminars ,recently, where they are touting annuities. All of my funds are in an IRA account, so they are deferred and I dont need an annuity for deferral. Also, there are several kinds of annuities. Please advise if you thing this is a good investment for someone in my circumstances and what kind of an annuity you would suggest, if, at all.
SAVAGE SAYS: There are way too many brokers pitching costly annuities. I have nothing against the product -- but the incentives to sell them are based on the huge commissions and ongoing costs. So you probably won't find the best deals at these seminars.
Aside from that, there's the question of whether you want to tie up your money for 5-7 years of surrender charges (yes, you can withdraw a little). But this lack of flexibility is disturbing -- and as you noted, you don't need the tax-deferred growth.
I'd suggest you avoid these seminars like the plague -- and tell your friends. Keep investing your IRA very conservatively, and youll be fine --

Hi Terry....is it true that,under Prs. G.W. Bush, if I want to take some or all of my money out of this country, the U.S.gov has passed a law whereby I cannot? What if I want to live in another country and start a new career?
Another country could be...Japan, S. Korea, Mongolia.
Thanks,
SAVAGE SAYS: At this point, you can still wire transfer money out of this country to a foreign country without reporting requirements. But you must declare on your income taxes that you hold a foreign bank or investment account, if that's what you're doing with your money. You MUST declare cash in excess of $10,000 if leaving the country -- and some countries restrict the amount of foreign currency that can be brought into their country.
And while you're considering "other countries" you might want to leave out Mongolia -- and consider something slightly more civilized!
Oh, and if your goal is just to get the interest rates and currency valuations of other currencies -- go to www.everbank.com -- where you can buy FDIC insured CDs denominated in foreign currencies -- and get the benefit (or loss) of value if exchange rates change, if the dollar loses value.

How does the government measure a "saved job?"
SAVAGE SAYS: Very carefully. You'll have to take their word for it!

I thought a law has been passed by Congress that the credit card companies cannot gouge the consumer with high interest rates and penalties anymore. I recently went over my credit limit (this was a one time mistake). The company is First Bankcard, Omaha, Ne. 68103-2557, 1-888-295-5540. I paid the usual $39 overlimit fee but the following statement showed that my interest rate had jumped to a whopping 30%! This, of course, has made my monthly payment double what it used to be. I called the company and a supervisor told me that the history of my account shows that I approach the credit limit too closely too often and that I would have to make a very big payment and then call them each month to see if they will lower the rate back down. Isn't there something illegal about this?
SAVAGE SAYS: It will be illegal NEXT year -- Right now they can still get away with it! Your only defense is to pay down the balance!

I'm a fifty-two years old. I have a mutual fund administered by Nationwide Insurance. It's worth over $50,000. I beleive the insurance companies are the next ones up for bankruptcy. Can you tell me what I would take home if I pulled my funds out and paid off my house with the proceeds. I owe 37,000 on the house. I want to be debt free.
SAVAGE SAYS: Well, first you need to understand the tax consequences. Is this mutual fund held inside an annuity, or a retirement account?
If it's a retirement plan, you may have to quit your job to gain access to the money. And even then, you'd want to do a direct rollover into an IRA, using a custodian such as Fidelity or Vanguard. Then you could invest in one of their funds -- and keep the tax-deferred account growing.
If the fund is inside an annuity, there may be penalties for withdrawing money -- not to mention taxes if there are still any gains.
It's not a bad idea to pay off a mortgage --but you still need some liquidity and some investments for your retirement.
Bottom line; based on the info you've given me, I can't really give you advice.

If two adults own a home (we still have a mortgage) in joint tenancy with right of survivorship and one of the two adults wants to take out a HELOC or equity loan by himself, does the other person need to sign the forms too before a HELOC or equity loan can be granted? In other words, either we BOTH sign-up for a HELOC / equity or loan or neither one of us can?

I am hoping the answer is both of us or neither one of us!!

SAVAGE SAYS: If you own the home in joint tenancy, BOTH would have to sign for a loan! Beware of forgeries!!!

if a person started a non-profit organization does every penny have to go to charity or is there a percentage and if so what perecent is required?
SAVAGE SAYS: If you really want to start a non-profit, you'll have to register as a 50l(c)3 charity -- That's the section of the IRS code that governs these organizations. And you'll need legal and accounting advice to comply with all the rules. So it can be an expensive proposition. Actually, not ALL of the money needs to go to the cause -- some can be used for overhead. But major charities are "ranked" by www.guidestar.org -- based on the forms these charities must file every year, showing how the money is spent!
If you want to grow money of your own for a charity, you could use a "charitable gift fund" -- where you contribute cash or stock, which grows tax-deferred until you direct distributions to registered charities. You get an immediate deduction for your contribution to the charitable gift fund account. Check with Vanguard or Fidelity, which offer these charitbale gift fund accounts.

Hi Ms Terry, saw you spekaing on Pastor Benny Hinn's broadcast.

I have 3 questions: I am based in the Uk and need honest financial advice as am currently in debt, not working cos I look after my two kids whilst my husband works. i would like to pay off those debts as well as invest. Should I post my question or would you rather point me to a UK based affiliate you know?
2) Where will you advice someone starting out in investment to begin
3) What is your opinion about being debt free. Do you honestly think one can stay completely debt free (even mortgage at age 40yrs).
I believe all things are possible with God though!!
Thanks and God bless you always - you are an inspiration!
SAVAGE SAYS: Well, it's nice to get a letter from that far away! I know things are a mess in the UK right now; the global financial crisis seems to be hitting them with a sort of delayed reaction.
As to your largest question, whethe rit's possible to have two kids and be debt free at age 40, the answer is YES -if you manage your money and your mind correctly. It might be asking a bit much to pay off your mortgage in that time period, but it certainly should be part of your goal.
In fact, most people in the mid-1900s actually lived debt-free during their lives, except for mortgages, since credit wasn't widely available. It just take some planning. You should take a look at websites like www.Mint.com -- social networking revolving around financial planning and services.
And I'm writing a new column -- so check my website -- about how this is a great time to start investing. Lower share prices mean you dollars buy more shares of stock or a mutual fund.
Good place to start -- with as little as $100 -- is the toll-free number on my website for the All-American Fund -- a diversified stock fund, that lets you start with $100 -- if you agree to an automatic monthly debit from your checking account of at least $30 -- a dollar a day!
That might not be easy if all you have is a UK bank account, or the fees might be too great, but call them at 800-US-FUNDS and learn about it.

in oct. 2007 our portfolio was worth $1,400,000
today it is worth 950,000 we bought a second in 2007 we could have payed for it with cash but toulk a lone at 6.15% instead it was the wrong move do you think that with low rates should we refinance or pay it off with cash it is $250,000.
we are 63 & 65 my wife keeps beating me up to pay it off we live on our pention & 20, from savings

SAVAGE SAYS: Your losses are about average if you were completely invested in stocks, and you've probably made a bit back. YOu two need a financial planner to help with this decision -- There are many other issues that you should consider, includng the purchase of long-term care insurance, and whether you have a current estate plan.
Current rates are not much lower, and I'm not sure you could get another mortgage with your current income, if you are living on your pension. Are you sure you need the second home? There's a lot to consider, and you need professional help.
Look at www.cfpboard.org or www.feeonly.org to find a planner in your area.

Dear Terry:
I really do think the dollar is going to collapse, with that in mind what do you think of investing in currency ETF's ie. FXE, FXA, FXC?Thus shorting the dollar. This country cannot sustain the rabid printing of money. I just want to save what I have left of my retirement and my grandchildren's school funds.

SAVAGE SAYS: I've been writing about this for years. Earlier this year I explained how to invest in a gold mining shares mutual fund or ETF. Those typically rise when currency values fall. And I've also written about the Merk Hard Currency Fund, which gives you exactly what the ETF does, with more diversification an dprofessional management. That's what I've done.

My husband's business, which is an s-corporation, is experiencing tough times and could be headed towards failure. Should bankruptcy protection be sought, to what extent would our personal assets be protected from creditors? What about my own personal assets?
SAVAGE SAYS: I think I'm going to refer you to a bankruptcy attorney to get answers for your specific situation. The S designation is purely a tax designation -- but I don't know how your personal assets are co-mingled with corporate assets -- and what specific impact a company bankruptcy might have on your personal assets.
By the way, it's easy to find a bankruptcy attorney -- even if you don't watch the commercials on late night television! Go to the www.abanet.org website of the American Bar Association and click on "lawyer locator."

My mom has a $50,000 CD with Chase. She does not speak English, so my sisters and I try to manage her bills. Last month her CD was re-newed automatically since she never said she received the notice that it was maturing. Well to her surprise her monthly interest check was for $8.34. Her yearly income is $14,134.00. She owns her home and we help her with alot of her bills. They give you 10 days to contact them. I contacted them 2 days late and so she is stuck with this ridiculous interest rate for a whole year. If we take it out prematurely, she will be penalized for about 1,500.

Can you give us a suggestion...???

SAVAGE SAYS: Well, my first suggestion might be that your mother list you or your sister as co-owner on the CDs she buys, and in that way you'll be aware of maturity dates.
My guess is that she purchased this CD a while ago, when interest rates were much higher. Now rates are low, and so her interest check is lower. But the only way to get a higher yield is to take more risk! And you don't want to do that with her money. So leave it in the current CD, and maybe rates will be higher when it matures next year.

I have a couple of questions,however, I think one a time is better.

I have a couple of credit cards, totalling over
$16,000. I am currently working two jobs, my wife is not working right now(she just finish nursing school, pregnant right now, will not start working until maybe july 2010), I can only cover my mortgage, utilities and car payment.
I have not payed any of my credit cards in four to five months.

My question to you is, how can I arrange to reduce these cards?,Is there a way to set up a payment plan with the banks, a means of negotiating without adversly damaging my credit?
SAVAGE SAYS: Don't be so calm! You are already in credit trouble - -and ifyou haven't paid in months, your credit is already damaged.
Contact Consumer Credit Counseling Services at 800-388-2227 -- and they will help you reorganize your finances. That # connects you to the nearest local office.
Your wife may not be able to take a year off work. You need to get back on track now -- and they'll help you figure it out. Don't fall for those ripoffs that offer to "negotiate" your balances down. You'll just wind up in more trouble.

We have a Bright Start Account (529) for each of our 2 children of $50K. We have a home equity line (currently at 2.5%) of $250K of which we have used up $185K. We have no credit card debt and we owe approx $185K on our home (we have about 10 years left on our mortgage at 5%). Question is : should we take out Plus and Stafford (which we qualify for) loans for our oldest child who is entering an expensive and prestigious college in the fall - or use up the 529 money - or finance college using home equity line and save 529 money for future (who knows if student loans will be available in future?) We are both self employed. We just don't know which way to turn.
SAVAGE SAYS: Could I start my response with a question? Can you REALLY afford to send your child to that expensive and presigious college? This is a tough choice that many parents are facing today. (And my parents faced it with me and my brothers years ago - -much to my initial disappointment -- when they told me they couldn't afford to send me to that school because they also had to plan for my two younger brothers. I went to Michigan, got a great education, and never looked back. Now I realize that even that school was a stretch for them.)
Fifty thousand dollars will probably only cover a year at one of those "prestige" schools. Then what will you do next year? And for the next kid?
Do you realize that Stafford loans are only for a limited amount. PLUS loans are a huge burden with high interest rates. You would wind up with the equivalent of TWO mortgages.
STOP -- right now -- and explain to your oldest child that his/her first two years wlil either be spent at an in-state school or community college. They'll learn a big lesson from this -- perhaps the most valuable college lesson of all!

Dear Terry,
My 88 year old mother want's to "gift me" the $13,000. allowed this year by the IRS. My question is this. If she should require to be placed in a care facility in the near future, would I be required to pay this back?
SAVAGE SAYS: Most states have a "look back" period of at least 3 years, but as long as 5 years to see if money was transferred, in order to "impoverish" the senior and qualify for state-funded care.
One other thing: you should check the difference between a state-funded facility and a private pay facility. Most states are short o fmoney and the care reflects that. She might be better off using the money to get into a private pay nursing facility, one that wouldn't move her out if she runs out of money, and has to hve the state pay future expenses. AT least she'd be in a better place!

I am looking to change my homeowners insurance and my auto insurance. I'm tempted to use the insurance companies listed online but I'm just a bit afraid becasue I'm not going thru a agent. Are these online insurance companies safe and what should I look for?
SAVAGE SAYS: Stick with a brand name company -- and they all have an online presence. YOu may be familiar with State Farm or Allstate, but you can also check quotes at GEICO and Progressive. Don't be penny-wise and pound foolish. If you NEED the insurance, you want to be with a large, responsible insurer.

I was in the process of refinancing my house and my position was terminated. Does that mean that I will not be able to follow through with this? I do have an interview for another job which looks very promising but would I have to put that on hold until I have a firm offer? I am current on my mortgage.
SAVAGE SAYS: You don't want to be accused of bank fraud, which is a criminal act. So if your refi isn't complete yet, you can't pretend you are still employed. Wait until you get that new job. I don't think rates are going to soar any time soon.

Was reading your response to my blog and can see from your response
that I misinformed you. I am retired with a pension after working 30 years.
This year my son graduates from college,and the private student loan debt
is approximately 50k with a variable interest rate. I have a 457b account
with approximately 150k in it. Would like to use some of the money to
pay down his student loan debt. Right now I am earning 3.8% on the monies
in the 457b account. I am afraid that with the accumulation of interest on
the student loans he could end up paying much more over the course of time for the cost of an education. This is already quite a bit of debt .
I would like to use some money from my 457b to at least pay some of the debt,if not all of it. What is the best way to withdraw the money that I am not taxed so heavily. Should I withdraw 20k yearly, or 50k in a lump sum,
or should I withdraw any of it? I am concerned about the mounting debt
since I cosigned for the loans. My pension is separate from the 457b account. This is an account that I started in addition to my pension.
Thanks for your help and for chewing me out because you thought I
took so long to pay off my college loans. I do like your style! (LOL)
SAVAGE SAYS: Wait! I'm going to chew you out again!!! DO NOT take money out of your retirement plan to pay for your son's loans!!! Read the recent column at my website -- www.TerrySavage.com - about a new student loan repayment program that goes into effect on July 1st, making it much easier to repay student loans. The payment is based on your income, so it is affordable -- and interest does not compound.
REPEAT -- DO NOT TAKE MONEY OUT OF YOUR RETIREMENT ACCOUNT TO PAY FOR YOUR CHILD'S STUDENT LOANS!

My company administers our company sponsored Profit Sharing Plan. I am fully vested in this plan (100%). My wife has lost her latest job, and we are going through some serious changes now concerning our house. I would like to save it, but my only way to do it would be to withdraw some monies from this plan. My company says I can not, unless I quit or am terminated or die. Is this true? If not how can I gain access to these monies, by loan or withdrawal?
SAVAGE SAYS: The company can and does set those rules. And you certainly don't want to compound your problems by quitting your job! Look, you cant get early access to your Social Security "contributions" -- and this is meant to be another sort of retirement plan. And banks will not lend you money against this type of non-liquid retirement account.
So forget about this pool of money, an look for a loan modification based on your current income.

Dear Terry,
I would like to know, should I cash in some of my sick time at 80% or try to continue saving them for retirement at 100% or go into more debt to pay for a vacation.
THank you.
SAVAGE SAYS: More debt? How can you possibly consider taking on more debt? Keep working, don't take a vacation this year -- and PAY DOWN YOUR CREDIT CARD DEBT!

