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2007-08-09 11:04:48.0
Administrator2: Hello and welcome to the Personal Finance chat with Kathy Kristof! Thanks for joining us, and thank you, Kathy!
2007-08-09 11:05:06.0 Stan: Do you recommend consulting with a fee-only financial planner and how do you go about finding a good one?
2007-08-09 11:06:14.0 Kathy Kristof: It depends on what kind of advice you're looking for. There is a referal service on the National Assocaition of Personal Financial Advisors web site at www.napfa.org, if you decide you need one.
2007-08-09 11:06:25.0 Michael: I have a terminal illness, with 2-6 months to live. I have life insurance totalling $500,000, and a disability pension for my 33-year-old wife's lifetime of $2,500 per month, and she is the beneficiary of my healthy 403b account. My college-bound children are ages 5 and 13. My wife has minimal employment skills, but is an exceptionally good mother and home budget manager, who hopes to be a full-time home maker until the youngest child enters college in 13 years. Our house and my funeral are fully paid off. How should she conservatively invest the $500,000 for our plans and goals?
2007-08-09 11:10:19.0 Kathy Kristof: First, I am so sorry. This is such a tough question. What you need to do is help your wife get financially savvy because she's going to need to know what to do when you are gone. I'd recommend that you both read our investing tutorial that's posted on our web site. Then, feel free to email me personally at kathy.kristof@latimes.com. And we can talk more specifically about your options.
2007-08-09 11:10:22.0 Jen: There have been wild swings in the markets over the past couple of months, mostly blamed on the deteriorating credit environment. Is today's drop of 200 points or so on the Dow an indication that there will be continued turmoil, or do you think the market will soon digest the credit issues and settle down?
2007-08-09 11:12:08.0 Kathy Kristof: The market goes through stretches of skittishness that can last a few days or a few years. This stretch, while unnerving, isn't particularly unusual. What you need to do is simply make sure that any money you have in stocks is invested for the long haul. Any money you need in the next five years should be invested elsewhere....And, to be more direct about your question abut when this will settle down. Your guess is as good as mine.
2007-08-09 11:12:21.0 Doc Rick: Good Afternoon.... I have been recently approached to consider trading Mid Term Notes, seasoned.. I am ashamed to say that it was a different language..can you direct me to some data source that will explain how these notes work?
2007-08-09 11:13:30.0 Kathy Kristof: They're asking you to buy these? Don't be ashamed not to know what this is. The description could refer to a number of things, some safe; some not. The only thing I can tell you from this description is that you'd be buying debt.
2007-08-09 11:14:09.0 Doc Rick: Thank you
2007-08-09 11:14:15.0 ARnel: We have 2 kids, one is ten and the other is eight. They both have about $20K each on a 529 plan. Since 529 is for college and my kids go to a private school, is it better for us to sign up with the Coverdale since we can use the money not only for college, but for elementary and high school as well?
2007-08-09 11:15:49.0 Kathy Kristof: The thing with both 529 plans and coverdell accounts is that the only money you save is the tax on the investment earnings. Since your kids will be going to high school in a few short years, that's not a huge savings. If they were infants, I'd say yes. But, as it is, you have more flexibility keeping the money in investments that are in your name.
2007-08-09 11:15:55.0 Jen: I loved your movie article, especially the Big Lebowski reference. In addition to the estate planning lesson, do you think there's also a lesson about renter's insurance? If the Dude had renter's insurance, wouldn't he have been able to have his rug replaced rather than have to get a new rug from the Big Lebowski?
2007-08-09 11:16:47.0 Kathy Kristof: I love your question. Unfortunately, I think he would have had to pay for the rug because of his deductible, though.
2007-08-09 11:17:41.0 Jen: how much is the typical deduction on renters insurance?
2007-08-09 11:18:46.0 Kathy Kristof: You choose your deductible, just like you do with homeowners coverage. The deductible choices are usually lower because you aren't insuring the structure of the apartment complex. But, the higher your deductible, the cheaper the insurance. Not to get too into the Dude, but my guess is that he'd go for less coverage at a lower cost.
