Chat transcript with Roy Komack

Roy_Komack Hi,

Roy_Komack I'm Roy Komack, and I'll be taking your personal finance questions from 11 to 12 today. I've been an investment advisor and financial planner since 1988, and I enjoy helping people build for their retirement security and cover the "other bases" of personal finance, including education funding, risk management (insurance), estate planning, taxes, etc.

Roy_Komack Fire away!

Roy_Komack Please keep in mind that I am neither an estate attorney nor a CPA, so I may not be able to give advice that is as detailed or as specific to you as you may require.

georgie22 I'm in my mid-30s and haven't saved much at all for my retirement. What are some of the first steps I should take to start saving?

Roy_Komack The most basic and powerful step you can take is to start contributing as much as you can or as much as you are allowed to your workplace retirement plan (401k, 403b, etc.).

BAMDAD I had a chance to roll about $9,000 in high interest credit card debt into one that offered 0% for 11 months and then only about 9.9% curently. I have excellent credit, but someone said if I closed the other two accounts that I switched, it would lower my score. Any thoughts? The other companies just increased their interest rates to 20% after I was paying 14%.

Roy_Komack Your FICO score is based on a pretty complex set of data about you. I would not let that concern stop you from consolidating to lower your rate and payment. Try to set a goal of paying the whole consolidated amount off in the 11 months you have. That will do more for your credit score than anything!

new_bostonian Hi, I'm a new US resident. For the last few years I have been self employed and lived in Florida, now I've moved to Boston and have a full time job, with all benefits, etc. How do I declare my taxes for this year? My income was as freelance in Florida all year until August, and now full time job with direct deposit checks in Boston.

Roy_Komack You should now be receiving paychecks that will result in your employer giving you a Form W-2 this coming January. You will be using that instead of the 1099s that you used to get. You will be reporting your income as salary on Page 1 of Form 1040 instead of on Schedule c. If you find the tax reporting confusing, you may wish to use a professional tax preparer for this transition year. Even H&R Block should be fine (and not too expensive).

cmf I have a fatal disease. What should I do to protect my wife?

Roy_Komack Be sure to update or create your will and see that your wife knows where to find all important records and documents. Sadly, it is probably not possible to increase your life insurance, due to your condition.

b Can a financial planner help with estate issues - wills, property title transfers?

Roy_Komack A financial planner can help a lot with analysis and advice, but you will need an attorney to do the actual documents. For estate issues, you should use an attorney who specializes in wills, trusts, and other estate matters (at least 75% of their practice).

bjc I would like a planner to look at all of my wife and my holdings and come up with a plan for us and not necessarily manage our accounts.. My wife works at a financial services firm that requires her to have only their funds. Can we still find someone to develop a plan?

Roy_Komack Yes, there are definitely planners who do not require asset management as part of the engagement. A "fee-only" planner will provide you with the most protection against biased advice. Two places to look are:

Roy_Komack Garrett Planning Network (www.garrettplanningnetwork.com)

Roy_Komack Cambridge Advisors (www.cambridgeadvisors.com)

new_bostonian Although I don't see my first question yet, this is my second: What are the best options for getting the highest interests possible in short term? I have some savings I'm planning on using in at least one year from now as down payment for a house. How do I grow my savings the best way in this short period of time? We are talking about more than $10,000.

Roy_Komack Look at 6-month to 1-year CDs and also at online savings institutions:

Roy_Komack www.ingdirect.com

Roy_Komack www.emigrantdirect.com

cmf If everything is owned jointly, is a will needed?

Roy_Komack A will is a good idea, even if it is mostly to cover you in case some assets are titled differently in the future. A basic will from a competent attorney will not be very costly (you need two wills). Be sure also to get Durable Powers of Attorney and Health Care Proxies.

Karen I have a 1 year old daughter and if I can show she has earned income, can I contribute to a Roth IRA for her now?

Roy_Komack Yes, but it might be a challenge to convince a hypothetical IRS auditor that she really earned the income.

new_bostonian Going back to my first question about tax reports, should my first half-of-the-year income (from Florida) be declared as if I lived in Massachusetts? I guess FL and MA have way different tax regulations and payments. What happens in cases like mine?

Roy_Komack You should definitely have your tax return for 2005 prepared by a professional.

Fran I have been contacted by a company called Fisher Investments who claims to help executives with their financial planning and making their investments work for them to maximize returns. Have you ever heard of them and what are your recommendations in pursuing a contract with them?

Roy_Komack Fisher Investments is one of the largest investment managers around. In my field, they are known more for how much they spend on advertising, mailing, and other marketing than for any other factor.

jan I work full time and have life, short term and long term disability insurance. My husband stays at home with our 2 young children. I am able to get a small life insurance policy through work but in the event of death or an accident I would not be able to meet our financial obligations. Which type of insurance would best suit our situation without wiping out our budget?

Roy_Komack I definitely encourage you to get a policy that is independent of your employment. Level-Premium Term Insurance is probably best for you. It avoids the high cost of "Whole Life" insurance by only buying you death protection and not an investment element. If you can get 30-Year Level-Premium Term, go for it! Check out Massachusetts SBLI and other low-cost, but reputable, providers.

dwchj I changed jobs about two years ago. I left the money I contributed to my 403(b) with my previous employer's plan. What options exist for me if I want to move that money elsewhere? Would it be advisable?