I paid off my credit cards. Two Visa and master Card. I borrowed from my 401K with a 2% intrest and a 5 year pay back. I plan on retiring in 5 years at the same point in time when the loan will be paid off. In addition, I still pay into my 401k. I was concerned about the credit score. Does it help your credit score if the credit cards show on the report as closed or the if accounts remain open but show a zero balance?
SAVAGE SAYS: At this point why the great concern over your credit score? Are you thinking about a major purchase? Credit bureaus are busy revising their ratings systems. I would suggest you keep the one or two cards you need, close the rest and make sure your credit report says "closed at holder's request." Then charge a little every month, pay in full and on time, on each card. That will build your credit score.

Hi Terry--met you several years ago at an ARA dinner--my husband & I are in our 70's--I have read most of your book The Savage Number & thought I understood your position on variable annuities, but after a recent column I am confused. We lost at least 35% of our retirement funds in the recent fiasco--I am pursued by an agent we have used many x's to take some of the cash we have left & put into a variable annuity--but I am uneasy about this & even though the insurance co is still ok, wonder about future stability--My understanding is the state will back up to $100,000. but at present I have all our investments with one company, as it seemed easier to figure yearly fee for IRS. Do you have any specific advice for us. Thanks.
SAVAGE SAYS: Check out the two recent articles on annuities on my website. I have nothing against variable annuities, especially the newer ones with minimum guaranteed income benefits (read the article). But I point out that you must deal with a strong insurance company. (State funds are a poor subsitute for bank FDIC insurance.) And you need to understand the restrictions, costs, charges invovled in these policies.
To all who read this; If you have a question about a variable annuity, contact my annuity guru: Jeffrey.Oster@raymondjames.com I trust him 100% to take care of you. And you can use my name or not, as I get nothing out of this.

Terry, where can I find information on how and where I can send cash out of the country? Taxes have been paid on everything the money is my savings. I can just see the government now thinking it can just "tap" into other "pots" of money that they can spend. I just want it to be safe, and not let the government think I am too "rich" and start cutting down on my social security or medicare.
SAVAGE SAYS: Well, first thing -- are you aware that you must report foreign bank accounts on your income taxes -- or face HUGE penalties? So the government will know that you have money abroad!
Second, it's easy to open a foreign bank account -- Just contact a foreign bank, and ask them to send you the forms. You probably can do most of it by email, but must have an account signature. Then you can arrange for your bank to "wire transfer" the funds to the receiving bank. You will wire transfer in US dollars -- but unless you open a special US dollar account, your money will be converted into the currency of the receiving country at current exchange rates. So you'll want to keep track of that exchange rate, as well as the interest rate they're paying, to know whether you're ahead or behind in this transaction in the future.

I have just found a part-time job after losing my job eight months ago. My question is, they are going to direct deposit my net pay into my checking account because it is only a part-time job without any benefits. Is there a way to have federal and state taxes taken out of this after it is deposited?
SAVAGE SAYS: I'm glad you're aware of this problem. Ask the company if they will do withholding for you. If not, you must file quarterly estimated income taxes. And if you are self-employed you must pay the self-employment tax rate of12.4 percent plus 2.9 percent for Medicare. (If your employer is paying, the company deducts 6.2% of your salary for SS, and another 1.45 for Medicare, and the company pays a matching amount.) As you can imagine, they don't want to pay their half, so they make you an "independent contractor" -- which means you are responsible for your own taxes! Talk to an accountant to find out how much you should be paying each quarter for your estimates, so you don't get socked with a big tax bill next April!

Would you share your opinion on the Bright Start 529 plan? It has had bad publicity lately regarding the manangement of the Oppenheimer funds. Is it wise to stay in it just for the tax write off on contributions or to consider a different 529 plan?
SAVAGE SAYS: The writeoff on your Illinois state taxes is not enough reason to stick with a plan that hasn't functioned well. I've deliberately held off giving an opinion on this, waiting to see if the Treasurer gets Oppenheimer to pay up on some of its malfeasance. Expecially if you were in one of those affected funds, you should not transfer to another plan, or you might lose your chance of any repayment. Give me till fall, and I'll re-evaluate Bright Start.

I am retired and receive a monthly pension. In addition I have a 457b account of about 150k that I have not touched since retiring. I would like to use some of the money, about 50k , from the 457b account to pay off
the student loan debt. Should I withdraw the 60k all at one time,or should
I withdraw a set amount monthly to pay on the loan each month until it is paid in full? I am concerned about tax consequences as well as interest
capitalization on the loans. Any advice you can give will be greatly appreciated.
SAVAGE SAYS: I find it personally astounding that you are retired -- and still have student loans! Either you retired too early, or you don't have a good track record of money management. I'm not critizing -- BUT it's an important observation. If you withdraw money from your small retirement account to pay off student loans, you'll definitely come up short in the years ahead, when you have rising expenses for medical care etc.
So without knowing how old you are -- I'd suggest you reconsider your retirement. That doesn't mean you should go back to your old job full-time. But it DOES mean you should earn enough on a monthly basis to make regular payments and pay down that student loan! The interest that has accrued over the years must be horrendous. Didyou calculate that? Set up a 5 -year repayment plan for the balance, and don't consider yourself "retired" until that loan is paid off. (And leave your 457 to grow tax-deferred.)

What percentage of your credit card(s) limit(s) should be based upon your income? Thank You.
SAVAGE SAYS: Are you talking about the amount you are carrying as an upaid balance -- or about the credit limit set by the card issuer?
Either way, there are no set rules. YOur GOAL should be to NEVER carry a balance from month to month. And there's nothing you can do about your card's credit limit. Banks are cutting back on all of them.

I just checked my free credit report at the three rating agencies. I did not find any thing wrong. I had a mortgage that I paid off about 15 years ago and that item is no longer on any of the reports. I also only have 1 credit card that I use once a year and have never carried a balance. I am not planning on using any credit, but should I be concerned that my credit report does not contain any payment history?
SAVAGE SAYS: You never know when you might need credit. So it helps to have a good credit history. Make a small charge on that one card every month, pay it off in full and on time. That will get reported as good credit. Just in case you ever need it!

Terry

The stimulas check being sent this month is a one time $250 payment to people receiving SS and other retirement vehicles. According to an article in the Friday addition of the Sun Times this payment may be taxable and would either reduce one's tax refund or increase one's tax bill. Please comment on your response to anonymous on 5/8/09.
SAVAGE SAYS: Check out the answer from SSA -- the same answer I wrote to the previous question: Click on this link to get to the Social Security website FAQ on stimulus checks!

http://ssa-custhelp.ssa.gov/cgi-bin/ssa.cfg/php/enduser/std_adp.php?p_faqid=1772&p_created=1235421430&p_sid=VielUPxj&p_accessibility=0&p_redirect=&p_lva=&p_sp=cF9zcmNoPSZwX3NvcnRfYnk9JnBfZ3JpZHNvcnQ9JnBfcm93X2NudD0zNSwzNSZwX3Byb2RzPSZwX2NhdHM9MiwxNDEmcF9wdj0mcF9jdj0yLjE0MSZwX3NlYXJjaF90eXBlPWFuc3dlcnMuc2VhcmNoX25sJnBfcGFnZT0x&p_li=&p_topview=1

Can I refuse the government stimulus check being mailed this week and be assured that it is noted somewhere that I refused it, thereby not having to pay taxes on it next year?
SAVAGE SAYS: The economic stimulus check is not taxable!

Hi Terry,
I love reading your columns. This is why I am asking you this. I beleive in the April 16th edition, there was an article about 5/3rd and refinancing. They were offering a $250.00 closing cost special.
Could you tell me how I can get a copy of that article?
SAVAGE SAYS: I believe that was an advertisement that appeared on the same page as my column. Call Fifth Third and ask for details!

Hi Terry,

Thanks for all your help and insight over the years!
I'm at a crossroads at my job, considering whether to take a severance package that will give me 6 months salary & health care benefits, and retire early (with 28 years at the company, I can continue on the group health plan at the retiree rate). I'm 58, married, kids out of college, home paid for, absolutely NO DEBT of any kind, an investment portfolio of $1.5M, pension starting @ 58 of $31K, and SS estimate of $21K annually starting @ age 62. My expenses over the past couple of years have averaged $75K annually, including taxes. My job is NOT secure, and is very stressful, for a large megacorp. Financial Engines says I'm in good shape, but I'm REALLY nervous, considering the SS problems, pensions being under funded, stock market volatility, bank failures, etc., etc.. In your expert opinion, am I being too cautious? Any advice would be sincerely appreciated!
SAVAGE SAYS: What a very nice posting to receive - Look, no one can give you a guarantee that things will work out. But it looks like you have a pretty good plan, and a good cushion. (The only other thing I wish you had was Long Term Care Insurance -- see this week's column at www.TerrySavage.com, because that need could easily wipe out all your assets and your plans.)
Other than that, I think it's important to take calculated risks in life --if you can do so without looking back, and also can allow yourself to accept your decision and enjoy it. What I'm trying to say is that you should figure out whether you will be happier staying in your job and worrying about your future -- or leaving your job and worrying about your future!
Even better, can you leave and really enjoy these best years with peace of mind? That will require self-discipline -- which you've already demonstrated by saving so much, so well.

So, if what you needed is my "blessing" -- you have it!
And remember, just because you leave this job doesn't mean you can't pick up some part time work in a year or two, using your existing skills. YOu aren't really jumping off a cliff -- even though it seems like it!

I am currently in need of borrowing about 10k and trying to weigh my options. I am unemployed and have very little income from some personal contract work I am involved in. I have some money tied up in stocks in Fortune 500 companies, all which I purchased more than 5 years ago and which are worth less (some much less) than I paid. I have a Roth IRA, which is currently in a cd. Lastly, I have a large sum tied up in my 401k, currently in a cash plan.

I am not sure which to take money from, since all have their drawbacks and the latter, penalties involved. Another possible factor is that I am paying for my own health insurance. I read that there is some sort of account that can be set up to help pay for it, (from a 401k) but I am not sure if there are other factors. (such as age,I am 40)

Any suggestions?

SAVAGE SAYS: It's a tough choice, but I think I'd have to advise you to sell the stocks, take the loss (it's a write-off on your income taxes when you file next year). That's better than taking penalties for early withdrawals and giving up future tax-deferred (or in the case of the Roth, tax-free) growth.

Two questions please. S&P just downgraded the parent firm of Fidelity (FMR). Is there any danger to the sustainability of the firm Fidelity Investments ?

Also my wife and i are retiring at 62 and have over $3 million,would you recommend us to consider putting a share of that money in an annuity and if so a fixed or variable annunity ?

SAVAGE SAYS: I answered another post to that effect. Don't worry about the downgrade. First, it's just a small notch and still very high. But most important, your investment money is segregated and is not an asset of the parent company!

As for the annuity, it's hard to answer your question. What you need is an overall financial plan for both investing and withdrawing in retirement. One of the best places -- and least expensive -- to start is at T. Rowe Price --800-638-5660. Ask about their $250 "retirement income planner' service. It is a one-time fee, and you don't have to have money there to use this service, which gives you investment and withdrawal advice. Or a Certified Financial Planner might even take a broader look, asking about your estate plan, long term care insurance, etc. Go to www.CFPBoard.org to find one in your area -- check references.

Please get me help on what you mentioned on t.v. this week. About signing up w/ this program wher we give you all our accounts..in case of fammily emmergency. And also, the other deal on Investing w/ little$$$ down. Thank you. Adriana
SAVAGE SAYS: If you go to my website -- www.TerrySavage.com -- and fill out the little box that pops up asking for your first name, email address -- you'll get an email with a link to my Personal Financial Organizer form, which you can print out as many copies as you like --

I have many funds in Fidelity and just read where S&P downgraded it's parent company FMR from AA to A.Is my money safe?
SAVAGE SAYS: yes, your money is absolutely safe at Fidelity, held in segregated accounts. As is mine! Your only risk is bad investment decisions!

Hi Terry
I filed bankruptcy in 2008. The discharge date Feb 2009. How do I build my credit score? I am currently receiving soc security disability and a pension from VA. The reason I filed was A diagnosis of ovarian cancer and chemo treatments. My goal is to return to work in about 3 or 4 months. I am also looking at receiving a settlement in the next couple of months. I would like to deposit it in a money market account until I can map out a financial future.
SAVAGE SAYS: One of the nice things about America is we give people a chance to start over (as opposed to the days of old and debtors prisons in Europe!)
You can start over by getting a "secured" credit card. Go to www.bankrate.com and click on "secured cards." They'll show you a list of card issuers. The deal is that you put money in the bank in a savings account. The amount of your deposit is your credit line on a Visa or Mastercard. You start using it regularly, paying in full and on time, and you're on your way to rebuilding credit.
As for your settlement: Yes, leave it in an insured deposit in a bank (not an annuity, or any other security that bank reps sell). Make sure it is just an FDIC insured CD or money market account. And if it happens to be over the $250,000 insured limit, use two different banks!

Hello Terry,

I have always valued your advice. My current F/T professional level salary enables me to cover my routine expenses with no frills (i.e. no cable T.V. or fancy cars). I've recently paid off my four year old car which I love and I own a condo that has a 30 yr fixed mortgage of 6%. My problem is that I have alot of credit card debt - nearly $50k (all interest rates less than 10% - for now) that I have amassed over many years. Additionally, the debt includes the financing of my MBA - graduation scheduled for June 2009. Rest assured that I've learned my lesson about spending on credit and I'm more than willing to take responsibility for my debt. I've been paying diligently (over min.pay's and on-time ALWAYS) for many years now and I have seen some progress. My credit score is still good at around 750 at each of the three credit reporting agencies, but my debt ratio is obviously extremely high.

I'm considering refinancing my home (hopefully just under 5% - 30 year fixed), pulling out $40k in equity (appraisal shows enough equity after cash out to still have just over 20% equity left, enough to eliminate PMI) which I'll use to payoff nearly all of my revolving debt. I'm keeping some of it as a reminder of where I will NEVER go again with regard to credit - also, my remaining credit card debt [1 card - 2 diff. promos (1.9%LT and 5.9%LT)]. I believe that I understand the ramifications of converting this non-secure debt to secure debt (i.e. interest spread over LT of the loan), but I feel the need to pay off this revolving debt for my own mental well being. Am I crazy to consider this? If the economy sinks further, am I better of having credit card debt and a mortgage or just a larger mortgage? Consequently, the resulting mortgage payment would be less than my existing payment plus the min. payments on the cards that I'd be paying off with the new loan. I've only had my current mortage for 2 years....
Any advice and insight would be much appreciated. Thanks much.
SAVAGE SAYS: Sounds like exactly the right plan to me!

In a recent column you predicted that the Social Security system is underfunded to such an extent that Congress will soon need to address the issue by limiting Social Security benefits to only "needy" recipients. Please clarify what you mean by "needy." I think this would be politically untenable and the solution will end up being a combination of higher taxes and later retirement age, plus some new incentive to avoid taking benefits until one reaches full retirement age. But assuming for a minute that your prediction is correct, are you saying that those of us baby boomers who will be eligible to collect in the next few years will be completely denied benefits after having paid into the system for 30 years? If true, that would have severe repercussions because it is too late for us to "save more" to replace the same value as the lost benefits. Younger workers, however, would be wise to heed your advice.
SAVAGE SAYS: Well, if younger workers ever realize that all the money they put into the system is going to their parents/grandparents, they'll revolt! That's why I mean by saying we're facing "generation warfare"!!
I have no idea what Congress will do to "fix" the system -- but we're running out of time. And ignoring the very real problem is no answer. (Neither is "printing" the money!)

