Jewish World Review April 4, 2001 / 11 Nissan, 5761
How should we invest $40,000?
DEAR BRUCE: I recently received a $50,000 settlement from an injury incurred on the job. I am no longer employed and stay home with my kids. We spent $10,000 of the settlement, leaving $40,000. We are not sure what to do with the $40,000. Mutual funds (which are scary)? CDs? Annuities? IRAs? What can you suggest? -- S.S., via e-mail
DEAR S.S.: You have pretty well covered the possibilities. If you have read my column and listened to me very often, you will know that I do not recommend annuities; CDs are paying very, very low rates of return; and IRAs are available only to those who have no other form of pension (and are limited in any event to $2,000 per person per year). You point out that the mutual funds are a little bit scary in today's marketplace, and I can understand that. However, if you are investing for the long haul, investments in the strong companies of America will always bring decent returns. Now, make sure that you understand that you could take a shellacking in the short term, but certainly not with all of your investment. For a longer period of time, you will likely do just fine. History is on my side.
DEAR BRUCE: My husband and I have a 30-year 6.625 percent fixed mortgage rate. We pay about $8,400 worth of interest a year. With our itemized federal income tax deductions I still spend a net of $7,000 in interest. Should I pay extra principal to cut down on this interest? -- G.L., via e-mail
DEAR G.L.: You've examined one side of the equation, but not the other. Your rate of 6.625 percent is very, very cheap money. Why would you want to pay that back early? Do the arithmetic, and consider what you would have earned on that money in the marketplace over the last few years. That money could earn 12 percent to 15 percent, and there would be a substantial profit there. I see no justification in prepaying such a cheap mortgage unless you were absolutely scared to death of any kind of reasonable investment risk.
DEAR BRUCE: We have applied for a mortgage, and guess what? Each of the reporting agencies lists my husband as dead. Thinking that they accidentally transposed Social Security numbers, my broker called back again. Same thing! My husband is dead as a doornail, according to all three agencies. We suspect his ex-wife somehow reported that her ex-husband was dead. She's a wacko! What do you suggest? By the way, my husband is very much alive. -- M.G., via e-mail
DEAR M.G.: Write to each of the credit reporting agencies, and tell them the situation. Ask them to confirm your husband's "demise." They will then be obliged to go back to whatever their source was for this information and, if it is not reaffirmed, the designation comes off. In the event that the source reaffirms it, then you will have to go back to them and ask for the source of their information. I think that you will find that if it is not reaffirmed in 30 days, like Lazarus, your husband shall rise
Send your questions to JWR contributor Bruce Williams by clicking here. (Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.) Interested in buying or selling a house? Let Bruce Williams' "House Smart" be your guide. (Sales of the book help fund JWR).
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12/18/00: Time to move on
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11/27/00: Collision insurance is a waste?
11/23/00: Rent our house or sell it?
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11/16/00: Ten-year fixed-rate mortgages
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11/10/00: Maybe a mobile home
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Yes, a contract means something
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07/25/00: Negotiate with your neighbor
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06/29/00: How social security seniors should invest
06/27/00: Waiting before re-establishing credit
06/21/00: Insuring an older car
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06/16/00: Utility company incursion
06/15/00: Insurance settlement is no bargain
06/13/00: A straightforward form of bankruptcy
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06/07/00: The trouble with tenants
06/05/00: Do I really need title insurance?
06/01/00: The truth about nursing home insurance
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05/25/00: CDs for security, not investment
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05/18/00: Building a college fund
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05/15/00: House is 'worth' what's offered
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05/11/00: Your heirs, your choice
05/09/00: Mutual-fund investigations
05/05/00: Credit cards vs. debit cards
05/04/00: Lawyer are good for something
05/03/00: The binding nature of contracts
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04/18/00: $10,000 limit on gifts
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04/11/00: Six percent is a pittance
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03/29/00: Pre-tax dollars in IRA taxed later
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03/22/00: Old cars as hobby, not investment
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