What the experts say

Funds for boomers, Student loans feel the squeeze, Tax relief from phantom income

Funds for boomers

Many boomers fear they won’t have enough money to last through retirement, said Rob Wherry in SmartMoney, even though collectively they’ve “socked away a whopping $7.6 trillion in various investments and accounts.” Funds designed to put portfolios on autopilot, often known as “asset allocation” or “target date” funds, have attracted many baby boomers’ investments. “Now, several fund families are taking that idea a step further,” promising to combine the investing philosophy of target-date funds with the monthly payouts of annuities. Fidelity’s “income-replacement” funds and Vanguard’s “managed payout” funds factor in payments retirees will receive, based on the funds’ performance. The question for boomers is: Are these funds “just the latest fad” or will they actually “deliver on their hype”?

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Tax relief from phantom income

Here’s a glimmer of good news for home­owners in foreclosure, said Sandra Block in USA Today. In the past, they would have been required to pay taxes on “phantom income” resulting from the lender’s resale of the house: Someone who walked away from a $400,000 debt, for instance, would have to record $100,000 in income if the lender resold the house for $300,000. That means a big tax bill for people who “probably don’t have much money” in the first place. Fortunately, Congress and the administration came together late last year to pass a law “that will make it easier to recover from foreclosure” by keeping such debts off former homeowners’ books. The law can also apply to “forgiven debts” from loan restructurings, short sales, and debt written off on a home-equity loan. One catch: This change isn’t reflected in most tax software or even the paper forms mailed by the IRS. Ask for a revised version of Form 982.