April 22, 2009
I have had a 30-year IRA CD (which lately was the only sure retirement asset I thought I had). For 25 years the certificate has been in a security box. Waiting, like me, to mature & retire. This certificate vastly multiplies in the last 5 years. The bank, Charter One, sent a Call Notice stipulating that they have chosen to redeem this certificate today (4/22/09). This leaves me nearly $23,000.00 short of the maturity value (5/11/2014).
To say, I am affected, is to put it mildly. The bank's branch manager has stated, when called, that there is no chance of reconsideration.
In the 80's we were encouraged to invest in bank products for retirement as secure & insured investments. Certainly I could not "redeem" the certificate w/o loads of barriers & penalties for the last 25 years. Now, I'm still paying penalties. It’s a loose: loose for me.
Even, if the bank has the "right" to do what has been done; is this the "right" thing to do?
Bank branch managers are paid poorly & certainly are not required to be finance wiz-kids. Someone else does all the "thinking" & I'm afraid they don't live in Illinois. Let's put these persons' feet to the fire & require all the accountability that a multi-million dollar beneficiary of our tax dollars, & now my retirement dollars, would be expected to produce.

I'm so sad, it hurts!
SAVAGE SAYS: Those "callable" CDs were a great deal for a while-- you received above market rates. But I wrote about them at the time -- suggesting that there was a potential that they weren't such a good deal for the long run -- because if rates dropped sharply, they could be called in. That's exactly what's happening -- and the possibility should have been explained to you at the time. They are well within the terms of the contract in doing so.
We want the banks to act in their best interest -- so they will be strong and profitable and the govt wont have to rescue them!

Own 8 townhomes; paid off. Due to age and helth issue, we would like to sell and owner finance. Is this a wise decission as we are thinking of collecting morgates instead of rents; saving on taxes, insurance and repairs.
SAVAGE SAYS: Just make sure you find a qualified buyer, and that you have a good attorney. Even banks are learning the risks that a buyer will default! You might be better off just finding someone with good enough credit to buy the townhouses and get their own mortgage!

I am 30 years old and I currently do not have a workplace 401K. (as employer does not offer one)

Since early 2003 I have a ROTH IRA and regularly makes contribution to that IRA
(maximum allowed per year by IRS guidelines)

So far I have contributed 24,000 and current account balance stand close to 20,800.

That about 13% loss of my contribution (not earnings) I know people might have lost a fortune in last fifteen months.

What would be your advice? Continue investing in a ROTH..? I am thinking of contributing for current year (2009) but now not sure

I hope I may even get my contribution back after 20 or 30 years.

SAVAGE SAYS: I fyou believe in the future of America, you MUST keep investing! You'll be buying more shares, at lower prices. Remember, so far there has never been a 20year period where you would have lost money investing in a diversified portfolio of large company American stocks, with dividends reinvested. Stick with your plan.

Hello !
In 1984, I purchased a 30 year IRA. In 2014, when I am 65, the IRA was to mature to $50,000. Note: This is the only IRA I own.
This week I received a letter from the bank indicating they are exercising a call (redemption) ~ the bank is putting the IRA into a 60 mo IRA Certificate of Deposit. Currently, the IRA has matured to a little over $27,000. I am to respond to the bank before the middle of May ~ or the IRA will automatically be moved into the 60 mo CD.
What are my options in this situation? Until now, I have never heard of Callable Certificates of Deposit ~ so do not know how to respond in my best interest to the bank! Should I let the IRA slide into the 60 mo CD or move it elsewhere?

Thank you, Terry ~ I appreciate your input on this issue !!

SAVAGE SAYS: Aha -- another case of not understanding what you own, and what could happen! Yes, the rate on this "callable CD" is much higher than market rates -- so they've exercized their right to "call it in." Now they want you to lock up your money at today's low rates for 5 years. Bad idea. Tell them that you want them to put in in a money market deposit account INSIDE your IRA. Then if rates rise -- because of inflation returning in the next 5 years, which is likely -- you'll keep getting higher rates on your money market account!

I currently have a 20yr mortgage at a fixed rate of 5.25%. I have had this mortgage for 3 years. I am considering refinancing for a lower 20yr mortgage (4.75%). My third child is entering college next fall, and the lower monthly payment would give me more dollars to make the new student loan payments that will start in the Q2 of 2010. I already am making student loan payments for my two other children. The lower monthly payment would be easier to make also if I were to lose my job due to employee reduction at my employer. Would refinancing be a good idea? Are there factors I should be considering that I'm not?

SAVAGE SAYS: I have seen fixed rates for 30 year mortgages below 5 percent. So by all means, try to refinance. And remember to make your kids responsible for paying some of those student loans!

Except for the balance on a car ($14,000.), I have only the normal bills, utilities, gas, groceries, etc. I have about 35K in savings and whatever I will be receiving from social security. I am 60 years of age with a job and plan to continue working at least until 65, Lord willing. Do you think it wise to purchase a house at this time? I am looking at some in the neighborhood of $70-90K).
SAVAGE SAYS: It's never too late to buy a home -- but make sure you do your homework. Yes, there are bargain prices these days -- especially in foreclosures. But make sure you have an attorney check for any liens, and that you don't have to evict the current tenants. Beyond that, call Consumer Credit Counseling services at 800-388-2227 -- and ask for their special program that helps homebuyers set up a budget, decide if they can handle all the expenses that come with homeownership-- including property taxes, insurance, upkeep and repair. They can give you more specific advice after looking closely at your situation.

I would like to know if there is anyway we can sell our house for less and row the balance over on a new home. Our credit is good and we only have a $240.00 a month debt. besides our house payment.
SAVAGE SAYS: I'm not quite sure I understand your question, but I think you're wondering if you could sell your house for less than the mortgage, buy another house, and add that amount you didn't repay on the first house to your new mortgage.
The answer is NO. Selling a house for less than the mortgage is called a "short sale" and should only be done with the written agreement of the bank. Then the amount you didn't pay will become a big negative on your credit report -- and you'll have a very tough time getting a new mortgage on another property! So stay where you are and keep paying until the housing market turns around.

Dear Terry,
I'm from Canada and in the midst of this economic downturn,do you think it is still a good idea for someone to go to university to study finance or banking?
I have knowledge in computing,accounting and engineering and it won't be a problem for me to study any one of them as a degree.
What is your advice and what you would have done if you were in my place?
Thank you very much.
SAVAGE SAYS: We're going to need smarter people in finance and banking! And if you stay in Canada, you'll be able to look for a job in a banking community that is much stronger than that of the US -- because they didn't make those crazy loans. If you're an undergrad you won't have to declare a major for a couple of years -- and you can see if one area atracts you more than banking/finance. YOu'll always be successful doing something you love.

Hello Terry,

My husband and I have two investment properties and our primay. Both of our jobs are affected by the housing market and we have used our savings and credit cards to pay our bills so far. At this point job wise things have picked up. We have not been making payments on one of our investment properties for serveral months, we do not want to loose either of the homes because we have put more than 20% of our hard earned monies as down payment when we purchased them. Our intention was to be able to sell the investment properties and pay down our primary to have less bills, but the e-conomy did a number on us financially and our investment properties are upside down, our primary is not because we had put a huge down payment of 42%. We have thought of may be selling our primary but because is a big house in an expensive area, there are not that many buyers, and if we do sell it, it would not even pay our credit card debts. We do have some other investments but it would not pay off our credit cards. Do you have any suggestions........ I have called the lenders as well on our investment and primary but so far there has been no word on modifications. We are stuck badly and sometimes very stressed, even though the bible say not to worry and that the lord will take care of our every need it is very hard. Do you have any suggestions????
SAVAGE SAYS: You are not alone. Those hour-long television commercial programs that taught everyone how easy it was to get rich in real estate by continually buying more properties have impacted so many people.
Look -- your investment properties are likely to be foreclosed if you do not make the payments. That will ruin your credit, but may be your only solution. But if you default on those loans, depending on how they are worded, the bank may be able to go after your other assets, or force you into bankruptcy. You need a competent attorney to guide you through this mess. If you can at least keep your residence, and don't have to file for bankruptcy it will be easier to start over!
Call Consumer Credit Counseling SErvices for an analysis. 800-388-2227 Talk to them before consulting an attorney who has an incentive to take you straight to banktuptcy.
You need to take action now to deal with this -- Remember, the Lord helps those who help themselves!

I just got home from a meeting with an attorney who "specializes" in mortgage modifications. He told me he can't help me, because we've been paying our bills! My husband was laid off in December; our only income has been his unemployment and small severence, which will run out soon. While I have worked hard to stay current with everything, I won't be able to once our $9k property tax bills come this summer. The attorney says we can't do anything until I'm 2 months behind in my mortgage; that I'd be better off to keep the money we have coming in and let our bills go. Can this be right? We've been married for 26 years and have built a solid credit rating, with never a late payment on anything. Now, we have too much debt, which we had been steadily working on when the layoff hit. I'm scared and I don't know what to do. I just can't imagine purposely not paying my bills!
SAVAGE SAYS: First, sorry for not responding sooner. A couple of postings seemed to have been "buried" and I just found them.
Well, you don't want to ruin your credit by failing to pay your mortgage. That's the whole point of the new loan modification program supported by the administration. Start over with your lender -- keep pushing - and tell them you qualify fo rthe loan modification program. Let me know what happens.

I want to rent my house in Grayslake until the mkt gets better and Buy another one in Gurnee (3 miles away). My wife and I make around $125,000 year together. Current house worth $215,000 w/ $142,000 balance. New house $225-$255,00 we're still lookin for short sale/bank owned etc. Credit score both 775-800. No real debt. Car mortgage, SAVAGE SAYS: It sounds like you are doing just fine in your present home -- Why ask for trouble? I'm on your wife's side! If you do want to move, do it the right way. Sell your place first, pay off the mortgage -- and then buy another!

The Visa card I have through my bank just sent me a notice stating that my APR is going up to 28.74%. They gave me the option of rejecting it. I don't know if that means I have to pay off the $3400 balance immediately or if it simply means I can no longer use the card (which is my intent anyway). Would I be better off transferring the balance to Discover who has offered me 0% APR on balance transfers for life? I love your advice about paying double the minimum monthly amount but I just lost my job. Thank you for you advice.
SAVAGE SAYS: First, you need to know exactly what your choice is with your current VISA card. Call and ask them. What does "rejecting" mean -- that your rate on the outstanding balance will immediately jump? That's certainly possible under the current law. YOu didn't say what your current rate is, so it's hard to compare. BUT I doubt that you will get that balance transfer offer from Discover now that you've lost your job. Go to www.LowCards.com and right on the home page of "best deals' you'll see that the Discover offer for 0% on transfers is good only for 12 months, and ONLY for those with the "best credit." If you qualify, and can pay off the balance in 12 months, that would be great!

I am 26, i remember my mom telling me it was easier to by a house 30 years ago than it is today. it seems that it grew harder to by a house for people in their twenties. How do i invest in property, how do i increase my credit, do i start with a small cheap house, or wait a few years and get a decent house? Rent or buy?
SAVAGE SAYS: Her memory is going! Thirty years ago in 1979 interest rates had started to soar -- reaching 15% on mortgage rates in 1980-81! But back then few people had credit card debt, so more of their money could go to a mortgage payment.
As for the present, you should save up enough until you can put 20 percent down on the purchase price -- and still have some savings for emergencies. Until then, rent -- or live with your Mom, pay a small amount of rent to her (she could probably use the money) and save the rest for your down payment! Don't worry, home prices aren't going to rebound that fast, and there will be plenty of bargains. And your home is NOT an investment in the traditional sense of the word "investment" -- such as stocks or bonds or mutual funds or even rental property. Your home is just the roof over your head, your personal security. So when you DO buy that first home, take advantage of any "first-time-homebuyer" mortgage deals that may be offered by the government (to reduce yoru payments) and be sure to take out a FIXED RATE mortgage!

Good morning,I've been out of work for a while and my husband's pay check has been paying our bills.As so many households, has fallen behind in some of our bills, but made sure that both mortgage's are being paid.While in cc debt of $20.00, I decided to close all of them and pay the just the limit at a lower intrest rate.Will this effect my credit in the future, and how can I re-establish my good standing so that my credit rating rises again? We don't want to touch our rather small annunity, for this is our retirement. Should we take some of that and put it into an IRA so there is something to back up on in the case of emergency?? Or pay the cc debt? And how do you take what is so small and build it for a cushin in our late age,(50)?
SAVAGE SAYS: I noticed you said mortgages -- plural. Do you own two properties, or do you have a second mortgage on your home -- in addition to your credit card debt? If you have another property, please try to sell it and use the money to pay down your credit cards. That should be your top priority. In fact, if you double the current miniumum monthly payment on any card, and keep paying that same amount every month -- and never charge another penny-- you will pay off the balance in less than 3 years!
Don't worry about your credit score now, or about closing card accounts. Just pay them down, one by one, and close all but one or two credit cards which you'll need for emergencies. You have to get "even' before you can get ahead! Credit card debt, and asecond mortgage will bury you. Write back when you've made some progress and we can look at your situation again.

I have been trying to get a Vanguard Variable Annuity 1035 exchange redemption request form so I can move my annuity to another company but they sent me the wrong form. Please send me the correct form for Florida so I can continue to process my request to another company. Thank You!!!
SAVAGE SAYS: Sorry, but you'll have to call Vanguard directly at 1-800-VANGUARD. And you didn't ask, but I can't imagine anyone wanting to switch OUT of a Vanguard variable annuity, since they are the lowest cost annuities around! I'll bet some annuity salesman got to you, offering what looks like a better deal. But any new annuity will come with new fees (guaranteed to be higher than Vanguard's) and also new surrender charges, which pay for the salesman's commission! It might be a good thing that you got the wrong form. Ask Vanguard to compare its products to the one you are considering. I'm betting that you should stick with Vanguard!

I am retired. Have an Am Ex card balance $10,000. I want to pay it off to make my life simple. Can you suggest how I can get some discount for paying the card off?
Thanks.
SAVAGE SAYS: some card issuers are offering a "bonus" if you pay off your card now. (They're worried about future credit losses.) So it can't hurt to call and ask if there is some kind of bonus, or discount. But, after all, you used the card, you bought the stuff -- and YOU OWE THE MONEY!

I am on social security and a retiree pension ($2,400.00). I do have a mortgage and many credit card debts($30,000.00)through out the past years. Don't know what to do. My ratio is higher then money coming in, so some lenders tell me. My house has been for sale in the market for one year and nothing is happening. Should I just sell my house for balance owed on the mortgage? I am going through so much depression lately. Should I loose house, go bankruptcy? NEED LOTS OF HELP...where do I start? :(
SAVAGE SAYS: You start by calling Consumer Credit Counseling Services, the national non-profit organization you can trust. Call them at 800-388-2227. That will connect you to the nearest local office. Make an appt, bring in all your financial info, and they'll help you work through the situation.

Jordan Goodman "Fast Profits In Hard Times" (who I heard on WGN Radio) has a website called www.truthinequity.com where you can buy a personalized report for $30 to see if his plan will help you get out of debt much quicker (including mortgage). Is this legit? Thanks.
SAVAGE SAYS: I've always had great respect for Jordan Goodman, but I have not seen this program so I can't advise. I CAN tell you that if you will simply double the minimum monthly payment on any credit card bill -- and keep paying that same amount every month-- without charging another penny-- you will pay off the credit card in less than 3 years! Works every time -- IF you stick to the plan. So if you really want to get out of debt, try this free advice!!

I have $3 million. No car,house or credit card bills. I am 62 and stopping work in a matter of months. I would like to draw $8000 a month NET.
SAVAGE SAYS: Probably -- as long as you don't get married! Seriously, the way to figure this out really depends on how you invest the money -- You need to earn at least enough to match inflation. And on how long you live! You can get personalized financial planning on this through some sophisticated computer modeling programs. Or you can get a rough estimate by going to www.choosetosave.org -- the website of the Employee Benefit Research Institute. They have the best online calculator -- a tool called the "Ballpark Estimate." Fill in all the variables and you'll get a good,specific answer to your question!

