Questions, anyone?

[DancingBear]

I think Mrs. DB ("scruffy") is lurking about the house somewhere. If anyone has a question that an experienced Certified Financial Planner (30+ years) could help with (that would be her), ask away.

Oops, for those who don't know, "scruffy" is a CFP with a Masters in Retirement Planning, and has a whole bunch of designations that fill up most of her business cards. If you have a question there's a good shot she'll know the answer, or at least be able to direct you to the right sources.

I'm acting as the go-between because she doesn't have enough posts yet to start her own threads.

[silverlib]

1. Thanks - and yes - questions

How does she feel about the dollar? and what future does she see in gold, silver and domestic versus foreign investments?

I think this is going to be a really intersteing forum.

[scruffy]

5. Your best bet . . .

is a diversified portfolio (I prefer doing it with mutual fnds) that includes domestic as well as international holdings, plus some segments that are negatively correlated with the US stock market. Sometimes gold can play that role, but it seems to do well maybe 1 year in 8, so you need to be real patient with it if you're going to hold it. Over time, I think the dollar with stabilize, especially as our interest rates slowly increase.

[thoughtanarchist]

2. I have one... Max out 401k or contribute to a Roth?

Would it be more cost effective to contribute less to a Roth in order to max out 401k contributions? on one hand is the after tax contribution for the roth, on the other hand is an extra point in the expense ratios in the 401k...

How do I figure out which way is cheaper?

...and Thanks!

[scruffy]

3. I'd go with the 401(k)!

If I were doing it I would max out on the 401(k) first .. . . it is automatically deducted from your paycheck so you (supposedly!) don't notice that it's gone, you don't pay taxes on it, etc. More importantly . . . I'm not totally convinced the tax-free treatment of the Roth IRA will remain that way - remember, Roths were invented when we actually had a budget surplus, times were good, and we weren't fighting multiple wars. I have a feeling that when lots of people start taking $ out of their Roths, Congress may decide to be not quite so generous and change the tax laws. So . . I would go with the tax deduction you know you can get (the 401(k)) instead of what that might be there, or might not be.

I can't say which way is less expensive as far as the costs are5e concerned - that's a function of what investments you have available in either plan.

[thoughtanarchist]

4. Sound Advice. Thanks.

I had not considered that the tax-exempt future of the Roth would be dubious...

:shrug:

[Kolesar]

6. How to shop for long-term disability insurance and long-term care insuranc

My employer offers both and I have enrolled in both. However, I don't know how to tell if the two policies are "good" policies. They may have provisions that do not suit a person in my circumstances.

It has been a while since I looked for information on both of those subjects. It is not an exciting topic, but insurance coverage could make all the difference in the world for your financial stability. For example, if you don't have medical insurance, a hospital will take your house, your savings accounts, your 401k, and your IRA to settle a debt from an expensive hospitalization. You could lose all if you don't have enough automobile liability insurance and an accident victim needs an expensive hospitalization.

This is probably worth a whole thread.

[scruffy]

7. LONG answer to your question!

You're right - Insurance is really important and really hard to tell if you have decent coverage or not. But here are a few things to look for:

Disability Insurance:

How much does it pay? Most group plans usually pay about 60%-66- 2/3% of income, but if you get both salary and bonus does it include the bonus?

How long does it pay for? Most group policies will pay to age
65, but some go shorter.

Who pays for it? If your employer pays and you are disabled and
collect benefits, they will taxable to you. If YOU pay and
the collect benefits, they are tax-free. If you have the choice
I would go with paying the premiums myself.

Probably the most important factor of all: What is the
definition of "total disability?" . . . what do you have to not
be able to do in order for policy to pay? The best definition
(and often hard to come by) is that you can't do ANY duty of
your own occupation. Theoretically, this would mean that a
surgeon might not be able to perform surgery, but if she could
still teach, she would be considered disabled and would receive
a benefit under the policy. This type of definition is found
more often in individual policies as opposed to group, but
some group policies will use that definition for the first few
years of disability, like 5 or 10. After that time runs out,
you need to be unable to do any occupation that you have the
training or experience to do. There are other definitions that
say you have to have a loss of income of xx% . . . these often
work out OK but you have to read what the requirements are. What
makes for a BAD policy is a definition that says if you are
doing any work for pay at all, even in another occupation, you
are no longer disabled.

Your alternative to a really bad group policy is to waive out
of the coverage and apply for an individual plan. Most
individual plans have better definitions and more flexibility,
including cost of living adjustments and the ability to pur-
chase more coverage as your earnings increase. They are also
portable so you don't lose your coverage if you leave this job.
They are, naturally, more expensive than group plans :(


Long Term Care Insurance:

What is the daily benefit for being in a nursing home? If your
plan pays anything less than $150 per day, you will be paying
a lot out of your own pocket.

What is the daily benefit for home health care? Lots of group
plans cut back in this ares. You really want a plan that pays
the same $ amount to be home, having someone come in and take
care of you, as it does to be in a nursing home. It's actually
MORE expensive to have the home health care if you need 24/7
care.

Is there an annual inflation adjustment to the daily benefit?
Otherwise, you will be stuck with your initial amount, even if
nursing home costs increase . . . and they are definitely in-
creasing!

Who determines if you need to go to the nursing home - your
doctor or the insurance company's doctor? This should be
self-explanatory - you want the decision to be between you
or your family and YOUR OWN doctor, not one the insurance
company uses.

