Chat Transcript: Your Personal Finance Questions
BOSTON (WBZ) ― Certified Financial Planner Susan Kaplan of Kaplan Financial Services in Newton joined us for a live chat on wbztv.com, answering viewers’ questions about their personal finances.
Lou_Ann: How will this mess affect the people on Social Security disability or any other government income that is fixed?
Susan_Kaplan: It won’t affect you at all.
Heather: What will the failing financial business do to a person with nothing in stocks and without a mortgage?
Susan_Kaplan: It will do nothing in terms of stocks or mortgage. But if you want to borrow money or if your job depends on the financial markets, it might affect you.
Isobel: As a senior, I have the obligation to meet required minimum distribution for my IRAs. I have mutual funds and CDs. Obviously the mutual funds are worth considerably less than they were on Jan. 1. Have you any advice on whether the money should come from the CDs, or should seniors bite the bullet and cash in securities?
Susan_Kaplan: As difficult as it would be, I would take it from the CDs right now and not sell depressed stock holdings.
lori: Listen to you every Sunday morning with Rick. Is the best thing to just sit tight? It’s difficult to watch all my accounts (401k,IRA and brokerage accounts) just decline.
Susan_Kaplan: You’re a good listener. Yes, sit tight.
Pam: I have several large CDs in Sovereign Bank, which today announced a huge loss due to bad mortgages. Sounds like it’s on the edge, although they claim they have enough reserves to continue doing business. Should I be moving these funds somewhere else?
Susan_Kaplan: If the total of your CDs exceeds more than $100,000 (the amount insured by the FDIC) then yes, you should allocated amongst several banks.
Lou_Ann: If your bank fails how long will it take to get your money and how do you get it? Is it covered by FDIC or the government?
Susan_Kaplan: It is covered by the FDIC. When IndyMac failed earlier this year, they were paid back that day. It will depend on the number of failures, but you will be paid back.
Lou_Ann: I’m on a fixed income and can’t afford to pay bills and meds now. If things will make it worse for me, what can I do to minimize the effect?
Susan_Kaplan: For your medication I would explore some of the online Canada sites that offer medications for a fraction of what you pay here (consult your physician). For the rest of the bills I would re-do your budget, but also consider applying for subsidized housing.
jplicks: should we buy stocks
Susan_Kaplan: Unless your portfolio is greater than $600,000 I would focus on a main stream mutual fund portfolio first. But yes, this is a wonderful time to enter the stock market.
dWade: Susan- is now a good time to jump in and buy cheap stock. OR is that too big a gamble?
Susan_Kaplan: After a 700 point drop, it’s an incredibly great time.
lori: I’m 34. what percentage of my retirement should be in international funds? Should I do 1/3 emerging, 1/3 internat’l and 1/3 domestic?
Susan_Kaplan: I would do 1/3 international - divided between emerging and general international; 1/3 in mid and small cap funds and 1/3 in large.
bob: How safe are funds in credit unions? After 100K, is the secondary insurance also safe?
Susan_Kaplan: Depends on the secondary insurance. I would keep all banking institution deposits under the $100,000 limit.
lori: My company stopped matching our 401ks. Should I contribute the max before funding my Roth IRA or contribute equally to both.
Susan_Kaplan: Continue to max out your 401k.
dWade: Susan- what stocks would you steer clear of? Financial institutions? or do they perhaps have the biggest upside since their prices are sooo low?
Susan_Kaplan: Until they complete the bailout we don’t even know what the game board will look like. We don’t want to make the George Soros mistake, who bought billions of Lehman Brothers.
money_honey: I plan to take a couple thousand out of the bank in cash to have on-hand in case. Why is everyone trying to suggest that this is the wrong thing to do?
Susan_Kaplan: Unless your bank account is greater than $100,000 there is simply no reason to do that. Your mattress will earn even less than a money market.
ted_1: I will not retire for 25-30yrs do I do anything with my 401k?
Susan_Kaplan: Keep investing in it.
ANNE: I have my pension that I did not contribute to with Mass General. They guarentee 6% interest. Mgh is now laying off employees. Should I move it to a safer place?
Susan_Kaplan: Anne - how large is your pension a year?
money_honey: …but my mattress can’t lock me out and shut down
KW: Hi Susan, I have a question regarding Long Term Care Insurance. My husband is 42, and I am 40. We have 2 children, and I am a stay at home mom. We are in good health. We max my husband’s 401K, have adequate Life Insurance and LTD for my husband. My husband’s company is offering LTC insurance via Unum. Do you advise your clients to purchase LTC? It is portable, and the rates do not increase if you leave employment. Thank you KW.
Susan_Kaplan: You are very young to buy LTC insurance. Unum is particularly unappealing since they have been raising their premiums by 30% for 2 years in a row. However if they were offering you a really inexpensive plan in your company, then I would take it.
Tim: I am just out of college and want to start investing, where is the best place for me to start putting some money for longterm growth?
Susan_Kaplan: The Fairholme Fund.
ANNE: The total is about 80,000. I now work for the city and don’t plan on retiring for about 20 years
Susan_Kaplan: The Pension Benefit Guarantee Corporation guarantees your pension even if your employer goes bankrupt. The yearly pension amount it guarantees is around $48,000.
Moderator: Send your questions for Certified Financial Planner Susan Kaplan
bob: Are there any worthwhile hedge funds or annuities?
Susan_Kaplan: Not for the average investor.
ANNE: I’m hoping to cash in some of my stock for a down payment on a house. Will I get killed in taxes if I do this?
Susan_Kaplan: It depends on what you paid for the stock.
KW: What are your thoughts on Government Money Market Funds?
Susan_Kaplan: Any money market funds are the place for the funds that you need to be immediately available to you.
lori: How would you diversify from these options in my 401k? GrowthFund of Amer, Davis NY Venture, Harbor mid-cap, Harbor small, Harding emerging, ING intern’l, mfs value, opp intern’l, pioneer, midcap & vanguard explorer admiral
Susan_Kaplan: It depends on your age, time horizon, risk tolerance and other investments in other places.
bob: if I hear about a particulat bank losing its value (such as soverign), should I withdraw my funds?
Susan_Kaplan: Not unless your funds are greater than $100,000 (the amount insured by FDIC)
Moderator: Our chat will be ending in a few minutes. Please ask your final questions.
kangie: is it worth it to put money in a short term cd
Susan_Kaplan: Sure. The maturity of the CD should match your immediate need for the funds.
felipe: i am looking to buy a new car should i pay from my savings or pay myself back? i am earnig 3.5 in the savings acct.
Susan_Kaplan: It depends on the auto loan rate. If it’s greater than 3.5% you should just pay for the car.
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