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Jewish World Review August 4, 1999 /22 Av 5759

Bruce Williams

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Econophone

Bank IRA the lowest-risk option


http://www.jewishworldreview.com -- DEAR BRUCE: I work for a profitable grocery chain and I have participated in their 401(k) program. When I mentioned this to my bank, they told me that when it comes time for me to retire, the bank can arrange for my 401(k) money to be rolled into an IRA. Is this good advice? I have never understood IRAs, and would like more information on them. -- B.S., via e-mail

DEAR B.S.: You certainly have the option of allowing your bank to roll over your 401(k) upon retirement. However, you should know that most banks take a very conservative view of investments and it would probably pay to see if you could stay with the company plan if their track record is decent. It isn't necessary, in most cases, to pull the money out when you retire. If you must, you can roll it into an IRA with a choice of custodians. A bank is certainly one, and a brokerage house another. You have to determine what your tolerance for risk is. In the event that you are a bit skittish about anything that isn't absolutely safe, then the bank might be the place to be. It seems to me if you are willing to settle for the long term and the approximate 5 percent the bank will offer you, why not think about tax-free municipal bonds? Even though your tax liability may be low, this would still give you a little bit of an advantage over a taxable CD or something similar.

DEAR BRUCE: After a lot of soul-searching, my wife and I decided to put our home up for sale, rationalizing that it was just to big for us to maintain. Our family is mostly grown, and we could live more conservatively and spend considerably less money by downsizing. Happily, at least at the time, we found a buyer through the real-estate agent who was willing to pay the listed price. We accepted a deposit and the buyer immediately sought and was granted a mortgage commitment. After about a month, my wife and I each noticed the other acting a bit on the down side, and after a discussion, we both found we were regretting the decision to sell the house. The liabilities that I described aside, it had been our home for many years, so we decided that we would like to stay. We contacted the agent and explained to them that we would like to put the transaction aside, and we would have the earnest money returned to the prospective buyer. The agent became very testy and said that we could not do this. I had signed a contract to sell it, and I would have to meet the terms of that contract. If I tried to avoid the sale in any way, the agent would hold me responsible for his commission. His contention is that it was owed when he found a buyer, and that the buyer, in turn, could sue me for damages on a number of different issues. I am very perplexed. Where do I go from here? -- L.T. Phoenix, Ariz.

DEAR L.T.: What the agent has told you is correct. He has earned a commission. The buyer, in turn, may have suffered serious damages. He may have already sold his previous residence, expended monies for credit checks and perhaps a survey of the property, plus all of the fees that are normal for a real estate transaction. While I can appreciate your remorse, unless you are prepared to spend a rather substantial amount of money, you may have to proceed with your original plan. Hopefully, in the long run that will prove a better way to go.

DEAR BRUCE: We are first-time home buyers. We found a house that we are very pleased with, negotiated what we feel is a good price and applied for a first-time subsidized home mortgage from our state. The day before we were to close, we suddenly found that we were not eligible for this mortgage at the very low rate, because we earned too much money. Just before the closing my husband received a good-sized annual bonus. This, added to our combined incomes, put us over the edge. Had we known this, he would have told his boss not to give him the bonus until after the mortgage had closed. Fortunately, we were able to get another mortgage. What we would like to know is: Is there anyone we could go after? If they had told us ahead of time about the income limitations, we would have acted differently. Please do not mention my state, as I am considering legal action against them. -- READER

DEAR READER: I don't see how you have a leg to stand on. It is public information as to what limitations are placed on subsidy programs. Realistically, if you have passed that point do you really think that you are deserving of subsidy? I think not. Be that as it may, it seems to me that you should count your blessings that you are doing well and be thankful that you did get another mortgage in a hurry, so that you could purchase your home and be on even footing with the rest of us.



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

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!
07/27/99: If it ain't broke...

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