Investing your rainy day fund
"Where is the most efficient place to stash that three to nine months of living expenses" you are supposed to have socked away? asked Kathleen Elkins at Business Insider. With savings, checking, and money market accounts yielding next to nothing, some advisers suggest moving your emergency savings to a short-term bond fund. The top short-term bond funds have 10-year annualized returns of 1.7 percent to 3.6 percent, according to Investopedia, compared with the 0.01 percent yields from savings accounts at most big banks. And unlike with some other investments, "you can withdraw your funds instantly." Short-term bond funds are only "slightly riskier" than traditional savings accounts, but if you're worried about price fluctuations, a money market fund is a good alternative.
When the IRS comes calling
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Don't panic if you can't pay your tax bill in full come April 15, said Caitlin Kelly at Reuters. Your best option for staying on the right side of the Internal Revenue Service is to pay as much as possible by the deadline. In about six weeks, the IRS will send a letter explaining that you only paid part of your bill. "If you have the balance by then, write the check. If you do not have the balance, send as much as you can." If you owe less than $25,000 at this point, it's possible to sign up for a payment plan that will give you up to 60 months to repay, using Form 9465. In addition to a $120 sign-up fee, the IRS will levy a fee of 0.5 percent interest per month on the balance until it is settled.
New love for reverse mortgage
"Reverse mortgages have earned a bad rep, thanks to smarmy TV ads and fears that borrowers could easily lose their home to the bank," said Pat Mertz Esswein at Kiplinger's Personal Finance. But new federal rules that reduce the risks for borrowers have financial advisers giving such loans a second look as a way to help make other retirement resources last. Reverse mortgages, officially known as home equity conversion mortgages, allow homeowners who are at least 62 years old to covert their home's equity into a lump sum or a line of credit without having to make a monthly mortgage payment. Borrowers are now required to undergo a financial assessment to ensure that they have enough money to pay ongoing costs, such as mortgage insurance and upkeep. Before the rules changed, as many as 10 percent of these loans went into default.
