Need help with a money problem?
South Florida financial advisors will answer your questions live online next week during the Your Money Personal Finance hotline.Submit your questions now online. Or call in Tuesday, Oct. 5, between 11 a.m. and 1 p.m., to speak to an advisor. Submit your questions at SunSentinel.com/moneyquestion or call 954-356-4628. To see previous questions, visit SunSentinel.com/PersonalFinanceQandA
-----------------------------------------------------------------------------------------------------------------------------------------

I am 57 and married. Our income is $66,000. We have $75,000 saved for retirement. We also have $6,000 in credit card debt. And we’d like to sell our home, but we owe about $190,000 on our mortgage and the house is probably worth $150,000 now.
I am about to receive a large sum from a personal injury award. After paying off the credit card debt, I feel we should put most of it toward the mortgage. Because the 4.5 percent interest we’re paying on our mortgage
is more than we could get in any investment that I know. What do you think?
Mary

The cash award is a bonus, but don’t spend it without doing some comprehensive planning, said Blair Shein of Compass Financial Group in Deerfield Beach.

First, it makes sense to pay off the credit card debt, because the interest rate is high for most cards.

With the rest, Shein does not recommend that you use most of the rest toward the mortgage until you first look at your overall financial picture. If you were to sell the house, you’d have to bring $40,000 to the closing to pay off the balance of the home loan. And, you should have at least three months’ living expenses set aside in an emergency fund. Shein figures that should be around $15,000. Those two items will put a big dent in the award that you’re expecting.

While the award will improve your financial situation, you still have more work to do. The retirement savings you have now won’t be enough to provide for your current lifestyle once you stop working.. Unless you want to cut way back on spending in retirement, you should save as much as you can now. Take a very close look at your expenses and see what you can do to reduce them.

Need help with a money problem? Columnist Harriet Johnson Brackey is working with certified financial planners to get answers. Submit your questions at SunSentinel.com/moneyquestion or call 954-356-4628. To see previous questions, visit SunSentinel.com/PersonalFinanceQandA
----------------------------------------------------------------------------------------------------------------------------------------
How do I go about clearing up old charge-offs from my credit report?
-Bonita McKenzie, Fort Lauderdale.

A charge-off is an old debt that a creditor has written off as uncollectible. Generally, this happens after six months of non-payment. But that’s not the important number you should remember here. The most important one is this: A charge-off can stay on your credit report – and bring down your credit score – for seven years.

“If the charge-offs were valid, then it is my opinion that she would have to wait the required period – seven years – for it to disappear,” said Certified Financial Planner Richard Russo of KR Financial Services in Hollywood.

How then can some companies promise to wipe out old debts or charge-offs or other negative marks on your credit? They can’t. “There is no magic cure for negative information in credit reports,” says Gerri Detweiler, personal financial advisor for Credit.com and an expert on debt.

But you, on your own, can improve the report. You do this by making sure your credit report is absolutely accurate. And by handling credit well now.

A credit report changes over the years. You said the charge-offs were in the past, which is good. Because the older a negative mark is, the less impact it has on your credit score. If you have built a positive credit record since then, that takes the sting out of the old charge off until it finally drops off your record.

You should make sure your credit report is completely accurate, too. Here’s how to do that:

-Get a copy of each of your credit reports.

You can make this request online at www.annualcreditreport.com or on the telephone at 877-322-8228.

Ask for all three – from TransUnion, Equifax and Experian. They can be different and you want to clean them all up.

-Look them over carefully.

Detweiler points out that a charge-off should show a zero balance. (If it does not and a collection agency is trying to get you to pay that old debt, the collection agency may put the same balance on your report a second time. That makes it look like you have more bad debt than you actually do, which would bring down your credit score. So look for the zero.)

Perhaps, the seven years have already gone by and the charge-off is still there.. You can ask the credit bureau to remove those old items. The clock on those seven years starts on the date of last action on the account – most likely, the date of the charge-off.

Or maybe there’s an error as to when the debt was incurred. Remember, older items have less impact on your credit, so you want to have the right date there.

Florida law gives creditors up to five years to try to collect a consumer debt. After that, the creditor cannot sue you for the debt.

But, the creditor can sell the debt to a third party collector – who can try to collect for as long as he or she wants to try. Several years ago, debt collectors would report old debts to the credit bureaus with a new date – a practice known as “re-aging.” This has been prohibited by federal law since 2003, but the practice used to be quite widespread. If the age of your debt is incorrect, you can challenge it and get it removed.

-If you find something in error or that you do not recognize as your own, you notify the credit bureau.

You can do this in a letter or online. There’s usually an address on the report itself or on the website for each of the bureaus. At TransUnion, for example, it’s a “request for investigation” and you download the from online.

