FINANCIALconnection
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the 401(k)
By Suze Orman
When I retired from the Veterans Administration, I left my employer-matching-contri-bution account in place. I went to another
employer and started an employer-con-tributed 401(k) account. Now I am with
a new employer that does not have a com-pany-matching contribution. I will be 70½ in
February and will need to remove my money
totaling approximately $40,000. Where do I
need to place this money?
MARC ROYCE
—A. Garcia
Los Angeles, CA
FIRST, A FEW things about required minimum dis-
tributions (RMDs). The general rule is that you
must start taking RMDs by April 1 of the year after
you turn 70½. If you are still working past age 70½
you don’t need to start RMDs from a 401(k) until
you retire, though IRA RMDS are required.
But here’s another twist: In December 2008
Congress passed a law that suspends RMDs for
2009; if you don’t need the money to live on, the IRS
is not going to insist that you take any RMDs in
2009. So for a multitude of reasons you may not
need to take RMDs this year from your 401(k).
Now, that said, if you are asking what to do
because an ex-employer is forcing you to quit the
401(k), then a smart move is to roll over your 401(k)
account into what is called an IRA rollover at a discount brokerage or no-load mutual fund company.
There’s no tax bill when you do a rollover, and rather
than be confined to the investment choices offered
inside a 401(k) you can pick and choose the best
investments for your goals.
Because of your age the bulk of your assets
belong in low-risk cash, bonds or bank certificates
of deposit. You may want to keep a small portion,
maybe 10 percent or so, invested in high-yielding
dividend-paying stocks or exchange-traded funds
(ETFs), where the dividend is safe, so a portion of
your portfolio has the chance for inflation-beating
gains. Be careful, though. Money that you will need
in less than five to 10 years does not belong in the
stock market.
My husband has a credit card for his small
business. The issuer doubled the card’s inter-
est rate, then doubled it again. We’ve never
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Also:
Credit-card rates
Credit-union
coverage
defaulted or paid late. Is there anything we
can do to get the company to lower the rate?
—P. Manley
Independence, MO
WELCOME TO THE new reality of credit cards.
Because of the financial crisis, the recession and the
rising unemployment rate, credit-card companies
have realized there’s a big risk that even good clients
like you might run into trouble continuing to pay
their bills. The big danger sign is if you are paying
only the minimum amount due each month or if
your balance is growing even if your payments are
on time. Credit-card companies interpret that as
meaning you are already stretched thin and could
have problems if your business runs into recession
trouble. So, in their infinite wisdom, they jack up
your interest rate because you are now a bigger risk.
I know you did nothing different. The problem
is that the credit-card companies changed the rules
on you. It is going to be tough to get a better rate. To
boost your odds of working out a deal, first make it
a priority to reduce the balance on your card. Then,
assuming you have a FICO credit score of at least
760, call up the card company, point out that you
have indeed shored up your account and see if they
will be reasonable about reducing the rate.
I’m 65. I have some money in a local credit
union. This credit union is not insured by the
FDIC. Would you consider my money safe?
—G. Harrington
Coronado, CA
LET’S BE clear here: Credit unions have never been
insured by the FDIC. But they can have the same
level of federal insurance if they participate in the
National Credit Union Share Insurance Fund
(NCUSIF), which is run by the National Credit
Union Administration (NCUA). The NCUSIF works
just like FDIC bank insurance: Your money is backed
by the full faith and credit of the U.S. government.
So check to see if your credit union is insured by
the NCUA. You can ask customer service or check a
recent statement (the NCUA logo is typically prominently displayed). Or you can check online at www.
ncua.gov/indexdata1.html.
You also need to understand the limits of
NCUSIF coverage. In 2009 the general rule is
$250,000 per person per credit union, though you
can have more coverage depending on the types of
accounts you have. The $250,000 is just for 2009; it
will revert to $100,000 next year unless Congress acts
to extend the current higher level of insurance. C