Is this achievable ?

Hi, we hare a family of 4 had a business and closed down about 1 year ago summer 09...in the interim we financed a vehicle to be able to transport my wife to cancer visits and kids to school. The job I have is not sufficient to pay all the bills, but God has been providing through tax returns, and coming through when we most need. It may have not been a wise decision but at the time we were in such need and got stuck instead. The sales person who sold us the vehicle totally lied to me at the purchase time, and instead of offering an affordable vehicle qualified me for the highest used vehicle in the dearlership.

We have told the financing company of our situation and they cannot do anything, we have tried many other options such as speaking to the dealership. But the only option giving to us is to return the car and loos the 1 year payments along with the down payment. Any suggestions?
SAVAGE SAYS: I'm sorry for your tough situation, but it may be better to allow them to repossess the car than go through a battle with them. But because this is a legal situation, and involves complicated personal finance issues, may I suggest that you contact Consumer Credit Counseling Services at 800-388-2227 -- That willconnect you to the nearest local office of this non-profit organization you can trust. Make an appointment and talk to their trained counselors.

As everyone my stock options have been affected and lost about 10K. I've been told I can take the full amount out ONLY to purchase my first home. Is this a valid statement? And do you suggest to just leave the funds where they are, place for a down payment or move to an IRA/CD/ETC? What can I do to avoid more loss?
SAVAGE SAYS: Well, from your question, you have a lot of things confused -- and you need to do some studying so you don't make some big mistakes.
First, I'm guessing that you don't have stock OPTIONS, but that you have a 40l(k) plan. And if that's the case -- and if your company plan allows -- you can "borrow" money from your plan to buy a home, but you must pay interest on that loan. And if you lose your job or quit, and do not repay that loan, then the loan becomes a "withdrawal" and you will pay ordinary income taxes on it, plus a 10% federal tax penalty if you're under age 59-1/2. Or you can take a hardship withdrawal from your 40lk to buy a home, but again you'd pay taxes and the 10% penalty. There are some hardships that let you withdraw without penalty. Ask your company HR department if you have a 40lk plan, and they'll explain all the exceptions.
If you have an IRA, you can withdraw up to $10,000 for the purchase of a first home without penalty -- but you will have to pay income taxes on the withdrawal.
Typically you cannot roll a 40lk into an IRA -- unless you leave the company!

I suggest you leave your retirement funds invested inside your plan, where you have a chance of making the money back. Save outside the plan for your down payment.

Kindly,

Claudia

I have 800 shares of Lehman Bros stock worth about $32 in my Schwab account. What should I do with them?
SAVAGE SAYS: If they're not inside an IRA or other retirement type account, you can sell the shares and use the tax loss. You can write off losses against any gains you might have if you sell another stock. Or you can use $3,000of the loss every year to offset ordinary income. And you can carry forward the rest of the loss, if any, for an unlimited number of years until you use it up!

I saw you on a Christian Broadcasting Network. I did not see the program in its entirety. But, the part I did not view, you were advising the audience on where and what to save there money in. I am going to take your advise on paying down my credit card account, but what I need to know is where should I save my money. I am cofused on the investment market. Should I invest in CDs, stocks, or mutual funds.
SAVAGE SAYS: Start by saving in CDs or a money market deposit account in your bank. When you have $10,000 saved -- you can do it -- then write back and I'll show you how to start investing some of your money. And be sure to pay down your debt before anything else!!

I know you have been asked this question many times during our country's financial situation, but I will ask again.

My husband and I are in our early 50's and foolishly did not invest in our early 30's. We started in our 40's and then took withdrew funds twice out of our 401. Last year (2008) we decided to get on the track (catchup) and talked with a Financial rep and got things going and then the stock market stuff happened. We have lost money, but have stayed the course. Did a refi on our house, went from 30 yr morgage to a 15 yr. mortgage at 5%. We want to sell our house and move into one that will be more suited for us for retirement (one level home from a three level home).
We are born-again Christians and know that GOD is in control, but we are to seek advice and wisdom.
What suggestions do you have the would guide us to make the right decisions in the days to come.

SAVAGE SAYS: Well, it seems like you're doing a pretty good job right now! You don't seem to have credit card debt. You have a low, fixed rate mortgage, and should have it paid off before retirement. I wouldn't be in a rush to sell the house now, especially since you don't need to move yet. Wait a few years till real estate prices rebound.
And JUST KEEP SAVING -- invest part in the stock market through your 40lk plans -- Yes, it takes courage, but America has always survived and prospered, and I'm sure it will again. And keep some money outside your retirement plan in a FDIC insured bank account -- CDs or a money market deposit account.
You're way ahead of many others who seek my advice!

Dear Terry,

I am 49 years old and plan to return to college after 23 years when I quit to care for my ill grandfather. I have 26 credit hours. I want to attend a Technology School but it will cost me $40,000.
The recruiter said that I can get a federal grant or loan to attend the school.
My question is, am I to old to return to school? I have no savings. No health insurance. I do warehouse work at $ 11.00 an hour. Or $26,000 a year.
I know that I can do better. It is in me now to get a degree in something. I worked and paid for my tuition 23 years ago. I have no college loans to pay.
Is it to late for me to return to school at my age?
SAVAGE SAYS: it is definitely NOT too late to start over. I always remember that Ray Kroc started McDonalds when he was in his mid-fifties!! BUT, this time around you will be smarter. You'll think about exactly what kind of degree you want/need to have a better life. And you probably won't go into debt to the tune of $40,000 to get it!!
There are currently plenty of technology workers without jobs. But the one area of technology that IS growing is medical technology. And as boomers age, there will be more demand. So check out fields in this area -- and I'm sure you'll find a way to get an education in a money-making field, without going so deeply into debt. Perhaps you could work for a medical firm, and they would pay part of your tution. Tough these days -- but even a job with a medical technology firm could leadyou in that direction.
Just remember, next year you'll be one year older -- God willing -- so you might as well be one year better educated!

I've heard Adam Bold of The Mutual Fund Store franchise on his broadcasts on WLS Radio on Saturday mornings, & the advice he gives seems to be reasonable. I'm wondering if you have any opinion about using that firm as an investment advisor.
SAVAGE SAYS: I don't know how his firm works, whether they take fees or commissions on the products they recommend. But there's no reason to pay a fee to buy mutual funds. Go to Vanguard.com or Fidelity.com or TRowePrice.com and you can buy the lowest cost funds.. And they'll help direct you to a diversified portfolio of mutual funds -- or a "target-date" fund that is designed to grow more conservative as you reach your retirement date. These are the lowest cost funds.
AND, on my website, I always have the toll-free number of the All-American Fund, which lets you start investing with as little as $100 -- IF you agree to an automatic monthly additional contribution of at least $30 -- a dollar a day -- from your checking or savings account. Again this is a low cost fund, no commissions. The toll free # is 800 US FUNDS.

Hi Terry, i was fliping thru tv channels Sunday
and heard you speak. and i did check out your
website, but in the q/a section i saw no answer to my question.

Myself and husband are both retired he's 64 receive Military disability and SS and his retirment from Civial Service total 5,000 a month
i receive 675 a month. were buying a mobile home
we own the property. we have around 10,thousand
in credit card bills, owe mortage 49,000 owe 8,thousand on one car. we have a total of 25,thousand in savings.

no ira or other accounts. in the news they are
talking about gold etc. and with such a limited
amount that we have i am not sure how to secure
our future or which way to go here. our bills come to 2,500 month then food etc.

should i take money out of saving and pay off
credit cards?
and then work on paying off the mortgage? before
trying to invest in any thing?

SAVAGE SAYS: I would definitely take the money out of your savings to pay off those credit card bills, because the interest you are paying is far more than the amount you are earning in interest. And you'll still have some savings in the bank. BUT you must be very careful not to be tempted to use those credit cards again! Close all but one, which you can keep for true emergencies.

Then, yes, work toward paying down your mortgage. Even a little bit -- $50 or $100 extra every month, if you can swing it -- will save you a fortune in interest and shorten the term of your mortgage. Do the same amount regularly, and ask your bank to put it toward principal. And at the end of they year ask for a statement showing how much extra money went toward principal -- and a new assessment of how long till you'll pay off your loan by making the additional monthly payments.
And let me say one more thing: You're likely to live a long time. You can't really "afford" to both be retired. Figure out something you can do -- even part time -- to earn more money!! That will make paying off the credit cards and paying down the mortgage much easier! Can't the mobile home wait till all that is done??

Hi Terry
My son and daughter in law started a Bright Start account for our granddaughter when she was born which we have contributed to and plan to contribute 500.00 per year for her birthday. She just turned 2, and we were wondering if we should continue to add, since it is not doing well, or purchase bonds for her until the market recovers and the account starts to make money again. Any opinions or suggestions would be welcome.
SAVAGE SAYS: If you believe in the future of America, I'd keep investing. Your $500 will buy more shares at today's prices. I know it's contrary to what seems like common sense. But if the stock market is still at today's low levels in 16 years when she needs the money for college, then we'll have a lot more problems than funding college tuition!

I would like to invest in a safe U.S. government bond that will protect me from inflation. I am considering IBonds. I understand I can buy them at a bank or through Treasury Direct. What is your opinion of IBonds?
SAVAGE SAYS: I think I-bonds are a good place to park your money -- if you plan to hold them for at least 5-10 years!

hi ms terry...hope this finds you and yours well.of course i don't really have any way of knowing, but i believe my situation is extreme and a "bit"of a challenge! it certainly is for me!i have no medical insurance.can't afford it. yet don't qualify for medicaid or care. deal with severe heart,lung,thyroid and weight problems..have a home in my name but attached to a forgiving loan, in desperate need of repair! the porch, rails, steps, columns,gutters, windows,roof,chimney,floors,even my appliances are to old and breaking down!(smile)i do work,but only three days a week(health),however, i will and frequently do work long hours.i owe city,state and federal taxes,am paying the city enough to stay out of jail,am not yet paying the state and am in an agreement with gov,to not pay at this time(don't have it),but they,(taxes,fines and interest),keep acruing. i have a small hair salon and i asume that the ecomomy is the reason for the drastic decrease in my business.i have no savings, credit is shot,credit card debt and a car reposessed.no iras or 401s, no rich husband or boy friend and no family to help. so!!!!! didn't i tell you it was next to impossible!Oh! by the way, i'm fifty four this july.i don't know what or how or when or where or even if to do anything about this.i filed bankruptcy once before, i don't want to totaly fail again. it's a matter of dignity and honesty and responsibility. i want to pay my debt to society this time. while i can't stand an extreme amount of stress anymore, and i wan't to be able to "live" a little before i die, i don't want to continue running and being ignorant of how to succeed with pride!"short" story is, i'm tired...so if you are up to the challenge or know anyone who is, i would be very grateful........sincerely yours emarie
SAVAGE SAYS: Oh that is such a tough story. And you're not alone in being in this tough spot. This economy is hitting lots of people -- who simply cannot manage the daily expenses of living.
I will make two suggestions:
1) Call Consumer Credit Counseling Services at 800-388-2227. That will connect you to the nearest local office, and they are great people -- non-profit -- who may be able to help you sort though your priorities.
2) Contact your church, and local community service organizations I don't want you to be "homeless" -- but it sounds like your home is just too much for you to keep up. Perhaps in return for donating your home to a church organization (and definitely get your own lawyer to help draw up the papers) you might get a lifetime promise to live in a church-based home or community center, where you could help others by providing your beauty salon services to them.

You'll have to be creative. And you'll have to ask for help! Just as you asked me -- but of the people in your community. (And I hope those reading this letter will recognize that there are many people in your area who really need your help!)

On the recent events of the stock market lows, it seems bank and financial stocks are at their bottom low and very attractive for long term holds. It seems to me that the government will not allow these institutions fail? At least for the foreseeable future? I see opportunity when everyone says these stocks are near worthless. Is level of risk what a home investor needs to consider when dealing with these types of stocks?
SAVAGE SAYS: The most important thing for an "investor" to know, when considering bank stocks, is that if the U.S. Government takes over a bank, it may continue to operate, but its stock will be totally worthless!

Dear Terry,

If possible can you please tell me about the state of the canadian economy?
I've heard that canada has among the best financial systems and its economy is still flourishing.
What is your asessment about the future of the canadian dollar?
I need your help in these matters because I'm going to migrate to canada this year and want to be sure what's awaiting me there.
Thank you very much
SAVAGE SAYS: Very interesting question, because I personally spend a lot of time in Canada. Make no mistake, their economy is slowing too. But not as much as ours, because they didn't have financial institutions making crazy mortgages! So their banks are in much better shape.
But they are our largest trading partner, and many auto companies have manufacturing plants in Ontario. Plus currently oil prices are low, putting a strain on their exports.
In the long run, I am very optimistic about the Canadian economy becuase they have so many raw materials, natural resources -- everything from oil to gold to water! The Canadian dollar is now around 82 cents -- has been in the 70 cent range -- and I think if inflation returns (making their commodities more valuable) you could see the Canadian dollar trading at parity with the US once again.

dear Terry,
I am disable on a fixed income. Needless to say for the last 20yrs i have incured an endless pit. Where would I start on the road to credit repair.
SAVAGE SAYS: Call Consumer Credit Counseling Services at 800-388-2227. This is the national non-profit organization that you can trust. Calling that number will connect you to the nearest local office. You can make an appt to go in, or they will help you over the phone. You can't fix a problem till you understand it -- and they're the experts!

Terry, My husband is 83. I am 70. We own 3 houses all paid for. we rent 2 of them. Live in one. Would it be wise for us to get a reversed mortgage on the house we live in? We have no credit card bills.Our house now is probably only worth $130,000 if that. was about $225,000
SAVAGE SAYS: Reverse Mortgages are a great way for seniors to withdraw money, tax free, from their home for living expenses. But if you don't need the extra cash, why pay the fees associated with a reverse mortgage? So I'd need to know more about your situation before making a recommendation.

IS forex a save and good investment?
SAVAGE SAYS: I assume you're referring to "foreign exchange". Forex is NOT an INVESTMENT! In fact, the commodities futures laws have a huge loophole that lets companies offer "foreign exchange" without any regulation. It is ALWAYS a ripoff to respond to these adds. If you want to learn more about TRADING foreign exchange on the futures exchanges go to www.cmegroup.com, and learn more about legitimate foreign exchange trading. But this is a very speculative type of activity, and you need to have a broad knowledge of the factors that impact relative currency values, as well as risk capital for your account.
(Full disclosure: I have been a member of the currency trading division of CME, and now serve on the company's board of directors. That is where most foreign exchange futures are listed for trading.)

I have been saving for a while and i am ready to invest in foreclousers, in real estate, do you know where i could get a list of them. I have tired the internet and paid different companys for listing and no luck. Also, what is another good investing path i should go.
SAVAGE SAYS: Most states have listings of auctions for foreclosed real estate. YOu can also google "foreclosures" and your city or state name and get a listing of auctions. A word of warning: be sure to actually visit the property, have an attorney read the auction wordings, regarding the title to the properties offered. (you don't want to be the one to evict the current homeowners, and you need to know that past taxes have been cleared.)
You may be better off finding a home owner in trouble and executing a "short sale" -- purchasing property before the foreclosure IF the bank will allow it, just to get their problem solved.
And you may want to work with a realtor specializing in these properties, although that may add to your purchase costs.

hello........i have a question we moved in ournew home and we hav a septic system....4 yrs later we find out that draniage pipes were installed wrong which will cost us to use our water and toilet...my question is i haved the permit papers from county it doesnt list a lincense contractor...how do i get owner to give me name of contractor and paperwork and alsohow do i go from here im checking his insurance position also....
SAVAGE SAYS: I'm afraid this is a little outside my territory of personal finance! You might need a local attorney familiar with country procedures.

