Color of Money Live

Mar 13, 2014

Join Washington Post nationally syndicated personal finance columnist Michelle Singletary for an online discussion on Thursday, March 13 at noon ET.

Ms. Singletary will be available to answer your personal finance questions or get your take on this week’s Color of Money question.

Send your money questions in early.

--On 401(k)s, plan fees really do matter, and the government wants to get you a better deal

-- Want a better financial life? It starts with your schedule.

-- Today's Color of Money e-newsletter: Deadline looming for Affordable Care Act enrollment

Thanks for joining me today. Hoping not to get blown away with the winds in my area. 

Lots of questions already, so let's get started.

I've been thinking of changing careers. The problem is that the one I have now is very secure (government) and the one I would be moving too is less so (real estate). I'm in my early 30's, single, and fairly unhappy at my place of employment. I have saved $100K in my retirement fund, paid off my car, paid off as many student loans as possible so far, and have about $20K in savings. I think there is at least the potential to match my salary, but of course that's not guaranteed. Any advice? The financial security is really the last thing holding me back from making the leap.

I want people to be happy in their work AND be able to meet their needs. So, I wouldn't hold you back from looking for employment that is more satisifying.

Just before you make the leap, clear some things up so that you won't be as worried about the money. Stay until you get all the student loans paid off. Make sure you have an emergency fund (3 to six months of living expenses) and life happens fund (for the things in life that happen such as car repairs. Aim for a few thousand in that account).

Also, before you leap, spend some time talking to folks in the real estate field. You could even get whatever requirements you need for the job (real estate licence) before you leave the gov't job. Then do the work part-time to see if you really will like it, including the ups and downs of income. 

You have some time to do this right. Get in an even better financial position per my previous suggestions. And talk to folks doing what you want to do. Spend some time doing what you want to do.

After that if you see want to change carreers, change. 

Life is too short to slog in a job you hate.

Hi Michele, I purchased a new home in 2013 with a 2 1/2% 5 year ARM. Since fixed rates are fluctuating, and I'm in a position financially to afford a 4.28% rate right now. Should I seriously think about refinancing in 2014? What would be your opinion of the pros and cons of doing so before the 5 year ARM is up?

Talk to a lender.  Work the numbers. Typically ARMs have a stop gap as to how much it can jump year to year. Typically about 2 percentage points. That would put you at about the 4.28 you're looking at. So you have time to do the math even if your ARM adjusts up the next schedule time.  There's also the cost of refinancing. You're just a year in. 

I would wait at least another year before jumping into a higher rate. 

I thought your column on looking at 401(k) fees was interesting. I've set time aside to look at my plan closer this weekend. What should I do if my employer's 401(k) plan has high fees? Can I take my retirement money somewhere else and still get the same tax benefits?


On 401(k)s, plan fees really do matter, and the government wants to get you a better deal 

Good question. If you see that your fees are high, talk to your employer. It's the plan sponsor who can negoiate a better deal. Within a 401 (k) you can invest more than an IRA, so I wouldn't jump out of the workplace plan. But you can look at the expenses of funds within the plan if the ones you're investing in has high fees.

I read your article on 401(k) fees this week. I don't know much about investing. How do I decide whether my 401k fees are too high or acceptable? More generally, how can I evaluate the performance of my 401k if it's in an automatically re-balancing fund with a target retirement date (in my case, 2050)?

In the previous answer there is a link for my column. In the column I mention a website that can help you look at the fees compared to other similar plans. That gives you an idea if the fees you are paying are high.


My nephew and his wife have gotten themselves in extreme financial trouble. I remember an ex's family member going through a legitimate debt consolidation organization that notified all the lenders, negotiated interest rates and amounts, set up a repayment plan, and then they paid a fixed amount monthly for a few years until all debt was eventually paid and they had re-established their credit. My nephew lives in West Virginia, and I'm trying to find a legitimate organization that does this. It seems so many are fronts for credit card companies or are simply scams. Suggestions please?

Have your nephew and his wife go to

On that site they can find a non-profit credit counseling agency to help them develop a plan to pay off their debts. They just type in their zip code.

They should not pay a lot of money for such a play. Perhaps $50 to set it up and about $25 to $30 a month for the credit counseling agency to manage the payments to their creditors. 

SBF, age 53, no credit card debt, paid off graduate school loan and car loan. Received $10K bonus, put $5K in savings and would like to invest $5k. Should I put in emergency fund, CD, government bond, or ROTH?

