Personal finance chat with Cheryl Costa

The_Original_Galt__The_Original_Galt_: How can I maximize FDIC insurance coverage at a bank for my wife and myself? Multiple accounts, joint accounts...?

Cheryl_Costa: The basic FDIC coverage level is $100,000 per individual per insured bank. However, additional coverage is available. IRAs, Roth IRAs, SIMPLE IRAs, SEP-IRAs and 457 deferred compensation plans are covered up to $250,000. Also, in a joint account, up to an additional $200,000 could be protected if both of the joint account owners have equal withdrawal rights. Additional coverage is also available for trust accounts. So, it is possible to have way more than $100,000 in coverage -- in fact a married couple could have more than $1M in insured deposits but they would have to be very careful about how the accounts were titled. Visit www.fdic.gov for more information.

keyriest__Guest_: my question concerns the current state of the mortgage industry. What impact will it have on first time home-buyers like myself? I'm actually awaiting word on a pre-approval today. what's different today than 3 months ago?

Cheryl_Costa: Earlier this year it was significantly easier to qualify for a mortgage. Today, even with stellar credit, you might encounter difficulties. If you are able to put down a fairly large deposit (at least 20%) and you have good credit, you shouldn't have too much trouble. If you are looking to get a mortgage and have only 5% to put down, you can expect a longer approval process and you might not be approved for as big a mortgage as you might like.

ACG__Guest_: My 401k has fallen over 10% since the beginning of the year. Is it worth my while to go back to my financial advisor and have him move the money into other accounts? I am 36 years old and still have a while to go until retirement.

Cheryl_Costa: I would resist that temptation. You are only 36 years old and it is likely that you will not retire for another 2 or 3 decades. A well diversified portfolio of equity mutual funds is really what you should be considering at this stage of the game. I would suggest going as close to 100% equity mutual funds as you feel comfortable. I urge you to stick it out and resist the urge to move to more conservative investments. With the market being down as much as it is, it is important to view this period as a buying oppotunity. Think of it as securities being on sale.

M_M__Guest_: My husband is self employed running his own business. He does not draw a salary. How will this effect his Social Security when he retires? I work full time.

Cheryl_Costa: Even though your husband is self employed, he is still paying into Social Security. (When you are self employed, you are responsible for paying both the employee and employer portion of Social Security and Medicare taxes.) So, his ultimate Social Security benefit will not be impacted by his self employment. SOcial Security benefits are determined by looking at your 35 highest earning years of employment.

Hojo20__Guest_: Hi, I have over 100k in a Countrywide Bank account. Should I be worried about Countrywide folding?

Cheryl_Costa: As would be the case with any bank, it is important for everyone to be familiar with the FDIC insurance limits. It is very possible that more than $100,000 in FDIC coverage is available at any bank -- see my earlier response.

collette__Guest_: My husband and I are in our 70's and have always been secure with even a 2% earning on our iinvestments. We have allowed ourselves one long and one short vacation each year. Now our investments, as are those of others, are losing money every month. We don't know when our health will not allow for travel and we're not in this for the 'long term' anymore. We never hear our situation discussed. Advise is always for people in their thirties and, primarily, for the 'baby boomers'. Any thoughts?

Cheryl_Costa: Current research in the field of sustainable withdrawal rates indicates that most retirees can safely withdraw up to 4% of their retirement assets each year and not run out of money in a 30 year long retirement. If you are keeping your withdrawals under this 4%, you should be OK.

Virgo__Guest_: Hi i Cheryl, any advice for a stay at home mom to save money and also any book recobook recommendations?

Cheryl_Costa: I enjoyed reading David Bach's "Smart Women Finish Rich". Also, David Chilton's "The Wealthy Barber" is very popular.

mainiac__Guest_: Hi, at 55 years old,hoping to retire in 3-5 years. I own two homes (no morgtage). Do you think buying another home in this market is a better investment than the stock market??