I could go on and on about either of these subjects . . . . hope that gives you at least a starting place!

[silverlib]

8. Thanks!

I didn't ask the question, but still appreciate the information. This is most helpful.

[haele]

11. Long Term Disability saved our finances...

and my job when I became injured. It covered the difference between what workman's comp/EED disability paid and what my normal salary was.

If my husband had both,when he become disabled on a non-work related issue, it would have covered his expenses until SSI kicked in instead of draining our finances. It took him two years with a good lawyer to get SSI. He's still kicking himself for not spending the extra $15 a month at work; it would have saved us a lot of stress, a lot of deterioration of his health over the time we had to wait for my insurance to begin covering him, and about 100 credit points on our TRW over that period.

I really believe that if your employer offers one or both, it's a bargain considering what happens to you and your family should something medical happen to you.

Haele

[amazona]

14. $15 a month? How?

The only long-term disability plans I've seen quoted me a higher cost than my entire income!

[MsTryska]

15. I think they are talking about

employer-subsidized plans.

[lastknowngood]

9. Thanks I'm just getting started. I have inherited about 30k which

was a TOD (transfer on death) from a tax deferred account. I have to take it out over the next 5 years or sooner. My questions are 1 can I roll it over to my 401k without having to pay tax and 2 can I use the catchup payment from 2004 (14k) and 2005 (15k) to transfer it. I need a good finical adviser and live in Maryland, are you available? or could you recommend someone? Thanks.

[DancingBear]

10. Hang on for a bit

Scruffy is out of town with no internet access readily available. She'll be back Tuesday evening - so check back on Wednesday or thereabouts.

mr. scruffy (DancingBear)

[scruffy]

12. Nice try, but it won't work!

Sounds like what you have is some sort of annuity - either a fixed annuity or a variable annuity - and you were the beneficiary. Under current tax law, you have to take distributions from the annuity over the next 5 years, and all of the gain in the annuity will be taxable as ordinary income.

Once you have withdrawn an amount equal to the contract's gain, so all that is left in it is the initial amount the person started with, then that part will be distributed to you tax-free. So if you haven't done this already, contact either the person or the company that sold the annuity and find out what the person's original contributions (called basis) were.

Until you have reached the basis amount, everything will be taxable to you, regardless of what you do with it, and you will get a 1099 at the end of the year showing what was taken out. If you take the distribution and put it in an IRA and if you are able to deduct your IRA contribution, your annuity withdrawal and IRA contribution may cancel each other out and you will have no additional tax liability. Or you could take a distribution, keep the $ and use it to help with ordinary expenses, and then increase your 401(k) contribution, including the 2005 catch-up of $4000 if you are over 50. So with some care you can minimize the income tax consequence but you may not be able to eliminate it entirely.

Thanks for asking, but I'm not able to take on new clients or to make direct recommendations. But here are some websites you can use to locate advisors in your area:

www.fpanet.org
www.IAQPF.org
www.IARFC.org

[dhuss]

13. Sorry to bring up a quazi-dead thread but...

This might be a little out of your expertise, but what do you think about the existence of a real estate market bubble. Me and my wife just got married (about 4 months now) and we're looking to get a house but are worried about an overinflated real estate market. Now I know that local markets go up and down all the time, but recently it seems like it's been just going up and both of us are worried about buying a house and then it loosing a chunk of it's value and then we'd be stuck there when we really don't want to be...

Should we hold out in an apartment until at least a dip in the market we're looking to move to? or just kinda go for broke and risk it?

D.H.

[Joebert]

16. I am interested for similar reasons...

I have a house, and have been thinking about selling it. I hate the prospect of living in an apartment, and not getting the tax writeoff and investment potential of the house.

However, I'm thinking of selling while it's hot, banking the money, and riding out for a while until the foreclosures start. And you know they will with all the interest only loans.

My realtor doesn't think my area will have a problem (Colorado) but that the coasts will. He says buy. I think my house has almost doubled in value in the last 8 years. And that just doesn't make sense.

I'd be curious to see what people thought of selling now, taking the equity and banking it.

[amazona]

17. I think you will still need a place to live

I haven't seen people do too well with the sell the place, take the equity, and "bank" it. It doesn't stay banked, because you have to buy a new place, which will be more expensive, or else you will have to rent, with all the costs, rip-offs, and inconveniences entailed by dealing with landlords. Also the "found money" gets dribbled because people lose their motive to work, so go back to school and get some useless degree, or start an art gallery, or you get the idea. One way or another, the equity ends up gone.

My neighbor sold his home several years ago and has never been able to buy an equivalent home in as nice an area ever again.

I vote that as long as you need to live in that area, continue to stay in your home and quietly enjoy the increase in value, banking it for a day when you retire to a less expensive area.

[Joebert]

18. Certainly good points, thank you.

I like the house, I don't WANT to sell it, but I'd hate to watch it lose 50% value and be that much harder to find a place when I do have to move.

I guess it comes down to the evil of timing the market. As a pessimist, and watching people around me spend like they do, I feel like selling just to sock the money away for when I do move.

I don't forsee moving before I see the housing market falling apart, which is why I'm thinking like this.

So much to think about these days.

[DancingBear]

19. Bear with us for a bit

We've just moved, and have just gotten the PC back up with DirecWay satellite connectivity.

Still working out the bugs - but as soon as we do scruffy will answer your question.

Sorry for the delay in responding. :)

DancingBear (mr. scruffy)