Last Updated Aug 28, 2011 10:59 AM EDT
We started with Aaron in WA, an investor in his late 30's, who asked about automatic reinvestment of dividends into his individual stocks. That seemingly straight-forward question led to a larger question: why buy individual stocks in the first place?
E-mailers Randy and Arch were looking for exchange-traded funds that focus on dividend-paying stocks. Two examples are: HDV (iShares High Div Equity Fund) and SDY (SPDR S&P Dividend ETF). The conversation allowed me to explain the difference between mutual funds and exchange-traded funds (ETFs).
Mike in NC needed some guidance on target spending and savings amounts. Here are some good rules of thumb:
- Mortgage Payments: less than 25-28 percent of gross pay
- Total debt service payments (including mortgage): less than 36% of gross pay
- Savings: 15-20 percent of gross pay (though I would take 10 percent, especially for those just starting out)
It seems that lots of financial salespeople are pushing annuities as the antidote to the gyrating stock market. But as I told Fran in CA, why would she lock up her money in an annuity, when the 5-year guarantee is only 1.6 percent?
Mark, WA and Jeff in CT and e-mailer Jim all had questions about their mortgages. There is no exact rule of thumb about whether or not to pay down a mortgage, because you need to incorporate your liquidity needs in the calculation. But, check out this handy Re-finance calculator that I found on line.
Judy asked about the rules surrounding her Required Minimum Distribution (RMD) from her retirement accounts; Ajit wondered about cashing in EE US savings bonds and how to qualify for the the education tax exclusion; and Cindy wanted the 4-11 on reverse mortgages. I have provided links below on all of these topics.
Here are web sites and resources mentioned in this week's show:
- 9 Questions to Ask a Financial Advisor
- 5 Reasons to Avoid Variable Annuities
- SEC Warning on Variable Annuities
- Why You Shouldn't Pay Off Your Mortgage (and Why I Did Anyway)
- Re-fi Calculator
- Reverse Mortgages: Are They Right For You?
- IRS Rules on Required Minimum Distributions (RMD)
- EE Bonds