Ask the Experts Archive: Personal Finance
Q. If I marry someone with no assets and he has to go into a nursing home in the future, would half my money in the bank be considered his by the state and be used to pay for his nursing home before Medicaid funds take over?
Q. We bought a time-share in Florida in 1984. We've tried several times to sell it, to no avail. How can we get rid of it? Can we give it back to the company that oversees it and get it out of our name?
Q. My company stopped contributing to my 401(k). Does that mean that I can now take out money without incurring a penalty?
Q. Internet banks are advertising high interest rates (5 percent) for savings accounts. Are these banks safe?
Q. I'm thinking of taking out a debt consolidation loan. Will the amount affect my ability to qualify for a reverse mortgage?
Q. My wife and I tried to cancel magazine subscriptions, but the company denied our request, telling us that a recorded telemarketing phone call proved that my wife agreed to accept them. We're on a fixed income and can't afford these magazines, which are being paid for automatically out of our bank account. My wife is 77 with hearing and speech disabilities, and says she didn't understand the phone conversation. What can we do?
Q. I'm leaving a job but keeping my 401(k) plan with that employer. My new company also offers a 401(k). Is it legal to have two of these accounts?
Q. My mother receives Medicaid assistance and lives in subsidized housing for older adults in New York state. She will inherit about $80,000 soon. Will this affect the financial assistance she receives?
Q. Are premiums for a long-term care insurance policy deductible from federal income tax?
Q. My broker wants to sell all my stocks and buy other stocks. I'm concerned he's trying to churn my account to earn commissions. What should I do?
Q. I'm still working, but I borrowed half of my 401(k) plan to pay off a bill. Do I have to pay this back with interest?
Q. I have my 401(k) with a former company that is not doing very well financially. Do I need to be concerned about the safety of my money if it goes bankrupt? I'm retired, but I like the investment options in the company's 401(k).
Q. I have my 401(k) with a former company that is not doing very well financially. Do I need to be concerned about the safety of my money if it goes bankrupt? I'm retired, but I like the investment options in the company's 401(k).Q. My husband and I are both retired. Our income is from a pension and Social Security. Can we still put money into our IRA and then deduct it on our federal income tax return in order to reduce our taxes?
Q. My 401(k) plan now offers some life-cycle portfolio funds. I like the idea that age-appropriate diversification and rebalancing are automatically provided, but I'm concerned that the trade-off might be lower returns than those I'd get if I managed the investments myself.
Q. Can I use money from my 401(k) plan as a down payment on a house and not be penalized? I am 57½ years old and have been retired about 4½ years.
Q. My husband was not in his right mind for some time before his death. He left me a list of serial numbers of savings bonds that I have not been able to locate. Is there a way to find them and to learn if they have been cashed?
Q. How can I get satisfaction from a firm that hasn't sent me a product I've paid for? I've called the firm seven times since August and was assured the order was being sent. It's still not here. Help!
Q. In 2005 I withdrew funds from my traditional IRA for an emergency. Can I redeposit some of the money before April 15 of this year to reduce the taxes and penalties I will incur for 2005?
Q. I am 55, single and a renter. I'm saving money to buy a home, which will take me at least five more years. Will I be able to get a 30-year mortgage when I'm 60?
Q. If I marry someone with no assets and he has to go into a nursing home in the future, would half my money in the bank be considered his by the state and be used to pay for his nursing home before Medicaid funds take over?
A. By federal law, all assets between married couples, including bank accounts, are considered joint assets when determining eligibility for Medicaid. However, Medicaid does allow spouses of those entering a nursing home to keep a certain amount of assets in order to prevent them from living in poverty. In 2007 you would be entitled to keep half of all assets up to a maximum of $101,640, besides your home, car and personal belongings. But many states have different and detailed regulations, so you should check your state's rules. —Expertise provided by Jean Accius, October 2007
Q. We bought a time-share in Florida in 1984. We've tried several times to sell it, to no avail. How can we get rid of it? Can we give it back to the company that oversees it and get it out of our name?
