Smart Money: Roth accounts help build tax-free nest egg

Dear Bruce: At age 51, does it make sense to open a Roth individual retirement account? I plan to retire in 12 years. -G.H., via e-mail

Dear G.H.: If you have no need for the money for the next 12 years, why not? Since you are older than 50, you can put in a maximum of $6,000 a year. Investing this money for 12 years, while it is a lot less than if you had started when the Roth was established a little more than 10 years ago, you would still have a nice nest egg, tax-free. You can leave it there as long as you wish. In other words, if you have other retirement monies that you can draw upon, use them first and leave the money in the Roth IRA. It's what I consider to be the best tax break that America offers.

Seek attorney to divvy up assets

Dear Bruce: If a spouse receives an inheritance, is it considered community property and shared with the other spouse? -S.T., Houston, Texas

Dear S.T.: State laws will vary. But generally, if the inheritance is received while married, this becomes part of community property and in the event of a breakup, will be subject to some distribution. In some states, it's equal and some states equitable. If you are in a situation where an inheritance is coming and you're considering a break-up, by all means see an attorney to reduce your exposure.

Protect mom's assets with CDs

Dear Bruce: My mom, who is 82 years old, recently sold her house and moved into a senior community. What is the best way for her to invest the money from the house, which also will give her a monthly allowance? -Kay, Washington

Dear Kay: Things get complicated as soon as you put the word "best" in the equation. For a person who is your mom's age, you want little to no risk. That reduces your options. At this writing, longer-term certificates of deposit (with terms of more than one year) are paying in excess of 4 percent. That is probably the best way to go. You may buy a Federal Deposit Insurance Corp.-insured CD at any bank, which will cover $250,000. If the amount invested exceeds $250,000, use another bank and get another $250,000 in coverage.

Own up to tax error

Dear Bruce: I am good friends with my attorney. He has done several favors for me, one of which is to prepare my income tax at a minimal charge. I changed preparers this year and he discovered that some things with regard to my rental property had been administered improperly. It could result in me owing more money to the Internal Revenue Service. Should I just say nothing and see whether they catch it? I feel that, sooner or later, it's going to be noticed, especially now that I have a new preparer. What should I do? -Reader, via e-mail

Dear Reader: You need to contact the IRS before they catch on. I would have the accountant prepare an amended return for the years in question. You are far better advised to correct these things yourself than to have the IRS discover them. They take a kinder view of the person who just made a simple mistake than of someone who took erroneous deductions.

Market condition presents investment opportunities

Dear Bruce: I am 60 years old and would like to retire in two years. I inherited $200,000 from my father and would like to know the best way to invest the money. -S.L., via e-mail

Dear S.L.: There is unfortunately no "best way" that I can suggest. The market is in a somewhat tumultuous state, as I'm sure you know. Since you're a buyer, however, there are some very good deals out there as long as you're willing to sit on them for a while. Two years may not be a long-enough period. If you have other assets apart from your father's inheritance, you can use them to take advantage of some substantial opportunities in the marketplace for appreciable growth. You should seek the services of a competent broker to help you make these decisions.

Bruce Williams is a national radio talk-show host and syndicated columnist based in Florida. He can be reached at bruce@brucewilliams.com.

[[In-content Ad]]