Smart Money: Roth IRA provides long-term, tax-free savings venue

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Dear Bruce: I'm 24 and would like to save now for my future, but I don't know where to begin. |ret||ret||tab|

Should I see a financial planner? Are there any books that you can recommend? T.M., via e-mail|ret||ret||tab|

Dear T.M.: Recognizing that you want to start saving is a giant step forward. Currently, one of the neatest financial products available to someone your age is the Roth IRA. |ret||ret||tab|

You are allowed to put $3,000 of after-tax money into it, assuming you don't earn over the maximum. This money could work for you for as long as 50 years and never a penny to be paid in income tax. |ret||ret||tab|

If your employer offers a retirement program such as a 401(k) or something similar, take advantage of as much as you are able. |ret||ret||tab|

At the very least, if there is an employer-matching plan, take full advantage of it. |ret||ret||tab|

The trick is to start early. At your age, a relatively modest savings will pay huge dividends in the future. Congratulations on having the foresight. |ret||ret||tab|

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Dear Bruce: I am 66 years of age and have a portfolio of approximately $250,000. |ret||ret||tab|

My financial adviser sold me a life insurance policy for $150,000 three years ago. The premium is $6,760 a year. His theory is that the policy builds a value and, at the time of my death, will go to my children tax-free. The question is, would I be better off canceling the policy and leaving the money where I will have access to it in later years when I might need it? D.B., via e-mail|ret||ret||tab|

Dear D.B.: It appears that you are purchasing a whole life policy. You have no tax problems with regard to your estate in that you are not likely to exceed the $1 million mark. |ret||ret||tab|

This could be a very large amount of money over the 20-plus years that are statistically remaining to you. If you are concerned with having this money available to you given your age, I suggest you invest this money elsewhere. If leaving a larger estate is your concern, then that is another matter. I think that your adviser did you a disservice.|ret||ret||tab|

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Dear Bruce: I invested $7,500 into a 25-month CD, which matures in a couple of months. |ret||ret||tab|

It has not made what I thought it would as far as the interest goes. Can you advise me as to any investments that I should look into? - Cheryl, via e-mail|ret||ret||tab|

Dear Cheryl: I am surprised that the CD didn't perform the way you thought given that most CD interest is predetermined when entering into the contract.|ret||ret||tab|

I suppose there might be some kind of floating arrangement out there. The problem with CDs is a very low return, particularly for the short term. If this is money that you do not want to risk and nor tie up for a little longer period of time, there are some FDIC-insured savings which you will find listed in your newspaper that will give you approximately 5 percent or better return. While this is not princely, it is guaranteed and that apparently is what you are seeking.|ret||ret||tab|

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Dear Bruce: My wife and I have a policy that covers both of our lives with a face value of $10,000. |ret||ret||tab|

The premium has increased from the high $20s to $180 for me, and $109 for my wife. |ret||ret||tab|

We have prepaid all of our final expenses other than transporting our bodies from Las Vegas to home. Is it necessary to continue to pay on this death policy? H.P., Las Vegas, Nev.|ret||ret||tab|

Dear H.P.: The questions to ask are: How important is that $10,000 to the surviving spouse, and would you rather have the premiums in your pocket to spend now or leave a little larger estate for your spouse? You failed to mention what other monies you have, so it's difficult to make a specific determination whether you should keep the insurance or let it go. |ret||ret||tab|

Obviously, you will have to decide which is more important to you. Further, the way the premium has escalated, I take it that this is term insurance. |ret||ret||tab|

Unless converted, it may go away altogether one of these days. You should investigate this possibility and find out what options are available in terms of conversion should you wish to continue.|ret||ret||tab|

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Dear Bruce: I receive a weekly e-mail magazine that promotes investing in gold. The editors provide an awful lot of rationale. |ret||ret||tab|

How does one obtain gold in the United States, and is it a good investment? T.C., Grantsburg, Wis.|ret||ret||tab|

Dear T.C.: One does not invest in gold or any other precious metal. One speculates. A purchase requires that they be kept in a secure place, which involves a cost. Many times, you are obliged to pay state sales tax, although frequently you can buy it in a state other than your own and the sales tax can then be avoided. Coins such as Krugerands, Canadian gold, United States gold coins and others are available from dealers who charge a commission. If you had invested regularly in gold over the years, the likelihood is that you would be in the tank. At one time, gold spiked around $800 an ounce and then sank quickly to under $300 an ounce. Investing in gold-mining companies may be to your advantage. |ret||ret||tab|

I know of no one, unless they have a vested interest, who promotes the sale of gold coins or other ways to hold the metal, that seriously advise amateurs such as you or me to hold substantial quantities of metal.|ret||ret||tab|

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Dear Bruce: Recently you mentioned something about four-year corporate bonds at 6.5 percent.|ret||ret||tab|

I would like to get the name of one or two companies so that I can get more information about these bonds. F.J., via e-mail|ret||ret||tab|

Dear F.J.: Consult any good stockbroker. There are a number of sound corporations available that pay 6 percent to 7 percent. Any bond investment is subject to the credit-worthiness of the issuing company. A bond is simply a way to borrow money for a fixed period of time. If the company goes south, so does the money. It's my opinion, however, that there are many good, solid corporations out there that are worthy of your attention.|ret||ret||tab|

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