A. First, you can offer the company a quitclaim deed to the property, which relinquishes your ownership. Your offer may not be accepted, since the company would lose the annual maintenance fees you've been paying—but it's worth a try. Second, some charities accept donations of time-share properties—go to www.timesharetrap.com and click on "Charities Accepting Timeshares." Or if you want to try to sell the property again, use only a time-share broker who takes a commission after the property is sold. Some outfits want an upfront fee before listing the property, but that would be a big mistake (and illegal in Florida): If the property isn't sold, you're still out the commission. —Expertise provided by Sally Hurme, September 2007
Q. My company stopped contributing to my 401(k). Does that mean that I can now take out money without incurring a penalty?
A. Ask your company what your plan allows. Generally, if you withdraw money before age 59 1/2, you have to pay a 10 percent penalty. For details, visit the U.S. Department of Labor. — Expertise provided by Sara Rix, June 2007
Q. Internet banks are advertising high interest rates (5 percent) for savings accounts. Are these banks safe?
A. It's harder to tell if a bank is legitimate when you can't stop in to talk to the manager. That's why you must check out an Internet bank thoroughly. First, read the material posted on the bank's website. Are there ways to reach the institution for customer assistance? Make sure you understand the terms—are fees and minimum balance requirements eating away at that high interest rate? Next, make sure the Federal Deposit Insurance Corporation insures the bank's deposits. Look for the FDIC logo on the institution's website, but don't stop there. Double-check by going to the FDIC Institution Directory at www2.fdic.gov/idasp for a list of banks it does business with. —Expertise provided by Sally Hurme, May 2007
Q. I'm thinking of taking out a debt consolidation loan. Will the amount affect my ability to qualify for a reverse mortgage?
A. No. Having the loan wouldn't disqualify you as long as the loan amount plus your remaining mortgage and other debts didn't exceed the value of your home. All your debts must be paid off with the money you get from the reverse mortgage. Here's an example: Let's say you owe $100,000 on your mortgage, your loan and other debts. Based on your age, home value and interest rates, you qualify for $125,000 under the reverse mortgage program. You'd be able to pay off all the existing debt and still have $25,000 left. (The $125,000 must be repaid when you or your heirs sell the house.) A reverse mortgage can be expensive, but it lets you tap into your home equity and continue living there. The older you are when you take the loan, the more you can get from your home and the less you'll pay in fees compared to the size of your loan. For more information, go to www.aarp.org/money and click on Reverse Mortgages. —Expertise provided by Sally Hurme, April 2007
Q. My wife and I tried to cancel magazine subscriptions, but the company denied our request, telling us that a recorded telemarketing phone call proved that my wife agreed to accept them. We're on a fixed income and can't afford these magazines, which are being paid for automatically out of our bank account. My wife is 77 with hearing and speech disabilities, and says she didn't understand the phone conversation. What can we do?
A. Some operators sell magazine subscriptions without authorization from the publisher. Contact the publishers directly and ask that your subscriptions be canceled. If that doesn't work, tell your bank you did not okay the debit and you want to stop it. You also should contact your state attorney general. To prevent telemarketing calls, visit our State-by-State Guide to Do-Not-Call Registration or the Federal Trade Commission's National Do Not Call Registry. Contact the FTC at 1-888-382-1222 (TTY 1-866-290-4236); call from the phone you want listed on the registry. If you're already on the registry, file a complaint with the FTC at the same number. —Expertise provided by Sally Hurme, March 2007
Q. I'm leaving a job but keeping my 401(k) plan with that employer. My new company also offers a 401(k). Is it legal to have two of these accounts?
A. Yes, you can have more than one 401(k) plan. Many employers will let you keep your 401(k) money in their plan after you leave the company. But you will no longer be able to contribute to the plan or borrow from it. You may want to consider transferring your 401(k) funds directly into your new employer's plan without incurring taxes or penalties. Or you may want to roll over the funds into an individual retirement account to keep your tax deferment and make it easier to track your investment. To learn more, call the Federal Citizen Information Center toll-free at (888) 878-3256 and ask for its free publication "401(k) Plans" (Item 583L). Or write the center at Dept. 583L, Pueblo, CO 81009. —Expertise provided by Jules Lichtenstein, January 2006
Q. My mother receives Medicaid assistance and lives in subsidized housing for older adults in New York state. She will inherit about $80,000 soon. Will this affect the financial assistance she receives?