2007-08-09 11:21:18.0 ARnel: With the current stock market situation, is it still a good idea to keep a good amount of your investment in a mutual fund mimicking S&P 500? I have about 15 more years before retirement.
2007-08-09 11:23:05.0 Kathy Kristof: Absolutely. Over long stretches of time, the stock market does considerably better than any other investment category. There are very few 15-year periods in history when you would have had a loss--or even a poor return. It's important to note that even with this tumult, the stock market is up --last I checked--about 6 or 7 percent for the year. That's not half bad for a few months return.
2007-08-09 11:23:19.0 Administrator2: Kathy, a few readers emailed their questions to us in advance of the chat; I'm going to throw some of those to you now. (If you want to submit your questions to Kathy in advance, you can email them to chat@latimes.com.)
2007-08-09 11:23:32.0 Administrator2: I understand that you should only expect to take out 4% to 4.5% of your retirement fund to have it last for 30 years (plus inflation every year after that). This method required that you stay aggressive in your investments of your retirement fund (65% stock, 25% bonds, and 10% cash). Do you agree with this formula and if so, what funds would you use for the stock and bond funds?
2007-08-09 11:24:59.0 Kathy Kristof: The formula is fine. But there are dozens of others that are just as good. As for individual funds....I always tout index funds because they're cheap; they're easy; they don't require a lot of worry or tending; and over long stretches they do as well, or usually better, than actively managed funds.
2007-08-09 11:26:14.0 Kathy Kristof: On the question of percentages, the real issue is that you need to have a very conservative withdrawal rate if the market is down, or generating poor returns, so that you dont deplete the value of your nest egg too fast in the beginning. If the market is generating solid returns, you might not need to be as conservative.
2007-08-09 11:26:20.0 Administrator2: My question for Kathy is: My husband and I make a combined annual income of $110,000. We're just on the cusp of 30 and think we would eventually like to buy a house. We have about $50,000 saved, and could probably get some parental help for a down payment, maybe $100,000. Here's the thing. We currently pay $1400 a month in rent for a nice, but small two bedroom apartment, that might be a little small if we have a kid. What do you recommend should be our next move? Find a larger two bedroom for $2000 or so, or stay in the small place until we can get money together for a house?
2007-08-09 11:28:22.0 Kathy Kristof: If you dont have a child yet, I'd wait to move until I needed to. The reason is obvious in that it's a lot easier to save when your rent is $600 cheaper. And, given how much you have saved now, you may have a great downpayment in even a year. For you, the good news is that the real estate market is sliding. You may be able to get in at a bargain price--or, rather, get the house that you'd want to stay in at a price you can afford.
2007-08-09 11:28:43.0 Administrator2: What is the best resource to find more information about annuities?
2007-08-09 11:30:02.0 Kathy Kristof: There are two different types of annuities--tax deferred and immediate. We've written a number of stories and even have a ten-part tutorial on insurance (these are insurance products) on our web site, where you can get lots more information. The short tutorial: (more....)
2007-08-09 11:32:02.0 Kathy Kristof: Immediate annuities work much like a pension. You give the company a lump sum, and the company agrees to pay that amount back to you, with interest, over your lifetime. The up side is that you can never run out of money. The payments will continue for as long as you breathe, so if you live much longer than you expected, you'll still be getting income and the annuity will turn out to be a great deal. The down side: If you die soon after buying the annuity, the insurance company wins. No money goes to your heirs. It essentially is used to help pay those people who live a long time. For somebody who doesn't have another reliable pension, these can be a great deal....As for deferred annuities: (more)
2007-08-09 11:36:34.0 Kathy Kristof: So-called tax-deferred annuities are sold as quasi-retirement plans. You give the insurance company money; they invest it for you. Usually they give you a whole bunch of different mutual funds to choose from and you pick which types of investments to make. The annuity "wrapper" ensures that if you trade investments inside the account, you're not taxed on the money while it is building up. The HUGE down side to these accounts are two: When the money is withdrawn, it's taxed at ordinary income tax rates that are as much as 20 percentage points higher than capital gains rates. Secondly, while the money is invested, you are subject to both mutual fund fees and annuity fees. These fees can knock your socks off and completely decimate your investment returns. There is one other type of tax-deferred annuity, which is called a "fixed" rather than "variable" annuity. Some people like these because they offer a set return, sometimes higher than a bond rate. But, I don't like them because while they can sometimes pay more than bonds, their "guranteed" rates--that's the lowest the rate can go--are often much lower--2% to 3.5%. And, meanwhile, they lock you into the product with surrender fees. I can't think of a time that I'd recommend a tax deferred annuity as a viable investment.
