Time to move into a smaller home: Do you rent or own?
Q: A long-term health issue precludes me from working outside the home and made it necessary to change my living arrangements. Would it be better to use the equity in my home to buy a small condo outright? Or, should I put the equity into investments and use the proceeds to rent an apartment? I am 49 and wish to make the best decision for the long term.
C.H., via e-mail
A: If you have other income to live on, William Z. Suplee IV, a certified financial planner in Paoli, Pa., recommends that you purchase a small condo rather than rent. That way, a large portion of your expenses will be paid for and you could still tap into the condo's equity for emergencies.
If you put your money into investments and rent, you create more risks by incurring both investment risk and inflation risk in housing expenses, Mr. Suplee says. Cashing in home equity and renting is more often a strategy for later stages of life, he says, similar to some retirement/total-care community situations.
Q: After my husband died, I invested $100,000 of his insurance money in a variable annuity. This investment has since doubled in value. But I have attempted since February to find the answer to one simple question: What is the expense ratio of each of the mutual funds that make up my annuity? I have spoken to my broker twice and to his assistant once. Each time I have been told they would look it up and get back to me. I cannot find these funds in newspaper listings.
L.W., Wilmington, Del.
A: Next time you call your broker, ask to speak to his supervisor so you can lodge a complaint over such shabby treatment. That will, hopefully, get you the answer you deserve.
Meanwhile, don't expect to find the funds from your annuity listed in the newspaper. That's because these investments are tailored specifically to annuities rather than standard retail mutual funds, says Cheryl Burbano, a certified financial planner in Wesley Chapel, Fla.
Ms. Burbano lists three expenses that annuities charge: the "mortality and expense" fee, the annual contract maintenance charge, and the subaccount management fee.
The mutual funds that are inside a variable annuity are called subaccounts. Each subaccount assesses these management fees to cover the cost of managing your annuity's investment accounts. These charges are in addition to the internal management fees of the mutual funds themselves, Burbano says.
The actual subaccount fees for your particular variable annuity can be found inside your variable annuity prospectus. These expenses are usually found in the first section of the prospectus and are updated annually.