Under the Fair Credit Reporting Act, the credit bureau must investigate the issue. If it finds the information is inaccurate, incomplete or it cannot be verified, then it has to be removed, usually within 30 days. If you notify the bureau that the item is too old to be on your record, if that is correct, it has to be removed.

If all this doesn’t happen, you have to right to sue and seek damages.

If you want to know more about your federal rights, the Federal Trade Commission has a good site explaining them at www.ftc.gov/credit.

It may surprise you that on an old debt, one that is beyond the time limit for being collected, a debt collector may call you anyway. This happens because debts get resold.

What you should do: Ask the collector for his or her address. Send a letter saying that you don’t want to be contacted and that you don’t owe the debt and it is beyond the statute of limitations, Detweiler suggests. Once you send the letter, federal law says the collector must stop contacting you.

Need help with a money problem? Columnist Harriet Johnson Brackey is working with certified financial planners to get answers. Submit your questions at SunSentinel.com/moneyquestion or call 954-356-4628. To see previous questions, visit SunSentinel.com/PersonalFinanceQandA
----------------------------------------------------------------------------------------------------------------------------------------

What do you think about debt consolidation companies? I’d like to make one payment every month, rather than multiple payments - Darla Layton, Southwest Ranches

Their ads about cutting your debt in half or government “bailouts” for credit card holders are enticing, but there have been plenty of consumer problems with debt consolidation companies. Consider it an option, but only as a last resort before bankruptcy.

There are other ways to tackle debt. One is for you to try negotiating a reduction in what you owe on your own. Credit card companies have been hit with a huge wave of defaults and apparently are more willing than in the past to cut deals.

Another option is to find a credit counselor and get into a debt management plan. This can last for up to five years. All your credit cards will be closed and you will make payments to the counseling agency, which then pays the creditors. The payments can be lower than what you paid on cards before you started.

If you do go to a debt consolidator, hold off for a little while. Starting Oct. 27, under a new Federal Trade Commission rule, debt consolidators won’t be able to charge advance fees for their services. They will only be able to collect money after they have renegotiated or settled or reduced at least one of the consumer’s debt. Previously, some companies collected hefty fees upfront and not all debt settlement companies are successful at lowering the consumer’s debt.

Another new rule requires debt consolidators to hold the consumer’s funds in a dedicated account at an insured financial institution. The consumer controls that money. Previously, consumers had no control over payments they made into accounts that were supposed to be used to cover their debts.

The FTC starting later this month also is forcing debt consolidators to make better disclosures, to let consumers know that debt consolidation can severely harm your credit score – by as much as 125 points.

A debt-management plan through a consumer credit counseling program will be reported to the credit bureaus, but it will not affect your credit score so long as you and the agency pay on time.

Need help with a money problem? Columnist Harriet Johnson Brackey is working with certified financial planners to get answers. Submit your questions at SunSentinel.com/moneyquestion or call 954-356-4628. To see previous questions, visit SunSentinel.com/PersonalFinanceQandA
----------------------------------------------------------------------------------------------------------------------------------------
I have $25,000 of credit card debt after a recent divorce. My salary is $80,000 per year. I have a very good credit score, pay all my debts on time, and pay more than the minimum. My interest rates are around 13.99 percent and the credit companies won't lower them any more. I am 56 and have barely any retirement money saved, though I have just recently started contributing to a 401K. My question is, how do I pay off my credit card debt and still save for retirement? I'm really concerned about retirement and whether I can live off of Social Security, if it exists by then. Please help. - Doris

Doris, you earn a nice salary but you need a spending plan, says Certified Financial Planner Luana Mobley Corral of Fort Lauderdale.

A general rule of thumb is to think in terms of dividing your money into three pots:

-10 percent to invest for the long term, which is retirement
-20 percent to save to spend. This is your emergency fund. It’s what you can spend so you can pay cash instead of using credit card debt.
-70 percent to live on

If we all did that when we started our first job out of high school or college, debt would rarely become an issue and most retirement goals could probably be achieved.

Because you have so little saved for retirement, you probably want to put away more than 10 percent toward that long-term goal.

Because you have so much debt, you have compounded your problem.

This is where you can start: Write down everything you spend money on and if you haven’t already, stop using your credit cards. You need an emergency fund and you need a plan to pay down your debt.

You have a 401(k) at work. Your initial retirement saving goal should probably be to put enough money in your 401(k) so that you get the full employer match. The employer match is free money that you don’t want to leave on the table.

Next, you need to segregate the expenses into needs and wants. I’m not suggesting that you eliminate all the “wants” from your spending plan, but for a season, at least some of the money you currently spend on “wants” may need to be redirected to paying down debt or retirement savings.

