Got a question for Dr. Don? Here are some of the most common questions posed to him on a range of important personal finance topics, from mortgages to Social Security and more, with some quick answers.
Should I draw down savings or investments to prepay my mortgage?
Consider what you’re earning on investments after tax and compare that with what you’re paying after tax on your mortgage. Making additional principal payments over time, rather than liquidating your portfolio, might be the better way to chip away at your mortgage balance. Read more
Can I receive Social Security via my ex?
You can draw retirement benefits based on your ex-spouse’s work record if you meet the Social Security Administration’s eligibility guidelines for those benefits. If you remarried after your divorce, you generally cannot collect benefits on your former spouse’s record unless the later marriage ended either by divorce, annulment or death — and there are other conditions as well. Read more
What are my options for my old 401(k)/403(b) plan when I start working at a new firm?
The key factors in the decision process are investment choices, account fees, and expenses and tax considerations. It can make sense to keep it where it is if the plan has low costs and attractive investment options. Read more
Should I change from monthly mortgage payments to biweekly mortgage payments?
I don’t recommend that homeowners switch to a biweekly mortgage — it’s just not worth the bother or expense. With additional principal payments, you have the flexibility to skip an additional principal payment if money is tight in a given month. Read more
If my retirement accounts are fully funded, how should I invest the rest of my cash?
Contributing to an employer’s plan limits your ability to make tax-advantaged contributions to a traditional IRA, but you can always make after-tax contributions to a traditional IRA and then convert them to a Roth IRA. If you still have discretionary income available for investing, then I’d suggest you open a taxable investment account. Read more
How should I save for college?
Both Series I savings bonds and Section 529 college savings plans offer tax-advantaged ways to save for college. I’d lean toward your state’s prepaid tuition plan if it’s in good financial shape and offers enough flexibility that Junior won’t be at a big disadvantage if he winds up going somewhere other than a state university. Read more
Should I co-sign for a loan, and can I protect myself?
When you’re asked to co-sign, you’re every bit as responsible as the primary loan signer for the payments, and the payment history will show up on your credit report. Because you’re upside down on the loan and the primary loan signer is out of work, the best option to protect your credit if you can’t come up with the cash is to continue making the payments with the hope the primary debtor finds work soon and will be able to start making the payments again. Read more
Why build a CD ladder?
A CD ladder forces you to reinvest periodically, which stops you from trying to time the market. When interest rates are low, you get a lower yield; when they’re high, you get a higher yield; but your average yield is expected to outpace what you could do by trying to time the market. Read more
Should we wait to take Social Security?
From my perspective, you’re in the best financial position in the event of a long life if you wait until full retirement age to start receiving benefits. If possible, the spouse whose work record has the higher income levels should wait until age 70 and earn delayed retirement credits. Read more
Snag lower rates with serial refinancing?
One way or another, the borrower pays the closing costs — they’re either paid up front, financed or bundled in the interest rate on the new mortgage. That said, if you can capture a lower interest rate on your mortgage than your current interest rate, and you’re not adding to your outstanding loan balance or paying costs at closing, you can benefit from serial refinancing to capture small changes in mortgage interest rates. Read more
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Ask the adviser
To ask a question of Dr. Don, go to the “Ask the Experts” page and select one of these topics: “Financing a home,” “Saving & Investing” or “Money.” Read more Dr. Don columns for additional personal finance advice.