Time horizon will help you determine when to make a move on I bonds
Q: With interest rates slowly moving up, is now a good time to invest in the 6.73 percent Series I Savings Bond? Should I wait until May, or look at other investments?
L.H., via e-mail
A: It mostly depends on your time horizon, says Tom Adams, author of the book "Savings Bond Alert." Mr. Adams believes that if you're investing for three years or less, you'll probably do better investing in I bonds before May 1. But if you are investing for five years or more, you'll probably do better to wait until after May 1. Here's why: Series I bonds pay a base rate (currently 1 percent) but also carry an inflation component that is set using the level of the Consumer Price Index in March and September. Between last March and September, the CPI rose at an annualized rate of 5.73 percent, which accounts for the current high I bond rate of 6.73 percent.
We'll learn this year's March CPI level on April 19. But based on February's CPI, Adams believes it's unlikely that the next I bond inflation component will be anywhere near the last. On the other hand, this might cause the Treasury to increase the fixed base-rate for new I bonds, which would be good for I bond investors after May 1.
In either case, you should also take a look at bank CDs. That's particularly the case if the tax features of Savings Bonds are of no use to you. (Savings Bonds are free of state and local taxes, for instance, and income tax on interest is deferred until you cash the bond or it stops earning interest, whichever comes first.)
Q: In 1965 my husband inherited 39 shares of CF&I Steel. Some time later that company morphed into Crane Co. He transferred the stock to me. I took dividends for a couple of years and then joined the reinvestment plan. Between then and now, Crane has had at least two 3-for-2 stock splits and spun off at least two companies. At this point, how can I figure the per-share cost basis for the stock?
A: There are three solutions that come to the mind of John Erb, a certified financial planner in Alexandria, Va.:
1. Review every statement you've received since inception. This is time-consuming but accurate. It's helpful if you have every statement or that any missing statements are not material to determining the final cost.
2. Ask the company's current and previous stock custodian and transfer agents to get you copies of missing statements. The company's investor relations department can give you contact information. There may be a fee.
3. Hire a professional to do this for you. This is probably the most expensive alternative and typically requires combinations of the first two solutions.
Unfortunately, says Mr. Erb, there are no short-cut antidotes to poor record keeping.
Q: I am 55 and my wife is 50. Together we make about $150,000 per year. We just bought our first house and intend to have it paid off within 15 years. We have no retirement savings. I need to speak with someone who can help me set up an IRA with my present circumstance in mind.
S.M., via e-mail
A: You need to speak to someone about more than just an IRA, says Erb. Having nothing set aside for your retirement signals to him that you need more than a particular tidbit of money advice.
Erb recommends that you check out www.fpanet.org. This website for the Financial Planning Association can help you find a planner near you.
Another group, the National Association of Personal Financial Advisors, represents planners who work only for a fee (FPA planners charge a commission). It also has a planner locator section on its website, www.napfa.org.