Look for less expensive ways to satisfy your “wants,” but ways that still satisfy you. Be creative about ways to reduce your “need” expenses. Such as:

-Have FPL do an analysis to see if there are things you can do to cut your light bill.
-Ask your cell phone carrier to evaluate if you are on the most cost effective plan.
-Review your insurance policies with your property casualty agent review to look for ways to lower your premium without substantially increasing your risk.
-Consider refinancing your home, if you plan on staying there a while.
-Brown bag your lunch a few days a week.

You get the idea.

The $25,000 of debt could be paid off in 5 years with payments of about $582 per month, figuring in your card’s 13.99 percent interest rate. That is less than 10 percent of your salary.

But let’s think about how to do this. First, make a list of all your credit cards, the balances you owe and the minimum payments for each one. You should pay the minimum payment on all the cards but one, the one with the lowest balance. For that card, pay as much as you can afford to pay. Let's say you have made a commitment to pay $600 a month toward debt and those minimums add up to $300. You pay them all and devote the extra $300 to the card with the lowest balance. When you get that card paid off, you apply the same strategy to the card that had the next lowest balance. You pay the same amount, in total, every month, but you stack it up so that you’re eliminating one card at a time.

Bottom line, if you start this plan in October, every single month you will be paying $600 toward all your debt until the last credit card is paid off. In February 2016, you should be celebrating the fact that you are debt free.

Why October? Because first I want you to put $1,000 into a savings account to establish your emergency/opportunity fund before you go on to the debt elimination plan.

Once you have paid off the debt, you will add the entire $600 per month into the emergency/opportunity fund until you have enough there to cover three to six months of expenses.

Once you have your emergency/opportunity fund up to that amount, you can begin to put that $600 a month toward your retirement savings. You should already be putting enough in your 401(k) to get your full Employer match. Now you are going to add the entire $600 per month to what you are saving already.

I suggest that you do your 401(k) deferral as a percentage of pay instead of a flat dollar amount. That way, you will automatically save part of your pay raises. When your paycheck goes up, so will the amount going into the 401(k).

Since you are newly divorced, I also encourage you to check all your beneficiary arrangements –you’re your will, any trusts, life insurance, retirement plans -- to be sure you have made all the changes that are appropriate for your new life as a single woman.

Need help with a money problem? Columnist Harriet Johnson Brackey is working with certified financial planners to get answers. Submit your questions at SunSentinel.com/moneyquestion or call 954-356-4628. To see previous questions, visit SunSentinel.com/PersonalFinanceQandA
------------------------------------------------------------------------------------------------------------------------------------------
Do you think we will be able to deduct state sales taxes in 2010 on our federal income taxes? – Andre

This is an important one to Floridians, who for the last few years have been able to take an itemized deduction for sales taxes. About one out of four returns filed from Florida took this deduction for 2008.

Floridians pay no state income tax – which is an itemized deduction for those who live in states that do have income tax. The sales tax deduction came about to give Floridians and residents of other no-tax states a similar write-off.

But, the sales tax deduction has always had an expiration date. Under current law, it ended last year.

That is “very likely” to change, said Jamie Summers, a partner at Deloitte Tax in Miami. “The sales tax deduction is included in the tax ‘extenders’ bill which has been passed by the House but it hasn’t gone all the way through yet,” he said.

In all about 60 expiring tax provisions are in this bill. “The fight in Congress is mostly over how to pay for the extension, and that has been holding things up,” said Mark Luscombe, a principal analyst at CCH, a Wolters Kluwer business that provides tax analysis and information.

Luscombe, too, said the expectation is that the issue will come up again before the year ends.
And that the sales tax deduction will continue.

You can take the deduction by using the IRS tables of average sales tax expenditures. Or you can use your actual expenses. You can also add the sales tax on a few major purchases, such as a car or a boat, to the average from the tables.

Need help with a money problem? Columnist Harriet Johnson Brackey is working with certified financial planners to get answers. Submit your questions at SunSentinel.com/moneyquestion or call 954-356-4628. To see previous questions, visit SunSentinel.com/PersonalFinanceQandA
------------------------------------------------------------------------------------------------------------------------------------------

I would like to pay off some high interest credit card debt by taking out a home equity loan on the condo where I live part of the year. I own it free and clear. But I can’t get a lender to give me loan. What can I do? – Maurice, Lighthouse Point

You're in a tough spot and it may not be because of your own credit worthiness. “It may not be the borrower at all, it may be the condo project,” said Dave Seleski, president and chief executive officer of Fort Lauderdale-based Stonegate Bank. He says if many of the neighbors' units have fallen into foreclosure, lenders probably won’t make a home equity loan on your unit. Another problem, he says, is that few lenders are making home equity loans anymore because they have suffered huge losses on them during the recession.

