To the new members who have joined these past few weeks – welcome! I’m Carla Dearing, CEO of SUM180, and for my blog post this week I’d like to try something a little different.

Instead of sharing a advice on a specific topic, I’d like to start an AMA (Ask Me Anything) thread. This means you can ask me any question you want. It can be on any financial topic, about SUM180 in particular, or even about my background – anything. Let’s chat!

Please post your question as a comment below and I’ll respond asap!

3-28-2016 4-42-19 PM

8 thoughts on “AMA: Ask me anything!”

  1. Okay, here goes. I recently received a small cash inheritance – about $10K – and I’m not sure what to do with it. I’m 49, recently divorced, with a decent income but not a lot of assets or retirement savings put away. What’s the best way to put the $10K to good use (to prepare for my future)?

    1. Hi Yvette –

      Thanks for your question. We would need to know more about your overall financial picture to give you the best advice on what to do with this money. For instance, it may be that you need to pay down some debt or put in place some insurance, both of which would be a priority. However, assuming that this money is free for savings and investment, we can give you some possible next steps to consider.

      First, you need “cash reserves” of approximately six months of your monthly expenses to cover unexpected expenses. So if you don’t have that already set aside, put some or all of this money in a readily accessible account to cover that.

      With what is leftover, max out every kind of retirement account you qualify for – your employer account at work or your own IRA or Roth IRA. Retirement accounts are the very best ways to save because you are able to put more money away since it is pretax and so more can be working for you over time. High quality, low cost providers like Vanguard, Fidelity or T. Rowe Price, can give you the specifics of what type of accounts you qualify for and how much you can put in each type of account.

      If all of that is already done, start or add to an investment portfolio with these funds, also with a high quality, low cost provider.

      Let us know how it is going?

    1. Thanks, Doreen. I think a lot of people have this question. I can provide some insight for you on your question based on the information you’ve given, but specific advice for you would require knowing more about your overall financial picture.

      First, term insurance is for when you have someone to protect. For instance, it should be put in place when you are married and do not have enough savings/investments to support your spouse’s living expenses if you die. You should determine how much support is needed annually, for how many years, and that will be the amount of the policy you should put in place, and the term of the policy is how long you think the protection will need to last. Be sure to cancel your term insurance when other assets have grown to where the term insurance is no longer needed.

      Another example is that term insurance should be put in place when you have children, if you do not have enough savings/investments to support their living expenses until they grow up if you die. Again here, you should determine how much support is needed annually, for how many years, and that will be the amount of the policy you should put in place, and the term of the policy is how long you think the protection will need to last. It is a good idea to ensure the policy term covers children well through college, so a 20 or 30 year policy is best. It can always be cancelled when it is no longer needed.

      Term insurance is also used to eliminate a debt you want cancelled upon your death. For example, if you want to be sure your home is paid off when you die, term insurance can be structured to accomplish that. Resolving business debt would be another use of term insurance.

      If you don’t have someone that you need to support or a debt to eliminate if you die, you probably don’t need term insurance.

      As for whole life, term insurance is usually better and less expense for addressing the need than whole life. The extra premium you pay for whole life, with the expectation of having a cash value at the time that it is cancelled, is generally higher than just taking the extra funds and investment them in a low cost investment account with a quality money management company, like a Vanguard, Fidelity or T. Rowe Price.

      Hope that helps as a start! Let us know how it goes?

    1. Hi Cara. Here’s what I would tell this member:
      – For a full service investment adviser, you should not have to pay more than 1% per year.
      – That adviser could/should pay for themselves by giving you access to low cost, high quality investments and/or helping you avoid extra taxes at year end.
      – You should not be paying for any commissions on top of fees with this type of adviser.

  2. My husband has started to withdraw from his IRA as part of our retirement plan. It was always considered “safe” to withdraw at a rate of 4%. Is this still considered the norm? Our returns are so far ahead of this withdrawal so it’s comfortable but what are experts suggesting?

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