Category: FAQ’s

Challenges for Social Security and Medicare

New Reports Highlight Continuing Challenges for Social Security and Medicare Most Americans will receive Social Security and Medicare benefits at some point in their lives. For this reason, workers and retirees are concerned about potential program shortfalls that could affect future benefits. Each year, the Trustees of the Social...
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Indexed Annuities

If you want to limit potential losses while participating in the potentially attractive returns of a market-driven investment but would also like a guaranteed return, an indexed annuity might be worth checking out. The performance of indexed annuities, also referred to as equity-indexed or fixed-indexed annuities, is tied to...
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Balancing Work and Family

At one time, the typical American family looked like this: a breadwinner father who commuted a short distance to work and earned a very good living, and a stay-at-home mother who took care of the kids and family home with aplomb. Life seemed easy and manageable, with plenty of...
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Getting Help from a Financial Professional

Are you suddenly on your own or forced to assume greater responsibility for your financial future? Unsure about whether you’re on the right track with your savings and investments? Finding yourself with new responsibilities, such as the care of a child or an aging parent? Facing other life events,...
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I need money: can I take funds from my IRA?

Answer: Yes, but the taxable portion of your distribution may be subject to a 10 percent penalty for early withdrawal if you’re not yet age 59½. If you are 59½ or older and take money from your traditional IRA, you will not be assessed a penalty, though you may...
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What is the difference between a W-2 form and a W-4 form?

Answer: You probably know that Forms W-2 and W-4 are related to income taxes. And chances are you’ve filled out a W-4 form at least once and have received a W-2 form from your employer every year. But do you really understand the purpose each form serves? Simply put,...
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What is an income-driven repayment plan for student loans?

Answer: The federal government offers several income-driven repayment plans for borrowers with federal student loans. Under these plans, a borrower’s monthly student loan payments are calculated based on his or her discretionary income and family size, which are verified and updated each year. Borrowers must qualify for these plans–enrollment...
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Should I invest my extra cash or use it to pay off debt?

Answer: To answer this question, you must decide how your money can work best for you. Compare the money you might earn on other investments with the money you would pay on your debt. If you would earn less on investments than you would pay on debts, you should...
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Which is better, an HMO or a PPO?

Question: Which is better, an HMO or a PPO? Answer: The question really is, which type is better for you? If you’re able to choose between a health maintenance organization (HMO) and a preferred provider organization (PPO), you’ll need to evaluate the coverage that each offers and determine which...
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How can I protect myself against identity theft?

Answer: The chance that someone will assume your identity to open fraudulent bank or credit accounts is increasing as thieves become more sophisticated. The best way to protect yourself is to try to prevent this from happening in the first place. Here are some ideas: Make a list of...
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Can I refinance my student loans?

Answer: No, you can’t refinance student loans. However, if you have multiple federal student loans, federal consolidation of your loans may make your debt more manageable. To be eligible for federal loan consolidation, you must have at least one federal student loan in grace, repayment, deferment, or default status....
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I get a lot of credit card offers. How can I tell which one is best?

Answer: Start by carefully reading the advertisement or application you’ve seen or received. It may seem like a lot of jargon, but that fine print contains important information about terms and costs. Here are three points to consider when comparing credit card offers: Annual percentage rate (APR): What interest...
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Should I pay cash for a car or finance it?

Answer: The least expensive way to buy a car is to pay cash for it, because with cash, you can buy only what you can afford, and you avoid paying the finance charges associated with a car loan. Nonetheless, the reality is that you may not be able to...
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Will debt consolidation hurt or help my credit rating?

Answer: Debt consolidation can lead to an improvement in your credit rating by making your debt easier to manage. Sometimes, debt consolidation means taking a loan at a lower interest rate to pay off several smaller loans at higher interest rates. Making one payment instead of many may help...
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How can I reduce my spending?

Answer: To reduce your spending, you first need to know where your money goes. Start out by keeping track of all of your expenses for a month. None are too small or insignificant: the daily newspaper, coffee on the way to work, an extra gallon of milk, that burger...
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How much money should I keep in a savings account for emergencies?

Answer: Many financial professionals suggest that you put away three to six months’ worth of living expenses for emergencies. If you lose your job, or become disabled and don’t have adequate disability insurance, you’ll need that money to pay your regular monthly expenses, such as mortgage payments, insurance premiums,...
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Test Your Knowledge of Financial Basics

How well do you understand personal finance? The following brief quiz can help you gauge your knowledge of a few basics. In the answer section, you’ll find details to help you learn more. Questions 1. How much should you set aside in liquid, low-risk savings in case of emergencies?...
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Should my spouse and I integrate our health insurance benefits?

Answer: When you and your spouse are making this decision, it may be useful for you to focus on three key areas: (1) the out-of-pocket cost of each plan, (2) the levels of service and coverage offered, and (3) the coverage offered to any dependent children, if applicable. Employers...
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Does the federal government insure pension benefits?