You are not alone in trying to find some alternatives for paying off high interest credit card debt, said Certified Financial Planner Michael E. Mader of Veritas Wealth Advisors in Plantation.

He suggests that you first ask the credit card issuer to lower your interest rate. At the same time, shop around for other credit cards where you might be able to transfer your balance to one with a better rate.

If you have a 401(k), perhaps you can take out a loan from it. Ask your plan's sponsor if that's allowed. If you have a Roth IRA, you can take out any money you contributed without a penalty, Mader said.

Home equity isn't the only option that's unavailable. Other options are closed off, due to your age. You told us you are 55, which means you’re too young to take money from a traditional IRA without paying a tax penalty. And you’d have to be 62 to qualify for a reverse mortgage on your property.

Need help with a money problem? Columnist Harriet Johnson Brackey is working with certified financial planners to get answers. Submit your questions at SunSentinel.com/moneyquestion or call 954-356-4628. To see previous questions, visit SunSentinel.com/PersonalFinanceQandA
------------------------------------------------------------------------------------------------------------------------------------------

My credit card statement says the Annual Percentage Rate is 24 percent. Is there anything I can do to bring that down? Can you give me some suggestions?
-Emily

Go ahead and ask for a lower APR, suggests Certified Financial Planner Howard Kramer of Plantation.

Call customer service and talk about your unhappiness, try to build rapport with the customer service representative and hopefully you will get an initial offer. Then try to get to a manager who will inevitably do better. If the first offer to lower the rate is not significant, keep pressing the case, he said.

If you have a good history with the credit card company, with no or few late payments, you have a better shot at a lower rate.

It is always helpful, too, to mention any balance transfer offers from other credit card companies if you have them.

Ultimately, you have to be friendly, persistent and determined to get a lower rate.

In general, credit card companies place a lot of emphasis on credit scores, so you should brush up on what goes into them.

The most important factor in calculating a credit score, according to www.myfico.com, is timely payment of your bills and not having any negative marks on your record, such as a delinquency. Next comes the balances in relation to the credit lines.

Those two factors you can control. First take a look at your credit report, which you can get for free at annualcreditreport.com, to make sure there are no errors that are lowering your score.

Then, do all you can to bring your balances down. To get the best credit score, your goal should be to use no more than 30 to 50 percent of your available credit.

I'll be back in the office next week. In the meantime, send me your questions.

Need help with a money problem? Columnist Harriet Johnson Brackey is working with certified financial planners to get answers. Submit your questions at SunSentinel.com/moneyquestion or call 954-356-4628. To see previous questions, visit SunSentinel.com/PersonalFinanceQandA
________________________________________________________________________________________________________

Need help with a money problem? Columnist Harriet Johnson Brackey is working with certified financial planners to get answers. Submit your questions at SunSentinel.com/moneyquestion or call 954-356-4628. To see previous questions, visit SunSentinel.com/PersonalFinanceQandA
________________________________________________________________________________________________________

What savings advice would you give for a one-income family? Our children each have small savings accounts they make regular small despots into. But the accounts earn only a few cents a year. Any advice for them?
Dora

With three children, one income and no emergency fund or retirement savings, it has to be tough to stretch those dollars. "I think it is noble that you are implementing a savings plan to the best of your situation," said Irwin Gross, wealth coach at Family Wealth Partners in Weston.

The best option for small amounts is certificates of deposit. You'll make a little bit more on them than "pennies." But overall interest rates are low at the moment, so it won't be much more.

As your accounts build in value perhaps you can consider other options.

If the money is for your emergency fund, we want to be sure it doesn't fluctuate in value. So you may end up staying in CDs or money market mutual funds.

Need help with a money problem? Columnist Harriet Johnson Brackey is working with certified financial planners to get answers. Submit your questions at SunSentinel.com/moneyquestion or call 954-356-4628. To see previous questions, visit SunSentinel.com/PersonalFinanceQandA
------------------------------------------------------------------------------------------------------------------------------------------

---

My husband and I are in the middle of requesting a loan modification from our lender Bank of America. I've heard so many negative things. Our credit, which is excellent, will suffer. They might reduce our interest rate, for a short term, or reduce our monthly payments for a short term, but they will add back any of those reductions to what we owe at the end of the loan. We are on Social Security and don't expect any increase in our income. So how can a modification help us? Should we continue with the request or just try to pay as we go? Any advice will be welcomed.- -Danielle and Josh

As with all financial products and strategies, there are pros and cons, said Certified Financial Planner Jubin Keyvan of Profitable Financial Strategies in Coral Spring.

Modifying your mortgage generally means working with your lender to change the terms of the note you signed when you bought your home or when you refinanced.

It may be a good tool to prevent foreclosure or as an alternative to doing a short sale.

