Hotline provides answers

Callers uncertain of best moves get clear advice from experts

The Dallas Morning News

26 Sep 2016

By JILL COWAN Staff Writer

Local financial planners doled out advice about saving for retirement, paying off debt and funding home improvements Sunday afternoon as part of a free hotline session hosted by The Dallas Morning News and the Financial Planning Association of Dallas-Fort Worth.

Here were some of the questions that came up:

If I’m retired, should I combine my 401(k), my IRA and my savings accounts?

Patrick Dougherty, president of Dougherty Wealth Management in Dallas, said he fielded a couple of similar questions about this issue.

One came from a 69-yearold woman who told him an insurance salesman had advised her to roll her 401(k), her IRA and her roughly $50,000 in savings together.

Dougherty said that’s not a good idea. While a 401(k) and IRA are tax-deferred, meaning you can park money there to grow without paying taxes on it, a regular savings account is not. And if you combine tax-deferred accounts with money that’s not, you have to start paying taxes on them.

Combining a 401(k) and IRA wouldn’t have those tax consequences, he said, so depending on your individual situation, it might make sense to roll those two together.

Should I borrow from my retirement savings to pay for home improvements?

Alan Goldfarb, managing director of Financial Strategies Group in Dallas, said two callers asked this question and the simple answer is no.

One was a divorced woman in her 70s who plans to retire next year. Goldfarb said the

woman told him she hopes to live in her house the rest of her life but she wants to fix it up. With the woman a year away from starting to draw from her retirement savings, it wouldn’t be wise to borrow from that pool of money, he said.

Instead, he said, a home equity loan would be relatively easy to get and would make more sense.

How should I knock out a car loan?

Hannah Moore, a certified financial planner and owner of Guiding Wealth Management in Dallas, said a woman who graduated from college about a year ago asked how she should pay loan.

Moore advised the woman to first establish an emergency fund of about $1,000. She suggested the woman then pay off her small credit card debt, which likely has a higher interest rate than her car payment. That’ll help build credit for future purchases.

Then, she said, pay off the car loan — and make sure the money is paying off the original loan amount, not just the next payment. Otherwise, the debt can pile up. off her car

How much money is too much money in one savings account? And what should I do about it?

Lynn Lawrence, a certified financial planner with Cetera Advisor Networks in Dallas, said a widow in her late 70s was spooked by the stock market, so she’d pulled her money out and put it into one Chase Bank savings account.

The balance? About $400,000, Lawrence said.

But the FDIC, which insures customers’ money if their bank fails, only insures up to $250,000 per person per institution.

Banks don’t really have much incentive to let people know they’ve exceeded that cap, Lawrence said.

So if you’ve got more than $250,000 in savings, she advised, it’s on you to make sure it’s divided up into accounts at different banks.