Read­ers want to know about fidu­ciary stan­dard and more

South Florida Sun-Sentinel (Sunday) - - Money - Jill Sch­lesinger Jill on Money Jill Sch­lesinger, CFP, is a CBS News busi­ness an­a­lyst. A former op­tions trader and CIO of an in­vest­ment ad­vi­sory firm, she wel­comes com­ments and ques­tions at [email protected]­lon­money.com.

I am ap­pre­cia­tive that so many of you have taken the time to ask fi­nan­cial ques­tions and make com­ments about my col­umns. Please keep ’em com­ing! I’m clear­ing out the in­box and an­swer­ing some of the most fre­quently asked ques­tions.

Q: I cur­rently work with a fi­nan­cial guy at a ma­jor bank, but I’m pretty sure he’s a sales­man, not a fidu­ciary. I plan to move to in­dex funds, but would like to con­sult with a fidu­ciary ad­viser be­fore mak­ing any al­lo­ca­tion de­ci­sions. Where do I start?

A: The eas­i­est thing to do is to ask him whether or not he is act­ing as a fidu­ciary, mean­ing that he is putting your best in­ter­est be­fore his or the bank's in­ter­ests. If not, you can eas­ily find pro­fes­sion­als who do ad­here to the fidu­ciary stan­dard. The Cer­ti­fied Fi­nan­cial Plan­ner Board of Stan­dards has said that as of Oct. 1, 2019, CFP pro­fes­sion­als must act in the best in­ter­est (i.e. ad­here to the fidu­ciary stan­dard) of the client at all times when pro­vid­ing fi­nan­cial ad­vice.

Un­til then, you can ask whether or not any prospec­tive ad­viser ad­heres to the stan­dard at all times — many CFPs do. You can find a CFP at lets­makea­plan.org.

Al­ter­na­tively, you can work with a mem­ber of the Na­tional As­so­ci­a­tion of Per­sonal Fi­nan­cial Ad­vi­sors (NAPFA.org), who al­ready ad­heres to the fidu­ciary stan­dard at all times and does not col­lect com­mis­sions.

And if you are only seek­ing port­fo­lio guid­ance, you may want to check out the myr­iad on­line au­to­matic plat­forms, like Bet­ter­ment, Wealth­front and Van­guard.

Q: Would you sug­gest tak­ing money that we have in the bank ac­count to pay off a stu­dent loan with a 1.7 per­cent in­ter­est rate and two car loans — one at 2.7 per­cent and the other at 0.9 per­cent? Or should I pay off my house or busi­ness loans, where the in­ter­est rates range from 2 to 4 per­cent? I need guid­ance!

A: Pre­sum­ing that the money in the bank is in ex­cess of your emer­gency re­serve needs (that’s 6 to 12 months of liv­ing ex­penses) and that you are earn­ing less than 1.7 per­cent on the money, then you may want to pay off the higher in­ter­est car loan and the stu­dent loan.

Pay­ing off any­thing else would re­quire a more de­tailed ac­count­ing of what else is go­ing on in your fi­nan­cial life. For ex­am­ple, if you are sit­ting atop a pile of money in the bank that is earn­ing very lit­tle, there's a case to be made for pay­ing off ei­ther the mort­gage or the busi­ness loan, sim­ply for peace of mind.

Con­versely, I would not want you to spend ev­ery avail­able liq­uid dol­lar to pay down debt, just for the sake of get­ting rid of it.

Q: My hus­band just turned 62 and due to un­fore­seen health is­sues, we have ac­cu­mu­lated $7,000 in med­i­cal bills, some of which have gone into col­lec­tions. We live on his small pen­sion and So­cial Se­cu­rity (about $2k per month) and he has a 401(k) that’s worth $130,000.

Our house is val­ued at $170,000 and we still have an $89,000 mort­gage, with 24 years to go. Should he pull money out of the 401(k) to pay off the med­i­cal bills?

A: In a word, yes. With­draw­ing the $7,000 from the re­tire­ment ac­count will re­sult in an ad­di­tional $7,000 of in­come this year, but even with that amount, you would re­main within the 12 per­cent tax bracket (for mar­ried cou­ples, the range is $19,051 to $77,400).

Re­liev­ing your­selves of the col­lec­tions fi­asco is well worth the tax bill.

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