However, modifying your mortgage will most likely damage your good credit.

You should proceed with very carefully.

First, you have to factor in that you may not qualify for a loan modification. The Obama administration's Making Home Affordable program for loan modifications is for people who have had a change in their economic circumstances – for example, a job loss or an illness. Since you said you have Social Security income, your income is probably stable and the lender would not agree to your request.

But there are other programs lenders can use to modify home mortgages.

Before you proceed, consider your goals and objectives. Ask yourselves: What are you trying to accomplish? What are the pros and cons of going down this road? And are you willing to accept the down sides?

Alternatives you should consider would include just refinancing the home with a new fixed mortgage. Interest rates for qualified borrowers with good credit are very low now.

Or, if you have sufficient equity in your home and you plan to live there for the rest of your lives, a reverse mortgage may make sense. A reverse mortgage is for people who are age 62 and older who want to tap the equity in their homes.

Keyvan recommends that you consult with some qualified advisors: including a bankruptcy attorney, a real estate attorney, your tax advisor and maybe even a financial planner. You may find that you have options you didn’t even know about.

Need help with a money problem? Columnist Harriet Johnson Brackey is working with certified financial planners to get answers. Submit your questions at SunSentinel.com/moneyquestion or call 954-356-4628. To see previous questions, visit SunSentinel.com/PersonalFinanceQandA
------------------------------------------------------------------------------------------------------------------------------------------

I have been considering entering a debt settlement program to get rid of my credit card debts. One drawback is I have not been late in any of my payments for more than 5 years even though the debt is pretty high (more than $40,000). My credit score is OK, around 630. I am wondering if lowering my debt by half, as the settlement companies advertise, is worth it because I know it will damage my credit score for a few years. Would I be better off in five years or would it be better to just keep paying my bills on time? --Ricardo

Certified Financial Planner Shomari Hearn, who is client service manager with Palisades Hudson Financial Group in Fort Lauderdale, advises against entering a debt settlement program. It is costly and may leave you further in debt than you are now.

The typical program requires you to stop paying your credit card bills. You are directed to make monthly deposits into a special account you establish with the debt settlement company instead. Once the account has an adequate balance, which can take many months, the company will try to negotiate lump-sum settlements with the credit card companies for a fraction of your outstanding balances.

Your credit card balances will increase during this period as interest and late payment penalties continue to accrue.

There is no guarantee the settlement company will be successful in negotiating a significant reduction in your debt. And, the credit card companies may file suit against you. If they win a judgment, they may garnish your wages or put a lien on your home, at which point a poor credit score will be the least of your concerns.

The fees charged by debt settlement firms can be very expensive. Some debt settlement companies charge as much as 15 to 20 percent of the credit card balances due – and collect that upfront. Some charge a hefty fee every month until the program is completed.

You’ll owe taxes, too, because cancelled debt is considered taxable income, and the IRS won’t waive any of the bill unless you’re insolvent.

Although this may not be what you want to hear, Hearn advises you to continue to pay your credit card bills on time. As long as your budget permits, make more than the minimum required payments each month.

Better yet, use your savings to pay down credit card balances if such resources have not been exhausted.

Most importantly, tear up your credit cards.

If you still think you need to do something about the debt, consider negotiating with the credit card companies directly instead of entering a program. You'll save on fees and you may be as effective at reducing your debts as the claims advertised by the settlement companies.

Keep in mind, however, that creditors generally won't discuss settlements with consumers unless they're at least three to six months behind on their payments.

I have a good job, I am contributing to my 401(k) account and I have no credit card debt. I’m 60 years old, no kids and am in good health. I have 15 years left on my mortgage. Since I have about twice as much as I owe on my condo in my retirement accounts, should I just pay off the mortgage? And start rebuilding my savings again with money left over and what I used to pay for the condo?
-Cory

Don’t shoot yourself in the foot, says Certified Financial Planner Mike Lynch, who runs Money Matters of America in Plantation. Lynch specializes in retirement planning.

Liquidating your IRA to pay off your mortgage early may sound good, but have you stopped to think what might happen if you lose your job prior to retirement? You are a few years away from being eligible for full Social Security benefits at age 66. You may need to work to age 70 to max out what your receive.

Another question: What would happen if your health changed and you were forced into early retirement?

And, do you know about the tax implications? Lynch says don’t do it is because liquidating your IRA will put you into a higher tax bracket. Closing your IRA would push all those IRA dollars into your taxable income.

If he were in your shoes, Lynch said he would want to maintain all the flexibility he could and keep all the options open in case you lose your job or run into serious problems.

Liquidating your IRA to pay off your mortgage early will close a lot of doors for you.

