I am Bobbie Munroe CFP, a NAPFA registered fee-only advisor in Atlanta (and soon, adding Tallahassee, FL). I am thrilled to be one of the advisors working with Kiplinger on this worthwhile event. Ask questions!
Welcome to this month's Jump-Start Your Financial Plan live chat! We have three NAPFA advisors with us today: David John Marotta of Marotta Wealth Management in Charlottesville, VA; Bobbie Munroe of Fraser Financial in Atlanta, GA; and Mitch Marsden of Longview Financial in Huntsville, AL. All three planners have participated in the Jump-Start chats before and we're excited to have them back. Thanks for joining us!
For those of you who are joining us for the first time, let me explain a little about how the live chat works: your questions will be submitted and held for moderation. Depending on the volume and complexity of reader comments, your question may not necessarily be approved right away. However, we will do our best to answer your question as quickly and thoroughly as possible!
Alright, let's go ahead and get started.
This is Bobbie Munroe CFP® in lovely Atlanta, Georgia where spring has sprung. I own a financial planning/investment management firm, Fraser Financial (www.supportingyourchoices.com). I look forward to "talking" with all of you today.
This is Mitch Marsden from Longview Financial Advisors, Inc. Glad to be here and excited to chat with you!
Mark, good question. It depends on the mutual fund. Each fund has different strategies, objectives, risks and similar parameters. Some funds will do that for you and yes, part of that is captured by the management fee. Other funds are more passive and still will follow the buy and hold strategy. All of this information can be found in the mutual fund's prospectus.
I'm not too anxious to bury "buy and hold." Indeed, if you look at it this way Mark, you buy and hold your investments and the fund managers do the rest. Even if you use indexing for all of your investments or the core portion, I think a good diversification strategy with periodic rebalancing still works just fine.
Mark, by the way, some are still very pro on the buy and hold strategy and an emphasis on strategic asset allocation rather than active management strategies.
Katie, also be patient as sometimes it simply takes time. Creditors want to see history of good debtor behavior - paying bills/loans on time and without any defaults. David has a great point as well - if you can build up a lot of cash, many creditors will look favorably on that and place less weight on history.
Katie, you want to avoid providers like Providian as they charge huge fees. Check with your local bank re: secured credit card. Any of these will have fees but they vary widely. Paying your rent on time will also increase your credit score.
Janek, I believe you are referring to 529 accounts. These accounts are tax-deferred accounts and, if used for qualifying higher education expenses (tuition, books, fees, room and board under statutory limits), they are tax-free. The contributions that are made to 529s are with after-tax funds. The growth and income within the 529 is what is tax-free if you follow the rules. Note, some states provide a tax deduction or credit for state income tax purposes for 529 contributions.
Hum, the link didn't come through. Google Clark Howard secured credit card
Janek, if 529 funds are used for NON-qualifying expenses, the income/appreciation will be subject to income taxes
AND a 10% federal tax penalty will apply.
529 plans - We often use the Utah Plan as they offer low cost Vanguard funds. www.uesp.org
#Maddy: You could probably do your taxes by hand if you wanted to. Sometimes a program obscures understanding by trying to make things easier. And sometimes new users put items into the software multiple times without understanding the concepts. We started with the 1040EZ, then after we bought a house moved up to the 1040. Now my tax return is 106 pages and I have a CPA who helps pull it all together.
Maddy: Turbotax is likely to be sufficient for most 23-year olds. If you get into capital gains and dividends or some of the itemized deductions like medical expenses or home mortage interest, you might work with a tax preparer. 1040 EZ is likely to work for you, as the others have suggested.
#Maddy: I think I would recommend trying it on your own and then getting software or help if you get stuck. Also, after filling out everything you can, don't hesitate to ask someone older to look it over.
I've seen some very simple errors made by individuals trying to prep their own taxes that cost them thousands of dollars. Not that this would be the case for you Maddy, but I do think it would be good for you to have someone who has some experience with it to glance through it.
Ah Colby, the flux in tax law is frustrating for all of us and makes it very hard to plan. Remember, that if the law that gives qualified dividends special tax treatment expires, capital gains rates will also go up (but still not as high as ordinary income rates which will also go up). That said, many of my clients are taking some gains in taxable accounts this year as they anticipate higher capital gains rates, if not next year, soon.
Colby, I agree with what the other advisors have suggested on your question. It will be interesting to see it all play out.
Healthcare REIT...sounds interesting as it is a way to invest in healthcare without worrying about medicare restrictions on payments and the like. And healthcare is likely to continue to grow at outrageous rates. BUT IT IS VERY HARD TO DO DUE DILIGENCE ON SUCH COMPANIES. Tread carefully. If you want healthcare exposure, look at the Vanguard ETF...VHT
ct: We use some non-publicly traded securities for our clients and some have been very beneficial. Others have turned into a complete mess. The liquidity factor (or lack thereof) is huge and you often don't realize how important it is until you want to get out of the investment. For most investors, publicly traded vehicles are a better way to access the investment exposure.
Well folks, that's all the time we have for today. A big thanks to David, Bobbie and Mitch for volunteering their time today! We hope you'll join us again. The next live chat with NAPFA advisors will be in one month, on Thursday, April 19.
Thanks to Kiplinger for hosting the event. Glad to be able to participate!
Yes, thanks to Kiplinger and to the other advisors who taught me a lot today.
Stay tuned for next week's live chat with Kiplinger's investing team. Now, let's all get outside and enjoy the nice weather!