Wednesday’s need-to-know money news

Today’s top story: When hybrid long-term care insurance makes sense. Also in the news: How to tell whether your credit card authorized user could become a problem, what pro athletes can teach us about retirement planning, and the 7 habits of highly effective investors.

When Hybrid Long-Term Care Insurance Makes Sense
Planning for the future.

7 Ways to Tell Whether Your Credit Card Authorized User Will Be a Problem
Proceed with caution.

What Pro Athletes Can Teach Us About Retirement Planning
Living below your means can protect your future.

The 7 Habits of Highly Effective Investors
Using your money wisely.

Tuesday’s need-to-know money news

Image9Today’s top story: The best way to invest $5,000. Also in the news: How a credit card helps with building credit, the life-and-death financial decision you don’t want to think about, and apps to help lazy people save money.

The Best Ways to Invest $5,000
Putting your money to work.

Building Credit? How a Credit Card ‘Gets You There Faster’
One way to build credit.

The Life-and-Death Financial Decision You Don’t Want to Think About
Life insurance is essential.

These Apps Are the Perfect Money Saving Tool For Lazy People
No more excuses.

Wednesday’s need-to-know money news

Today’s top story: How to start investing. Also in the news: Inexpensive online money management classes, social media scams to watch out for, and why your busted March Madness bracket isn’t all bad news.

New to Investing? 4 Steps to Get You Started
Putting your money to work.

Your Guide to Inexpensive Online Money Management Classes
You can’t afford not learning how to manage your money.

3 social media money scams you need to watch out for
If it sounds too good to be true…

Your March Madness Gambling Losses Could Soften the Blow of Tax Season
Your busted bracket isn’t a total disaster.

Q&A: Saving and investing for a child

Dear Liz: I recently got a court judgment for my daughter’s father to pay me child support. She is 1 year old, and it will be about $1,500 a month. I would like this money to be a gift for her when she is older. I’m told not to put it in her name now, as it may hurt her chance for financial aid for college later. How do you recommend I save and invest it for her? I’d like her to have it when she is a young adult.

Answer: This could be quite a gift for a young woman. If the money earned a 5% average annual return over time, you could be presenting her with a check for half a million dollars.

Consider putting at least some of the money in a 529 college savings plan. Withdrawals from these plans are tax-free when used to pay qualified college expenses. College savings plans receive favorable treatment in financial aid formulas because they’re considered an asset of the contributor (typically the parent), rather than the child.

Book giveaway: “Juggling with Knives”

JugglingKnivesI’m giving away two copies of my friend Jim Jubak’s new book, “Juggling with Knives: Smart Investing in the Coming Age  of Volatility.” This book arrives at the perfect time, as you can see from this description on Amazon:

Stunning volatility is the new “fact of life” that defines our age. Financial markets fall off cliffs one day, but then stage a recovery the next, only to do it all over again. The switch back and forth is emotionally draining, making us susceptible to irrational responses that can turn manageable problems into huge personal crises. But while there is danger in volatility, there is also the opportunity to profitably juggle the knives that volatility throws your way—with less risk than you might think.

To enter to win, leave a comment here on my blog (not my Facebook page). Make sure to include your email address, which won’t show up with your comment, but I’ll be able to see it.

All comments are moderated. So it may take a little while for your comment to show up. But rest assured, it will.

The winners will be chosen at random Friday night. Over the weekend, please check your email (including your spam filter). If I don’t hear from a winner by noon Pacific time on Monday, his or her prize will be forfeited and I’ll pick another winner.

Also, check back here often for other giveaways.

The deadline to enter is midnight Pacific time on Friday. So–comment away!

Q&A: Investment returns

Dear Liz: In a recent column you mentioned a fund that shows a return of 7% consistently for several years to present. Would you be so kind as to provide me with the name of the fund?

