Indiana, PA - Indiana County

SMART MONEY: Daughter needs a hand getting a loan

by By BRUCE WILLIAMS on December 15, 2013 1:50 AM

DEAR BRUCE: My husband, who is 60 years old, is looking to retire in two years. I retired five years ago. We have saved our whole lives and have a credit score of 849.

Our daughter, who is going through a divorce, has some money problems. Her vehicle needs to be replaced, and she will not qualify for a car loan on her own. We would like to co-sign on a car loan with her to help her out.

Can we do this without compromising our credit rating and still be OK when my husband retires? Is there anything we should do to cover ourselves? — M.B., via email

DEAR M.B.: I don’t have any problem with what you want to do, assuming you feel that you can afford the money. There is nothing I can see that will compromise your credit rating. The only thing is, if your daughter doesn’t make the payments, you are stuck with paying the balance of the loan.

You ask if there’s a way to cover yourselves. Unfortunately, that’s not possible. Your daughter apparently has severe financial problems, and nobody wants to loan her money. You’re as good as gold and can easily get a loan, but you must understand that if she doesn’t make the payments, you are directly on the hook. If you don’t make the payments, then your credit rating will be compromised.

DEAR BRUCE: I am a 61-year-old retired construction worker. I have approximately $135,000 in my union benefit annuity. I should do a roll-over, but I’m not sure where I should re-invest. We have an adequate retirement, so we would like to place it in a very safe account.

It takes six weeks to get the money out of the account, so if something drastic was to happen and the market was to go down, my account would suffer substantially. This is why I want to move the account. The account is evaluated on the day of withdrawal. — W.D., via email

DEAR W.D.: Your question asks for something that is absolutely not available unless you are prepared to give up all the interest the money could earn, and I think that would be a tragedy. If you want a very safe account, you will limit yourself to things such as CDs and certain savings accounts.

I understand you are concerned about the money not being available for six weeks, and if the market went down, you would suffer substantially. This is a possibility, but very unlikely.

If safety remains your No. 1 concern, take the money and put it into something like a five-year CD at your local bank. You realize that you are going to earn very little money and you will also be penalized by the tax man.

You might also wish to consider tax-free municipal bonds. There have been substantial failures in municipalities around the country — Detroit is the classic example — and as a consequence, there is a certain degree of risk. But there are solid communities with little possibility of going under. You might want to consider their bonds because of the tax-free provision.

It all comes back to this business of you not wanting to take any risk.

I don’t think at 61 years old you should be writing off the idea of taking some risk to earn a decent return on your money.


Send questions to bruce@brucewilliams.com. Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.

The Bruce Williams Radio Show can now be heard 24/7 via iTunes and at www.taeradio.com. It is also available at www.brucewilliams.com.

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