Financial Planning FAQ
Questions and Answers:Finding the best Financial Planning services are very difficult and we provide you with information and a portal to making that decision easy. We at InfoFAQ have asked the experts some frequently asked questions about finding Financial Planning services online.
Frequently Asked Questions About Financial Planning Online
Is there any way to eliminate the federal and state penalty for withdrawing from your IRA prior to age 59 ½?Many employees are terminated from employment and need this emergency cash flow. The answer is yes! The IRS makes this possible under Section 72-T. It is called “substantially equal periodic payments”. You agree to take regular payments of the exact same amount for at least 5 years or until age 59 ½, whichever is longer. While you pay tax on the IRA withdrawal, the withdrawal penalties are waived.
Is a shorter term bond safer than a long term bond?Yes. With an 8% coupon, if interest rates fall by one percentage point, the 5 year bond loses 4% in market value. However, the 20 year bond loses 9.2%. With a fall of two percentage points in interest rates, the 5 year bond falls 7.7% while the 20 year bond drops 17.2% in market value.
Are the purchase of Class “B” mutual fund shares ever appropriate for an investor?No, never! Class “B” mutual funds are often marketed with the feature of “no load” to the investor. What is not disclosed is that the Mutual Fund company advances the commission to the stockbroker and is paid back by DOUBLING the annual management fee in Class “B” mutual funds compared to Class “A” funds. Then the investor is prevented from circumventing this higher annual charge by an ongoing back-end load with the product. Liquidity is decimated with a 5 to 6 year declining surrender charge with Class “B” shares. Depending upon the time horizon of the investor, Class “A” or Class “C” shares are always superior to Class “B” shares.
Are Junk Bonds ever appropriate for an investor?After all, they were up over 28% for 2003. Perhaps, but consider “Junk” not “Trash”! Trash bonds are those that have been downgraded by Standard & Poors and Moody’s below investment grade status due to credit problems. Junk bonds also include non-rated bonds whereby the issuing company prefers to pay the investor an extra ¼ to ½ point per year rather than secure a rating at a cost of between $400,000 and $500,000 from the above-named agencies. Literally, Sears & Roebuck, Dr. Pepper and 7-Up Bottling Co. have issued un-rated bonds in the past and offer a good bang-for-the-buck to the investor. Having said this, limit “junk” bond purchases to no more than 15% of your investment portfolio.
Is there any stock market index that mirrors the entire stock market?
No, not entirely. However, the Wilshire 5000 Index includes 99% of the stock market and is widely accepted as the most inclusive stock market index. Then, the Russell 3000 includes approximately 98% of the U.S. equity market.
Consumer Safety and Information
Financial Planner - www.consumeraction.gov
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My Money - www.csrees.usda.gov
Tips and discussions about financial planning and consumer decisions.
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