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Getting Personal
Getting Personal
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About the author
Christopher Farrell is economics editor of Marketplace Money, a nationally syndicated one-hour weekly personal finance show produced by American Public Media.
My wife and I are moving for a new job for her, and we're trying to plan our finances before we get there. She will have a job, but I don't have anything lined up yet; when she fills out her W-4, does it make sense to try to figure out the right number of deductions, or should we calculate her Federal tax from the published rates, claim no deductions, and have the calculated amount withheld?
I am in my mid-twenties. My wife and I are paying for a house and a car. We have a 7.5% loan on the car and no excess credit card debt. We are about to receive a $20,000 severance check. Do I pay off the car, or buy into a mutual fund that requires a larger buyin amount? Do you have any thoughts or suggestions?
It is distressing to hear people given vague advice, and excruciatingly painful to hear incorrect statements by so individuals who know, or should know, better. The man from Lenoir North Carolina who asked about his company's 401 plan was classic. What he should have been toll was:
"It seems clear that you are a person who needs and will benefit greatly by establishing a relationship with a trusted advisor. Your employer has let you down by failing in his fidicuary responsibility to assure that when you choose the funds in your plan you are making an informed choice, meaning that regular education sessions should be scheduled for your benefit. But this is not unusual. You may be able to take an "inservice distribution" from your plan and roll it into an IRA. Ask some people you know, respect, and think are pretty smart if they have an advisor they feel comfortable recommending. Ideally get a couple of names and call them for an appointment. They will be glad to have you come in and discuss things, even if there is no immediate business for them. When you retire, which will likely be in a couple of years they will have earned the privilege of serving you for the rest of your life. It will not be free, but free is what got you where you are now, which is not a good place. On the otherhand, if they do their job properly the value they add with their service will more than offset the cost of their service".
That would have meant something to this man. Whewn he hiung up after the call he was right where he was before he called.
Take your role seriously.
Dear Chris,
Many people who participate in 401(k) plans do not know the difference between equities, fixed income, and other investments in their plans, nor do they realize that they're too heavily invested in company stock. Their benefits departments aren't educating them either. You advised a caller this morning (6/20/09) to lock in his principal when he rolls his 401(k) over upon retirement. As I listened to his questions, I think he revealed that he doesn't have a clue what that means. Perhaps your answers could be a little more fundamental when you suspect a listener doesn't know much about investments. Thank you for your usual expert advice.
Janet Goodsell