2007-08-09 11:36:44.0 Michael: I've noticed that some online banks are offering checking accounts with no fees and interest rates much higher than average (e.g. Max-Rate Checking at E*Trade with 3.25% APR) if you maintain a significant sum in another account at the same bank. Do you recommend these checking accounts for someone with a large savings account, or do you distrust them as short-term promotional gimmicks?
2007-08-09 11:38:40.0 Kathy Kristof: Generally, there is no long-term interest guarantee on a checking account, so the bank could change your rate at will. But, since you can pull your money out at will, that's not a huge negative--as long as you are paying attention. As for the online bank deals: Many of them are great. Just make sure the bank is FDIC insured. BankRate.com has lists of some of the best deals offered.
2007-08-09 11:38:56.0 Jen: I work for a big retail coffee company and get stock option grants – not a lot, but still nice. Except the company's stock has gone from $40 to $27 in the past year. Should I put much value in these options, or figure I'll be long gone before they are in the money and start investing in something else?
2007-08-09 11:40:46.0 Kathy Kristof: You should definitely invest in other things because you dont want both your job and your investments to be dependent on the fortune of just one company. As for whether they'll be worth anything: Only time will tell. Since you don't have to pay for them (except that maybe you're taking a lower salary in exchange for the grants) just consider it a bonus if they end up valuable. But, in the meantime, start establishing a diversified portfolio of stocks, bonds and international investments in a retirement account.
2007-08-09 11:41:01.0 Administrator2: Here's another from the e-mailbag, Kathy:
2007-08-09 11:41:04.0 Administrator2: How do we find out about socially conscious investing? I used to use Fidelity as my fund manager, but since I've heard they have ties to investments toward Sudan, I don't know where to go and who to trust. Is there an easy way to find out who I should trust?
2007-08-09 11:43:25.0 Kathy Kristof: Yes. I'm afraid I've forgotten the web site, but there's a wonderful one that actually sorts social investment options by what they specialize in--or screen out. Some screen out "sin" stocks--tobacco, alcohol and fire arms. Others look for employment issues--companies records on hiring women, minorities, etc. I'm pretty sure you could find the site by doing a web site--it may be sponsored by the Social Investment Forum. But there are also a handful of companies that specialize in social investments. Two that come to mind are Calvert and Pax. You might check on them too.
2007-08-09 11:43:47.0 Kathy Kristof: Also...Domini has socially screened index fund....
2007-08-09 11:44:14.0 Administrator2: And one more...
2007-08-09 11:44:17.0 Administrator2: What is the best way to make the most of my old 401k from my former employer? Should I convert it into an IRA or move it to my new company's 401k? Or is there a better option?
2007-08-09 11:45:33.0 ARnel: Is there a time limit to transfer your 401K from an old employer to a new one? or to an IRA account?
2007-08-09 11:46:25.0 Kathy Kristof: Those are your two best choices. Which is smarter depends on a couple of things. First, are the investment options and fees in your current employers 401k reasonable? If your current employer doesn't have great investment choices, you should consider rolling the money into an IRA, which you can set up at virtually any investment company. The other side: If you think you might want to borrow against your retirement money at some point, you'd want to roll the money into the new employers 401k. 401k plans are the only retirement account that you can borrow from without tax penalty.
2007-08-09 11:47:48.0 Kathy Kristof: Hi, Arnel. As long as the money remains in a retirement account, there isn't a time limit for tax authorities. But, your new employer may have one. Each employer gets to set their own rules for their 401(k) plans--within certain federal perameters--so, ask.
