To Liz, please:I am currently unemployed and putting my job search on hold. My adjusted gross income is low (mainly capital gains from incremental asset sales), but I have a sizable amount of savings in a diversified portfolio that would last for many years if necessary.
Although I’m hesitant to apply, I believe I am eligible for low-income assistance programs for healthcare subsidies and electricity costs.
I don’t feel comfortable participating in these initiatives, which are meant to help those in need. Are affluent or low-income households prohibited from applying for aid for legal reasons? Is it morally right?
Answer: There is no legal reason why you cannot join in a program if you meet the income requirements and there are no asset constraints that would prevent you from doing so.
However, you may have ethical concerns about accepting help that someone else needs more if the program’s resources are limited.
The tax credits that lower the cost of health insurance acquired through the Affordable Care Act exchanges, however, are too good to pass up. The program was purposefully created to provide assistance with health insurance premiums to the majority of Americans, not simply those who were most in need.
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Considering municipal bonds
To Liz, please:I am cash rich for the first time in my life after downsizing and selling my house at the age of 84.
My current objective is to avoid paying taxes on my assets, which I would have to do with certificates of deposit, rather than to significantly increase the amount of money. What would you recommend, or are tax-free municipal bonds my best option?
The lower interest rates offered on municipal bonds can nevertheless provide you with a sufficient return to justify purchasing them if you’re in a high tax bracket, such as 32% or higher. The math is less clear if you’re in a low tax bracket.
Also, unlike certificates of deposit, municipal bonds are not insured by the FDIC. Bond investing carries some risk. Selecting highly-rated bonds reduces the likelihood of default, but if interest rates increase, your bonds may lose value.
Make use of some of your funds to pay a fee-only, fiduciary planner who can assist you in developing a plan that takes into account more than simply your tax liability.
Liz Weston, a Certified Financial Planner, writes a column for NerdWallet about personal finance.She can be contacted by phone at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or via the atasklizweston.com contact form.
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