Making money: What the experts say

A retirement gamble

Beware of using retirement funds for anything but retirement, said Steven M. Davidoff in The New York Times. More and more Americans are tapping their 401(k)s to invest in start-ups or speculate in commodities. While there are tax advantages to such investments, and “armies of advisers” ready to facilitate them, faulty ventures can leave near-retirees penniless. Many are using their 401(k)s to finance new businesses, despite compelling “evidence that most of these businesses do fail.” Another popular option is to use a self-directed IRA to invest in commodities like gold. Such investments may be “great tax shelters,” but committing much of your retirement portfolio to gold or any other single commodity is pure speculation. “And as is the case with most speculation, the average investor is not likely to make money.”

No deductibles for Sandy

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Hurricane deductibles can leave affected homeowners with thousands of dollars in out-of-pocket costs before insurance companies pay a dime, said Brad Tuttle in Time.com. But those slammed by Hurricane Sandy in the Northeast may be able to dodge that extra burden. By the time Sandy made landfall in New Jersey, the storm had been officially downgraded to a “post-tropical cyclone,” so hurricane deductibles will not apply to wind-damaged homes. “Insurers should understand that the Department of Financial Services will be monitoring how claims are handled,” New York Gov. Andrew Cuomo said. Unfortunately, homeowners may still be on the hook for flood damage.

The bank of Mom and Dad

Many parents are soft touches when their adult children ask for money for a new business or graduate school, said Rachel Louise Ensign in The Wall Street Journal. “But a well-intentioned gift or loan can easily turn into a family disaster,” say experts. Secure your own finances first. “A good rule of thumb is to not give more than 5 percent of your net worth.” Ask for details on the potential payoff, whether it’s an advanced degree or a new career, and consider keeping “future funding contingent on the business’s success.” Finally, set strict terms, whether it’s loan repayment or a stake in a start-up, and have a frank discussion about what happens if things don’t go as planned. “Families are forever,” said entrepreneur Brendan Synnott, but often “these businesses only last a period of time.”