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Ask The Expert

About Richard Barrington, CFA & MoneyRates.com Senior Financial Analyst
Richard Barrington

Richard Barrington, CFA, is the primary spokesperson and personal finance expert for MoneyRates. He is a 20-year veteran of the financial industry, including having served for over a dozen years as a member of the Executive Committee of Manning & Napier Advisors, Inc. He earned his Chartered Financial Analyst designation in 1991 with the Association for Investment Management and Research (AIMR). Richard has written extensively on investment topics, including investments, money market accounts, certificates of deposit, and personal finance as it relates to retirement.

Richard has been quoted by numerous media publications such as The New York Times, The Wall Street Journal, and Pensions & Investments magazine.[...] Read more Richard can discuss economic and market history in detail and is well respected for his ability to relate to a broad audience from a personal financial standpoint. Richard approaches financial topics with an understanding that fresh perspectives are often more valuable than mainstream consensus. He has written for over 50 financial Web sites, such as Investopedia, Yahoo, MSN, Allbusiness, and Encarta, and is most sought after by members of the media for his niche expertise in these topics: Certificates of Deposit, Money Market and Savings Accounts, Saving for Retirement, Housing and Mortgage Meltdown, Interest rates, Investments, Macro Economic and Government Policy Issues, Historical Financial Events, Discerning Long Term Implications

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How can I keep getting paper bank statements?

February 25, 2015

| MoneyRates.com Senior Financial Analyst, CFA

Q: I like to keep meticulous records of my checking and savings accounts, but my bank is making it difficult. They cut my savings account statements back to quarterly, and now they charge a fee for getting paper statements. Also, the tellers no longer give me a receipt when I make a withdrawal. Can they do this?

A: The short answer is yes, but the question should not be limited to what the bank can do. You might find that the more satisfying question is what you can do about it.

What the bank can do. According to the Office of the Comptroller of the Currency, banks are permitted to do the things you mention. Banks do not have to provide statements more frequently than quarterly, unless there have been electronic funds transfers in or out of the account during the period. In addition, tellers are not obligated to provide paper receipts when you make a withdrawal.

What you are experiencing in this regard is a symptom of the ongoing cost-cutting the banking industry has conducted since the 2008 financial crisis. First, the collapse of the housing market sharply curtailed the mortgage lending business. Then, a spate of financial regulations squeezed profits on things like overdraft fees, debit card transaction fees from merchants and credit card rates. In particular, those overdraft and debit card fees were used by banks to help subsidize checking accounts, so banks were left to re-evaluate their strategies for those accounts.

In response, banks have been trying to make up for it by raising fees and cutting services. It sounds as though you have been on the short end of both of those responses.

What you can do. So, banks are doing what they can do to cut costs. What can you do to get the service you want?

Regarding withdrawals, you might consider starting to make them at an ATM rather than from a teller at a bank branch. ATMs are required to produce receipts when you make a withdrawal. Given that ATM locations are typically more convenient than bank branches, theoretically the only reason for continuing to walk into the branch is to get more personal service. However, if the result is that you are getting less of the service you want rather than more, you might want to just cut the teller out of your life altogether.

As for statement frequency, you might want to start monitoring your bank records online. This is especially helpful for the up-to-date information needed to keep close track of checking accounts, but for savings accounts it can let you check the status at any time and help you avoid statement fees.

Finally though, the ultimate response might be to shop around. Not all banks are responding as drastically to the need to cut costs, and you might find one that still provides the documentation you want without extra charges. Just remember, though, that those policies are subject to change at any time, so ultimately going online might be the longest-lasting solution.

Got a question about saving, investing or banking? MoneyRates.com invites you to submit your questions to its "Ask the Expert" feature. Just go to the MoneyRates.com home page and look for the "Ask the Expert" box on the lower left.

More from MoneyRates.com:

The best checking accounts: Why finding one is critical

A guide to CD, savings and money market accounts

American Express Bank: A review

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Pay down student loans or save for retirement?

February 5, 2015

| MoneyRates.com Senior Financial Analyst, CFA

Q: I graduated a few years ago with a lot of student debt. I've kept up with my payments, and thankfully now I'm starting to make more money. I'd like to get rid of my debt faster by starting to make bigger payments, but my parents are telling me I should use the extra income to start saving for retirement. Which is the smarter move?

