April 27, 2012 - When Mom and Dad Help With Housing - by Morningstar Investment Research
I'd like to help my kids buy their first homes, but I'm not sure whether I'd be better off loaning them the money or giving it to them outright. What should I be thinking about as I decide?
Morningstar assistant site editor Adam Zoll addressed this question by stating that today's historically low mortgage rates, along with depressed real estate prices in many markets, make this a great time for first-time homebuyers, and parents might want to help financially. But before deciding how to help your kids, make sure you have enough saved for your retirement. Your kids can take out a loan for a hous e, but no one will loan you money to cover your senior years. That said, of the two possibilities questioned, gifting money is often the better choice if you can swing it, and the amount you can give to your son or daughter (and their spouses) tax-free may surprise you.
The Ins and Outs of the 5-Year Rule for Roth IRAs
Morningstar director of personal finance Christine Benz recently addressed the confusing nature of the various rules governing contributions to and withdrawals from IRAs and other retirement vehicles. These regulations are clearly there to keep people from gaming the system for extra tax benefits and to help ensure that they don't raid their retirement assets prematurely--both worthy goals. But the net effect is still off-putting, especially for IRA holders aimi ng to figure out how--and when--they can withdraw their money. One of the particularly Byzantine wrinkles in the IRA regulations is the so-called five-year rule for withdrawals from Roth IRAs. Benz provided an overview of the rule as well as a look at some of those unexpected wrinkles.
Among the other topics we addressed this week:
Challenge Your Advisor's Biases--and Your Own. When and where investors 'grew up' can have a big impact on their investment choices.
Fidelity Sacks Growth Manager, Shuffles Ranks. Plus, Vanguard cuts fees, Meridian reunites with an old friend, and more.
An Inexpensively Valued Fund in a Better-Managed Industry. Even in a weaker global economy, Market Vectors Steel ETF fund should keep its strength.
Taking the High-Quality Road With High Yield. The economy is not robust enough, nor are yields high enough, to protect high-yield investors against certain shocks, which is why Eaton Vance's Mike Weilheimer is looking at better-quality bonds.
Funds That Have Thrived on an Apple-Free Diet. It's been hard for large-cap funds to succeed without Apple recently, but a handful of funds have.
3 Market Segments We Like, and How to Invest in Them. Bargain-seekers might want to consider the energy and finan cial-services sectors along with the large-value category.
Look for Consumer Sector Exposure When Selecting an Emerging-Markets Fund. Cap-weighted index funds have somewhat of a global cyclical tilt, as well as exposure to some near-term risks.
Adding Foreign Funds to a U.S. Lineup Is No Easy Task. Three funds that have just passed their five-year mark show the challenges involved.
Star Manager Hasenstab Has Generated Strong Results for This Fund. Investors should consider adding this strong-performing emerging-markets CEF to their portfolio.
Fund Expense Ratios Dropped in 2011. Why the average investor is paying less for fund management.
How Does Social Security Factor Into Your Retirement Plan? Retirees and pre-retirees are feeling confident about the benefit, but for younger folks, not so much.
Is There Trouble Ahead for Muni Funds? If investors don't watch out, their fund might get hit by changes in the yield curve.
Tune the Static Out of Monthly Data. Don't let volatile monthly economic data points drive your outlook, writes Morningstar's Bob Johnson.