2007-08-09 11:47:55.0 JK: This question's regarding college financing. I have 529 accounts for my 2 kids and am wondering how much to have in those accounts. Is there a general guideline as to how much to fund the 529 accounts?
2007-08-09 11:51:24.0 Kathy Kristof: Egads....I'm in the process of writing a story about this. It is an extremely difficult question to answer because at the time thta you're in the best position to save--when your kids are toddlers--you have no idea where they are going to end up in school. And the difference in cost between a public college or university in Califonria and a private one is massive. Public colleges and universities charge about $10,000 a year in tuition and fees. Your total costs might be twice that. Private universities, meanwhile, charge upwards of $50,000 in tuition, fees, room and board. The bottom line is you have to decide how much you will be wiling to pay and make that your savings goal. One word of caution: If you opt for the private school education, you might want to save some of that money outside of a 529 plan--maybe just in an index fund in your name. That's because you could be subject to tax penalities if the money is used for anything other than education. And, since your child might not need it all for education, you are better off leaving your options open.
2007-08-09 11:52:46.0 ARnel: If one is think of buying some stocks of Apple Computer for long term investment, will it be a good idea to buy now or wait for a few months?
2007-08-09 11:55:20.0 Kathy Kristof: I don't recommend--nor discourage--investments in any individual company. I will tell you only how to choose a stock that's a good long-term buy. Look at its price relative to its earnings and see how that compares to its historic p/e ratio. Also look at the company's earnings growth rate. If the company's p/e is higher than its growth rate, it's probably expensive and will post lackluster future returns. If its p/e is lower than historic levels and lower than its growth rate, it may be a bargain. This too, is part of our Investing 101 course, that's posted on the Times web site.
2007-08-09 11:56:18.0 Administrator2: We're going to wrap it up for today; thanks for coming! A transcript will be available later today at http://chat.latimes.com, and check back soon for Kathy's next chat (schedule forthcoming).
2007-08-09 11:56:34.0 Kathy Kristof: thanks for joining us!
2007-08-09 11:56:55.0 Michael: Thank you so much.
2007-08-09 11:05:06.0 Stan: Do you recommend consulting with a fee-only financial planner and how do you go about finding a good one?
2007-08-09 11:06:14.0 Kathy Kristof: It depends on what kind of advice you're looking for. There is a referal service on the National Assocaition of Personal Financial Advisors web site at www.napfa.org, if you decide you need one.
2007-08-09 11:06:25.0 Michael: I have a terminal illness, with 2-6 months to live. I have life insurance totalling $500,000, and a disability pension for my 33-year-old wife's lifetime of $2,500 per month, and she is the beneficiary of my healthy 403b account. My college-bound children are ages 5 and 13. My wife has minimal employment skills, but is an exceptionally good mother and home budget manager, who hopes to be a full-time home maker until the youngest child enters college in 13 years. Our house and my funeral are fully paid off. How should she conservatively invest the $500,000 for our plans and goals?
2007-08-09 11:10:19.0 Kathy Kristof: First, I am so sorry. This is such a tough question. What you need to do is help your wife get financially savvy because she's going to need to know what to do when you are gone. I'd recommend that you both read our investing tutorial that's posted on our web site. Then, feel free to email me personally at kathy.kristof@latimes.com. And we can talk more specifically about your options.
2007-08-09 11:10:22.0 Jen: There have been wild swings in the markets over the past couple of months, mostly blamed on the deteriorating credit environment. Is today's drop of 200 points or so on the Dow an indication that there will be continued turmoil, or do you think the market will soon digest the credit issues and settle down?
2007-08-09 11:12:08.0 Kathy Kristof: The market goes through stretches of skittishness that can last a few days or a few years. This stretch, while unnerving, isn't particularly unusual. What you need to do is simply make sure that any money you have in stocks is invested for the long haul. Any money you need in the next five years should be invested elsewhere....And, to be more direct about your question abut when this will settle down. Your guess is as good as mine.