A: Look at it this way: With the choices you have presented, you can't really lose. Either one is a responsible use of your growing income.

With that said, you do still have a choice to make, and there isn't one right answer to this that fits all situations. Rather it comes down to some specific numbers. Basically, you need to investigate whether you could earn more on the money by investing it for retirement than you could save on interest by paying off your student loans sooner.

Right now, the federal student loan interest rate for undergraduates is 4.66 percent. That dwarfs what savings accounts are paying these days, though it is less than the long-term expected return from the stock market. Also, you would gain a tax advantage by saving for retirement in a plan like a 401(k) or an IRA. Thus, if your interest rate is in the low-to-mid single digits, you have a good chance of coming out ahead by just making your scheduled loan payments, and putting the excess toward retirement.

On the other hand, depending on when you got your loan or whether some of it was borrowed for graduate school, your rate might be higher than 4.66 percent. The higher the interest rate is, the more you should lean toward paying the debt off faster. Note that if you have multiple loans, you should target the one with the highest rate for early payment first.

Not to complicate things, but there is a third option you should consider. This would be to use some of your spare income to build an emergency fund. This would be money you could access at any time in case the need arises. This kind of emergency money is typically invested in highly liquid vehicles such as savings accounts or money market accounts, and is kept outside of tax-advantaged retirement savings so you could tap into it without penalty.

Once you have built three to six months worth of expenses in your emergency savings account, you could move on to your plan to either pay down your student loans more quickly or start to save for retirement. Meanwhile, having that emergency savings to fall back on would give you some added flexibility to keep up with your obligations in case of a financial setback.

Got a question about saving, investing or banking? MoneyRates.com invites you to submit your questions to its "Ask the Expert" feature. Just go to the MoneyRates.com home page and look for the "Ask the Expert" box on the lower left.

More from MoneyRates.com:

The best checking accounts: Why finding one is critical

A guide to CD, savings and money market accounts

American Express Bank: A review

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Should I hire a professional to do my taxes?

January 30, 2015

| MoneyRates.com Senior Financial Analyst, CFA

Q: The past few years have been a bit stressful for taxes. I've tried doing them completely by myself, and I don't think I got back as much as I should have. I think I may want to get help from a tax accountant this year. Would you recommend that?

A: It has been about 30 years since there was a major reform of federal taxes, and what happens over time is that taxes tend to get increasingly complicated, as each year brings a few more tweaks. The IRS advises that e-filing can catch many common errors automatically, but this won't necessarily help you make all the right decisions about your taxes. A tax accountant or other professional tax preparer is a possible solution.

Here are some things to consider in deciding if this makes sense for you:

  1. Just how complicated is your particular tax situation? If your investments are limited to plain vanilla savings accounts, tax prep can be a simple matter, but if you have more exotic investments like real estate holdings or options, it might be more important to get a professional involved. This can also be the case if you have several deductions.
  2. What would you have to pay for professional tax preparation? Be sure to shop around to get competing quotes on this.
  3. How valuable is your time? It's not just the result of the tax return that's at stake -- there is also the amount of time you have to invest to do the taxes yourself. You might realize that the money you are saving is not worth the time you are putting in.
  4. What is your comfort level with tax rules? This is not just a question of making sure you don't overpay. It is also important to avoid making mistakes that could result in you incurring fines and penalties.

By the way, don't necessarily take not getting much money back as a sign that you are not preparing your taxes correctly. It may simply be a sign that your withholding is set at an efficient level. In fact, many people feel getting a refund is a bad sign, because it means they had too much withheld and could have been earning money on that interest in the meantime. Of course, given the low level of savings and money market rates, this is less of a big deal than it used to be.

There are firms that offer to give your returns a free look to see if they could do better for you. It might make sense for you to start with one of those reviews, to see if paying for tax prep is likely to be cost-efficient in your case.

Got a question about saving, investing or banking? MoneyRates.com invites you to submit your questions to its "Ask the Expert" feature. Just go to the MoneyRates.com home page and look for the "Ask the Expert" box on the lower left.

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Should I use my retirement savings to start a business?

