Q: I’m a gay man in my 40s and I have struggled with credit card debt for years.  Now that I’m making a decent income, I’m determined to get on a better path going into 2019.  Can you please offer me some advice?

A: I’m sure other readers may have similar concerns, and I think it’s great that you’re making a commitment to take some positive steps to improve your situation going into the New Year.  Here are some thoughts to get you started.

Q: My spouse and I are debating whether we have enough life insurance and also what type we should consider getting if we need more. Can you please help us better understand our options?

Q:  I understand that the mutual funds in my 401(k) plan charge me fees.  But it’s not clear to me how much or what those fees are for. Can you please help me better understand this?

A: As part of your retirement plan, you should receive regular disclosures about the fees you are charged, including those charged by the fund companies in which you invest.  Here’s a bit more information specifically about fund fees that may be helpful:

Q: My spouse and I are considering buying our first home and we understand that our credit history and credit score can factor into the terms of our mortgage. Where can we start to learn more about our scores and how to make them better if needed?

Q: I have most of my money invested in bonds now that I’m retired, and I’m living off the interest they produce. But I’m worried about changes in interest rates. Do you have any suggestions on how I should invest my bond money?

A: In the current interest-rate environment, you certainly need to be careful with your bond-investment strategy. Here are a couple thoughts for you to consider:

Q: I’m considering retirement in the next year or two. I think I’ve saved enough money, but I’m not sure how to think about my income and expenses in retirement.

Q: When the stock market crashed back in 2008-2009, I sold everything and went to cash. And now all these years later I’ve missed out on all the market upside. I’m fearful about going back in now. What should I do?

Q: I’ve been reading a lot about potential inflation concerns and also about something called “TIPS” as an investment idea for this. Can you please help me understand how these work?

A: Yes, there has certainly been plenty of talk recently about whether or not we may see more inflation in the coming months and years. Here’s a bit more information about TIPS: what they are, and why they may be an option for some.
 
Remember inflation — that nasty beast that plagued the U.S. economy in the ’70s and ’80s, driving prices up more than 10 percent a year and wreaking havoc with financial markets?

For most Americans, high inflation may be only a distant memory, at least in the U.S. In fact, the last time the Consumer Price Index registered an annual increase above 4 percent was in 1991 — more than 25 years ago.1 And in the five years ending Dec. 31, 2017, it averaged only 1.4 percent.

Lately, there have been growing concerns about mounting inflationary pressures. A thriving economy, a tight labor market, a housing boom, the stimulative effects of the $1.5-trillion tax cut passed in December and, most recently, the prospect of a trade war all put upward pressure on prices. In January, the CPI spiked to a seasonally adjusted .5 percent for the month — which, if the trend continued, would put annual inflation considerably above the fed’s target rate of 2 percent. Although the monthly increase dropped down to .2 percent in February, many economists see an eventual uptick. The Federal Reserve has already been applying the brakes, with six increases in the federal-funds rate since late 2015, including a .25-percent hike in March.

But even at moderate levels, inflation can still take a toll on investments over time. Consider that the purchasing price of $1,000 would erode to just $744 if subject to 3-percent inflation over 10 years. So, for investors, especially retirees and others depending on fixed-income investments, inflation is a real concern.

TIPS to the rescue
In an attempt to protect fixed-income investors from inflation, the Treasury Department issues inflation-indexed bonds called Treasury Inflation Protected Securities (TIPS) in five-, 10- and 30-year maturities with a return linked to the inflation rate. These bonds are available for purchase in $100 increments through financial advisors, banks and Treasury Direct (www.treasurydirect.gov).

The benefits of TIPS include:
• Rate of return is guaranteed to exceed the rate of inflation.
• Principal is indexed to the CPI.
• Semiannual interest payments are based on the interest rate applied to the inflation-adjusted value of the principal.
• Guaranteed return of the principal even if the rate of inflation drops.

The drawbacks of TIPS include:
• If sold before maturity, prices can be volatile, varying with interest-rate changes.
• TIPS are less liquid than ordinary treasuries.
• Interest payments on TIPS will vary, depending upon the inflation adjustment.
• Although the principal is adjusted for inflation, TIPS typically pay lower interest rates than treasuries with comparable maturities.

How do TIPS compare with traditional treasury bonds? Assuming the inflation rate is 3 percent and the yield of an unindexed $1,000, 10-year treasury note is 5 percent, the real yield of this note would be 2 percent (5 percent minus the inflation rate). After a year, an investor would gain $50 of interest but be ahead by only $20 because of the effect of inflation.
In general, it makes the most sense to purchase TIPS if you expect a major uptick in inflation. Whether that scenario is in the offing at this time is unclear. But if inflation does rear up, TIPS could be a viable alternative to consider.

Jeremy R. Gussick is a CERTIFIED FINANCIAL PLANNER™ professional affiliated with LPL Financial, the nation’s largest independent broker-dealer.* Jeremy specializes in the financial planning and retirement income needs of the LGBT community and was recently named a 2017 FIVE STAR Wealth Manager as mentioned in Philadelphia Magazine.** He is active with several LGBT organizations in the Philadelphia region, including DVLF (Delaware Valley Legacy Fund) and the Independence Business Alliance (IBA), the Philadelphia Region’s LGBT Chamber of Commerce. OutMoney appears monthly. If you have a question for Jeremy, you can contact him via email at This email address is being protected from spambots. You need JavaScript enabled to view it.. Jeremy Gussick is a Registered Representative with, and securities and advisory services are offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC.
   1Federal Reserve Bank of Minneapolis, Consumer Price Index, 1913-Present.
    Bonds are subject to market and interest rate risk if sold prior to maturity. Although the interest that inflation-indexed bonds pay is exempt from state and local taxes, federal income taxes apply. You are required to pay taxes on the interest and any increase in principal on an annual basis.
    This article was prepared with the assistance of DST Systems Inc. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. We suggest that you discuss your specific situation with a qualified tax or legal advisor. Please consult me if you have any questions. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.
    Because of the possibility of human or mechanical error by DST Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall DST Systems Inc. be liable for any indirect, special or consequential damages in connection with subscribers’ or others’ use of the content.
    To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity
*As reported by Financial Planning magazine, June 1996-2017, based on total revenues.
**Award based on 10 objective criteria associated with providing quality services to clients such as credentials, experience, and assets under management among other factors. Wealth managers do not pay a fee to be considered or placed on the final list of 2017 Five Star Wealth Managers.

Q: I have contributed to a 529 Plan to help pay for the costs of college for my child. Did the new tax law change something about how I can use the 529 Plan?

A: Yes, with the Tax Cuts and Jobs Act of 2017, Section 529 plan savings may now be used for K-12 tuition as well as for higher education costs.  Here’s what you need to know:

Q: My 401(k) investments have done very well in the past several years. But I’m worried if the stock market goes down, I would stand to lose more money than before. How can I make sure I’m not taking on too much risk?