Two other thoughts from Lynch: If you could increase your retirement savings account contributions to 15 percent of your income, that’d help you build up more assets.

And, if your credit is good, you may want to look at refinancing your home to capture today’s great low interest rates and potentially lower your monthly mortgage payment.
------------------------------------------------------------------------------------------------------------------------------------------
Need help with a money problem? Columnist Harriet Johnson Brackey is working with certified financial planners to get answers. Submit your questions at SunSentinel.com/moneyquestion or call 954-356-4628. To see previous questions, visit SunSentinel.com/PersonalFinanceQandA

My husband and I have just started a family and we are exploring our options for setting up a college fund to be able to pay for our children's college tuition. Should we do the Florida Pre-Paid or do you recommend a 529 Plan? What are the pros/cons of each?
-Jennifer

The best way to do college planning is so start at the beginning of the child’s life. With time, your savings will grow. And you’ll avoid the financial panic that seems to set when parents and students begin to fill out college applications.

The Florida Prepaid program does cover tuition costs, but that is not the full bill at many colleges.

Since 2007, Florida has allowed the state’s public universities to charge something other than tuition. This second amount, called a tuition differential fee, can add up to 40 percent to the total cost. Plus, the differential can increase by up by 15 percent a year.

To cover most of the bill at a Florida university using the prepaid program, you’d have to buy two plans, one for tuition ($16,647 for a one-time, lump sum purchase price for a newborn today) and one for the differential ($19,700). You can also buy the two for a monthly payment of $234.

There’s even a third program, to cover such things as activity and athletic fees and health care costs.

The prepaid’s greatest benefit: Low-risk. You can get your money back for a minimal fee if it’s not used to pay college costs. You can also transfer the plan to another child. And it can be used for certain out-of-state private colleges, community colleges and technical schools.

The cons? It’s expensive. You have to stick to the payment schedule. And your child may choose a school that isn’t part of the program. If you decide to take your money back, you get back what you contributed, but no interest or earnings on that amount.

If instead you opt for a Section 529 college savings plan, what you’re doing is investing the money in the market, with all the risks involved. It could provide a higher growth rate for your savings than the Florida Prepaid. But if you encounter a terrible year, your investment will go down in value.

With a 529 plan, you have more flexibility about the amount you put in and which mutual funds you’ll select. You’ll need to evaluate the fees and administrative costs involves vs. the investment results. There's a great variety of 529 plans, including those that give state income tax breaks to savers in states that, unlike Florida, have income taxes. You can pick your plan from any state.

You also can pay such costs as laptops with 529 plan funds. You cannot do this with the Florida Prepaid funds. That money can only be used for tuition. The one exception: If your child gets a full scholarship, not a partial one, to cover tuition, the prepaid money can be refunded, semester by semester, to you to use as you please.

The 529 plan’s greatest benefit: The money can be used, tax-free, for public or private college in any state.

And here’s a con that’s true for both the Prepaid and a 529 plan: If your child doesn’t go to college and you don’t shift the money to another relative or use it for education, there’s a tax catch. Jack Rosenberg, a certified public accountant and a partner at Goldstein Schechter Koch in Hollywood, says any earnings on the amount you contributed will be subject to income tax and a 10 percent penalty.

Overall, your concern for your child’s college costs is going to pay off, no matter which way you decide to handle your savings.

Both the Florida Prepaid and a 529 plan are good ways to save, compared to saving the money in an account in the child’s own name. That’s because 529 plans are considered assets of the parent, not the child, and parental assets don’t count as heavily in the financial aid calculation as money saved in the child’s own account.

For more information, see www.myfloridaprepaid.com , www.sec.gov/investor/pubs/intro529.htm and savingforcollege.org for more information.

These sites give the basics. But things change. The contribution limits for each plan are set by the state or the educational institution sponsoring the plan. So check the details before you make a decision.

Need help with a money problem? Columnist Harriet Johnson Brackey is working with certified financial planners to get answers. Submit your questions at SunSentinel.com/moneyquestion or call 954-356-4628.

My group health insurance Cobra coverage ran out on June after the 18-month maximum coverage. Now I need to look for new health insurance.
I was told I don't qualify for the continuation of coverage under the Health Insurance Portability and Accountability Act (HIPAA is a federal law that provides opportunities to enroll in group coverage if you lose your health insurance) because my insurer says I can continue my old policy if I pay a premium of $1,000 a month. I can't afford that.
This seems to be a "Catch 22" because I don't qualify for HIPAA that should insure you when you have been dropped from your group health plan because the former insurer now offers insurance you at an outrageous price. How can I get a reasonable insurance plan?
-JohnB

Since you are 56 and you told us you are in perfect heath, Certified Financial Planner John Carrig of Gold Coast Financial Planning in Boca Raton says you only really need a plan that covers all major care. He recommends a program with a high deductible or one that would be compatible with a Health Savings Account.