Roy_Komack You should be allowed to roll over the 403(b) assets into an IRA that you can manage on your own (or get professional help with). An IRA almost always gives you more flexibility and opportunity to diversify than a 403(b) or 401(k). Be careful not to use this as a way to invest unwisely or speculatively. Low-cost Index Funds should be used for the core of your investment program.

nancy_g I own two houses, one rental property with a minimal mortgage and my home with a mortgage of about 75% of its value. Does it make sense to refinance the rental and use the proceeds to pay off my home? I like the idea of owning my home outright.

Roy_Komack This is a bit too complex to analyze "on the fly." Considerations include where you can get the best deduction, whether rates are too unfavorable right now, etc. This would be worth seeing a professional planner about, even if it is a "one-shot" project that might cost you only a very few hundreds of dollars.

401_k__guru What is the Pension Protection Act of 2006? And how does this affect the average worker?

Roy_Komack Two of the biggest areas of change are the strengthening of the funding requirements for company pension plans and lowering some of the barriers to more widespread participation in 401(k) plans, etc. It would be best for you to do a simple online search on this topic to learn more.

bjc Should you have a certain amount of assets before you seek financial advice?

Roy_Komack The only sensible answer to this is "It depends." Some financial advisors can provide plenty of benefits without managing an investment portfolio. Tax savings, insurance premium savings, budgeting help, etc. are some of them.

chins Hi. I have about 45K in a savings account that doesn't earn much interest. In addition, I have a stable job with a retirement plan. My question is: I want to buy a condo for under 300K. How much should I put down as down payment and still keep an emergency fund (how much?), and what should I do to earn more returns on my money that is not too risky? Thanks.

Roy_Komack Look earlier in this chat transcript for higher interest savings ideas (ING, CD, etc.). We usually suggest an emergency fund of 3 to 6 months' expenditures. The down payment question takes a bit too much time to go into here.

Fran When turning over your investment portfolio to Fisher Investments, why do they only consider and want the investments from your IRA and not other investments from stock brokerage accounts?

Roy_Komack Probably, they don't want to take on investments that might have too big a tax consequence if they sell them. This could be a disadvantage of working with a large, "factory-like" firm. Investment advisors who have $25 million to $500 million under management can most likely spend more time on individual issues that firms with the $30 BILLION of assets like the one you asked about. My firm, and many others like mine, take these tax-sensive positions into account and come up with creative strategies for dealing with them.

Roy_Komack Warning: I will have to end at 12:00 sharp, so some questions may not get answered. Visit my Web site for more info at: www.famfin.com

Frank Mr. Komack -- I just happened upon this chat now and find it very interesting. 1, is this a one time event, or is this available every Monday at this time? 2, I have a few IRAs with Fidelity, and am not that familiar with "Roth"-- should I convert the existing IRAs to a Roth? 3, I have about 12k in credit card debt that I want to pay down -- can I take money out of UFUND accounts for that purpose, or does UFUND have to go to education?

Roy_Komack I believe that this is a weekly (or more) feature. Check with Boston.com.

soon I have 24 months left on my mortgage (6.125% interest), I am getting 5% on my savings, should I just pay off the mortgage?

Roy_Komack Sounds like a good idea to me. Why borrow at 6.125% to earn 5%? Of course, you shouldn't deplete your emergency fund, etc.

Ashley I was laid off from a former employer a couple years ago and have not moved my 401k with them. I want to move it out now and invest it into a few stocks. Are there any rules to moving it around?

Roy_Komack You can roll it over into an IRA. I suggest low-cost Index Mutual Funds, rather than individual stocks.

future Could you explain a 'Fee only" financial planner? Is this simply a one-time payment for a financial plan?

Roy_Komack Fee-only means that you pay the entire fee, rather than the advisor getting commissions, referral fees, etc. Fee-only can include hourly, project, quarterly, and asset-based fees, but NOT transaction-based fees. Fee-only is your best assurance of unbiased advice. Beware of the term "fee-based." It is used to conceal the fact that it is not Fee-ONLY.

Pudge We are in the very initial stages of researching the best way to finance a home addition that will cost about $100K. Our oldest child will be heading to college in 2 years, followed closely by our youngest. Are there any financial aid considerations associated with the debt/financing that we will incur with the home renovations?

Roy_Komack There may actually be a benefit, but time is too short for me to answer more fully. Sorry.

Whiskarina Hi there, I recently paid off my mortgage and have no debt. What should I invest my money in? I am thinking of buying another home. Do you think the real estate prices will drop even lower?

Roy_Komack A. See other comments above.

Roy_Komack B. Forecasting real estate prices (or any other financial parameter) is too risky and uncertain for anyone to be good at.

Roy_Komack I'm sorry, but we've run out of time. I have to clear the "CyberWaves" for another chat. Come back another time, and thanks for participating!

Roy_Komack Roy

Roy_Komack Bye ...