Unlikely government will seize someone's 539 asset

Dear Dave,

    I have a 5-year-old daughter, and I want to start a 529 for her. However, I'm concerned that the government might seize the 529 assets in order to pay off debt and give people treasury bonds instead. Do you think this might happen?

Barry


Dear Barry,

I think there's less than a 1 percent chance they'd seize the actual assets. Really, I don't believe they're any more likely to come take investments away than they are to come take your home. I mean, we're really talking about private property here. If you have $100,000 in a retirement fund, and they say they're going to take that away from you, it's like taking a person's home. I just don't see that happening.

The big question, I think, is this: Are they likely to take away some of the tax benefits – like the 529 plan's ability to grow tax-free? As in, they just come in and say they're making it all taxable to pay the bills they've accumulated up in Washington, D.C., from all their stupid behavior. That kind of thing actually could happen.

-Dave

How to ask for a Raise at work

Dear Dave,

What’s your advice on asking for a raise at work when you have more responsibility than a co-worker but the same title on paper? After being with my company four years, I feel like I should make more money and I have the right to complain about this.

Vanessa



Dear Vanessa,

Sorry, no. You don’t have a right to complain. You agreed on your pay, and you are doing your job the way your character and integrity tell you to do the job. If someone else is a slacker in the same position, that doesn’t mean a whole lot in terms of your personal compensation.

I’ve got several people at my company who hold similar positions and make similar money. Some of them have been here for years, while others are relatively new. I don’t pay people for how long they’ve been in the building, and I don’t want anyone on my team who doesn’t give 100%. Now, that may be a different issue than pay, but at the same time I don’t want someone who gives 50% and I pay them 50%. I want everyone at 100%, but that kind of thing isn’t your problem. It’s the company’s problem, because she works for them and not you.

If you honestly feel like you deserve a raise because of your effort and performance, that’s fine. Sit down with your leader and make a logical and reasonable argument for why you deserve more money. But don’t bring up your co-worker and what he or she makes in the discussion. That’s just not relevant. What is relevant is your worth and the value you bring to the organization.

But a comparative analysis with someone else on staff just isn’t a good idea. I’d stay away from that, Vanessa.

-Dave


via http://www.foxbusiness.com/personal-finance/2014/08/19/real-reasons-deserve-pay-raise

Rental property vs Mutual Funds

Dear Dave,
I’m retired, and my husband plans to work for several more years. We have $130,000 in savings accounts, plus a rental property. The rental property has a $150,000 mortgage, but we have no other debt. Should we sell the rental and reinvest in the stock market?
Barbara




Dave Ramsey

Dear Barbara,
If I were in your shoes, I’d be investing in mutual funds and paying off the rental property as fast as possible. That would be my game plan.

When it comes to mutual funds, you shouldn’t be jumping in and out. The key is to find good ones with long track records of success and stability. Then, leave the money alone for several years and let it do its thing!

—Dave

Becareful when pulling money out of a 529 fund

DEAR DAVE: My wife and I have $25,000 in credit card debt, $2,500 in medical bills and $89,000 each in student loan debt from when we each got our master’s degrees. We make about $100,000 combined. Our son is 6 years old, and we have $18,000 in a 529 plan for him. Should we use that money to pay off debt instead?

—Sean



DEAR SEAN: I wouldn’t do that, if I were you. You’ll get destroyed with penalties, because if you take money out of a 529 for anything other than college, you’ll be taxed at your current tax rate and hit with a 20 percent penalty. The other thing is, you’ll have this weird feeling that you took money away from your kid.

Technically, it’s your money. You put it there. But when you did, it was in your child’s name. Plus, that doesn’t really solve your problem. You’ve got a ridiculous amount of debt, and that little bit won’t move the needle very much. Having more money in your hands isn’t the big answer here. What you both need is a behavior change when it comes to money.

My advice is to leave the 529 alone. Stop adding to it for the time being. Put any retirement saving you’re currently doing on hold, too. You guys need to start living on a budget, working a debt snowball plan and looking for extra income. Even tutoring would bring in some additional cash. I’ve got a feeling, too, that those master’s degrees can provide you with more money than you’re currently making.

It can be done, Sean, but it’s going to take a lot of hard work and discipline. It may even take four or five years to get this mess cleaned up, but you can’t keep living without a plan.

—Dave

Dave Ramsey: Find mutual funds with 12percent returns

DEAR DAVE: Where can I find mutual funds with a 12 percent rate of return?

—Jason


DEAR JASON: There aren’t a lot of them, but they are out there. Currently, there are about 8,000 different mutual funds floating around. You have to get online and do some serious research, or talk with an investing professional with the heart of a teacher, but I own several mutual funds that have an average annual return in excess of 12 percent over the lifetime of the fund.

Now, do they make that every single year? Of course not. The figure I’m talking about is an average. I own one in particular that has done that for about 70 years. But the stock market in general has averaged just under 12 percent a year since its inception. So yes, with solid research and due diligence on the part of the investor, it is possible to get that as an average annual rate of return.

—Dave