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Jill On Money: Summer mail bag

Jill Schlesinger on

It’s that time of year, when the inbox is bulging, so time to get cracking on a lightning Q&A!

Question: I will be receiving $160,000 from a life insurance policy. I do not want to risk it in the stock market -- I want to put it somewhere safe where it'll be able to earn some interest. Your thoughts?

Answer: You can investigate government securities at TreasuryDirect.gov and also check out Certificates of Deposit. Just know that when the Federal Reserve begins to cut interest rates, a strategy that provides safety will not seem as appealing, but I trust you when you say that you do not want any risk.

Question: My wife and I are in our 30s and are looking to buy a house in the next few years. Currently we have about $140,000 in retirement savings. Can we press pause on retirement contributions for a year or two, so that we can start saving for a down payment?

Answer: When near term goals crop up, it is fine to incorporate them into your longer-term plan. So yes, a temporary pause/reduction should be fine, but I recommend that you contribute enough money to capture the company matches, if you are entitled to them. Once you have enough saved for the down payment, you can start cranking again on retirement.

Question: I've been with a small investment group, and they have been quite helpful and educational, but I'm thinking that as we approach retirement, I could save some money and handle things on my own. Are we close enough to retirement so that we should stay with them, or is it time to minimize fees and move on?

Answer: When it comes to financial services, it depends on what you're getting in return for the fee that you are paying. If the firm is providing full-blown, individualized financial planning, it could be worth it, especially as you close in on retirement.

But if the firm is only allocating assets and you trust yourself to adhere to a plan and not get too emotional, then feel free to do it yourself and save whatever fee that they are charging.

Question: My financial advisor is suggesting that I take advantage of tax loss harvesting. I'm a bit confused as to what it means. Can you explain?

 

Answer: Tax loss harvesting is a fancy way of saying that you are getting rid of losing positions in your taxable account. The way it works is that you sell a stock, a mutual fund or an exchange-traded fund that has lost value. The loss can be used to offset a winning position. If you have more losses than gains, you can deduct up to $3,000 against ordinary income for the current tax year. If losses total more than $3,000, they can be carried forward into future years.

Question: My husband and I are 55 and owe $324,000 on a 15-year mortgage at 2.12 percent. We thought that this would be our forever house, but the value has increased so much (it’s now worth $1.5 million), we wonder whether we should sell, capture the equity, and buy a new house for around $1,000,000 and be mortgage free? Our overall retirement picture is in good shape.

Answer: In theory, the plan can work, but often people like you who attempt to downsize, can’t pull it off, because they end up spending more than they budgeted for the next home. Your current mortgage rate is dirt cheap, so unless the maintenance on the house is steep or you can’t see yourselves aging in it, it may make sense to stay put.

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(Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at askjill@jillonmoney.com. Check her website at www.jillonmoney.com)

©2024 Tribune Content Agency, LLC



 

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