MSRI, I come from the Dave Ramsey school of debt repayment vs. savings. That is, you tackle the debt repayment with 100% gazelle intensity before starting a serious savings plan. Even subsidized rates are going up as interest rates rise.
And Debbie, how about you take this next question from KW.
I cover student loans and would like to join the group for a few minutes.
KD, options for investing in any type of vehicle, retirement or taxable, depends on the risk profile of the individual. With that being said, I would suggest keeping the most aggressive (stock heavy) funds in the Roth as it has time to grow and you can handle the swings as you wont access this money until retirement.
Hi Jane! Thanks for joining us. Jane Clark, Kiplinger’s college editor, and is certified by the National Institute of Certified College Planners. She's going to help the planners tackle a few of student-loan related questions before she has to head into a meeting.
Jane, here's a question from Odile.
Odile has a follow-up, too.
Matt, here's a question from Brady
Hi Greenjake. I'll take a stab at this, but I do not use Preferreds. Partially, becuase I like to take risk in stocks (that's where I am comfortable) and partially because I never figured out the answer to your question. From the internet -- Income Stream
Preferred stock has a fixed dividend payment, but a corporation can choose to skip the payment to preferred stockholders if the company is in financial trouble. Bond interest payments are backed by the force of law, which requires the issuer to pay or face bankruptcy. Because of this distinction, bonds offer a more reliable income stream than preferred stock.
So this is one answer to your question. Do any of the other advsors have a better answer? Jamie
The parent with whom the child lives with for most of the year fills out the FAFSA.
ScottB, all three people can make the payment and if it is reported under one person's name, the can take all the deduction and then add back the amount allocated to the two other people who can then take their own deduction. But I have a lot of other questions on this. Is it a home or investment property? If you had come to me, I would have suggested that you set up an LLC with a formal arrangement (to include what happens when one of you wants out), put the property in the LLC. Then the 3 person LLC would make the payment, file the taxes (as a partnership or a corporation) and each partner/shareholder would get a K1 reporting their part of the income and expenses. It is not too late for you to get this set up correctly. Get thee to a CPA and or fee only adivisor.
Thanks, Jamie. Any of the other advisors want to chime in on Preferred's?
And Jamie, here's the next question from taxquestioner
Brady, that's a tax question is out of my domain. However, I do know that deductions only help if you have income to offset it.
Let's see if any other advisers can help out.
No problem, Matt. Any advisors specialize in taxes and want to take Brady's question?
KW, did you mean take out a small loan, not smaller? If so, I always recommend using your own money for living expenses. You need to have a cushion of course, but even government loans are expensive. Once you get out of law school, you probably will earn too much to get a tax break on the interest your are paying. If selling mutual funds cause a capital gain, then it changes the dynamic towards withdrawing cash. If you need to sell a mutual fund for expenses, choose one where you have a loss and one that is not performing well.
Matt, here's a question from NoviceInvestor
And Bobbie, here's one for you from Just Married (congrats!)
Greenjake, Jamie got it right. The preferreds pay more because there is more risk. Like any other equity, shareholders will be paid AFTER bond holders if it comes to that. Sounds like the interest you are seeing is much like what you could get on high yield bonds. I do include high yield in my portfolios but do so understanding completely that there is extra risk. More money, more risk.
Debbie, how about you take this one from Scott.
Thanks for following-up on Greenjake's question, Bobbie.
Sorry Rich! Here's a question from AdamJ
Noviceinvestor, I love the STAR account and just recommended to a new investor yesterday. I wouldn't want to move money in and out of the Roth too often because while it is not taxable you will create some tax reporting headaches with 1099 forms. It sounds like you have a robust liquid account but I would want to make sure it's at least two months of monthly expenses.
Jane, here's a question about Coverdells.
Yes, there is an income restriction for whoever takes out the Coverdell.
Hi Taxquestioner. First I am not a tax preparer. From how you list the question, it doesn't seem like you are in too bad shape -- other than you need to get the taxes filed. First, do you have all the necessary income/expense/deduction information -- if not you'll have to track that down. If you do and you do not have a complicated tax return (maybe a W2 and a Schedule A) I'd file the return, include a note and keep all copies. If you do actually owe money, I'm not sure if this complicates the process or not. It does if you owe and can not pay the balance owed all at once. If you have a more complicated return, I suggest seeing a tax professional. Anyone else? Jamie
And Jane, one more from Liz.
Noviceinvestor, you will also want to have some more aggressive investments for the longer term which you do not plan to touch. The STAR is a bit light on the emerging markets and there are some great values in the Foreign developed markets that have emerged during the Euro crisis.
Liz: It is very difficult--almost impossible-- to get a student loan discharged in bankruptcy. Unfortunately, cosigners are equally on the hook for the obligation.
Thanks, Jamie. Here's a good question from Sarah about whether to save for retirement or pay off student loans.
AdamJ, I am not quite sure how to resolve this problem. I would suggest calling BOA (or whoever owns your loan now) and trying to resolve it with them. You may have to pay some late fees, but it will be worth getting it resolved and off your credit.