A. Housing assistance and Medicaid are separate programs and have different rules and eligibility requirements. Since Medicaid assistance is based on the value of a person’s assets, an $80,000 inheritance would likely cause her to be dropped from the program—at least until the asset is spent down. Normally, a person who qualifies for Medicaid has no more than $2,000 in assets. As for housing assistance, there are many programs at the federal, state and local levels. Your mother should ask the housing provider where she lives about the eligibility requirements that relate to her program. Generally, most housing assistance is based on income. So if your mother invested that $80,000 at 5 percent interest, for example, her annual income would increase by $4,000. To get housing assistance, an individual must typically earn no more than 50 percent of a region’s median income. So it’s possible that your mother could remain eligible for subsidized housing even if she no longer qualifies for Medicaid. — Expertise provided by Andrew S. Kochera, November 2006
Q. Are premiums for a long-term care insurance policy deductible from federal income tax?
A. Premiums paid for private long-term care insurance are deductible if you meet certain conditions. First, your medical expenses must exceed 7.5 percent of your adjusted gross income and all deductions must be itemized. Second, the long-term care policy must be classified as federally “tax-qualified” based on laws established by the Health Insurance Portability and Accountability Act. The amount that can be deducted is based on the age of the policyholder. For specific information, visit the Internal Revenue Service online. — Expertise provided by Enid Kassner, November 2006
Q. My broker wants to sell all my stocks and buy other stocks. I'm concerned he's trying to churn my account to earn commissions. What should I do?
A. Churning occurs when brokers buy and sell clients' stocks frequently to earn commissions, not because it's in the clients' best interest. Experts say investors lose billions a year to churning. If you don't know your broker well (and even if you do), check out his license and record by contacting your state securities regulator. (Go to the North American Securities Administrators Association website for the regulator in your state.) Next, ask your broker why he's suggesting these transactions and exactly how much he'll earn by making them. Check out what the tax consequences will be. Also, consider getting a second opinion from another financial adviser. In the end, if you suspect that your broker is not acting in your best interest, take your business elsewhere. You can also file a complaint with your state regulator. —Expertise provided by Sally Hurme, October 2006
Q. I'm still working, but I borrowed half of my 401(k) plan to pay off a bill. Do I have to pay this back with interest?
A. Many plans allow participants to take loans from their accounts, but they must be repaid with interest so that the funds intended for your retirement are not depleted. However, an employee age 59½ or older is permitted to make withdrawals while working for the company sponsoring the plan. There's no penalty on the amount withdrawn, but you'll still have to pay income tax. Anyone under 59½ must pay income tax on any withdrawals plus a 10 percent penalty. For more information about 401(k) plans, go to the Internal Revenue Service online, and use the search box to find the "401(k) Resource Guide." —Expertise provided by John Turner, September 2006
Q. I have my 401(k) with a former company that is not doing very well financially. Do I need to be concerned about the safety of my money if it goes bankrupt? I'm retired, but I like the investment options in the company's 401(k).
A. You should worry only if you have invested part of your 401(k) assets in your former company's stock (think Enron). In that case, you would lose money if the company went bankrupt. But you don't face the same risk with the other funds in your 401(k) because they are not assets of the company but are held in a separate trust. However, if you wish to cut ties to your former employer, you could investigate other investment options in the marketplace. July 2006
Q. I have my 401(k) with a former company that is not doing very well financially. Do I need to be concerned about the safety of my money if it goes bankrupt? I'm retired, but I like the investment options in the company's 401(k).Q. My husband and I are both retired. Our income is from a pension and Social Security. Can we still put money into our IRA and then deduct it on our federal income tax return in order to reduce our taxes?
A. You must be receiving "earned income" that is taxable—such as wages and commissions—in order to contribute to an IRA. Income from rental property, interest and dividends, or from pensions or annuities, for example, is not considered earned compensation. So if you don't have income that requires a W-2 or 1099 tax form, you may not contribute to an IRA. July 2006
Q. My 401(k) plan now offers some life-cycle portfolio funds. I like the idea that age-appropriate diversification and rebalancing are automatically provided, but I'm concerned that the trade-off might be lower returns than those I'd get if I managed the investments myself.
