Make Money - Retirement

Question: I just retired from my company and am considering my options for the funds I have in my 401K. What would you suggest that I do to make sure I have what I need to meet my ongoing financial obligations?

Dr. Gala's Response: The answer to that question would be different for just about everyone. There are so many factors to consider including your current available income and obligations, your age, your other available assets, and then, of course, the amount you have accumulated in your retirement plan. For some, a self-directed and managed IRA might make sense. Or, you might opt to use the services of an investment advisor to manage the IRA. For others, an annuity would provide the security and peace of mind that you want in retirement. For virtually every person in your situation, I would suggest having a financial plan prepared by someone that is independent and unbiased. Many retirees make mistakes early on that are difficult to compensate for. You’ve worked hard for many years to be able to retire comfortably. Now is not the time to cut corners!

Make Money - 401K Plan

Question: I am 50 years old and have most of my retirement assets in my employer-sponsored 401K plan. How would you suggest I protect myself from another downturn similar to 2001?

Dr. Gala's Response: You are not alone. There are billions of dollars held in employer-sponsored accounts. Have you researched your available investment options? By doing that, you can determine which funds best match your objectives. You would want to know much more than just performance history. The fund rating and current management are important considerations. If you aren’t comfortable doing your own research, some financial planners will do the work for you for an advisory fee. Your allocation should be evaluated at least quarterly. Even a small performance improvement can more than pay for the fees charged by your advisor. Typically, I see very little attention paid to this potentially huge component of a person’s savings for retirement.

Make Money - Reverse Mortgage

Question: I just retired and live in a small home that my children will not be interested in after my death. I would like to know more about a reverse mortgage. Am I a good candidate?

Dr. Gala's Response: One of the first questions I ask someone considering a reverse mortgage is whether keeping the home after you’re gone is important. You’ve already answered that question. While your heirs can elect to keep the home, most likely the property would transfer to the lender. Most people have spent their lifetimes working to pay off their home to own it “free and clear”. For those people, the reverse mortgage doesn’t seem to make sense. You have to think “outside the box”. There are many factors to take into consideration, but the bottom line is that a reverse mortgage allows you to use the equity in your home without having to make a mortgage payment. It puts you in control of how your equity will be used.

Make Money - Refinancing an ARM Mortgage

Question: I am 2 years into a 5-year ARM. Interest rates seem to be going up, should I wait to refinance or should I be looking into this now?

Dr. Gala's Response: You are correct, interest rates have been rising - 15 times since June 2004. With any market, including interest rates, there are cycles. Eventually rates will stabilize and most likely even decrease. Since we don't have a reliable crystal ball, we can only deal with the known. You should review your paperwork and determine how much your payments can increase in years 6 and beyond. Another serious consideration is your ability to obtain suitable financing when the time comes. Managing credit scores is a critical component in any financing decision. When I work with someone, the first thing I do is review their credit including their FICO scores. If you believe there is a risk that your scores will go down in the next few years, then that would help make the decision to refinance sooner rather than later. Can you continue to make all of your payments timely? While the costs of refinancing are significant, if your credit scores decline your options will be restricted and your hands will be tied.