What the experts say
Safe investments, tricky math
Low interest rates on savings are pushing retirees to look for investments that offer both safety and above-average returns, said Darla Mercado in CNBC.com. Increasingly that means indexed annuities and indexed universal life insurance, but “take a minute before you write a check to your insurer.” These complex financial instruments aren’t for everybody. Both products are tied to the performance of a market index, but money isn’t invested directly in the stock market. Instead, insurers use complex formulas to determine what investors have earned. As a result, an investor’s account balance is shielded from market slumps, while still capturing at least some of the gains. However, neither can match the overall performance of stocks, despite marketing that says otherwise.
Donating from an IRA
“There are a lot of tax perks to be gained from giving your required minimum distributions from an IRA directly to a charity,” said Kerri Anne Renzulli in Money.com. By directly transferring money from your IRA, you are able to credit that amount toward your account’s annual required minimum distribution without increasing your adjusted gross income. It also lets you “reap a tax benefit for your generosity” even if you don’t itemize your tax return. If you do itemize, however, “this may not be the best strategy for you.” That’s because tax-free transfers from your IRA to charity can’t be deducted. “If that’s your goal, take the withdrawal yourself, and then make the donation.” You should also avoid directly transferring money to a private foundation or a donor-advised fund. Only gifts to public charities qualify for the tax-free treatment.
Are you sure you can afford a second home? asked David Mount in The Washington Post. Many buyers underestimate the overall cost of ownership beyond the down payment and mortgage. “Rental properties in particular may need a high number of repairs.” A good rule of thumb is to set aside 2 percent of the home’s sale price for annual maintenance, including fixing and replacing appliances. If you don’t want to answer 1 a.m. phone calls about leaks, you should also budget for a property manager. In calculating a property’s potential value, “use a conservative growth rate and look at median home prices in the area over the past decade.”
Charity of the week
When chef and cookbook writer Richard Grausman began teaching home economics in disadvantaged New York City high schools in 1990, he saw that many of his students lacked both job skills and college prospects. So he developed the Careers Through Culinary Arts Program (ccapinc.org), a nationwide organization dedicated to preparing students for career opportunities in the restaurant and hospitality industry, as well as for college. C-CAP operates in seven locations across the country, providing high school cooking competitions for scholarships; access to internships and job training; and college counseling to more than 17,000 students annually. The students have access to lifetime career guidance, including job shadowing and networking events. Ninety-five percent of C-CAP job-training students have been hired for paid culinary internships.
Each charity we feature has earned a four-star overall rating from Charity Navigator, which rates not-for-profit organizations on the strength of their finances, their governance practices, and the transparency of their operations. Four stars is the group’s highest rating.