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Friday money chat with Ember Martin

by Frank Mungeam

Bio | Email | Follow: @KGWNews

Posted on October 10, 2008 at 6:09 PM

Updated Wednesday, Nov 4 at 2:35 PM

Ember Martin, CFP, with Deschutes Investment Advisors, will answer your money questions in the KGW Money Blog Friday from 5-7 pm. To post a question, scroll to the bottom and fill out the "comments" form.

Thanks for all your questions. We hope we've been of some help. See you next time.


The Oregon College Savings Plan offers Vanguard index funds at extremely low cost. A portfolio of three funds: Total US market; Total International Market and Total Bond Market would provide enough diversification for any savings goal. The only thing to determine is the relative proportion of each fund to invest in. This will be based on the risk desired or the age of the student beneficiary. Their website will have help in this area. Good luck.


If the money you're receiving from selling your home is substantial I would consider hiring a financial planner to help integrate this windfall into your other assets to address your life's goals. Ad hoc investment advice is usually not the best way to go. While you're looking for a good advisor, you might spread this money into CD's of $100k or less from different banks. This can be done efficiently in a brokerage account at Schwab, Ameritrade, or many other retail brokerages with little or no fees.


Unfortunately the right advice for your 86 year old mom cannot be given unless we know much more about her needs, resources, income needs and ability to tolerate risks.

I would be careful with any annuity products as they are better suited for long term investing. The costs are also much higher than other alternatives and so you should proceed with caution. Read more about annuities before buying one.


The amount you have in your 401k is not the best place from which to pay down/off a mortgage. Because of the penalties and taxes associated with a 401k withdrawal your benefit is likely to be limited. Plus you need the 401k funds for your retirement. In 14 years this money will be a large part fo the quality of life you experience in your post-work years.

Your mortgage balance is small and combined with your tax deduction should not be too large a burden. I would keep the mortgage and stick with your 401k account and wait for the markets to recover, which they undoubtedly will do eventually.

By the way, a Roth IRA is only a account. It cannot be 'safe'. Only the investments you choose to invest inside that IRA can be safe or (not safe) as the case may be..


Your situation can be overwhelming to handle alone. You should look for some help and guidance for dealing with creditors to give you some breathing room to get back on your feet. The internet has many sites (try googling something like "consumer credit counseling" or visit There's help out there. You jnust need to not give up and find some help.


I would sell your gold and silver and book your gains and be happy with them. There is no expectation for return from these commodities expect that which derives from supply and demand. The long term return from gold and silver is terrible, about the same as inflation. They are short-term speculative investments for money you can afford to lose.

As for GE or any other stock I cannot help you since forecasting the return from individual stocks is not possible with enough reliability to compensate for the risk of large losses (see GE price from 2000 to 2003).

As for stabilizing the economy it is my opinion that the bailout bill will not work soon enough (or possibly at all) to kick start lending again. Some folks think the govt should focus on a smaller group of financial institutions that can be saved and inject cash directly into them so they can start lending right away. The idea being that this would cost much less than $700 billion and we'd see whether it works much sooner. I guess we'll have to wait and see.


Money market funds are NOT covered by FDIC. Your credit union savings, checking and CD options are all covered by FDIC, up to $100k per individual account holder. To get $250k worth of coverage you'd need to split the money into multiple CD's from different issuing banks (this can be done within one Fidelity brokerage account, by the way). Depending on the bank or credit union's risk of insolvency (hard to tell, admittedly) money market funds may be as safe an option. Check out the Fidelity notices about their money market funds for more information.


I would not withdraw money from a 401k to pay off credit card debt since you will pay income tax and deplete your retirement savings. You should consider other means of paying off those cards. Spending a little less money each month is the first thing to look at. I know its the harder course but its the smart one.


Yes, you're right that one should always try to defer into your 401(k) at least as much as you need to capture the full employer matching amounts (when they exist). After you've saved into a 401k then you should consider IRAs, especially Roth IRA's if you're younger.

After all tax-deferred saving accounts have been utilized, then you would save into a taxable accounts. The main reason to save in taxable accounts is when your savings goals are sooner than retirement. Retirement account levy penalties for withdrawals prior to age 59 1/2. Taxable accounts can be used to save for major purchase goals such as houses, vacation homes, weddings, private school or even college. An emergency cash fund is another reason to save in a taxable account.


I'm hoping that your large amount of student loan debt is due to the fact you are now qualified to earn serious money and therefore have a decent chance of earning your way out of this debt. As for bankruptcy, I believe the recent changes in the bankruptcy laws limit severely the ability to discharge debts in general (e.g. credit card) and other debt not at all (e.g. IRS debt and student loan debt). Check with an attorney after doing some Google searches.


Investing in individual stocks is fraught with risk in the best of times. Investing in individual stocks now is definitely not recommended for anything but speculative funds. I repeat, do not invest in individual stocks now with any money you can't afford to lose significant amounts of.

Even if you choose to gamble with a few stocks, I would choose at least 10, all from different areas (sectors) of the market and invest equally among them. That way you might limit your losses should your picks not work out. I personally would stick with exchange-traded funds (ETFs) or other diversified mutual funds.


As a 74 year old investor I would advise you to not concentrate your IRA investments into solely High-Yield corporate bonds. Such bonds have higher yields because they're RISKIER than most other bonds. IN the current bond market environment I wouldn't be in any bonds except those from the US Government (short-term bills and notes).


Your son's college funds (savings, 529, etc) should not be exposed to much risk since he is currently in college and therefore the money needs to be liquid. I would reduce the risk in his education portfolio to LESS than 50-50 stocks / bonds. This will prevent you from recovering the recent losses but it will help preserve the money remaining for his last 2 years.


Losing a sum such as $40,000 is distressing. As you may suspect you're not alone as many investors are suffering similarly. Being some 15-25 years before the traditional retirement date I would counsel you to ride out this terrible period in the market by staying in your investment allocation. Now, this assumes you were invested in a diversified portfolio appropriate for your retirement goals. The alternative is to reduce your risk but that either a) removes the possibility of participating sufficiently in the future recovery, or b) having to decide the timing or re-entering the markets in the future. Timing the market movements is a losing game, as you probably know.


From your question it sounds as though you're already retired, or at least separated from your hospital job. If so, then rolling your previous employer's 401k or 403b into an IRA is a good strategy to open up your investing options beyond the Fidelity plan's choices. The same can be said for the TIAA- CREF plan. It would important however to get some sound advice about specific planning for your retirement goals, so you can get some guidance about which investments are most appropriate for these retirement assets.


Anyone's 401k savings, however small, are important. Buying gold would be a bad idea on two levels: first, while gold may (or may not) hold its value in the short term, it is a highly speculative investment and therefore not very appropriate for retirement savings; second, to buy gold you'd have to cash out your 401k and therefore take a tax hit.