Of course I don't know what your monthly expenses are but I'm betting that $5,000 will only cover about one month or maybe 2. You should aim to have at least three to six months of living expenses. So I would out about $8,000 in the emergency fund and keep $2,000 for a "life happens" fund. Then calculate how much more you need to build upon the $8,000 to reach the 3 to 6 months goal. 

Hi Michelle! I'm not sure if this is more a question for you or for Dear Prudence, but if you feel like tackling this I'll gratefully listen. I'm currently renting a house and am the only person signed onto the lease; as such, the rent check comes solely from me and goes straight to the landlord. With my landlord's permission, I've taken on subletters in the past to help defray costs -plus, living in a 3-bedroom house by myself isn't necessarily my ideal situation. I've never had an issue with any of them paying so long as we were upfront about rent payment - i.e. if I know in advance that someone's going to be renting for six weeks, I'll 'charge' them only six weeks' worth of rent, instead of two months' worth of rent. Two weeks ago (on the 1st of the month) a subletter moved in, having told me that he was looking for a temporary place and that he didn't know how long he would need a room, and we both agreed (verbally and by email) that that was ok, and that he would pay a full month's rent when he arrived. He did that, but two days ago let me know that he found a permanent place to live, and will probably be moving out this weekend. My question is: even though we never agreed on what to do in case he moves out early - because it never occurred to either of us to make any prior stipulation about this, oops! - am I obliged to refund him for the two weeks he won't be renting the room? My gut tells me that that's the decent thing to do, but... the rent's already been paid for the month, and it would be a bit of a burden for me to have to refund him out of my own pocket. He hasn't asked me yet, or offered to just take the two-week hit to his bank account, but I anticipate that he might when he moves out. Or he might not, but might be expecting me to offer. Help! What do I do?

I don't think you owe any refund. He paid a full month's rent and so that's what he got, a place for a month. The fact that he's moving earlier than expected isn't your issue. If having the issue hang in the air bothers you, just say that you paid the rent based on the assumption he would be there for at least a month.

But let this be a lesson. You need a written agreement for all folks you let live there. If they want to pay weekly and you are ok with that fine. However, given the tight margins you seem to be operating on, I would require all renters to pay monthly. If they leave before the month is up, they do not get any refund. You might also me sure to get the renter to say in writing he is moving.

One last thing, be sure to check the rental laws in your area. You need to be clear about what you can and can't do with renters. For example, what if someone moves in, pays the first month but doesn't pay the second month? Can you kick the person right out? Do you have to give the person a notice of eviction?  To protect yourself, you need to know these things. 

My Dad passed away and my Mom has asked me to move in with her as she doesn't want to live alone. The house is paid off and is in good condition, being only 12 years old. I would clear $300,000 after selling my own house. The problem is she lives in an area where the unemployement rate is high and I'm not sure that I could find a job in that area. I have a decent job where I am now. My mom won't move to my area due to the weather, she lives in Southern California in almost perfect year around temperate climate. Can someone live on $300,000 for the rest of their life, considering I don't want to collect SSN until I am 70? I would pay 50% of things like utilities, insurance, taxes are only $1000 per year. My car is paid for. I don't have any other debt other than my current house mortgage. I don't want to put myself in a position where I am living off my Mom if I can't find a job and I have read that it is harder for older adults to find employment. I did help with the downpayment with my parents home so I don't feel like I am "moving back home". I gave them to money for the home rather than putting it in a retirment savings plan for me because they needed it more than I did at the time. Current value of Mom's house is $500,000.Mom is just 75 years old and in good health. I know there are lots of other social/emotional aspects to such a move but want to consider the financial aspects of is it doable first. Thank you.

I really can't give you a flat out answer because there are so many viables. 

One quick thing, just because you gave your parents the money for the downpayment does not give you an interest in the home unless you are on the deed. That money is considered a gift. So if you are expecting the house and there are other heirs, you need to clarify whether your mother intends for you to have the house when she dies. If not, you may be forced to move. And you might get some of the value of the home but not all. 

As to whether you can live off $300,000 at 55? Let's just say, you don't invest the money and you draw down $20,000 a year. That means you can live off those funds for 15 years. That would take you to 70, when you want to collect Social Security. But could you live off Social Security for the rest of your life? 

If you invest the money, you risk losing some or gaining more, but you have to factor in that risk.

If I were you, I would pay to see a fee-only planner and work thu the numbers.