2007-08-09 11:12:21.0 Doc Rick: Good Afternoon.... I have been recently approached to consider trading Mid Term Notes, seasoned.. I am ashamed to say that it was a different language..can you direct me to some data source that will explain how these notes work?
2007-08-09 11:13:30.0 Kathy Kristof: They're asking you to buy these? Don't be ashamed not to know what this is. The description could refer to a number of things, some safe; some not. The only thing I can tell you from this description is that you'd be buying debt.
2007-08-09 11:14:09.0 Doc Rick: Thank you
2007-08-09 11:14:15.0 ARnel: We have 2 kids, one is ten and the other is eight. They both have about $20K each on a 529 plan. Since 529 is for college and my kids go to a private school, is it better for us to sign up with the Coverdale since we can use the money not only for college, but for elementary and high school as well?
2007-08-09 11:15:49.0 Kathy Kristof: The thing with both 529 plans and coverdell accounts is that the only money you save is the tax on the investment earnings. Since your kids will be going to high school in a few short years, that's not a huge savings. If they were infants, I'd say yes. But, as it is, you have more flexibility keeping the money in investments that are in your name.
2007-08-09 11:15:55.0 Jen: I loved your movie article, especially the Big Lebowski reference. In addition to the estate planning lesson, do you think there's also a lesson about renter's insurance? If the Dude had renter's insurance, wouldn't he have been able to have his rug replaced rather than have to get a new rug from the Big Lebowski?
2007-08-09 11:16:47.0 Kathy Kristof: I love your question. Unfortunately, I think he would have had to pay for the rug because of his deductible, though.
2007-08-09 11:17:41.0 Jen: how much is the typical deduction on renters insurance?
2007-08-09 11:18:46.0 Kathy Kristof: You choose your deductible, just like you do with homeowners coverage. The deductible choices are usually lower because you aren't insuring the structure of the apartment complex. But, the higher your deductible, the cheaper the insurance. Not to get too into the Dude, but my guess is that he'd go for less coverage at a lower cost.
2007-08-09 11:21:18.0 ARnel: With the current stock market situation, is it still a good idea to keep a good amount of your investment in a mutual fund mimicking S&P 500? I have about 15 more years before retirement.
2007-08-09 11:23:05.0 Kathy Kristof: Absolutely. Over long stretches of time, the stock market does considerably better than any other investment category. There are very few 15-year periods in history when you would have had a loss--or even a poor return. It's important to note that even with this tumult, the stock market is up --last I checked--about 6 or 7 percent for the year. That's not half bad for a few months return.
2007-08-09 11:23:19.0 Administrator2: Kathy, a few readers emailed their questions to us in advance of the chat; I'm going to throw some of those to you now. (If you want to submit your questions to Kathy in advance, you can email them to chat@latimes.com.)
2007-08-09 11:23:32.0 Administrator2: I understand that you should only expect to take out 4% to 4.5% of your retirement fund to have it last for 30 years (plus inflation every year after that). This method required that you stay aggressive in your investments of your retirement fund (65% stock, 25% bonds, and 10% cash). Do you agree with this formula and if so, what funds would you use for the stock and bond funds?
2007-08-09 11:24:59.0 Kathy Kristof: The formula is fine. But there are dozens of others that are just as good. As for individual funds....I always tout index funds because they're cheap; they're easy; they don't require a lot of worry or tending; and over long stretches they do as well, or usually better, than actively managed funds.
2007-08-09 11:26:14.0 Kathy Kristof: On the question of percentages, the real issue is that you need to have a very conservative withdrawal rate if the market is down, or generating poor returns, so that you dont deplete the value of your nest egg too fast in the beginning. If the market is generating solid returns, you might not need to be as conservative.
2007-08-09 11:26:20.0 Administrator2: My question for Kathy is: My husband and I make a combined annual income of $110,000. We're just on the cusp of 30 and think we would eventually like to buy a house. We have about $50,000 saved, and could probably get some parental help for a down payment, maybe $100,000. Here's the thing. We currently pay $1400 a month in rent for a nice, but small two bedroom apartment, that might be a little small if we have a kid. What do you recommend should be our next move? Find a larger two bedroom for $2000 or so, or stay in the small place until we can get money together for a house?
