Barber Could Take a Little More Off the Top

It is no wonder that this hobbyist barber expresses his fear of financial planners and investments, which might cost him his life savings of $87,000 [“A New Style,” Money Make-Over, Oct. 14]. Even with this expert from New York showing him the way, I doubt that he is brave enough to overcome his risk aversion. And why should he? His main ambition to cruise the Caribbean is a better “new style” for the immediate future.

The failure to address income tax implications in this planning is unfortunate. In five years he will need to start mandatory distributions from his [individual retirement account]. Right now he could gain a few tax dollars by placing $2,000 per year in a new IRA from his $5,400 net income from his barbershop.

Refinancing the house sounds good, especially if he can pay off the car and now deduct the additional interest in his tax return. But will the new rate savings be eroded by points and other fees to obtain the new loan?

Being risk-averse as he is, the fees that he is paying for the annuity guarantee him a death benefit equal to his investment. A tax-free 1035 exchange of his annuity to a variable product in a stock fund could increase his equity investing as well as gain a new guarantee of his investment dollars at the level to which they have grown.

Furthermore, he should address long-term-care insurance if he really wants to protect his life savings, which will only provide about two years of care for either him or his wife.

Somehow, I don’t think he needs international stock exposure.

THOMAS E. KOLANOSKI

Certified Financial Planner

Costa Mesa