Hi Michelle, Just wanted to shout out a huge thanks for your article last year that steered me in a different direction--I wasn't certain we could afford to refinance (husband is retired) but you wrote that a person could prepay her mortgage and effectively lower the mortgage interest rate over the life of the loan. Brilliant! We've been doing this, and the amount of time left on our mortgage is shrinking rapidly, so much so that our bank send us 2-3 notices a month trying to get us to refinance! (one offer even came by FedEx)! Thank you!

You are so welcome. My husband and I are doing that -- making a few extra mortgage payments a year -- and we are slated to pay off our mortgage in the next 10 years. 

We just incurred a $10K bill for roof replacement. Where should we get it from - ROTH IRA or HELOC ( 0 balance on it now)? I am over 59 1/2...

Now you are talking to someone who hates debt. 

I would use the cash I had. Unless taking $10,000 would be a huge hit to the little you've got in savings. 

After 10 years of owning the same vehicle, I would love to purchase a new one. But I have a Honda and there's nothing wrong with it. Is it okay to purchase a vehicle as a want and not a need? I fully fund my retirement (TSP & IRA) and save $$ in my child's 529.

Here's who I decide such things, especially becasue it's a want:

1. Do I have a well funded emergency fund? A good one would be six months of living expenses. An ok one would be 3 months.

2. Do I have a life happens fund? About $2,000 or more depending on things that might happen.

3. Am I on track to save well for retirement? Including any catchup savings I might need.

4. Am I saving well for my kid's college funds so they nor we will have to borrow ANY money?

5. Do I have any other debt that could be paid down -- student loans, credit cards, etc.

6. Am I at a good pace to pay off my mortgage before I retire? If not, extra funds after 1-5 are taken care of goes toward the mortgage.

If I answer yes to 1-6 I would buy the car with cash.

Hi Michell, My sister works in an area of a major urban city where it is not uncommon for a parent (or relative) to open up a bill in a child's name (child is under 18), run the bill up and then leave it unpaid. Is there any way for an outsider to put a freeze on or do something to alert the credit report agencies? Unfortunately the children find out too late and then have a ruined credit report for things they knew nothing about.

Parents can put a credit freeze on their children's credit files but I believe it has to be a parent or custodian. A freeze is so much stronger than a credit alert because it shuts down the ability of people to get credit in that person's name. 

If this happens to a child you know who later finds out, please encourage the person to file a police report and follow the tips to clear their name as it relates to identity thefy on 

A lot of people go into real estate because it looks like easy money. Talk to newbies in the business, not just the ones that advertise they're in the "Top 100" or whatever. New agents get smaller and less prestigious properties (and therefore lower commissions). If you can, try it on for awhile part time and see if it appeals, while keeping the secure job. The RE job is a time suck (nights, weekends, whenever clients want to see a house), and may be a lot of work with no regular payoff.

Thanks. Good tips following up on what I said. Try it out first.

I liked your answer to the person who is considering leaving a secure, but not enjoyable, government for a real estate career. Would you give the same answer to somebody (me!) who is four years from retirement? If I left now and took my pension, it would be reduced by about 20%, with the alternative being taking no pension until I reached 62. I do have sufficient savings for both retirement and "life happens" funds.

Me, I wouldn't because I'm risk adverse. A 20 percent reduction is a lot of money.

BUT...if you hate what you are doing, have run the numbers and you are willing to take the hit, go for it. 

Seriously, life is too short. I always promised myself that I would leave a job when it got to the point that whenever I crossed the doorway, I was cussing OUT LOUD! Or something like that. 

If you can manage on less and you're ok with that, do it. Having good mental health is priceless!

I have approximately 10K in credit card debt, 12.9% apr.. all on one card. Have about $500 a month in excess money. I've read that you should have 3-6 months living expenses. I have about 2 months. However, I've also heard that if you have debt all money should go to pay that off. Dont want to use debt consolidation because I'm never late and pay extra whenever I can. Thought about balance transfers but would have to use 2 credit cards. Not sure what to do since this debt doesnt seem to be going down as quickly as I would like. And I would really like to get that paid off.

Since you have the start of a good emergency fund, I would put all of the $500 toward paying off the credit card debt.

What I tell folks is that when paying off debt, you still need some savings. Because if you don't have some money saved and an emergency comes up, how will you pay for it?

By getting into more debt.


Hi Michelle! In your books and columns, you have talked about taking care of family members who had unusual health needs. Your family has done a heroic job of looking after many people. What about yourself: have you signed up for long-term care insurance? Why or why not?

Such a great question.

My husband and I are considering buying long-term care insurance now. But we are in that group of folks who could self-insure because we've saved well.