Cheryl_Costa: I don't think this is a great idea given the fact that you already own two homes. You don't want too much of your net worth concentrated in real estate.

kd__Guest_: What would you do? I have emergency funds and retirement savings have started and some other cash. I also have 2 car loans. Is it better to pay off the loans to free up the tight monthly budget, or better to keep extra cash on hand, and possibly use it if the monthly bills need some help? Loans total $700/mo and $17K to payoff

Cheryl_Costa: It depends. How large is your existing emergency fund? If it would not cover at least 3 months of expenses (and maybe as much as 6 months), I would look towards beefing up the emergency account instead of paying off the loans. If your emergency fund is more than sufficient, paying down some of the loans might be a good idea, especially if you are feeling that cash flow is very tight.

Betsy__Guest_: My daughter and son in law want to borrow $30,000 from us to pay off credit card debt. They have no other options. They believe they can pay back in 3 years. Our money is currently in a savings account. What's the best way to do this? Loan service like Virgin? We don't want to have to ask for the monthly payments, nor do we want to be without the money or interest for more than 3 years. We want to help. But, we don't want to hurt ourselves or our relationships.

Cheryl_Costa: Loans services like Virgin are a fantastic idea. Keeping this arrangement as formal as possible will serve all parties well.

Dave_2__Guest_: What might I expect now and short-term for interest rates on $50-100, 000 CD rates and savings accounts? Best places to check rates?

Cheryl_Costa: Some high yield savings accounts are paying as much as 3.5% with no minimums and you can probably get close to 4% for 12 month CDs. I probably wouldn't lock in CDs longer than 6 to 12 months because rates are expected to go up. My favorite places for good savings and CD rates are ING, HSBC and Countrywide.

sleepy__Guest_: my question is in regards to retirment - i am 25 and a governement employee. upon retiring i will recieve a pension. i also contribute the max to a ROTH IRA each year. i have funds in excess to those contributions to put towards retirement but don't know where to put them, ie mutual funds, etc..., what do you suggest?

Cheryl_Costa: Sounds like a great situation to be in. If you find yourself with excess cash to invest, I would recommend investing in a well diversified portfolio of mutual funds with a focus on index funds, Exchange Traded Funds (ETFs) and Exchange Traded Notes (ETNs). These are all very tax efficient ways to invest.

MKB__Guest_: I will make approximately 107K in my first job. I will approximately 20K in my second job. I think that I will be paying in too much in to my Social Security. What do I do? WIll I get back the overpayment come tax time? I appreciate any advice you may have.

Cheryl_Costa: Even if you do nothing, you will definitely get the overpayment back when you file your taxes. The good news is that you don't have to wait until then -- there is a way to coordinate the payments so that you don't pay more than you need to this year. Visit your HR department and ask them how to adjust the withholding. For more information, you can visit ssa.gov.

DJB__Guest_: Is it possible to be saving too much for retirement?

Cheryl_Costa: Anything is possible, but I'd say it doesn't happen too often. If you can save 10 to 15% of your earnings starting with your first job and continuing through your working career, you should be in good shape.

Tia__Guest_: wondering if my husband declares personal bankruptcy, would that have anything to do with me?

Cheryl_Costa: Generally speaking, you would be responsible for any liability where you and your husband were joint applicants or you were a co-signer. I would recommend that you speak with a debt counselor for more specific guidance.

rick__Guest_: Scott Burns said investors should watch expenses, maybe throw their fund money into a low-expense index fund. But index funds have been hammered. Your thoughts?

Cheryl_Costa: Watching expenses is very good advice. Index funds may have been hammered this year but so have many other funds -- these days you see negative returns in lots of asset classes. In my opinion, index funds are still a great option for many investors.

Cheryl_Costa: I'm sorry everyone, but we are out of time for this afternoon. There are a lot of questions that I was not able to get to today. The good news is that I recently launched a personal finance blog with the Boston Globe -- www.boston.com/business/personalfinance/managingyourmoney. I answer questions like these every day in the blog and I will attempt to answer all of the questions I couldn't get to today. Thanks again for all the terrific questions!!