Answer: The federal government insures certain pension benefits. Specifically, it insures defined benefit plans (but not other types of retirement plans) through the Pension Benefit Guaranty Corporation (PBGC), a federal agency created by ERISA. A defined benefit plan is a qualified employer pension plan that promises to pay a...
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My company has a profit-sharing plan. How do these plans work?

Answer: A profit-sharing plan is a defined contribution plan in which your employer has discretion to determine when and how much the company pays into the plan. The amount allocated to each individual account is usually based on the salary level of the participant (employee). Your employer’s contributions to...
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Roth Rollover Guide

Required distributions and non-spousal death benefits can’t be rolled over. Required distributions, certain periodic payments, hardship distributions, corrective distributions, and certain other payments can’t be rolled over. Spouse beneficiaries generally have the same rollover rights as the plan participant, and in addition may roll over Roth 401(k) and 403(b)...
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I think it’s time to start planning for retirement. Where do I begin?

Answer: Although most of us recognize the importance of sound retirement planning, few of us embrace the nitty-gritty work involved. With thousands of investment possibilities, complex rules governing retirement plans, and so on, most people don’t even know where to begin. Here are some suggestions to help you get...
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Can I set up a traditional IRA?

Answer: Almost anyone can set up a traditional IRA. The only requirements are that you generally must have taxable compensation (typically, salary or wages from your job) and be under age 70½ in order to put money into an IRA. Beyond that, the basic mechanics of setting up an...
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How late is too late to start saving for retirement?

Answer: This question is difficult because the answer depends on your income and assets, your goals for retirement, and many other factors. Ideally, you should begin saving for retirement in your 20s. More time to save enhances your chances of having the kind of retirement lifestyle you want. If...
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Should I use my 401(k) to fund my child’s college education?

Should I use my 401(k) to fund my child’s college education? Answer: You can, but it isn’t your best option. Your 401(k) plan should be dedicated primarily to your retirement. There are two primary drawbacks to using your 401(k) for college funding. First, if you withdraw funds from your...
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What is the college inflation rate?

What is the college inflation rate? Answer: The college inflation rate refers to the annual increase in college tuition and fees, similar to the way the general inflation rate refers to the annual increase in the cost of living. The college inflation rate is typically in the range of...
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My husband just died. Do I have access to his accounts?

My husband just died. Do I have access to his accounts? Answer: Generally, if your name does not appear on the account, either as a joint owner with rights of survivorship, trustee (if the account is held in trust), or a beneficiary, you probably can’t access the account unless...
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My spouse just died. Who do I need to notify?

My spouse just died. Who do I need to notify? Answer: As a recent widow or widower, you’ll face many personal and financial challenges in the following months. You should contact a number of people and agencies to help secure the financial future of you and your family. If...
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Am I liable for my spouse’s debts?

Am I liable for my spouse’s debts? Answer: The general rule is that spouses are not responsible for each other’s debts, but there are exceptions. Many states will hold both spouses responsible for a debt incurred by one spouse if the debt constituted a family expense (e.g., child care...
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I’m getting remarried. How will this affect my Social Security benefits?

I’m getting remarried. How will this affect my Social Security benefits? Answer: If you’re receiving benefits based on your own work record, your benefits will continue. If you’re receiving spousal benefits based on your former spouse’s work record, those benefits will generally end upon your getting remarried, but you...
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What are required minimum distributions and how are they calculated?

Answer: Required minimum distributions are the amounts that you must withdraw each year from your traditional IRA, employer-sponsored retirement plan, or tax-sheltered annuity. (Lifetime minimum distributions are not required from Roth IRAs, but your beneficiaries generally must begin taking distributions following your death.) You must begin to take the...
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What is Medigap?

Answer: Medigap is health insurance that supplements the benefits covered under Medicare. It also fills in some of the gaps left by Medicare, such as your deductible and coinsurance contributions. Medigap policies are sold by private insurance companies, and must be clearly identified as “Medicare Supplemental Insurance.” Currently, 10...
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What is an annuity?

Answer: An annuity is a contract between you (the purchaser or owner) and an insurance company. In its simplest form, you pay money to an annuity issuer, and the issuer then pays an income stream back to you or to a named beneficiary. Annuities are generally used to provide...
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What happens if my Medicare HMO goes out of business?

What happens if my Medicare HMO goes out of business? Question: What happens if my Medicare HMO goes out of business? Answer: You have several choices: Return to the original fee-for-service Medicare plan Supplement your fee-for-service Medicare plan with a Medigap policy Enroll in another Medicare Advantage managed care...
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If I’m covered by Medicare, should I have additional health insurance?

If I’m covered by Medicare, should I have additional health insurance? Answer: It’s often wise to purchase health insurance to supplement your Original Medicare coverage, because Medicare generally won’t cover all of your medical expenses. Usually, you’ll have to satisfy a deductible before Medicare pays anything, and you’ll also...
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How do I enroll in Medicare?

How do I enroll in Medicare? Answer: You’ll be automatically enrolled in Medicare when you turn 65 if you’re already receiving Social Security benefits, or when you apply for Social Security benefits at age 65. In either case, the Social Security Administration will notify you that you’re being enrolled....
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