AARP offers a good package through Aetna for members under 65. There have several different plans with deductibles ranging from $1,500 to $5,000 The premiums range from about $300 to $700 - the higher the deductible, the lower the premium. Their website is:
http://www.aarphealthcare.com/products/default.aspx?Products=50to64#Age5064

Need help with a money problem? Columnist Harriet Johnson Brackey is working with certified financial planners to get answers. Submit your questions at SunSentinel.com/moneyquestion or call 954-356-4628.

My husband and I are contemplating a reverse mortgage. There seems to be so very many out there. Are there any that are better than others? Do the prices vary as to the upfront amount you have to borrow or are they mostly the same?
Charlotte

A reverse mortgage is a loan that lets you borrow against the equity in your home. The amount you can borrow will be based on your home’s appraised value. The payments to you are tax-free. The borrower does not repay the loan. Instead, the balance and interest are due when you die, move, sell the house or stop paying property taxes or insurance.

Those are the basics, but here’s the caution: Reverse mortgages are complicated arrangements that take some time to evaluate. Certified Financial Planner Robert D. Barboni of Ibis Financial Group in Boca Raton recommends that you first do a complete examination of your finances to decide if a reverse mortgage is appropriate for your needs.

He points out that reverse mortgages can be a viable solution to individuals over age 62 who need income. Most are what's called Home Equity Conversion Mortgages and are insured by the Federal Housing Administration.

And yes, you can compare the loans. Some lenders are competing, lowering fees and costs. Here are some of the major terms:

Reverse mortgages come with fixed or adjustable interest rates. And you have options on how to receive the money – in a lump sum, in payments monthly for as long as you live in the home or as an equity line which you can draw down when you need money. Examine the terms of each option closely. That sounds simplistic, but the way the interest charges are determined on these loans can differ from a traditional mortgage.

A few other considerations Barboni says you should look at:

Closing costs are considerably more than for a traditional mortgage.

There also can be monthly servicing fees. You should ask your lender for a full explanation of what’s called “total annual loan cost.”

And cancellation policies are important.

If you look at all of those factors, you should be able to answer your own questions about which reverse mortgages are best.

The most important question is whether the purpose of the loan matches the loan’s potential payout.

You can talk over the terms of a loan even before you apply for one with a federal Department of Housing and Urban Development-certified counselor. You can find one by calling (800) 569-4287. Press four for "Home Equity Conversion Mortgage Counseling."

Another great place to get general information on the loans and even an estimate of what the payments could be is at www.AARP.org. Just put “reverse mortgage” in the search box.

Need help with a money problem? Columnist Harriet Johnson Brackey is working with certified financial planners to get answers. Submit your questions at SunSentinel.com/moneyquestion or call 954-356-4628.

Need help with a money problem? Columnist Harriet Johnson Brackey is working with certified financial planners to get answers. Submit your questions at SunSentinel.com/moneyquestion or call 954-356-4628.

I am a 68 year old retiree. About a year ago, I converted an Individual Retirement Account into a Roth IRA. I reinvest the dividends to help it grow so that I have an ace-in-the-hole later in life. I have three questions: Do I need to wait five years before taking any money out or will I have to pay a penalty? Can I take out the dividends without penalty or taxes?
Would I have to pay taxes on withdrawals I make after five years?
George W.

Rick Shapiro, a certified financial planner and CPA at Epstein & Shapiro in Fort Lauderdale, says the answers are no, it depends and no.

For your first question, the crucial fact is your age. The general rule is that someone who converts an IRA to a Roth IRA must wait five years or until age 59 and a half to withdraw the money and avoid a 10 percent tax penalty. Because you’re beyond that age, you won’t owe the penalty.

To answer the second question, Shapiro assumed you’d made only deductible contributions to your original IRA. The rule on this one is you can get back what you put in, tax-free, during the first five years. But you’d owe tax if you took out anything more.

As an example, let’s say you converted $5,000 from your IRA to a Roth IRA. You could withdraw $5,000 without any taxes due. But if your $5,000 grew to $5,500 because of those dividends, you’d pay taxes on the $500. That’s if you withdrew the full $5,500 during the first five years after the conversion.

For the third question, the answer is no. You could take out any amount, including dividends or earnings or interest, tax free five years after the conversion.

Personal finance Q&A
Submit your personal finance questions to Harriet Johnson Brackey at 954-356-4628 or SunSentinel.com/moneyquestions. Financial advisors
will offer answers online every Monday.