2007-08-09 11:28:22.0 Kathy Kristof: If you dont have a child yet, I'd wait to move until I needed to. The reason is obvious in that it's a lot easier to save when your rent is $600 cheaper. And, given how much you have saved now, you may have a great downpayment in even a year. For you, the good news is that the real estate market is sliding. You may be able to get in at a bargain price--or, rather, get the house that you'd want to stay in at a price you can afford.
2007-08-09 11:28:43.0 Administrator2: What is the best resource to find more information about annuities?
2007-08-09 11:30:02.0 Kathy Kristof: There are two different types of annuities--tax deferred and immediate. We've written a number of stories and even have a ten-part tutorial on insurance (these are insurance products) on our web site, where you can get lots more information. The short tutorial: (more....)
2007-08-09 11:32:02.0 Kathy Kristof: Immediate annuities work much like a pension. You give the company a lump sum, and the company agrees to pay that amount back to you, with interest, over your lifetime. The up side is that you can never run out of money. The payments will continue for as long as you breathe, so if you live much longer than you expected, you'll still be getting income and the annuity will turn out to be a great deal. The down side: If you die soon after buying the annuity, the insurance company wins. No money goes to your heirs. It essentially is used to help pay those people who live a long time. For somebody who doesn't have another reliable pension, these can be a great deal....As for deferred annuities: (more)
2007-08-09 11:36:34.0 Kathy Kristof: So-called tax-deferred annuities are sold as quasi-retirement plans. You give the insurance company money; they invest it for you. Usually they give you a whole bunch of different mutual funds to choose from and you pick which types of investments to make. The annuity "wrapper" ensures that if you trade investments inside the account, you're not taxed on the money while it is building up. The HUGE down side to these accounts are two: When the money is withdrawn, it's taxed at ordinary income tax rates that are as much as 20 percentage points higher than capital gains rates. Secondly, while the money is invested, you are subject to both mutual fund fees and annuity fees. These fees can knock your socks off and completely decimate your investment returns. There is one other type of tax-deferred annuity, which is called a "fixed" rather than "variable" annuity. Some people like these because they offer a set return, sometimes higher than a bond rate. But, I don't like them because while they can sometimes pay more than bonds, their "guranteed" rates--that's the lowest the rate can go--are often much lower--2% to 3.5%. And, meanwhile, they lock you into the product with surrender fees. I can't think of a time that I'd recommend a tax deferred annuity as a viable investment.
2007-08-09 11:36:44.0 Michael: I've noticed that some online banks are offering checking accounts with no fees and interest rates much higher than average (e.g. Max-Rate Checking at E*Trade with 3.25% APR) if you maintain a significant sum in another account at the same bank. Do you recommend these checking accounts for someone with a large savings account, or do you distrust them as short-term promotional gimmicks?
2007-08-09 11:38:40.0 Kathy Kristof: Generally, there is no long-term interest guarantee on a checking account, so the bank could change your rate at will. But, since you can pull your money out at will, that's not a huge negative--as long as you are paying attention. As for the online bank deals: Many of them are great. Just make sure the bank is FDIC insured. BankRate.com has lists of some of the best deals offered.
2007-08-09 11:38:56.0 Jen: I work for a big retail coffee company and get stock option grants – not a lot, but still nice. Except the company's stock has gone from $40 to $27 in the past year. Should I put much value in these options, or figure I'll be long gone before they are in the money and start investing in something else?
2007-08-09 11:40:46.0 Kathy Kristof: You should definitely invest in other things because you dont want both your job and your investments to be dependent on the fortune of just one company. As for whether they'll be worth anything: Only time will tell. Since you don't have to pay for them (except that maybe you're taking a lower salary in exchange for the grants) just consider it a bonus if they end up valuable. But, in the meantime, start establishing a diversified portfolio of stocks, bonds and international investments in a retirement account.
