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Q. Next year, I will need to make a decision on survivorship options for my pension. I prefer an option that will give my husband the largest possible monthly income in the event of my death. My husband prefers that I elect a lump sum plus a smaller monthly income. Are there any good business or financial reasons for taking a lump sum rather than a monthly option?
I have always handled our finances and my husband has no interest in learning about investments. I am concerned that he would be easy prey for someone wanting to "help" him with the lump sum after my death. We do not have to be concerned about leaving money to anyone.
A. The primary reason to elect a lump sum is that you think you can earn a higher return investing the money yourself than you would get if you collected the pension. That means investment skill is an important consideration. So is life expectancy. If you don't think you will be around many years to collect your pension, the lump sum looks better. A financial adviser can run the numbers for you based on your own assumptions about returns and life expectancy. If the pension adjusts for cost of living, that should be included in the calculations.
Another reason someone might elect a lump sum is to put it to a special use such as buying a house or paying off a mortgage. It appears that does not apply to your case.
Your concerns about your husband's ability to handle the money sound valid. If this is becoming a sore point in your marriage, it might help to discuss the situation with a counselor or financial adviser.
Q. Do you have any information about for-profit credit repair agencies? A friend is determined to pay one of those agencies $400 to have his credit improved. They have advised him that they can get bad credit histories and even a 5-year-old bankruptcy removed from his record.
A. Tell him to save the $400. Credit-repair agencies cannot legally do anything for you that you could not do yourself. Some of them overpromise and engage in illegal tactics, such as changing your Social Security number or substituting an Employer Identification Number.
The keys to repairing your own credit are:
Find out what's on your credit report, checking all three major reporting agencies.
Challenge any inaccurate information.
Negotiate with creditors to eliminate debts and judgments and have them removed from your record.
Re-establish credit with a major credit card.
For specifics and helpful hints on how to go about this, head to the library or bookstore. One good source of information is Credit Repair, written by Robin Leonard and Deanne Loonin and published by Nolo.
Q. My broker recommended Putnam Premier Income Trust for my individual retirement account. He said it was perfectly safe and I could buy it at a discount. The interest is 8.8 percent. He never tells me the down side and we've lost a lot of money in the market over the past two years. Have you ever heard of this bond?
A. You need a new broker. A broker should explain the pluses and minuses of any potential investment. This particular fund is a closed-end bond fund, which means it trades like a stock and shares may sell for more or less than their net asset value.
Your broker is correct that the fund trades at a discount and pays a good dividend, but your broker should not be telling you that the fund is "perfectly safe." Although it performed well the past two years, the fund was down 19 percent in 1999. Like other bond funds, this fund is affected by fluctuations in interest rates.
I cannot tell you if this is the right investment for you. But I can tell you that you need to understand it better before you part with your money.
Online money map
A new booklet, Just the FAQs: Answers to Common Questions About Reverse Mortgages, is available through the National Reverse Mortgage Lenders Association Web site or by calling toll-free 1-866-264-4466.
-- Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.
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