Terry,

I am looking into working with Credit and Debt Management of America(CDMA) of Dallas, Texas. I have about $50,000 in unsecured debt and CDMA is offering a plan where they provide debt settlement programs. They state their settlement teams are experts in negotiating debt reduction and typically settle 40-60% of the original balance. They mentioned that my credit score will be impacted by 100 – 150 points within the first 90 days of not making credit card payments. However, they also state that debt settlement shortens the process and reduces the cost by negotiating the balance and pay off the debts within 3 years. After this 3 year period that your credit score will improve since all of unsecured debt will be paid-off. I want to know what your thought are on this company and the service they offer. Also, how will it impact my credit score.
SAVAGE SAYS:The whole idea is that you set aside the money (in an account YOU control) instead of paying your creditors. Then when you accumulate enough cash to negotiate, they handle the process. Of course, they take their fees first!

The Savage Truth is: I don't know. Some of these companies are pure ripoffs -- they take fees, don't get deals for you. And your credit is ruined. I can never tell which is which. I know some companies DO negotiate your balance downward. But the trap is -- you're now way behind on your debt, your credit score is ruined as all the creditors report late payments, and the creditors are moving quickly to turn these accts over to collection agencies. And they're harder to deal with than the initial creditor.

So if you do this, and if it works, or doesn't-- please let me know about your experience!

I have a Zero Coupon IRA CD, opened from St Paul Federal, in 1985, about 10yrs ago St Paul was taken over by Charter One, who is calling back the CD, 5 years prior to it's maturity date, due to it's high percentage rate. I'm 49 years old and was wondering what your recommendation is for me to do. My CD call back date is 22April. Can it be rolled over to a IRA Roth CD, it was a IRA Traditional CD.

Since CD rates are currently so low, would your recommendation be to do a 1 year, and hope the rates improve in 12months, I wish to make the most percentage but keeping the IRA CD safe from any losses, only wanting to rollover to a FDIC banks, etc, and not willing to put it into something that is risky. Appreciate your input.
SAVAGE SAYS: Actually, I'm surprised they didn't do this earlier, instead of continuing to pay those high rates. It's within their right when one bank takes over another.
To respond to your question-- when it matures make sure it stays INSIDE your IRA, and you can put it in a money market deposit account or short-term CD.
As for rolling to a Roth IRA, you can do that -- if your income this year is under roughly $101,000 on a single return, or $159,000 on a joint return.
And you'd need to have money outside the IRA to pay the taxes, which will be due when you file your return next year.
If you wait until 2010 -- and if Congress doesn't go back on its promise -- there will be no income limit to convert to a Roth IRA.
The reason to do so is if you suspect that tax rates will be much higher in the future.

Meanwhile, the most important thing is to make sure that when your CD is redeemed, it stays INSIDE your current IRA, until you can make a decision.

Hi,

I enjoy reading your answers. I need some direction. I have $170,000 in a money market bank account and $100,000 total in a variable annuity and mutual fund. I have no debts other than my $87,000 mortgage($920 monthly at 6.7%) A financial advisor had set up an account to pay my mortgage but that account has come to an end.
A fee pay only fin. advisor suggested that I refinance by mortgage for 30 years at the current lower rates to bring my payment more in line with what I make. I work in a school system making $34,000. Although this is not a lot, my health insurance along with a flex account are paid by them too. I have been in my house for 10 years. Should I refinance or should I pay it off out of my mm account. Obviously, retiring is not in the picture any time soon. I am 58. Luckily, I do have a job that I can continue to work in for as long as I choose to. Help, I need a second opinion
SAVAGE SAYS: Well, I definitely think you should refinance if you qualify based on teh value of the home, and your equity and your credit report BUT, here's an alternative idea: See if you can refi to a 15 year FIXED RATE loan. That way you'll save a fortune in interest -- and have the home paid off before you're too far into retirement!

Terry
We are not happy with our financial person and would like to switch to another. We are afraid of the monetary loss of switching. What would you recommend.
We have a Metlife Annunity, an IRA, and some CD's thru the advisor. My husband is 62 on Social Security working part time and I am 61 working part time. Own our house..no credit bills.
Thank you
SAVAGE SAYS: You are not enslaved to this financial advisor! But you should understand the products you own, and any costs involved in selling the products. There is NO cost to "switch" to another financial advisor, or to seek a second opinion. The only costs might come when you sell one product and buy another!

So let's start with what you own:
1. The MetLife annuity. If you have passed the period of "surrender charges" -- typically up to 7 years, you can get out of this annuity. BUT you'll pay ordinary income taxes on any gains --unless you "roll over" or do an "exchange" to another similar product, which starts a surrender period all over again! SO, ask yourself: Why do you want to get out of this annuity -- assuming you haven't started taking a monthly check for life, in which case you CANT get out of it?
You can hang on to the annuity, as it is probably providing you either a fixed rate of interest, or a choice of funds insde -- a variable annuity. If the latter is the case, and you've lost money in your funds, you could switch to more conservative funds INSIDE this very same annuity. If you don't understand what I'm talking about, contact my annuity expert: jeffrey.oster@raymondjames.com. (And promiseyourself never to buy a product you don't understand.)
2. CDs -- are these FDIC insured CDs in a bank? If so, you don't need your "adivors" to do anything. If these are "brokered CDs" -- and not inside an IRA, then when they mature, just move them to a bank of your choice.
3. IRA -- ok, so you have an IRA with this advisor, but what's INSIDE this IRA -- Is it stocks, mutual funds, or cds? Don't know -- shame on you! You can always "roll" an IRA to a new custodian -- such as your local bank, or Vanguard or Fidelity. But first you must know what's INSIDE your IRA -- And typically you'll convert that to cash and roll the cash to the new custodian where you can start over. Warning: if you rollover to a bank, make sure it's to the bank and NOT to the brokerage firm INSIDE the bank -- or you'll be paying commissions to reinvest your IRA. (you won't have that problem if you rollover to Fidelity or Vanguard, for example, because they don't charge commissions to purchase their mutual funds if you do it through their offices or toll-free phone numbers.)

Now, if all this is too complicated for you to take the time to learn,then what's more important to you at this stage of life? Take the time to ask questions, demand answers, and LEARN -- or there will be plenty of salespeople who will earn their retirement selling stuff to YOU!

I have a 30 yr IRA CD with Charter One Bank was taken out in 1985 with a maturity date of May 2014 with an interest rate of 11.p percent.

The Bank is calling in the CD and moving up the maturity date to 4/09. It appears that I would lose 42 percent of the agrred value of the CD.

Can I appeal this? Is this legal?
SAVAGE SAYS: Yes, it's legal -- but it hasn't happened much in the past. When a bank is taken over, the new bank can legally change the terms of the deposit accounts. And given current rates, it's not surprising that they would do that!

With credit card companies reviewing all of their accounts, several have either been closed or received severe cuts in credit limits due to these accounts being inactive.

I am extremely concerned about the impact this will have on my FICO score and have no control over what these companies are doing.

What can I do to keep a great credit score from becoming mediocre? It is not possible for me to pay off accounts at a faster rate.
SAVAGE SAYS: I have received similar questions/comments along this line. Since so many lenders are doing this -- raising rates, requesting payoffs, and bribing customers to close their accounts -- I'm quite sure the next round of FICO scores will figure out a way to deal with this issue. After all, it's better ot have paid off an account and have it closed, than it is to go through bankruptcy or some kind of debt settlement procedure.
Just concentrate on paying it down as fast as possible -- don't worry about your score.

Dear Terry,
Lately I have seen many ads in the newspapers and also signs saying gold, jewelry, coins and other items are being bought for "top dollar". Today when I came home from the grocery store, 2 huge signs were posted in front of gas stations and they have the same message. I have some items I was tempted to sell at one the places which was advertised in our area a few weeks ago @ the Ramada Inn in our area, but my husband said these places are just rip-offs. Are any of them reputable or trust-worthy?
SAVAGE SAYS: The Savage Truth is -- I don't know! You can check the gold price every day (www.kitco.com) and know what's a fair range of prices -- assuming you're selling .999 fine gold bars or coins. They usually take a 7 percent discount on those. But if you don't know the gold content of your jewelry, you risk getting ripped off.
If I have a better idea on this issue, I'll do a column -- soon!

do i have to pay state/city taxes on my deffered comp. im a retired state correction officer
SAVAGE SAYS: YES. It is compensation -- and it is taxable.

3 years ago we refinanced with Citimortgage at 6.0% ARM that will adjust in 10 years. Soon after, we had our basement finished by Corning at about $33K, which, as was suggested by Corning, was financed by Key Bank. This became our second mortgage. During the refinancing our home was appraised at $442K. Since the refi was LIBOR only, we've been looking for a fixed mortgage. At present we have $326K balance with Citimortgage & $19K with Key bank. We have been trying to consolidate both into one loan but couldn't find anyone willing to refi us now that the rates have gone down. I had the house pre con'd(?) but was told that here in Addison, Ill around where we live, the highest value is only $320K. I have a 4bedroom 2-story with 2car garage, fenced backyard, 2600 sq ft + finished basement 6 year old house but can't find any company that would refinance me.Terry, could you help? Thanks.
SAVAGE SAYS: Go to www.GuaranteedRate.com to shop for a mortgage. If your credit is good, and you still have equity in your home, you should have no trouble refinancing. But this time stick to a FIXED rate for 30 years!

I heard you on the news earlier say that part of the stimulus bill would go to help people on cobra. Where can I find this information.
SAVAGE SAYS: Contact your former employer. The February bill specified that people who lost their jobs after September 1, 2008 and are otherwise entitled to COBRA (the 18 month extension of company health benefits) will have 65 percent of the cost of the first 9 months of COBRA subsidized by the government. Your employer should bill you for only 35 percent of the cost of COBRA for the first 9 months.

My husband and I have several fixed rate annuity's with AIG annuity company, we are very worried about the safety of these policies (all of our life savings ) and are considering surrendering them in spite of the fees. Our state gaurantee fund only covers less than half of the value of our policies, we have heard that it can take months to get the money once you send in the surrender forms, and worry that the company may not last that long ! please help
SAVAGE SAYS: WEll, I certainly understand your concern -- in spite of the fact that the government has indicated it will do everything to save AIG (exactly because so many people are in your situation.
I have always advocated not keeping all your chicken money eggs in one basket! So the first thing you need to do is find out if you are really still subject to surrender charges. And then you need to realize that if you are not subject to surrender charges, you have two choices, not one.
You could take the money out, past the surrender period, and pay ordinary income taxes on the gains.
OR you could do a "1035 Exchange" to another policy from another company -- to avoid paying taxes on the withdrawal.

For more information on your annuities, I suggest you contact the one expert I really trust (and have purchased my own annuities from him). Jeffrey Oster can be reached by email: Jeffrey.Oster@raymondjames.com.

Hi Terry,
Here comes another mortgage question. We built our house in 2004 for $230,000 @5.375% Fixed 30yr with $100,000 down. Our note is $961.43 a month. We have lost hundreds of thousands of dollars in the stock market. We didn't know that we shouldn't even have been in it, because we use that money to pay the mortgage note. All we have left is $73,000 (now in CD's & Bonds). The principal balance on the mortgage is $118,000. Should we continue to pay the $961.43 for the next 5 years or so until all the money is gone and then refinance, or should we cash out the $73,000 and what is left after penalties and loss, take that money and apply it to the principal and refi now? I don't know how to calculate what the principal would be after paying the 5 years of payments. One way or the other we will have to refi and pay the mortgage out of our fixed income. My partner is 69 and I am disabled. Can you please advise. Thanks Roy

SAVAGE SAYS: Don't follow one bad mistake (putting all that cash in the stock market) with another -- using up all your cash to pay down your mortgage now!
Look, you have a great low rate. There is no reason to refi, especially because your house is probably worth less than when you originally took out the mortgage!
You can make the monthly payments. AND you need some cash on the side for emergencies.
Five years from now, the house may be worth more -- especially if inflation returns. They maybe you can sell the house, and have some money left to rent a small apartment.

Hello, I wonder about financial advisors who say you need to have maybe a $ million for retirement (as if someone who made $30K a year could save that much). I am 58 & have $175K in savings. My living expenses, including Health & Long Term Care Insurance are @ $20K a year. I own an almost paid up condo - equity @ $150K. I will get a pension ($11K/ yr) at age 60. According to Social Security at age 62 I will get at least $15K/ yr (future dollars). Right now I am only working very part time because I almost collapsed from working at my previous job 50+ hrs. a week. I have checked retirement calculators & supposedly I will have more than enough $ to live on for 30 yrs, even. accounting for inflation. So, can I not worry so much about having enough money (except for the world collapsing, or horrible medical problems)? Right now I'm pinching pennies to spend less. Thanks!
SAVAGE SAYS: Well, that "need millions" figure depends on the lifestyle you plan to have in retirement! I'm glad you have Long Term Care INsurance -- that's the most devastating cost that most people don't consider.
For others reading this and wondering how much they REALLY need to save, I suggest using the "ballpark estimate" calculator at www.ChoosetoSave.org.

Dear Terry,
I have a Mastercard with a balance of around $2,000. My February statement showed an APR of 14.83%. My March statement showed an APR of 21.24%, so I called customer service to ask about the rate increase. What I was told was that I could opt out and close the account and pay off the balance at the lower (14.83%) rate, or keep the account open and pay it off and/or use it at the higher APR. I was wondering that if I choose to opt out, if doing so will affect my credit score, and is opting out the same as closing a credit card account?

Thank you very much!!
SAVAGE SAYS: This is happening all across the board: card issuers are trying to collect balances in any way they can before the next round of bankruptcies. If you have the cash NOW, you should pay down the balance. Then if you close the account! Then it will read "closed at the request of cardholder, paid in full" (That presumes you have another card you could use in the future if necessary.) If you don't have another card, pay down the balance -- and then use it only for charging purchases you can pay in full every month.
This is such a new thing that no one can really tell how this type of closing will be modeled in credit scores. But it is a SURE THING that you're being ripped off if you pay 14% interest, much less at 21%!!

Terry, I recently inherited $200,000 and want to invest for my future. Because of market losses I only have $55,000 in a 401k that I finally moved into stable value funds, and $5,000 in an IRA that was valued at $12,000 about 9 months ago. I have $50,000 in a Money Market account. I'm self-employed and am making ends meet, but barely. A financial adviser wants to take all my money and manage it, investing in a variable annuity ($100,000 RiverSource Ins.) and $100,000 in mutual funds, $30,000 in a CD under a moderately conservative plan. For health reasons, I might find myself unable to work in the very near future. I have lupus and the disease is progressing to the point where I fear that I will work only about 5-7 more years. The financial adviser assures me that I will have an income for life from his investments. Does this seem credible to you? I'm concerned about the annuity, and yet, he feels the annuity is one of the most important aspects of the plan. Thank you.
SAVAGE SAYS: Hang up on this "financial advisor." Selling the annuity will make him rich, not you! Given your circumstances this is not a good plan. Please contact me by email if you would like at least two other financial planners whom I trust to get their opinions.

