Q: My husband turned 70 ½ years old on March 7th of this year, but unexpectedly died in June. I understand that IRS rules would have required him to take a required minimum distribution from his retirement accounts this year. I am the sole beneficiary of his IRA, but I am only 57 years old. Do I need still need to start taking RMD’s this year on the inherited IRA?
Q: My wife and I bought our first home a few years ago. The home has gone up in value, so now we have some pretty good equity in our home. What do you think about using our home equity to buy stocks?
A: Congratulations on the timely purchase of your home. I am glad to see that rising home values have given your wealth a solid boost. Many first-time home buyers find themselves in a similar situation. The stock market rally has many of them asking the same question.
Q: My husband and I recently took a vacation to Mexico. While there, we attended a presentation for a vacation club. We didn’t buy, but the presentation sounded good and we have been thinking about going back. Are vacation clubs a good deal?
A: The vacation club is just another version of the more familiar timeshare concept. Before you buy a membership in a vacation club or a timeshare, do yourself a favor and take a timeout. There is a lot you need to consider before making such a purchase.
Q: I am frustrated. I was told to diversify my holdings using index funds, so I did. I was told to put part of my investments in foreign stocks, so I did that too. Now I find that my portfolio isn’t keeping up with the market. If diversification is such a great idea, why does it hurt so much?
A: If you diversified your portfolio hoping it would boost your investment performance, I can understand why you might be frustrated. Though it can sometimes help with performance, diversification is mostly an exercise in risk management.
Q: Our adult daughter has Down’s Syndrome. We have been thinking of setting up a special needs trust to help provide for her care. Should we open an ABLE account, as well?
A: Financial planning for individuals with special needs poses unique challenges. The goal is to help an individual receive needed support from family and friends without losing government benefits. Special needs trusts and ABLE accounts can help you do this.
Special needs trusts are very flexible and come in three varieties: first-party, third-party, and pooled. Given your circumstances, I suspect you are probably considering a third-party trust.