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Jewish World Review August 1, 2000 /29 Tamuz, 5760

Bruce Williams

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Consumer Reports


Cash in your savings bonds


http://www.jewishworldreview.com -- DEAR BRUCE: We have two daughters and have been buying Series E bonds for their college education since they were born. They are now 9 and 14. We have put aside $200 a month per child. Should we continue to buy bonds, or should we be saving in a different way? The bonds are in their names. -- M.J., via e-mail

DEAR M.J.: You certainly have shown discipline and diligence in investing so methodically for your children. However it would be difficult to have chosen a worse vehicle. Savings bonds are long-term investments that pay short-term interest. There are so many other ways in which you could do much better. If I were in your position, I would contact a bank and have a schedule made up of when these bonds have their next interest posting, and cash them as soon as the interest is posted. A good mutual fund, a decent selection of equities, almost anything would be better than the savings bonds. I know that this must sound unpatriotic, but the truth is the truth.

Savings bonds, like some consumer products, are riding on a reputation earned many years ago. This reputation is undeserved today.

DEAR BRUCE: I have approximately $175,000 and would like to receive between $20,000 and $25,000 in interest annually. I never want to touch the principal. What can you suggest? -- R.M., via e-mail DEAR R.M.: Given your requirement about not touching any of the principal, it looks like you are going to need somewhere in the range of 15-percent return, depending on the level you reach. Not an easy task, but not too difficult in today's world.

But you must invest in corporate growth. There is no way that you can achieve this kind of return without taking at least some risk. I am sure that you realize that company stocks can and do go down as well as up. While this loss might only be short-term, it would certainly reduce your principal. While I think that your goal is achievable, you will be obliged to have a fingernail-biting day or two in the process.

DEAR BRUCE: My husband and I are retired and have about $900,000 invested in individual stocks and mutual funds. When my husband turns 65 soon, a disability check of $30,000 per year that he receives will end. What is the best way to generate this amount for our investments to replace that income? We would like to preserve the principal and continued growth in our investments if possible. -- D.A., via e-mail

DEAR D.A.: Well $30,000 from $900,000 is a no-brainer. You could receive $45,000 in income by buying municipal general obligation bonds, and the money would be totally tax-free. If you chose to invest more aggressively, you would do better. In addition, I am sure that you have considered that your husband will now be eligible for Social Security. Your goals are almost impossible not to meet, and you'll still have a fair amount of appreciation happening in your account. I am sure that you are trying to preserve your money for your children, but why not spring for a little luxury for you and your husband?



Send your questions to JWR contributor Bruce Williams by clicking here. (Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.) Interested in buying or selling a house? Let Bruce Williams' "House Smart" be your guide. (Sales of the book help fund JWR).

Up

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08/03/99: Reverse mortgages good for the elderly
08/02/99: Get the survey BEFORE you buy the house!
07/28/99: Get a lawyer -- it's worth it!
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