I called my Fidelity broker today about purchasing 20 bonds (US Treas NTS 2.12500% 01/15/2019TIPS). I was told by broker I would have to pay almost $21,000 (about $1,000 would be paid by me to the federal government because these TIPS were a reissuance). I decided not to purchase because of the $1,000 additional cost. I was told to call back on July 2 when New Issue 10yr.TIPS will be offered again. I am willing to purchase TIPS, but I don't want to pay extra interest fees. This is the first time I've tried to purchase TIPS. I know you've recommended TIPS funds, but bond funds can loose money and there are management fees to pay. Please comment. CD rates are so low now. I'm looking for a safe place to invest.
SAVAGE SAYS: Did you ever hear the old expression: "Penny wise and pound foolish!" That applies to you.
Purchase TIPs (Treasury Inflation Protected Securities) in a FUND - and pay the pros a very small amount to manage the money! And, by the way, even TIP Bond Funds can lose money IF interest rates rise sharply, and the market value of the bonds declines because the inflation adjustment can't keep up with the rising rates in the free market. And if you don't understand that concept, you shoudl keep most of your money in a money market deposit account.

Would it be advantageous for me to open a Reverse mortgage as I do not have any heirs ?
Should the housing market values increase after I take a Reverse Mortgage, would this effect & be of any benefit/advantage to me should I take a Reverse motgage on my home ?
Do the low mortgage rates that are now in place
increase the benefit of opening a Reverse mortgage?
I would love to make some new home updating & purchase a new car.
Just appreciate reading all of your advice/comments ! thankyou
SAVAGE SAYS: I'm a big fan of reverse mortgages, when used correctly. I even got one for my own father! BUT, I don't know enough about your situation to comment. First, you should be well into your 70s before takign out a RM, as the amoutn you can withdraw-- either monthly or in a lump sum -- depends on your age, value of your home, and interest rates. YOu should also be plannign to stay in the home for a while, because there are costs associated with an RM.
Right now, interest rates are low -- which is good, meaning they'll give you a larger monthly check. BUT, home values are down, which means the appraisal will be lower, and you'll get access to a smaller pool of money in home value.
I suggest going to www. GoldenGateway.com and using their calculator. They also have counselors who can answer your specific questions.

I am soon going to be receiving a bonus that I want to use to eliminate several of my credit cards and my car loan. Should I negotiate for a lesser balance on my cards? Will this hurt my credit score? What is the best way to go about doing this? I will still have a consolidation loan open.
SAVAGE SAYS: If you are successful in negotiating a lower balance, save money for taxes you'll owe next year on "forgiveness" of a debt! My advice is to pay down those cards, close the account, and demand they send a report to the credit bureaus saying the account was closed at the request of customer. Put it in writing when you send the check, keep a copy, and ask for a return receipt.
And what's with the conolidation loan? HOpe you can pay that down, too.

Hi,

My money situation is - -
I have $168,000 in a money market account.
I owe $87,000 on my home (no other debt)
I have $90,000 in a variable annuity
I have $28,000 in a mutual fund.

I am 58 years old. I am planning on paying off my mortgage and then begin to slowly invest the remainder of the money account in to a safe area, but one that might offer a little more interest than what I am currently getting in my money market. Money I was using to pay the mortgage has come to an end. This was set up as an account that would be depleted in 5 years. I hope my plans sound OK. I only make 32,000 a year. Any suggestions??

SAVAGE SAYS: My first suggestion is to get a more realistic plan! The first step is to replace the income that you're losing (sounds like maintenance from a divorce just ran out). You are likely to live 30 more years -- and drawing down your money market savings to pay down your mortgage is NOT a solution. You need to find more income -- at least enough to pay your mortgage and living expenses! Or else, when the market rebounds, you need to think about selling your house.

(Yes, I know this is a recession, but if you don't start with an honest appraisal of your situation, you are just kidding yourself.)

Second, there is NO place where you can get money market safety AND higher yields! Again, you're fooling yourself. If you get a higher promised rate, you are surely taking MORE RISK! Ask yourself, how much of this money can I afford to lose??
This is not a good plan.

Dear, Terry,

Thanks, in advance for your help!

My husband and I are in our early 30s with no kids but hope for two. We currently are maxing out our respective 401K's, contribute the max to Traditional IRA's (can't do Roth) and do not carry debt. We are debating the pros and cons of a low-cost tax-deferred variable annuity. We are not aware of other tax deferred shelters. Would you recommend this variable annuity or is there another vehicle in which you would place a chunk of money until retirement age? Thanks!

SAVAGE SAYS: Please read my column in tomorrow's (Thursday) Sun-Times!

We invested in GMsome time ago. Wehave not e njoyed watching it disappear. If GM files bankruptcy, will the courts do anything for the stockholders or is this a complete loss for us and others? Thank you
SAVAGE SAYS: If a company goes bankrupt, the shareholders lose everything. (The bondholders, lenders, and other creditors may receive a portion of the money that is owed to them.) Even if GM comes out of bankruptcy as a new, slimmed down company, the new shares will go to the creditors -- and the old shares will be worthless! You can take a tax writeoff -- up to $3,000 a year as a capital loss -- unless the shares were held in a retirement account.

My father needs help in financing a loan for a home. My part would be paying off some of his debt or a down payment. We will both be living at this residence and I will be paying 60% to 70% of the mortgage. If I am added to the title at time of purchase, can I use the tax and interest deductions at tax time as he does not file income tax as he has only social security as income? I will also not be a co-borrower. Thanks and any help would be great.
SAVAGE SAYS: Well, your letter is confusing. If your father needs "help" in financing a home loan, I would assume that your name would be on the mortgage as well as on the title to the home. And in that case you could use at least a portion of the mortgage interest and property taxes as a deduction on your income taxes. Check with your tax preparer as to how much of that cost you could take on your return. I doubt that your father could get a mortgage based only on Social Security income.

Are you able to get your credit score for free? It seems every website I go to there is always a charge. Please advise, thanks.
SAVAGE SAYS: You can get your credit REPORT free -- by going to www.annualcreditreport.com. But the credit SCORE is a proprietary number -- created by several different companies. The most frequently used score is the FICO score. You can get it at www.MyFICO.com -- but there is a charge for it!

I am looking for your recomendation, I have a 15 year mortage on my primary residence a 5.125% and have 9 years left. The balance is apox. 152000 and the home is worth aprox. $500,000. I also have a second home(condo)in Arizona with a 15 year mortage at 6.375% with a balance of aprox 189000 and 14 years left. My primary home has a second of aprox. 81000.00 with an interest rate now at 3.5% but changes with the market.My question is do I refi my primary with the max amount I can at 15 years and pay off or as much as possible of the second mtg and second home. Thank you in advance.
SAVAGE SAYS: You owe a LOT of money in mortgages -- and my advice is to pay them ALL down as quickly as possible. BUT, I would definitely figure out a way to get rid of that $81,000 floating rate second mortgage asap. Right now, rates are at their lowest in history. But in a few years, it's entirely possible that inflation will push rates higher. The one to refi is the condo -- IF you can, and take enough money out to pay off the $81k. It's a shame to touch that 5%-15 year loan -- but if you wait a few weeks, you might even be able to refi that one at a lower rate for 15 years. I've seen them under 5 percent lately. Don't be paralyzed by doubt, though. Go after this opportunity to refi one or both --

Hi Terry,
I am a retired widow, age 75, & may have some interest in a Reverse mortgage.
Will the present lower mortgage rates have some advantage on Reverse mortgages also.
If so, would you please explain.
Many thanks.
SAVAGE SAYS: I'm about to write another column on Reverse Mortgages, which I consider a great tool for seniors, under the appropriate circumstances -- IF you plan to stay in your home. But you should wait until you're in your 70s -- because the amount you can withdraw -- either in a monthly check for life, or in a lump sum -- is determined by your age. (The younger you are, the less you get!) Two other factors determine how much you will received: the value of your property now, and the current level of interest rates. Of course, many home values have dropped significantly in the past two years. BUT on the bright side, the interest rate is currently very low -- and that means you can get more money out of your house, because they do not have to "reserve" as much money from the value to pay the interest on the loan. (Remember, you do not have to pay the interest, it is just used to determine how much you can withdraw. It will diminish the remaining value in your home, if you should move out and sell, or if your heirs sell after yoru death.) Go to www.GoldenGateway.com to use their Reverse Mortgage calculator to see what you could receive.

My husband passed away a few years ago, from cancer, when he died he left had retired from a large company and had taken a lump sum, he hired a retirement analyst who put the money into annuities, i receive a monthly annuity payment now and it started when my husband was sick to give us income. the rest was invested within an ING annuity and I did fine with it until this last year, now I have less than what I started with, and most of th emoney is in money market accounts within the annunity, do you feel this is a good choice? I just don't know.
SAVAGE SAYS: Send me an email to Savage@Suntimes.com and I'll reply privately with a resource that you can trust to assess the situation.

Terry,
At age 54 I lost my job of 32 years due to the downturn in the economy. At that time I rolled my 401K retirement plan over into a traditional IRA. I am now contemplating a move of all my monies from this finacial institution to a private financial advisor. Would this move involve a penalty since I'm not yet 59 1/2 years old?
SAVAGE SAYS: You can do a rollover to another firm, the one with the financial advisor, but you have to wait 12 months. BUT, where did you roll it to in the first place? If it's something like Fidelity or Vanguard, you can get FREE financial advice on diversification, plus the lowest ongoing costs. Think twice before "hiring" a financial advisor to do this for you.

At what income level does a life insurance trust become a good idea?

My mother has an estate worth about 5 million.

She is 62.

Should she self insure (have the estate pay the death tax)? Or should she spend +$20,000 a year on a 20 year term life insurance policy?

The insurance is expensive, and she could live beyond the 20 year term.
SAVAGE SAYS: In a case like this, you need an experienced insurance agent. If you want to send me your email address. i'll give you someone you can trust.
Basically, we don't know what will happen to estate taxes. Your money would only need life insurance -- held outside her name in an insurance trust -- so the estate would have money to pay the taxes. Ordinarily, you'd want to wait and see what happens with the estate tax, which will certainly come up for review this year, as it is scheduled to expire next year -- then get reinstated the following year at very low levels! But the real issue at your mother's age is to get the insurance while she is still insurable -- both in terms of health and age! And there may be something besides term that would solve this problem. So if you'd like to pursue it further, let me know

Terry, First off, thanks so much for helping us. It is so nice to be able to have a trusted source so readily available, you are providing a wonderful service and it is appreciated. My question involves 401(k) funds. If 401(k)funds are transferred into an IRA account after termination of employment, can you still borrow against those funds like a 401(k)? Or are those benefits gone with the conversion? I am planning on borrowing against my 401(k) for college and do not want to lose that feature if I roll it over.
SAVAGE SAYS: Thank YOU for your note. Here's what happens when you roll that 40lk (or 403b) into an IRA. You can withdraw money for "qualified higher education expenses' for yourself, your child, or grandchild. If you're under age 59-1/2, you don't have to pay the 10 percent early withdrawal penalty if you use the money for education. BUT you DO have to pay taxes (at your marginal tax bracket, which means this is considered "income added on to your other income) in the year of withdrawal.

I am about to receive about $250k from a court settlement (potentially more $500k). I own three properties, mortgage is high on all, 147k, 250k, and 99k, two were supposed to be for investment but it is hard finding renters now. We have about $25k in other debt, credit card and so forth. I have a 2 ½ year old and both my wife and I (in our early 40's) work. What could we be doing with the money? Any thoughts? Is there a plan that shows us step by step? Do we need a trust? Sell the properties? Help!!

SAVAGE SAYS: Sorry I'm late in responding, I must have missed this one. Well, you definitely need some good professional advice to create a plan that includes saving, college for your children, and retirement for you and your wife. Will you contact me by email (Terry@TerrySavage.com) and I'll ask where you live, and try to make some recommendations for trusted advicel.

I am 56 yrs old and lost my job and I have an IRA that is about $5,600. If I take it out as a hardship would I have to pay an early penalty and if you can let me know how much taxes would I have to pay on that amount.I need the money to pay my bills and to live on. Hopefully I can recieve an answer from you soon. Thank you.
SAVAGE SAYS: Unfortunately, there is no provision for a "hardship" withdrawal from an IRA, as there is from a 40lk or 403b plan. So, since you're under age 59-1/2, you would pay a 10% penalty AND ordinary income taxes on the amount withdrawn. (Those taxes would be calculated based on any income you earn this year, plus your unemployment benefits.) The tax and penalty would be due next April 15th (2010) if you withdraw now.

I am a senior who just sold her home and is now renting. I would like to know what is the safest way to invest the proceeds of the sale
SAVAGE SAYS: Leave it in the bank (assuming it's under $250,000) in a money market deposit account, or at least a portion in a mm account, and the balance in CDs with maturities no longer thaqn 2 years. If it's more money than that insured amount, go to www.TreasuryDirect.gov, clikck on "individual" and learn how to buy Treasury bills (IOUs from the government) online thought a direct deduction from your money market account. Nothing else!!!

Dear Terry We aquired a reverse mortgage several years ago for $275,000 . It has been fine but we're in the need for more cash. Would it be wise to re-negotiate for $375,000 which is closer to the house value and why are closing costs,etc. so high on reverse mortgages.
SAVAGE SAYS: What type of reverse mortgage did you get -- a monthly check for as long asyou live in the home, or a lump sum? It's tough, and expensive, to renegotiate -- because you have to pay the fees all over again. And most homes don't appraise as high as they did when you took out the RM -- so there might not be much cash left if you took out a lump sum before. Remember, they hold back a portion of the equity, to protect them against the possibility that you might live to 100! So contact your original lender, but don't expect much. Or go to www.GoldenGateway.com and use their calculators to see what you could get tody on your home, given your ages, and compare that to the amount you've already withdrawn to see if it's likely there's excess cash. They also have a toll-free # on their website and can counsel you -

Dear Terry:

I would like to know if the interest on a Roth IRA is really tax free when you withdraw it if it has been open longer than 5 years and you are over 60 years old. The research I've done has conflicting information. Please set me straight on this.
SAVAGE SAYS: I can't imagine where you heard otherwise! If you have your Roth (an after-tax IRA) open for at least 5 years, and if you're over age 59-1/2 there is no penalty and no income tax on the withdrawals. Unless Congress changes that in the future!

I'm considering a reverse mortgage but I have some Questions. Can the bank take the house away if I go into a nursing home? Some friends told me they can. House is paid off, I'm 69. Can't live on social security. Please help. Thank you.
SAVAGE SAYS: I'm a big fan of reverse mortgages, and in fact, I did one for my Dad! That said, you should go to my website --www.TerrySavage.com -- and read some of my past columns on the subject. To answer specifically: 1) Yes - if you move out > to go into a nursing home, the reverse mortgage must be repaid. You can do that by selling the home, or perhaps your chlidren can refinance it. "Permanently" is determined by a physician saying that you cannot live there again. But if it is just a temporary situation, say after a surgery or illness, then the answer is NO, they cannot force you to sell the home.
BUT, my second resonse is to a question you did NOT ask. Although you can do a reverse mortgage after age 62, I'd say you're way to young to start at age 69. The amount you would get for your equity would be so small every month -- because your life expectancy is so relatively long I usually suggest people wait until their 70s to take out an RM -- to get a larger amount. That is, unless you think you have a relatively short life expectancy!
Go to www. goldengateway.com to use their calculator to see what amount you're likely to get, depending on your age and of course, the value of your home.

DEAR TERRY,

MY QUESTION IS ABOUT LIFE INSURANCE WITH INDEXED FEATURES.
1) I AM 43 YRS OLD, WITH A 1 YR OLD AND WIFE AND LOOKING TO PURCHASE LIFE INSURANCE, IT WOULD BE A FLEXIBLE PREMIUM ADJUSTABLE LIFE W/ INDEXED FEATURES

2) WHAT ARE THE PRO'S AND CONS, IF ANY DURING TIMES LIKE THESE VS REALLY GOOD TIMES

3) IF RECOMMENDED, THEY HAVE 6 DIFFERENT ONES, s/P 500, DJIA SM,NASDAQ 100, S/P MID CAP 400, RUSSELL 2000, DJ EURO STOXX 50 AND ALL ARE FURTHER BROKEN DOWN BY ANNUAL VS MONTHLY VS DAILY, WHICH ONE S DUE YOU RECOMMEND?