Answer: I don’t know of any mutual fund that’s shown a consistent 7% return year in and year out. What you may be referring to is research showing overall stock market returns. Taking into account each year’s gains and losses, the average annual return over each 30-year period starting in 1928 — from 1928 to 1958, 1929 to 1959, and so on — is greater than 8%, but you can’t expect 8% every year.

Q&A: Invest or pay down mortgage?

Dear Liz: I usually finish the month with $1,000 to $2,000 left over after expenses to invest. My savings are with a money manager who has conservatively invested in a diversified portfolio. Given the uncertainty of the market, does it make any sense for me to start using that monthly excess to pay down the balance on my 15-year mortgage rather than continue to invest? The mortgage has about 91/2 years to go with a balance of just under $75,000. One added point: I would like to retire in about five years.

Answer:
It’s time to talk to a fee-only financial planner who can review your entire financial situation and offer personalized advice. The planner can give you a better idea if you’re really on track to retire within five years. If you are, then paying down the mortgage may be an excellent use of the money. Having a paid-off home will reduce your monthly expenses, which in turn can reduce how much of your retirement funds you’ll need to tap.

Before you prepay a mortgage, though, you should make sure all your other financial ducks are in a row. In addition to saving enough for retirement, you should have paid off all your other debt, accumulated a decent emergency fund (at least six months’ worth of expenses) and be properly insured.

Q&A: Using Roth IRA earnings for a first-time home purchase

Dear Liz: My 29-year-old son recently married, and as a gift I pledged $20,000 as a down payment on a house. My daughter-in-law is beginning a career as a registered nurse and I know they will not be buying for a few years. Is there any type of account that will grow tax-free or tax-deferred for a first-time buyer? Maybe I could gift this money to them into a retirement account for the time being?

Answer: You may be able to give them enough money to fund Roth IRA accounts for both 2015 and 2016. They would be able to withdraw those contributions tax- and penalty-free at any time in the future for whatever purpose they wanted.

Withdrawing earnings from a Roth can trigger taxes and penalties, but that’s not likely to be an issue in this case. Each person is allowed to withdraw up to $10,000 in Roth earnings for a first-time home purchase. If they plan to buy a home within a few years, it’s highly unlikely that your gift would generate enough earnings to cause concern.

The ability to contribute to a Roth begins to phase out for married couples filing jointly at modified adjusted gross income of $183,000 in 2015 and $184,000 in 2016. Assuming their incomes were below those limits, they each can contribute up to $5,500 per year to a Roth. The deadline for making 2015 contributions is April 15, 2016. If you give them the money now, they could fund two years’ worth of contributions at once.

Monday’s need-to-know money news

Zemanta Related Posts ThumbnailToday’s top story: How to protect your credit cards online. Also in the news: Tips to avoid investing scams, moves to make before the Fed raises interest rates, and how to handle investments if you divorce.

4 Ways to Protect Your Credit Cards Online
With holiday shopping just around the corner, you can’t be too careful.

Simple steps retirees (and others) can take to avoid investing scams
If it sounds too good to be true…

5 moves to make before the Fed raises rates
It’s only a matter of time.

How to Handle Investments When You Divorce
Making sure your assets are fairly divided.

Finally Start Saving for Retirement With the Help of Your Tax Refund
Saving instead of splurging.

Why banks want you to drop Mint, other ‘aggregators’

Image9Millions of people share their bank account passwords with third-party sites and apps that help them track their spending, but some of the biggest financial institutions, wary of hacking risks, are trying to scare people into not using them.

JPMorgan Chase & Co and Capital One Financial Corp, for example, warn on their websites that customers could be liable for any fraud in their accounts – even though federal regulations say otherwise.

Capital One’s site (here) tells users: “If you choose to share account access information with a third-party, Capital One is not liable for any resulting damages or losses.”

Chase (here) admonishes, “If you give out your chase.com user ID and password, you are putting your money at risk.”

In my latest for Reuters, a look at why banks are issuing these warnings, and if users should be concerned.

In my latest for MoneyWatch, why the best gift to give your kids this holiday season is a head start on investing.