I recently began to be paid at my employer like a "consultant" instead of a regular employee. The paycheck now does not have money withheld for Social Security, Medicare or federal income taxes. Am I supposed to pay these taxes quarterly? If so, how? And how do I pay my taxes at the end of the year?
Gary

First, you need to check whether your employer can make such a change. As a general rule, worker classification is based on IRS guidelines and unless your particular situation changed, neither should your status with your employer, said Carl Howden, a partner at MarcumRachlin.

Assuming that the change is correct and you become a sole proprietor, yes, you do have to pay the taxes yourself every quarter if you expect, at the end of the year, to owe tax of at least $1,000.

You will owe self-employment (FICA/Medicare) and federal income tax, which your employer withheld from your check. Only now, you would be responsible for both shares, your employer would no longer match. Self-employment tax is a combination of Social Security (12.4 percent) and Medicare (2.9 percent). The tax rate is steep, but when it is time to pay federal income taxes, you get to deduct half the self-employment taxes.

You can figure your self-employment tax on Schedule SE on the 1040 form, which is available online at irs.gov.

For federal income taxes, you should use Form 1040 ES to figure and to pay your taxes.

And remember, self-employed people can deduct business expenses such as office costs.
You would report your income and expenses on Form 1040-Schedule C.

I have 5,000 shares of Kmart stock. I want to know if I can collect any of the $10 million fine that the former CEO has to pay because he was found guilty of lying.
Morris Eisenstein, Delray Beach

Sounds like a song.....If I had a dollar for every CEO who lied, I'd be rich, rich, rich....

In 2005, the Securities and Exchange Commission charged former Kmart CEO Chuck Conaway with failing to disclose the company’s distressed financial situation during a conference call with Wall Street analysts -- just two months before KMart filed bankruptcy in 2002. Over the next 15 months, KMart shuttered 600 stores and cut thousands of jobs before emerging from bankruptcy.

In June, 2009, Conaway was found guilty after a short jury trial A federal judge issued an order in February compelling Conaway to pay more than $10 million in penalties.

Where does the money go? To the SEC.

There's no indication that the SEC will distribute any of this money to investors.
The agency has been able to do that since the passage of the Sarbanes-Oxley Act in 2002. It creates a "Fair Fund" to distribute proceeds from cases to those harmed by violations of securities laws. There's no sign of that here.

The court ordered that the fine be paid to the SEC. A spokesman said it will be turned over to the U.S. Treasury.

Sorry.

Your question? You can put me - and a cadre of local financial advisors - to work finding answers. We'll do the research and publish the Q&As online on Mondays.

Submit your questions at sunsentinel.com/moneyquestions. Or you can leave me a message at 954-356-4628.

We are two elderly folks, ages 91 and 84, who have not been in the stock market for some time – thank goodness. But we are at a loss to know what to do with some cash we recently got from a certificate of deposit. What is being offered in the way of interest on another CD leads us to believe we’re just as well off to “put it under our mattrress” – more or less.
Name withheld, Coconut Creek

Leave that bed alone! But you might feel like jumping under the covers when you consider that the average one-year CD is paying only 0.7 percent, according to Bankrate.com.

Certified Financial Planner Ronald Myers of Associated Financial Consultants in Fort Lauderdale says if you plan to not touch the principal and pass this money on to your family after death, you could take a little more risk than a government-insured CD. Myers said you could put together a basket of preferred stocks and short-term bond mutual funds and probably come up with a 4 percent to 5 percent yield.

Another idea: A fixed-rate annuity, if you act before the 84-year-old’s next birthday.

There’s a five-year annuity from Lincoln National available to customers up to age 85. Its effective rate is 3.15 percent if you invest $100,000 or more. That beats the five-year CD average of about 2 percent.

Your money would be locked up. If you needed your principal before the end of five years, you’d pay surrender fees - and it could lower the interest you are paid. However, the owner of this annuity is allowed to withdraw 10 percent of the principal in any one year. The same is true for many others.

You can check, too, to see if the money can be taken out penalty-free in the event of death or the start of nursing home care on other annuities.

The interest you receive will be taxable, like ordinary income.

Normally inflation is a problem because it eats away at the purchasing power of fixed payments, but inflation has been extremely low in recent years.

And your risk? The payout depends upon the financial strength of Lincoln National – and you can check the ratings on the company’s web site, www.lfg.com. If it goes out of business, Florida’s state insurance guaranty fund is designed to back fixed annuities up to $100,000.

For more information on that annuity,go here or call: 800 950-2454.

Before you make a decision, there may be similar or even better deals out there, so shop around. But stick to fixed-rate annuities to avoid too much risk and to financially sound firms.

Your money questions answered
Do you have a question about personal finance? Submit your question for consideration to Harriet Johnson Brackey at 954-356-4628 or sunsentinel.com/moneyquestions. Financial advisors will offer answers online every Monday.