SO MUCH IS OUT THERE, SO MANY VIEWS.

CAN YOU HELP ME.
SAVAGE SAYS: I think these types of insurance are designed to make the insurance broker rich -- not your heirs.
I ALWAYS recommend keeping your life insurance separate from your investments. It's almost always a better deal. These policies have very high fees, surrender charges, and typically don't give you the full upside of the index they say they match.
So, assuming you might only need life insurance for the next 20 or 30 years at most, go to www.Accuquote.com and quote 20 or 30-year LEVEL TERM. (The only reason you'd need life insurance after that is for estate planning purposes -- and that might involve the creation of a life insurance trust -- for which you'll need an estate planning attorney.)
Then contribute the difference to an IRA -- where you can control the investments and they are much, much ower cost -- assuming you use mutual fund from Fidelity or Vanguard.

Dear Terry,

Thank you for providing this resource for readers to learn from your expertise.

Topic: Rolling over an annuity

I have $92K in a nine-year (I was so foolish!) variable rate annuity, purchased in June of 2003 with $75K as part of a 40lK awarded to me at the time of my divorce. The ceiling is 6% on the annuity (with a guaranteed 3% fixed on 90% of the original investment--now equal to a little over 78K.)

Since the rate is tied to the S&P, I did not make any money last year, and I'm sure I will not make any this year (the 92K was as of 2007). Plus, I am a bit concerned about these insurance companies in an age of AIG's.

I am 60-years-old, and this money represents about a third of my retirement savings. I am tempted to roll the money over, with a $5,200 penalty, into a bank CD. Losing over $5,000 is not good, but my thinking is that $87K is better than $78K if the company goes under sometime in the remaining three-plus years on this investment.

Question: What do you advise, Terry?
SAVAGE SAYS: The administration is not likely to let insurance companies fail. You're getting at least 3 percent, which is far more than you'd get in a bank CD. Hang in there and don't break out of this until the penalty period has passed.

I AM RETIRED AND HAVE AN IRA. I WAS ADVISED
TO CHANGE THIS INTO AN ANNUNITY AND GET 7% INTEREST. THE ANNUNITY HAS 7 YEAR CAP. IS THIS
A GOOD IDEA AT THIS TIME FOR ME?
SAVAGE SAYS: It's probably NOT a good idea for your retirement, but it will certainly help your broker's retirement! Ask a few questions including: What are the penalties for "breaking out" of this annuity? How long do those penalties last (maybe as long as 10 years)! If it's already inside an IRA, why should I pay for the tax deferral of an annuity? What happens if I die? (hint: an IRA would pass to your heirs, who could keep it growing tax-deferred; with most annuities,the balance reverts to the insurance company!) And finally, ask this: If safe, U.S. govt Treasury bills are paying only .25 percent, and 10 year Treasury notes are paying only about 3%, WHY would this insurance company pay me 7 percent????

We are in our early 50's and want to fund 2008 IRAs by 4/15/09. I'm in charge of research this year for the first time and don't know where to start. There are so many financial companies & types of funds. How do I choose where to gamble this time? Thanks for any advice you can offer.
SAVAGE SAYS: First, don't GAMBLE!!! This is an investment process. And this year's choice should a) be balanced with your other investments, and b) give you the opportunity to buy bargains in high quality stuff. (Investing this year is like shopping at Marshalls! You need to know the REAL bargains!)
So, without knowing what you already own, it's hard to give advice. If all else fails try an S&P 500 index fund, low cost, and low prices!

I am 74 and down to my last 30K in an IRA money market. I am afraid to buy mutual funds at this time. Any suggestions? Thank you.
SAVAGE SAYS: At your age, and financial situation, leave it in your insured IRA money market deposit account.

Hi Terry, just listened to Lars interview you. Thank you knows there is much dismay with people who have lost their homes to foreclosure, even hatred. I lost my home and I resent some of the misinformation being spread by the media. I do agree that many people should not have got into homes, but they were mislead by the realtors and the mortgage companies. I had owned my home for over 20 years. Then I refied because I was told my 9.5 percent loan was bad. When I arranged the laon, I was told that it was based on my income. Itr was not but the lender wrote it as a guesstimate. I was told that there would be a period of 2 years penalty for an early refinance, but as it turned out, it was 3. Centex out of Phoenix was the lender. They sold the loan to Wells Fargo. ASC (Americas Servicing Company) serviced the loan. It was sometime before I learned that Well Fargo held the paper. ASC would not tell me for months who held the loan. They would not tell me that they were Wells Fargo. Google the problems with ASC to save time in what I would need to write about them.
I had obtained a new loan through Franklin bank with a fixed rate, but I needed to erase the 7,000 early penalty. Well Fargo would not do it. I then went to work on a job that was too much and I ended up on disability. I am 55. There was no help from the non-profits like "Hope" as Mr. Bush suggested, or any others. They would contact one time, then you never hear from them again. They sold my house at the Title Company. I owed 168k, they sold it for 114. ASC continued to service the loan. I believe that the buyer bank was another subsidiary of Well Fargo. Most of the money I took out of the accrued value I put back into the house in improvements. It had a new roof, siding, some new windows, sheet rocked the garage, new paint in and out, new fixtures in the kitchen and baths. I have lost everything and now am living in the back of my Chevy pickup. I am typing this letter on my laptop at a Safeway/Starbucks. I did not try to fraud or cheat. It was the other way around. Why are the radio talk people bashing people like me? I resent it very much.
SAVAGE SAYS: Yours is an astounding story -- and, sadly, not unique. Please turn to local church groups or government agencies for help. I'm posting your letter as a reminder that we must count our blessings and extend a helping hand.

Hi Terry,

Everyone is talking about mortgages, but my problem is that we are drowning in debt.

For various reasons - mostly business related - my husband and I took on a lot of debt through credit cards and did not manage it well. We got hit by reduced income, inflated gas prices, etc and started having trouble making payments. Of course that skyrocketed interest rates upwards of 25%-30%. When I realized how out of control it was (and with the encouragement of a very kind financial analyst at one of your seminars) I got us into a debt management program.

Currently we are at least $136,000 in debt and are paying about $4,000 each month against it- even with negotiated interest rates. We have no savings and no emergency money and, obviously no credit cards. I am fearful about what we would do if we truly had an emergency. On top of it, our incomes have already been reduced this year and the projections are not too positive.

I have finally started slipping on the mortgage payment. Isn't that THE most important thing I should make sure I pay? My husband keeps talking bankruptcy, which I would imagine we would qualify for... but it is hard to embrace that as the solution. I've started researching debt settlement, but everyone says that would be worse than bankruptcy.

Any suggestions or guidance would be most appreciated!!!!
SAVAGE SAYS: We don't have debtors prisons in America! We have bankruptcy laws. You are carryng a heavy burden, and I can't imagine how you can dig out from under. I don't recommend any debt settlement agencies.
You say you are in a debt management program. Did you do that through a Consumer Credit Counseling Services agency? (800-388-2227) If not, call them for a conference, and they'll likely refer you to a bankruptcy attorney.

I have two questions. The first: for someone who is over their head with credit card debt at ridiculous interest rates, is it better to negotiate directly with the credit card company to establish a payment plan and relief on interest, or to use a debt consolidation service? If a service is preferred, are they fee-based, or does the government have a free program available to help with this?
The second question: If 401(k)funds are transferred into an IRA account after termination of employment, can you still borrow against those funds like a 401(k)? Or are those benefits gone with the conversion?
SAVAGE SAYS: About the credit card debt -- neither is a good choice! Don't go to a debt settlement agency. Most are pure ripoffs. All require you to stop paying, set aside enough money to pay their fees AND give them some leverage with the card companies. Few issuers will negotiate directly with you, though you can try. Call CCCS at 800-388-2227 for advice you can trust! Terry

Terry,

My home was going to be auctioned on March 17, 2009 because my husband lost his job and we fell behing on our payments. I am working full time and I contacted a lawyer to do a loan modification on my home. He wanted $1600.00. We worked out a payment arangement and so far I gave him a total of $1000.00. He got my auctioned postponed for a month. He said. He is now looking for the balance of the fees he charges and he keeps telling me that the bank is reviewing my case. I am scared I will give him the balance and He can't help me. What should I do?
SAVAGE SAYS: In my experience, lawyers can't do much to get a loan modified -- although it's not too difficult for an attorney to contact the foreclosure attorneys and get a sale postponed for a month, just as a courtesy.

Hi Terry,

After reading your question section I called American Century about TIPS and ended up asking them about asset allocation. I am involved with full time mission work and don't have much income. I think I could come up with $2,500 to invest for the first time, or $500.00 down and $100.00 monthly until it reaches $2,500 Would you recommend their LIVESTRONG program for 2020 or 2025 or would you recommend the risk based portfolio - conservative, moderate, or aggressive? Pardon my ignorance, but how is this different from an index fund with Fidelity or Vanguard? Would that be better, or would you recommend something different entirely? Thanks much
SAVAGE SAYS: Ok, you really went off in a different direction from that original question. You didn't say how old you are, but I do believe that the best way to invest (assuming you are earning some income) would be to open an Individual Retirement Account - You could do that at Vanguard, or Fidelity, or American Century -- but they have pretty high minimums to open an account. Check with each of them for their IRA minimums. Then I would use their "target date" retirement funds -- where they do the investing for you, in appropriate allocations. Each fund company has a different name for it (Target Funds, LIvestrong, etc) but they basically work the same. And you should keep making regular contributions over time.
If those minimums are too high, then go to www.usfunds.com and ask about opening an IRA in their All-American Fund. They let you start with as little as $100 -- if you contribute an automatic monthly deduction of at least $30/month -- a dollar a day! That's more affordable. And if you're under age 55, it's not a bad idea to invest it all in this diversified stock fund -- assuming you have a little extra money in savings outside your IRA.

I purchased 2 homes as investment property in 2007. I have renters in the properties but am
not getting enough rent to cover my monthly mortgage payment. I am putting approx. $1000/month out of pocket. If I were to try to
sell the properties now I would take a big loss.
What do you suggest I do?
SAVAGE SAYS: I'm not sure you have much of a choice! It will be tough to sell the properties. Just figure out how much of a loss you'll take, compared to keeping them going at $1,000/month until the market turns, probably in a few years!

I am a real estate agent in the Chicago area.
If you talk to any realtor who has worked with
short sales they will tell you it is the most
frustrating process. It can take 3-4 months
before the banks even respond to the offers.
I am to the point that I won't even show short
sales anymore. There are so many bankers/financial people out of work. Why can't these banks hire qualified people to take care of
these offers, instead of just letting these buyers walk away? The news media should start
talking about this issue.
SAVAGE SAYS: I know EXACTLY what you mean! I have a friend who is a real estate agent who told me the same thing; She had a buyer for a property, simply can't get through to the banks! I will do a column about this!! Thanks --

I will try again..........how does a person know which AIG has controll of their funds. I am 77 yrs old and have forgotten with whom I dealt with.
Dan from DG
SAVAGE SAYS: There is only ONE AIG-- and I'm not sure I understand your question. Look on your most recent statement. It should tell you exactly WHAT you have -- ie, an insurance policy, an annuity investment. Even if there is no broker's name on it, there surely is a toll-free number and your account number. Call them and ask them any questions you have about your product.

IS IS BETTER TO KEEP THE CASH IN MY MONEY MARKET ACCOUNT AND PUT LESS DOWN ON A HOME MORTGAGE, THEN PULL THE M.M.$ MONTHLY TO PAY THE MORTGAGE? THIS WOULD BE FOR A INVESTMENT/VACATION PROPERTY, MY PERMANENT HOME IS PAID OFF. ALSO, CAN YOU TELL ME THE PROS & CONS OF DOING IT THIS WAY?
SAVAGE SAYS: This is a balancing act. You need to put down enough cash to get the lowest rate mortgage -- and yes, the amount of your down payment will make a difference in your rate, and basically in your ability to get a mortgage these days. But you always need some cash (money market) on the side, for emergencies. That gives you flexibility. Don't sink all your money into the house -- because you may not be able to borrow it out again in the future at a reasonable rate. AND BE SURE TO GET A FIXED RATE MORTGAGE~!

Terry,

My wife and I both worked full time to make ends meet. I lost my job last month and prospects don't look good for landing a new one any time soon. We cannot afford our mortgage on one income, but we still have income and have never missed a mortgage payment. Can we qualify for the government's Home Affordable Modification program based on these circumstances? We have some savings but it won't last more than 4-5 months. Do we have to first burn through all our savings before they will modify our mortgage under this program?
SAVAGE SAYS: The lender > consider your application under the new plan -- but most don't have their systems set up yet! Start calling now -- and ask to speak to a supervisor. Ifyou don't get anywhere, get back to me.

Terry,
It seems like all the mortgage assistance programs being floatds are designed for people who are already behind, but what about people in changing circumstances to avoid falling behind.
I recently lost my job and I owe $160,000 on a balloon note coming up in May, 2010. My condo is appraised at $440,000. I have never been late on a payment and have reserves to stay current for at least 3-4 months, but would like to re-finance or modify the loan so I dont have the balloon hanging over my head or can reduce payments for a little wiggle room. So far, I havent gotten to the right person at my mortgage company (NatCity) to appreciate my situtaion or offer any suggestions. Not looking for any forgiveness on the loan amount or even the rate, I just want to convert my balloon to a 15 or 20 year fixed. Again, I have never been late on a payment, have a FICO score of 715, just temporarily out of work. Any advice? Thanks, Greg
SAVAGE SAYS: I'm not surprised that they won't talk to you -- too many people are in worse trouble, and you're still paying. BUT, since you have equity in your home, AND income, you can go search for a completely NEW mortgage -- at any financial institution or lender. Beware of mortgage brokers. Contact a lender directly and tell them you have equity and income. They'll pay attention.

I have a small TSA thru Valic/AIG. It is about $5000 right now but at 100% guaranteed as I was afraid to make it risky when I set it up which I am thankful for now. With all the AIG issues, would I be able to roll this into a IRA with my Bank without having to pay taxes or incur a penality for closing this account with AIG? Or, should I just leave it as the stock market does not affect my balance?
SAVAGE SAYS: If you're retired, you can probably roll it to your bank into an IRA CD. Call them and ask if there is any penalty. I truly don't believe the govt will let AIG go under -- and the recent headlines confirm that. But if you won't incur a "product" penalty,and if that will let you sleep better, inquire about doing the rollover.

Hi Terry,

I have several credit cards I am paying off. My question is, is it better to leave these cards open and show a paid balance or would it be better to paid it off and actually close out the card? Would one way better reflect my credit score?

SAVAGE SAYS: There's a lot of debate about that! My preference is to pay them off, close them but not all at once, and then make sure it says on your credit report that these were closed by the request of the customer. You'll need, of course, to keep a couple of cards open --even if you do not use them much. It's a good idea to charge a small amount every month -- and then PAY IN FULL and ON TIME. That shows you're in control!

Mortgage problem - What should I do?
1st Mortgage - $67,000 6.25%
2nd Mortgage - $13,000 8.00%
House value - $90,000 (low estimate)

Other debt
Charge - $10,000
Car Loan - $6,000

Annual Income: $33,000

Credit Score: 689

SAVAGE SAYS: The arithmetic doesnt work here! Contact Consumer Credit Counseling Services at 800-388-2227 for a closer look at your situation. That number will connect you to the nearest local office.

Terry,

Can you recommend several reliable dealers from which to purchase gold coins?

