What’s the best way to cash in savings bonds?
DEAR BRUCE: My father had bought my son a savings bond for college many years ago. Now it is college time. What is the best way to use these so our taxes won’t be horrible? Any other information you can give us on this subject? — Cindy, via e-mail
DEAR CINDY: If the proceeds from the savings bonds are used for college education, the taxes are waived if your modified adjusted gross income is less than $73,500 (or $117,750, if filing a joint return). It’s a very good deal for savers. The savings bonds themselves have not been the most efficient vehicle, but that’s water over the dam. At least you will have considerable tax savings since the money is being spent for education.
DEAR BRUCE: In the last few years I’ve noticed almost all car dealers add a “Document Fee” when buying a new or used car. It varies from $99 to $298. To me this is 100 percent profit and even if you bought the car at cost they would make a profit. I usually try to negotiate this out of the deal, but I’m sometimes told, “We have to pay the lady that’s does the paperwork.” It’s hard for me to believe the big car dealers do not have clerks hired full-time to do this. Is this a nationwide trend? — F.W. Hernando, Mo., via e-mail
DEAR F.W.: You say this is 100 percent profit. There is no such thing as 100 percent profit. Overhead has to be deducted from the gross profit, and while they very well may have clerks hired full-time, this may come as a huge shock, but those clerks expect to get paid. The money has to come from somewhere. Car dealers are getting their brains beaten out by people who shop like crazy, looking up the prices of the cars on the Internet, etc. The public wants to believe they are buying the cars at cost. Think about it. If they sell it at cost, how do they keep their doors open? They are entitled to a profit. I am not in any way partial to automobile dealers, but people expect a dealer to sell a product that may cost upwards of $30,000 and walk away with a $300 or $400 gross profit. There is no way that can be done. With the shopping that is done by the public, they have to make it up someplace and fees are how they are getting the job done. Frankly, I don’t think that’s wrong.
DEAR BRUCE: You recently wrote: “Nursing home and home health care insurance is best suited for people of middle means. As I have stated, the poor cannot afford and don’t need it because the government will take care of them. The reasonably well-to-do can handle their own affairs. If a retired couple has a combined income of somewhere between $80,000 and $100,000 a year, they can afford to handle their own expenses.” My question is, besides income as a measurement, how much should people of middle means have in savings or rainy day accounts? Are there statistics that indicate what the norm would be for the need for nursing home care? The cost at our age (67 and 66) would really be a drain on our income. — Reader, via e-mail
DEAR READER: You’re asking a question similar to “how high is up”? ” How rich is rich”? “How much is enough”? No one can really answer that question definitively. There are people who have very little put away and are quite comfortable, others who are by most standards comfortable in terms of numbers and still feel they need more. The current costs for nursing homes can easily run $50,000 to $75,000 a year, and there’s nothing to persuade me that these costs are going to ameliorate. My statement still stands: If you have an income between $80,000 and $100,000 a year and savings, you might be able to handle things yourself or augment with a small policy. It is a sorry situation when the wealth accumulated over a lifetime can be used for just a short nursing home stay at the end of life.
DEAR BRUCE: My husband and I are seniors whose sole income is Social Security. We have a few large credit card bills due to medical and medicine that came with a heart transplant. We have a mortgage on our home that is being paid by a family member. We owe about $130,000 and the going price in our neighborhood is about $470,000. I’m wondering if a reverse mortgage would be advisable? We would put the house in the name of the family member that is making the payments now. — M.R., via e-mail
DEAR M.R.: I certainly sympathize with your situation. Major medical bills that come with things like heart transplants can be devastating. The reality however is you can’t do what you want to do. A reverse mortgage is predicated upon the age of the borrower. The thesis is that one will borrow against the equity in the home and upon death, the home will be sold to retire the indebtedness. Understanding this, you will realize that you cannot put the house in the name of another family member unless of course this is an elderly person and reverse mortgages seldom make sense unless the person taking out the mortgage is at least in their 70s. The reverse mortgage is out if you want to put it into someone else’s name.