2007-08-09 11:41:01.0 Administrator2: Here's another from the e-mailbag, Kathy:
2007-08-09 11:41:04.0 Administrator2: How do we find out about socially conscious investing? I used to use Fidelity as my fund manager, but since I've heard they have ties to investments toward Sudan, I don't know where to go and who to trust. Is there an easy way to find out who I should trust?
2007-08-09 11:43:25.0 Kathy Kristof: Yes. I'm afraid I've forgotten the web site, but there's a wonderful one that actually sorts social investment options by what they specialize in--or screen out. Some screen out "sin" stocks--tobacco, alcohol and fire arms. Others look for employment issues--companies records on hiring women, minorities, etc. I'm pretty sure you could find the site by doing a web site--it may be sponsored by the Social Investment Forum. But there are also a handful of companies that specialize in social investments. Two that come to mind are Calvert and Pax. You might check on them too.
2007-08-09 11:43:47.0 Kathy Kristof: Also...Domini has socially screened index fund....
2007-08-09 11:44:14.0 Administrator2: And one more...
2007-08-09 11:44:17.0 Administrator2: What is the best way to make the most of my old 401k from my former employer? Should I convert it into an IRA or move it to my new company's 401k? Or is there a better option?
2007-08-09 11:45:33.0 ARnel: Is there a time limit to transfer your 401K from an old employer to a new one? or to an IRA account?
2007-08-09 11:46:25.0 Kathy Kristof: Those are your two best choices. Which is smarter depends on a couple of things. First, are the investment options and fees in your current employers 401k reasonable? If your current employer doesn't have great investment choices, you should consider rolling the money into an IRA, which you can set up at virtually any investment company. The other side: If you think you might want to borrow against your retirement money at some point, you'd want to roll the money into the new employers 401k. 401k plans are the only retirement account that you can borrow from without tax penalty.
2007-08-09 11:47:48.0 Kathy Kristof: Hi, Arnel. As long as the money remains in a retirement account, there isn't a time limit for tax authorities. But, your new employer may have one. Each employer gets to set their own rules for their 401(k) plans--within certain federal perameters--so, ask.
2007-08-09 11:47:55.0 JK: This question's regarding college financing. I have 529 accounts for my 2 kids and am wondering how much to have in those accounts. Is there a general guideline as to how much to fund the 529 accounts?
2007-08-09 11:51:24.0 Kathy Kristof: Egads....I'm in the process of writing a story about this. It is an extremely difficult question to answer because at the time thta you're in the best position to save--when your kids are toddlers--you have no idea where they are going to end up in school. And the difference in cost between a public college or university in Califonria and a private one is massive. Public colleges and universities charge about $10,000 a year in tuition and fees. Your total costs might be twice that. Private universities, meanwhile, charge upwards of $50,000 in tuition, fees, room and board. The bottom line is you have to decide how much you will be wiling to pay and make that your savings goal. One word of caution: If you opt for the private school education, you might want to save some of that money outside of a 529 plan--maybe just in an index fund in your name. That's because you could be subject to tax penalities if the money is used for anything other than education. And, since your child might not need it all for education, you are better off leaving your options open.
2007-08-09 11:52:46.0 ARnel: If one is think of buying some stocks of Apple Computer for long term investment, will it be a good idea to buy now or wait for a few months?
2007-08-09 11:55:20.0 Kathy Kristof: I don't recommend--nor discourage--investments in any individual company. I will tell you only how to choose a stock that's a good long-term buy. Look at its price relative to its earnings and see how that compares to its historic p/e ratio. Also look at the company's earnings growth rate. If the company's p/e is higher than its growth rate, it's probably expensive and will post lackluster future returns. If its p/e is lower than historic levels and lower than its growth rate, it may be a bargain. This too, is part of our Investing 101 course, that's posted on the Times web site.
2007-08-09 11:56:18.0 Administrator2: We're going to wrap it up for today; thanks for coming! A transcript will be available later today at http://chat.latimes.com, and check back soon for Kathy's next chat (schedule forthcoming).
2007-08-09 11:56:34.0 Kathy Kristof: thanks for joining us!
2007-08-09 11:56:55.0 Michael: Thank you so much.
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