Thank you.
SAVAGE SAYS: In Chicago, I recommend Harlan J. Berk, Ltd at 31 N. Clark St. because I have known them for years. But to find other reputable dealers go to www.money.org -- the website of the American Numismatic Association. Then under the tab "membership" you can search for a local member dealer. Be sure to keep your coins in a safe deposit box!!

If I buy T.I.P.S., what length would be best, i.e. 5 years, 10 years, etc.?
SAVAGE SAYS: I recommend buying TIPS (Treasury Inflation Protected Securities) through a mutual fund, such as the ones offered by American Century Funds (800-342-2021) or www.AmericanCentury.com.

I am retired school employee on pension and ss, I have a 401 K with $ 11000.00 should I withdraw it and pay off a credit card with $10000.00 and 7.9% interest rate which I currently pay off at $250.00 per month.
SAVAGE SAYS: That is only a good strategy if you know you'll never charge up your card again! And, remember, when you withdraw that money, you're liable for income taxes on it. So next April, where will you find the money??
A better suggestion: get a part time job, and use all the money you earn to pay down your credit card balance!! You can get completely retired again, when you pay off your debt!

I HAVE LOST MONEY IN HARTFORD MUTUAL FUNDS AND EVERYDAY IT IS GOING DOWN. I HAVE LOST 18000.00
I AM IN MY MID 70'S WHAT SHOULD I DO? IT IS THE ONLY MONEY I HAVE SHOULD I TAKE IT AND PUT IT IN MY PERSONAL BANK SO IT WILL BE INSURED/ I NEED TO PUT IT SOME PLACE WHERE I DON'T HAVE TO PAY INCOME TAX FOR MOVING IT. IT IS IN AN IRA BUT NOT IN BANK AND NOT INSURED.
SAVAGE SAYS: Oh, what a shame. You didn't listen to me about setting aside "chicken money" when it looked like the stock market would go up forever. If you can't afford any more losses, walk into your bank and ask to open an IRA account. Bring your Hartford paperwork. Ask your bank (NOT THE BROKERAGE FIRM INSIDE THE BANK!) to help you roll-over your IRA into an FDIC insured CD.

Hi Terry,
What a wonderful service you do provide !!
Thanks a bunch for your reply to my e-mail of 3/6/09 regarding withdrawals from Ira's without penalty after age 70 1/2.
What of I needed to withdraw money not considered an RMD ? Needs for other reasons ?
Also, I do have some ee, money market & I bonds for using as liquidity.
Would you then also recommend putting some in less than a 5 yr. CD as they give a much less interest rate?
SAVAGE SAYS: Well, I think you're asking if you could break an IRA CD -- even if it wasn't for a required minimum withdrawal. Almost every bank will let you break an IRA CD for any reason, if you're over age 70-1/2. Be sure to check with your bank.
As for your Series EE bonds, be sure to check to see if they've "matured" and stopped earning interest. Your bank will help you with that, or you can do it at www.TreasuryDirect.gov. And, I would always want to have some money in a money market fund just for immediate emergencies.

I am considering buying T.I.P.S. in my IRA account through my brokerage company in April. I am considering buying 10 year T.I.P.S. and my husband is going to buy 5 and 10 year T.I.P.S. I am 59 and my husband is 69. Our home is paid off, we own land in Upper Michigan, EE bonds, other CD's. We have no debt and pay for everything in cash. Two years ago, we went to an all cash position because I had been reading about the huge debt levels and I felt the market had peaked. I may buy some index funds or Berkshire Hathaway later this year. Can you recommend a company to buy gold Eagle coins?
SAVAGE SAYS: As noted in a nearby response, I'd buy TIPS in a mutual fund. Try those at www.AmericanCentury.com. Let them manage the maturities. Congratulations on your great insight in getting out two years ago! And go to www.money.org -- the American Numismatic Association website, look under Membership for a search of member coin dealers.

what are the new rules for reverse mortgages? i was told to get a r.m. until age 83. is that right? are the fees reduced at this time?
SAVAGE SAYS: Recent legislation increased the amount that can be withdrawn from your house using a Reverse Mortgage. The older you are, the more money you can borrow. I typically recommend people wait until at least age 75 to start a reverse mortgage. Go to www.goldengateway.com and use their online calculator to figure out how much you could take out tax-free in either a lump sum or monthly check using a Reverse Mortgage. By the way -- I like this idea so much I did one for my father!!

Hi Terry,
I've seen you several times speaking at our meetings here in Deerfield. I am always facinated with the wealth of information you send to each of us personally each and every time you are here.

I like many fell to divorce and a pretty large sum of marital debt to go with it. I've struggled for 4 years in an attempt to be rid of the black cloud, I've made great progress but very slow. I've been using low interest credit cards with 0 or little percent. I'm still struggling and hear about all these get out of debt now commercials. Advertising that you can get out of debt quicker than ever possible. I don't want to fall prey to possible criminals giving my financial information over them, but I realy have no idea where to go. Some banks, as advertised, are not interested in helping you get out the debet and offer no solutions because they want you to stay in it and they need me to pay their salary.

Do you have suggestions for people like me who can get some kind of save consolidation process, to pay out of this quicker? I have excellent credit and always do what I can to save it.

SAVAGE SAYS: I have been tempted to write about these services, trying to find one of the few legitimate companies, but there are so many ripoffs out there. Even the good ones tell you to set the money aside in an account, stop paying on your card, and then they'll help you "negotiate" a lower payoff, using the money you've set aside (after they take their fees, of course). Meanwhile you've ruined your credit.
My best advice is to try to find additional work, to pay down the balances faster. If you take the current monthly minimum payment, double it -- and keep paying that same amount every month, without charging anything else, your balance will be paid off in less than 3 years!!

For the life of me I cannot understand why anyone believes that lowering the capital gains tax on 'risky investments' serves any purpose.

Do you want to encourage risky investments? How does it benefit the country if someone buys stock (risky or not) on the NYSE and then sells it for a profit? The investor created no jobs. The investor created no wealth for anyone for him/herself.

Investments that create jobs deserve a huge capital gains tax break. But normal stock market investing does not. Those gains should be taxed as ordinary income.

Investments that earn profits when creating jobs or building infrastructure deserve big tax breaks. Ordinary capital gains do not.
SAVAGE SAYS: Mark, I'm surprised at your short-sightedness. Look at it this way.
People start businesses, and grow them, in an effor to make profits. If you build a business and it gets larger, you have two choices if you want to reap the rewards of all your work: You can sell to a larger company, or you can sell to the public.
Either way, you'll hope to have a big gain. You're risking your life to build this business, which employs more and more people as the business grows.
You're taking the risk of building a business -- instead of working for someone else at a salary. You wouldn't take the risk of building a business unless there was a special reward: that LOWER CAPITAL GAINS tax rate!
Same thing for stocks: Why risk your capital to help someone else build a business, without getting an incentive to do so-- LOWER CAPITAL GAINS taxes!!

Terry, I'm 57. I have a 401K with my previous employer invested 45% in bonds and the rest in stocks. I've lost 30% so far. I haven't switched to anything more secure believing that "sticking to my guns" and waiting for the market to rebound is the best thing to do. But now, when it reached its new low I started losing my sleep and think about switching to something safer.Advice?
In my current job I have my 401K invested conservatively and I am not losing. I contribute as much as I can. Since my employer matches only up to $500 per year, wouldn't it be better for me to put some of this money into money market account and have better access to it in case of hardship?
Also, I have a 30 year fixed rate mortgage on my condo with interest of 5.75%. I know I will never pay it off because I started 3 years ago. I prepay my monthly payments by $300 to have more principal paid off. My current 401K contribution and mortgage prepayment do not leave too much to put into my savings account after paying my monthly expenses. Am I doing the right thing?
SAVAGE SAYS: Well, the market won't reach bottom until EVERYONE -- even those who promised they'd stick it out -- panics and sells! Maybe that happened a week ago, maybe not.
First, I always advise rolling over your old 40lk to an IRA. Have the new custodian -- Fidelity, Vanguard, or T. Rowe Price handle this process for you.
Second, in that old 40lk you haven't lost money on your bond position, unless the bonds insde that fund defaulted. So it's likely only the stock portion that is down. Do the math: Is your balance really down 30% overall? If so, you were invested in funds that were way too aggressive, and that's not usually the case inside 40lk plans.
Third, it's not a bad idea to build up savings OUTSIDE your 40lk plan, for two reasons. These savings give you liquidity. And since it's likely that tax rates will rise, it's not a bad idea to pay the taxes this year and hold after-tax dollars for your "chicken money" liquidity account outside your retirement plan.
Finally -- who cares if you never pay off your mortgage?! You have a low fixed rate, presumably you can afford the payment, and you should just enjoy your home. (I advise younger people to pay off their mortgages, always.) But since you have no better place to live at the same price, stop worrying about it. When you're gone, your heirs will get whatever equity is left after the mortgage company is repaid.

Terry,

Why do you suggest readers invest in mutual funds? I understand that choosing individual stocks is difficult for most.

But those funds charge fees that are simply too high. In addition, most funds cannot beat the market averages. Thus, fund buyers pay management fees, and in return get underperformance. In short, I believe fund managers look out for themselves and not for their clients.

Is there is reason you don't recommend index funds, or exchange traded funds, with tiny management fees and minimal expenses (low portfolio turnover)?

SAVAGE SAYS: Gosh you must have me mixed up with someone else. I ALWAYS recommend index funds, primarily from Vanguard and Fidelityi because the costs are low. Read my books -- all of them say the same thing, over the years!

Hi Terry,
I too, saw you with Pat Robertson on the 700 Club. My question regards a recent change that both my husband (63)and I (59)recently made. We each rolled our IRA's over to our local bank Regular IRA plan. NOw instead of loosing more than $1000 per month, we will be receiving 3.6% interest. Do you think we did the "right thing"? We are also considering buying some gold or gold stocks. I've read your "Everything you need to know about gold", but I'm still not clear as to whether this would be a good idea for us. My husband is still working. I am unable to work due to health problems. Thanks so much for your help!
SAVAGE SAYS: Given your circumstances, I think you did the right thing to roll over your IRA from a stock market fund to a bank CD. YOu wn't lose any money, and you'll get interest. But it looks like you bought a long-term CD to get that high rate. Once you're over 70-1/2 you can break an IRA CD without penalty. But until then, you should stick with shorter term CDs -- and make sure it's an FDIC-insured CD!
As for gold, you might buy a few coins, but you don't need to spend too much money-- It's not so impotant under your circumstances -- Terry

Dear Terry... I am Going to get my first Social Security Check in the fall...I will be able to save most of it and want to know...should I put some in a CD..and then do something else with the other half.?..like buy bonds.etc?..I am really ignorant about this and Need some good Advice.. Just started looking at your Website..so much information..I feel Overwhelmed...Thanks SUSAN
SAVAGE SAYS: Just put it in a bank cd, so you can build up a "chicken money" account for emergencies -- But have you purchased Long Term CAre Insurance yet? Read my books, columns on the subject. And for princing call MAGA LTC at 800-533-6242. I think this is absolutely a must for women. You can use my name or not, because I don't get anything out of this recommendation. It's were I purchased policies for my mother, and myself!!

CAN YOU RECOMMEND A SPECIFIC BOOK TO LEARN ABOUT BASIC ECONOMICS(i.e.---"ECONOMICS FOR DUMMIES?", OR HAVE YOU WRITTEN A BOOK FOR A BASIC UNDERSTANDING OF THE SUBJECT?
SAVAGE SAYS: Well if you can stand my bias toward free market capitalism, start by reading the columns on my website. Just click on "read recent columns."

Hi Terry,
I have a (Bank)IRA CD that will be maturing in one week & I have been encouraged to reinvest this CD for 5 yrs. at the rate of 3.5% interest rate.
The bank tells me that because I am over 70 Y.O. & retired that if the rates should change to a higher rate I can close this account without paying any penalties & reinvest at the higher rate.
I do know that I would not be accountable to pay a 10% IRA penalty because of my age, but I cannot understand how I will not be responsible to pay a bank penalty if I break the 5 year CD prior to maturiy.
Would you please confirm & explain this transaction (and how to be sure I do it right if at all possible ) to me.
Greatly appreciated.
SAVAGE SAYS: Strange but true. If your CD is INSIDE AN IRA, and you want to break it, there is no bank penalty for doing so. That's because IRA owners might need to access their money for required minimum withdrawals. The bank, on the other hand, really likes to show that it has money in long-term CDs. I'd take half and take that long term CD to get the higher rate. Then take the other half and roll 6 month CDs, just beause I believe in liquidity, with no issues!

If I take the cashout option for my half of my exhusbands retirement, when do they take out for the penalty if i'm not 59.5 years or older? at tax time?
SAVAGE SAYS: You shouldn't take a "cash out" option! You should ask them to do an automatic rollover to a new IRA custodian, so your money can keep growing for your retirement. If you call Fidelity or Vanguard they'll help you with this process, as will your local bank. They cannot require that you cash out -- only that you take the money. A rollover is a perfectly acceptable alternative, and preferable by far. If you have any problems with this, pls get back to me.

Terry, I played by the rules. After raising three children and tking care of mom I am about to lose my home. The thing is no matter how hard I tried to get child support no one followed thru and got it. Now 60 years old and on a fixed income I will be losing my home. Before I do that I would like to hear from other moms/grandma's who need a home and like them to enjoy mine with me before I lose it. I will put them on the deed and we will all work together.
Hardships I had I overcame-But I don't think I can overcome this one. So I would like rights for us single moms who never got child support.
Not charity, just maybe a roof over our head and some food and medical expenses in our old age.
My phone is XXX XXX XXXX Do you think you could help me find other woman like me who are interested in this concept? It could be like a corporation. Thanks for listening. Soon about to be homeless-The lady in the Red

SAVAGE SAYS: This is a potentially dangerous precedent, but I'm going to post your letter, while disclaiming ALL responsibility for what may follow!
The thing is, I've been receiving a lot of similar letters from women age 50-65, who are simply lost financially, and never expected to be in this position. There's no chance to start a career they're too young for Social Security, and it certainly won't provide enough for a middle class existence. The devoted their lives to husbands, children -- and now they're literally out in the cold.
I say this is dangerous -- because in this position you're also potential victims of all kinds of people who prey on single women. So I deleted your phone number and email address. But if anyone wants to post a response, I'll try to forward their email address. (What a chore I'm taking on!)
But instead of giving up title to your house, I suggest you consider renting. Get a lawyer to draw up a rental agreement. And for those of you who want to try this as a solution, I suggest you check with your local church or other reliable community organizaton to check out any respondents.
I'm making a point of this because too many women are about to become "bag ladies" --and there is no safety net.

What do you think of today's news that the FDIC is warning it could go broke this year? Should we still keep money in our savings accounts? We are with 2 large banks, do we keep the money there, look into small banks or credit unions?
SAVAGE SAYS: It was a ridiculous and mistaken comment by FDIC chairman Sheila Bair. The FDIC fund has a direct line to the government. Read my Monday column, inspired by this comment!

I have a Hartford life Annuity, amount invested is $10,000, in 1994. The value of the Annuity as of today is $11,003. I saw on TV yesterday that Hartford Insurance Co. was not doing very well, and thinking about going to the government for help. What happens to my “guaranteed” $10,000 (the purchase price) if Hartford Insurance goes under? Do I have any choice but to leave it there? I am 52. Thank You!
SAVAGE SAYS: The govt has signaled that they won't let a major insurer fail, even though there is no federal insurance fund for those companies If you decide to withdraw, youll pay ordinary income taxes on the gain. You should be past the penalty period by now.

I currently have a CD at a bank that is FDIC. My CD will be maturing soon and it is fully insured since it is below $250,000. If I feel the bank I'm currently at is in danger finacially and will not be around much longer, should I take my money out when the CD matures? I can