Jill on Money: Real estate, risk, retirement
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When does tapping a retirement account to fund real estate make sense? Not for Paulette, who is weighing a home equity loan vs. a withdrawal from her 401 (k) for big renovation project. But Jeff in Michigan has a novel idea: he wants to short sale his house to his fianc?e. She would purchase the home with a loan from her 401(k).
A 401(k) loan is preferable to a withdrawal because it avoids the tax liability. Also, while most loans from 401(k)'s must be paid back in five years, your employer may give you up to 15 years to repay a 401(k) loan if you are borrowing the money to buy a home. There is one major drawback to borrowing from a 401(k): If you lose or leave your job, you generally have just 60 to 90 days to pay back the loan or it will be considered a distribution -- and subject to taxes, plus a 10% early-withdrawal penalty if you're under age 55 when you leave your job.
Historically low mortgage rates might be enticing you to purchase a home before you are ready to do so. That's the situation in which Sam and his wife find themselves. With mega-college loans outstanding, should they take the house plunge now, while rates are low?
Joe in Philly and his wife have accumulated a $2 million portfolio. They are targeting retirement in 5 years and are weighing the age-old investment question: risk vs. reward. Joe seems to have tilted a little too far in the risk camp, as you will hear.
Janice from CT is in terrific financial shape, which is why she should run, not walk away, from the salesman who is pitching an indexed annuity. After all, Janice already has the two main features of an annuity: a stream of payments and tax deferred accounts. Phew, another caller saved from a bad idea!
Helen listens to the podcast of our show while she walks her Yorkies! Her question is whether she can change her mind about Social Security once she has filed. The good news is that if you change your mind within 12 months of filing, you can withdraw your Social Security claim and re-apply at a future date. BUT, you must repay the benefits received (plus money withheld for Medicare Part B, Part C and Part D premiums and tax withholding of federal income taxes). If you change your mind 12 months or more after you became entitled to retirement benefits, you cannot withdraw your application.
Karen asked about how to keep investment fees down. One big hint: it's all about the fees! Check out this blog post "You can't beat the market so stop trying"
Here's a TV segment for Mark, who wants to whether to send him off to college with a credit or debit card:
Here are web sites and resources mentioned in this week's show:-- How to Choose a Financial Advisor: 10 Questions
-- NAPFA: National Association of Personal Financial Advisors (fee-only advisors)-- NYT Rent vs. Buy Calculator
-- Financial documents: What to shred, what to keep
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