However, I also want to leave a financial legacy for my kids. And what if we become very, very ill and need many, many years of care.

So we are probably not going to get a top of the line policy but one that supplements the savings we have.

If you are super low income and really couldn't afford the payments, you will probably qualify for Medicaid and that pays for long term care.

If you don't have great savings but enough income to pay for a good policy with an inflation rider, you should be looking at this insurance in your 50s. 

We are the in-between folks, which is why we are still looking at the numbers. Because we could spend 20 years making payments and not need it. That's money we could be saving. Since we are good savers, that's why we are considering a combination of long term care insurance and relying on our savings.


Did you factor in agent commission, settlement costs and income tax on that figure? Are you overly optimistic or realistic on what your house will bring? Will your house need repairs, painting etc before showing?

Good points!

My husband and I just recently sold our townhouse and moved into a single family house. We kept the majority of our furniture but still need to purchase other items. Our savings has decreased to only 14K, since we have to use 25K as a downpayment for our new home. Is it wise to use 9K of our saving to purchase these items or place it on our credit cards for 0% APR for 18months. We both make good money and can pay the 9k off within that timeframe. Please guide us in the right direction. Thanks in advance Michelle!

What happens if your job situation changes in the 18 months?

If you are fairly confident about your jobs and you are very discplined and can pay off the $9,000 before the 0% offer expires, I wouldn't say no.

But, consider saving the cash for the household items. And I say that because in the time it takes you to save, you may realize you don't need as much as you think. 

Hi Michelle - I paid off my 09 Hyundai Sonata 2 years ago and have about 85K miles on it. Well, it appears the car is starting to fall apart. I've already had $700 worth of repairs so far this year and was told that the water pump may be on the verge of breaking (another $1000). Im single female and really don't want to have to deal with these types of major repairs - especially when the car is out of commission for 4 days being repaired. So here's my delimma: I have no debt, I have an emergency fund and retirement/investments. I would use the trade in value of the car (what's left of it) to purchase the new (used, I never by 'new') car. Is it better to continue to pay for major repairs versus having a car payment?

It's still cheaper to repair than pay for a new or used car.

But do both. Make the repairs and start saving to pay cash for a replacement car when you add in what you'll get for the trade-in.

As long as you aren't be stranded -- meaning you can plan the repairs -- keep the hoopty until you have the cash for the replacement car.

Hi Michelle, My husband and I currently have about 20,000 of the 30,000 we need for 6 months of expenses(and that's at our current level of spending, if worst came to worst, there's a lot of areas where we could cut back). I also have about 40,000 in student loans. He thinks we should continue to save until we have 6 months or more, but I'm anxious to pay my student loans off ASAP. I already pay a little extra, but with the money we put in savings each month they could be paid off in a couple years.

I'm siding with you. Stop saving because you have a good emergency fund, more than most Americans.

Attack that debt NOW! Get that monkey off your back.

I would love to get rid of tipping. Pay staff what they are worth, don't leave it up to the customers to decide. Also, since tipping is based on the cost of the meal, the server gets a bigger tip for a steak dinner than a chicken dinner which costs half the price but requires the same effort. The one possible downside is that the workers would get the same amount for a slow night as a busy night where there is a lot more work to do to keep things going.


In today's e-newlsetter: No Tipping Allowed

Interesting points. Thanks for your comments.

I favor paying people a good salary and getting rid of tipping even if that means the cost of my meals go up.

I have a friend who regularly gives me, my husband, and my daughter very expensive gifts (Mother's Day, birthday, Christmas, baby shower, etc.). We cannot afford to come even close to her generosity in return, though I wish we could. Should I say something about our budget and inability to do so or just continue to thank her profusely?

Give sincere and heartfelt thanks and say nothing more.

You don't have to feel guilty. The friend gives what he or she can. You give what you can afford. 

I'm so sorry. I always feel bad when I don't get to all the questions. But there are way too many for the hour. However please know I appreciate your taking the time to send questions or comments or help me with your own tips and suggestions. The material is never forgotten. I often use the questions in future columns. 

Thank you for joining me today. If you don't already, please subscribe to my weekly eletter (delivered to your email box) and follow me on Twitter at @SingletaryM.

See you right back here next week.

In This Chat
Michelle Singletary
Michelle Singletary writes the nationally syndicated personal finance column, "The Color of Money," which appears in The Post on Thursday and Sunday. Her award-winning column is also carried in more than 120 newspapers. In her spare time, Singletary is the director of a ministry she founded at her church, in which women and men volunteer to mentor others who are having financial challenges.

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