A. A life-cycle portfolio fund is designed for people who don't have the time, interest or ability to manage their own retirement portfolio. If you're willing to research, monitor and rebalance your investments when necessary, then you may want to manage your own portfolio. But if you are not willing or able to do this, then an age-appropriate life-cycle fund with automatic rebalancing may be for you. As for the trade-off, the range of probable returns is small—success depends more on your saving and spending habits over a lifetime. June 2006
Q. Can I use money from my 401(k) plan as a down payment on a house and not be penalized? I am 57½ years old and have been retired about 4½ years.
A. There are two ways you can access money in your 401(k) plan—through loans and withdrawals. You can take a loan without penalty from your 401(k) plan if it provides that option. Your plan's administrator can give you that information. In general, you cannot make a withdrawal from a 401(k) plan before age 59½ without paying a 10 percent penalty. However, if you leave the company providing the plan in the year you turn 55 or any year thereafter, you may take a withdrawal without penalty—if your plan allows it. But the withdrawal must take place after you leave service. In your case, you would have to pay the 10 percent penalty for a withdrawal because you retired before age 55. For more information, go to the Internal Revenue Service online at www.irs.gov. Click on "Retirement Plans Community," then on "401(k) Resource Guide." —Expertise provided by John Turner and Mary Ellen Signorille, May 2006
Q. My husband was not in his right mind for some time before his death. He left me a list of serial numbers of savings bonds that I have not been able to locate. Is there a way to find them and to learn if they have been cashed?
A. Your situation is not uncommon. More than $13 billion worth of savings bonds have matured and remain unredeemed. Here's what you should do. If you have only the bond serial numbers, write to Bureau of the Public Debt, P.O. Box 7012, Parkersburg, WV 26106-7012. Describe the bonds as fully as possible—approximate issue date, address or any other information you may have—and request a search of U.S. Department of Treasury records. The department will replace your savings bonds if they haven't been cashed. You can also try a "Treasury Hunt" at the Treasury Department's online database. To start a search, you will need either your Social Security or employee identification number or your husband's. (You also can find out what your bonds are worth by using the site's calculator.) Once you have received your replacement bonds by mail, you can redeem them at most financial institutions if you are listed as an owner, co-owner or beneficiary. You will need proper identification. Because your husband is deceased, you will also need to show a certified copy of his death certificate. —Expertise provided by Naomi Karp, April 2006
Q. How can I get satisfaction from a firm that hasn't sent me a product I've paid for? I've called the firm seven times since August and was assured the order was being sent. It's still not here. Help!
A. By law, retailers—including online retailers—are required to ship an order within the time stated on their website or in their ads. If no time is specified, the product must be shipped within 30 days of the order. If the company can't do this, it must say so and allow the consumer to cancel and receive a prompt refund. Here are a few things you can do: Report the retailer to the Federal Trade Commission by calling (877) 382-4357. Alert the Better Business Bureau. Dispute the charge—if you used a credit card—by not paying that part of your bill and following the credit card company's procedure to challenge it. For more, go to www.ftc.gov and click on "For Consumers" or check out www.consumeraction.gov. —Expertise provided by Sally Hurme, March 2006
Q. In 2005 I withdrew funds from my traditional IRA for an emergency. Can I redeposit some of the money before April 15 of this year to reduce the taxes and penalties I will incur for 2005?
A. To avoid taxes and a penalty, you must redeposit funds in your IRA within 60 days. If you are younger than 59½ and you do not act within 60 days, you generally must pay a 10 percent penalty and income tax on the funds you withdrew. (If the funds were for a medical emergency in which you must pay unreimbursed medical expenses greater than 7.5 percent of your adjusted gross income, you do not have to pay the 10 percent penalty.) If you are older than 59½, there's no penalty, but you'll have to pay taxes on the amount withdrawn. Under certain conditions, part of your withdrawals may not be subject to tax. For specific rules on the tax treatment of IRAs, go to www.irs.gov/publications. —Expertise provided by John Turner, March 2006
Q. I am 55, single and a renter. I'm saving money to buy a home, which will take me at least five more years. Will I be able to get a 30-year mortgage when I'm 60?
A. It is very common now for people in their 60s to buy or refinance homes. If you have established good credit, you should be able to get a 30-year mortgage. To reassure yourself, check with several lenders about the home-buying process. You may also want to check out the various types of loans and loan terms that are available to you. For more information, visit the U.S. Department of Housing and Urban Development website. —Expertise provided by Craig Hoogstra, February 2006
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