Welcome to December's Maximize Your Money Q&A!
During the event, expert financial advisors will answer questions across an array of personal finance topics.
The floor is open for questions if you'd like to submit one ahead of time by clicking "make a comment" above.
Talk to you soon!
Good morning and welcome to December's Maximize Your Money chat. Let's give everyone another moment to get logged in.
Welcome everyone! For the next 8 hours, NAPFA planners will be on hand to answer your questions. You can find a Fee-Only financial planner in your area at www.NAPFA.org.
With us this morning are advisers Bonnie Sewell, Frank Boucher, Delia Fernandez and Rob Schmansky.
Thank you all for being here!
Hi Martin, the book answer is the values decline as rates rise. Values do come back though so long as you hold the bonds to maturity and they don't default. Prices though react to anticipated rate moves, and expectations of rate changes are constantly changing. Volatility would be higher on high-yield bonds. I would be cautious of higher risk muni bond funds myself going into an era of higher borrowing rates, and massive unfunded obligations.
Hi Bill, is there a specific purpose for these funds? I would look to see if you qualify for Education Savings Accounts or 529 plans if it's for their future education costs. If it's otherwise long-term money, I personally would try to diversify a little more than just large-cap, US stocks. It's going to be hard to do a lot with that amount, but you could use a target-risk or target-date retirement fund and get more diversification. There have been decades the S&P 500 had a 0% return while more diverse portfolios have doubled. I
Hi Bill! I guess it depends on what you expect the grandchildren to do with the money. If it is to help them with college and they are close to college age, maybe you want to keep that money in a savings account. If they are little people and they won't get this money for a while, then either of the funds you mention is fine. I'm partial to low cost index funds so I would vote for the Fidelity 500. I think it is always a good time to own stocks. The recent run up after the election is a little scary and I do think we'll have a major correction that might be painful in the near term but if you are able to ride it out, go for it!
Hi Dan! Build up the emergency fund first and then go after that debt like it was your worst enemy.
Hi m3000, as long as you are eligible for an HSA you receive a deduction for your contributions, and can use them tax-free for eligible medical expenses.
Adam, Some are better than others and I think they are fine for "back of the envelope" planning but when it really matters, a qualified professional is best.
Hi Adam, I always try to look at ones I hear are helpful. I find many love the technology, many are still very concerned about having their info online. For the most part I worry that some provide only part of the answer, or an incomplete analysis without a human, but I think some of these human-advisor and tech tools are pretty interesting. It's an interesting time for fintech!
Hi John, file and suspend isn't a valid strategy any longer. You can stop your contributions if you won't need the income, but it sounds as if you do.
I'm sorry to hear about the tough spot that you're in Sally. I don't know if there's a good answer. I certainly wouldn't want to continue to take on debt or tap into assets for an extended period if the home doesn't sell. I suppose we also would need to know if you would recover the funds in a reasonable period. You mention a few of the cheapest places to borrow to cover very short-term needs. The 401(k) you'll only be able to do one loan from, so I would perhaps consider how long you may need funds if that was the route. I'm not sure credit cards have low rate cash advances any longer, especially with rates rising. I would probably prefer to borrow if possible, but if withdrawing from an IRA is necessary you can roll that back in within 60 days (only 1 time per year though). I might consider starting with a loan and looking at that, but it's a guessing game with when the sale is going to happen. I'm sure you're also looking at lowering the price since it won't pay to not drop it and take on the expense of these other strategies. I'd be a little worried about rising rates and would want to do all I could to get this sold.
I've never personally been into these strategies. I would assume if they work over any time period it's more of a fluke. It is the case though that investing in 'unloved' stocks can add value, but I prefer to be far more diversified by owning markets instead of individual stocks. So, the idea is to own maybe a total market index, and then tilt to value stocks. I also tilt to small stocks. I don't know if the Dogs strategy is too risky or not, these are good companies, but investing in individual stocks involves taking on volatility that isn't necessarily something you are rewarded for.
Hi Susan - Do you want to be a landlord? I'm a bad person to get an unbiased opinion on here since I had the same situation. I went with the renter. It quickly turned into renters after one left, and the second was arrested for growing marijuana in the basement and breaking into the neighbors condo via a shared attic. It's a great story to share with clients to see if they really want to be responsible for renting. It wasn't worth the damage and cost in my case, I would have been better dropping the property. But, if you can find good renters, and you think the market will increase, I'm certainly not suggesting you may not be better off keeping it. You do have to consider your market, and that we have rising rates now so people will be looking to lower the purchase price.
Susan. I was in the same boat years ago when I had to move and couldn't sell my property. I did rent it and finally sold it at a loss but because I was depreciating it while it was a rental, I actually wound up paying capital gain taxes. Sometimes life just throws you a curve ball! If I had to do it all over again, I would sell as long as I could clear my mortgage.
Danny - I'm not aware of any provision that would let you use your HSA for your Mom's medical bills. As hard hearted as it may sound, you are not responsible for her medical bills. Contact your local government to see what programs may be available to her.
I think unless she is or becomes a dependent then it isn't possible. It could be that if you pay more of her expenses and she doesn't have a lot of income other than SS that she could be claimed. I would speak to a CPA.
John. The "File and Suspend" provision expired for eligible recipients on April 30th of 2016. I'm afraid that strategy won't work.
John, Laurence Kotlikoff is a source I would look up if you want to see if he's written about this specific situation, he does a lot of writing about very specific cases like this, but I don't know there is a strategy left.