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Answers to Today’s Money Questions

Lots of us have lots of questions about our money these days.

Many of our long-held financial beliefs – like the benefits of diversification and the stability of brick and mortar banks – are being challenged. It’s a good time to check in on your finances and figure out where you’re OK and where you can do better. But it’s also a confusing time to do so.

FiLife visitors are asking our personal finance gurus for some help. Here are a few of their answers related to retirement savings, home equity loans, health insurance and taxes. Check them out – their words of wisdom just might apply to you. Or ask a guru your own personal question.

Question 1: Economic Decline
I am just curious what advice would you give to people in regards to how they should handle their 401 k as it relates to the economic troubles the country is facing?

- Cashe22

Cashe22,
Certainly, today’s environment leaves us all a bit stressed about our retirement funds. But at the same time, it also emphasizes all the more the importance of spending less than you earn, and saving money for the future, so that you’re better able to handle times of financial stress.

For those who have a very long-term investment horizon until they retire, I don’t think any major changes need to occur. For some, this environment is a reminder of the importance of having a well-diversified portfolio, and for everyone it’s a reminder that the markets do have downs in addition to ups. But that’s part of the normal market cycle (although obviously the cycle is a little more extreme this time around!). Read Full Answer

Question 2: Is There A Penalty?
I have a high interest home equity loan. Is there a penalty if I prepay or pay more every month than what is required?

Also, is there a penalty for adding principal every month?

- GMAChomeowner

Most HELOCs do not have a big prepayment penalty– something like $300 if you pay it off before 3 years. The best thing to do is to take a look at the paperwork that you received when you closed your loan. In there, there will be what is called a “prepayment penalty rider” that will tell you the terms–if any–of your prepayment penalty. Another thing you may do is call the customer service number on your statement and see if they can give you the information you seek. See All Answers

Question 3: My Momma Needs Hip Insurance
Her hip replacement went south and needs a new one, but old insurance doesn’t cover upgrades?

- billmsn

Get her doctor to write a letter that states that the hip replacement is medically necessary and then submit an appeal of the decision, including a copy of the letter. Insurance companies will generally not substitute their judgment for the judgment of the medical professional that is providing patient care.

At the same time, get a copy of the actual policy document (the long one, not the one-page summary) and read it carefully. Sometimes there is fine print you can use to your advantage, by demonstrating that the policy does indeed provide coverage in the given situation. Read Full Answer

Question 4: Take the money and run?
If I’m behind 3+ years and have not completed my tax forms, should I leave the country? Kidding aside, what are my options as I would prefer to stay.

- gregsmarty

This is an easy one… file, file, file! Really. The IRS will be happier if you come to them than if they come to you. So, making a proactive effort to file - even if late - is a good thing. Even if you can’t pay all of the taxes at once, you can file and enter into an installment agreement to pay off your tax burden over a period of time.
It’s important to note that there is no statute of limitations if you don’t file - so letting extra time pass won’t help you at all.