A: For the money you keep safe, I Bonds are a beaut. They currently pay 7.49 percent at an annualized rate–government guaranteed and tax-deferred. Series EE bonds are paying 5.73 percent.
The “I” stands for inflation. Each bond carries a fixed, permanent rate of return (currently 3.6 percent) plus an inflation adjustment that changes every May 1 and Nov. 1. (EE Bond rates float with the market, and change on those same dates.)
Lately, inflation has been rising, so the yield on I Bonds has risen, too. Yields will fall when inflation ebbs. Nevertheless, your real returns should outdo those of EE Bonds, as currently priced.
After buying an I Bond, you have to hold it for at least six months. There’s a three-month interest penalty if you redeem during the first five years. After that you’re home free. At redemption you owe federal income taxes but no state or local income taxes. Minimum investment: $50. Maximum: $30,000 a year.
You can buy I Bonds through 40,000 participating banks, a few payroll deduction plans or on the Web (savingsbond.gov). Go for it.
Q: I read about missingmoney.com, where states list the names of people who have overlooked money they’re owed. I started to register at the site to make a search. Suddenly, the screen displayed a stranger’s name, address, Social Security number and other personal data! I didn’t copy it, but someone else might have.
A: Wow! That’s a site I’ve written about. It pools information from the unclaimed-property offices of 27 states and Washington, D.C. By the end of the summer, 40 states could be on board. You use it, free, to track money you or a relative may have forgotten about–for example, bank and brokerage accounts, IRAs, uncashed paychecks and dividend checks, and unclaimed insurance proceeds.
Last month missingmoney.com upgraded its site, I’m told by vice president Mark Zill. Oops. When new users tried to sign in, the screen flashed them with one woman’s personal financial data. The glitch took more than three days to fix. Zill says the company will “protect the member from any adverse impact” (one hopes they’ll reimburse her if crooks open credit cards in her name). Right now they’re putting “fraud alerts” on her file at the credit bureaus. These alerts tell creditors to check with her directly before issuing a new card.
You can search missingmoney.com by entering just your name, with no Social Security number. Look for that option on the left of the screen. Zill says the SSN helps if your name is misspelled in any of the records.
If you’ve lived in a state not included in this database, search those states separately (there are links on the site). Unclaimed money might also be sent to the company’s home state, often Delaware or New York. You’ll be looking only for money owed by businesses and some states. Uncashed federal checks, like IRS refunds, aren’t online.
If you’re not on the Web, send a stamped, self-addressed, business-size envelope to the National Association of Unclaimed Property Administrators at P.O. Box 7156, Bismarck, N.D. 58507. Its brochure gives you the address of all the state unclaimed-property offices. The states will do a search for you, free.
Q: My widowed mother, 75, has $45,000 in savings and $4,900 worth of stock in the insurer, UNUM. She needs about $200 a month to augment her Social Security. I’ve been encouraging her to put some money into a stock-owning mutual fund. She refuses, in part because my father’s investments proved unsound, as we learned after his death. What do you think?
A: First, I hope this letter is read by every man who plays around with stocks and hides bad results from his wife. You will be found out! The same goes for wives who tuck their stock-trading tickets into their lingerie drawers.
Your mother should sell the stock, says planner Ginger Applegarth, president of First Financial Advisors in Winchester, Mass. She gets no diversification from owning it. What’s more, UNUM has confirmed her mistrust of equities (its price has plunged 63 percent in the past 12 months).
But should she risk some of her money in stock mutual funds?
Applegarth votes yes, with three ifs: if she’s in good health, if she won’t touch the money for at least five years and if you’ll relieve her fears by agreeing to reimburse her for any losses (that’s a test of how confident you are, too). In that case, Applegarth suggests putting $5,000 into Vanguard’s S&P 500 Index trust, in hope of building a little cushion for unexpected expenses. Otherwise, she should play it safe–with a mix of money-market funds, bank CDs and I Bonds (also for five-year money; see the letter above).
But it’s her money. If she doesn’t want stocks, her situation isn’t dire. Applegarth says her savings could last to age 95, if she earned an average of 5 percent (assuming she gradually raised her monthly, $200 withdrawal to cover 3 percent inflation). Luckily, five-year CDs are averaging 6.5 percent. With a phone call, she can get 7.66 percent at Provident Bank in Cincinnati (800-335-2220; for other high-rate CDs, check bankrate.com). Your mom’s instincts are OK.