January 28, 2015

| MoneyRates.com Senior Financial Analyst, CFA

Q: I'm retired and have my savings in a traditional IRA. I'm concerned that the stock market has gotten just too dangerous, while bonds are hardly paying anything and savings accounts even less. I'd like to go back to work so I can earn a little extra that way, but I'm having trouble finding a company that will hire someone my age. I'm thinking of taking my savings and going into business myself. I'm over 59 1/2, so I can take out the money without a tax penalty, and I'm healthy enough to keep working for the foreseeable future. It seems better than sitting by and watching my money do nothing. Any thoughts?

A: Well, your frustration with the lack of viable options in the current investment environment is understandable, but don't let that frustration prod you into doing something dangerous.

Here are some reasons why plowing your retirement savings into your own business might not be a good idea:

  1. You would give up some tax benefit by not keeping the money in your IRA longer. You correctly point out that because you are over 59 1/2, you would not incur the 10 percent penalty for early withdrawals. However, you would pay ordinary taxes on the amount withdrawn, and doing it all at once could kick you into a higher tax bracket. Also, your earnings on this money would no longer be able to compound on a tax-deferred basis.
  2. New businesses tend to be a drain on cash flow. You are concerned that your IRA investments are not producing enough income, but you need to think long and hard about how long it might be before a new business could do better. Start-ups tend to have negative rather than positive cash flow, so you could effectively go from low income to negative income.
  3. You would be putting all your nest eggs in one basket. Putting all your money in one venture would essentially leave you with a risky and non-diversified investment portfolio.
  4. There is no telling if you would be able to cash out when you are ready to retire for good. You say you are healthy enough to keep working, but eventually you are going to want or need to retire permanently. Private companies cannot just be cashed in on demand, the way publicly traded securities or savings accounts can.

Remember, while savings accounts and other insured deposits like CDs and money market accounts don't offer much in the way of interest these days, they do offer two things that are very important to retirees: security and liquidity. Keep that in mind before you opt for a riskier alternative.

Got a question about saving, investing or banking? MoneyRates.com invites you to submit your questions to its "Ask the Expert" feature. Just go to the MoneyRates.com home page and look for the "Ask the Expert" box on the lower left.

More from MoneyRates.com

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Should I sell before HARP expires?

January 16, 2015

| MoneyRates.com Senior Financial Analyst, CFA

Q: I have a second home that I'm looking to sell, but I've been holding onto it because home prices are rising. Still, I know that some of the recovery has been due to government programs, and that a major one of these programs, HARP, is set to expire this year. Should I get the house sold before this program runs out, or do you think the government will take other steps to boost the housing recovery?

A: While the Home Affordable Refinance Program (HARP) is slated to expire at the end of this year, there are other programs and conditions in place that favor homeowners.

HARP allows certain borrowers who owe more than their loan balances to refinance. With current mortgage rates exceptionally low, this allows those borrowers to take advantage of favorable refinance rates, and thus helps stem the tide of foreclosures. Thus, it does not create new demand for housing, but it does slow the supply of distressed properties on the market.

Beyond HARP, there are three things that favor home prices, all of which are at least in part the product of government initiatives:

  1. The FHA has slashed mortgage insurance premiums. The 50 basis point cut to these premiums has the same effect as a 50 basis point drop in mortgage rates.
  2. The Federal Finance Housing Agency (FHFA) has given the green light to 3 percent down payments. By allowing Fannie Mae and Freddie Mac to back these mortgages, the FHFA aims to make low down payment loans much more widely available.
  3. Mortgage rates remain near record lows. Remember, Federal Reserve policy helped current mortgage rates reach such low levels in the first place, and the Fed is being cautious about how it unwinds its low-interest-rate policies.

The first two items on the above list are relatively recent developments, demonstrating that even with the worst of the housing crisis now a few years behind them, government agencies are still actively finding ways to support the housing market. So, the biggest risk you may be taking by waiting to sell a house is economic risk.

From an economic standpoint, you have to hope mortgage rates can continue to walk a sort of tightrope. Too much economic growth could send mortgage rates sharply upward, whereas if the economy drifts back toward recession, you could see housing demand dry up.

In assessing this economic risk, be sure to take into account the local nature of real estate. If you are in an area that is struggling more than most -- for example, an area whose economy will be hit hard by lower oil prices -- you may not want to risk waiting much longer to sell your home.

Got a question about saving, investing or banking? MoneyRates.com invites you to submit your questions to its "Ask the Expert" feature. Just go to the MoneyRates.com home page and look for the "Ask the Expert" box on the lower left.

More from MoneyRates.com:

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