You Asked, We Answered
We rounded up your questions and submitted it to experts at SunTrust Bank and SunTrust Investment Services. Here’s what they had to say:
Q: I’ve been looking to work with a financial advisor who will not try to sell me a product or investment plan, but rather help me create a plan for best use of my current assets. e.g. best strategy for attacking credit card debt, determining priorities, etc. I’ve worked with a financial advisor before, but he says he is not the person to help me (or he is not interested in advising me in this way). I’ve asked a few others, but no one has a referral for a “fee-based advisor”. Is there such a thing or is there a different name for this type of consultant?
A: Yes. You want to hire a Certified Financial Planner™ whom you can pay a fee to (typically $500- $7,500 depending on the time required and complexity of your situation) to complete a thorough review of your current financial situation, including but not limited to the titling of assets, outstanding liabilities, cash flow (income vs. expenses), retirement planning and projections, college savings planning, personal insurance needs, estate planning, asset allocation, etc. I have been providing this service to clients since 2003 and it include a comprehensive, written formal Financial Plan complete with a “to do” list and recommendations based upon my findings. To learn more about CFP® professionals, go to www.cfp.net.
Brooke West, CFP® and private financial advisor for SunTrust Investment Services Inc., SunTrust Private Wealth Management.
Q: I have fantastic credit and have always paid every bill on time. I am now on my husband’s credit card and other accounts. My name is on these as well. Is this ok? Seems I should still have great credit and do not see the point of getting a card in my own name that I have no need to use. What do you advise in a case like this?
A: Life is about surprises and changes, so while it is great that you are building a credit history, it is equally important to make sure you always have access to credit. There may come a day when you are unable to use the credit cards you share with your husband, and it would be preferable to have your own, even if you only keep it for an emergency. On a similar note, under current regulations an applicant for a credit card must have their own income, so if you are considering not working at some time in the future, it would be preferable to get a card in your own name now.
Felicia Speetjens, managing director and SVP, SunTrust Bank, Private Wealth Management, SunTrust Investment Services, Inc.
A: First, I think it is important to distinguish between the two ways people can share a credit card. The first way is as an authorized user on the credit card. As an authorized user, you aren’t legally responsible for making payments on the credit card, but can make charges to the account. The second way is to add the person as a joint account holder. With a joint credit card, both parties are held responsible for paying the balance and therefore the card can impact BOTH individual’s credit score. So if that is what you have with your husband, then assuming your credit utilization percent is favorable (10 percent – 30 percent) and the bill is consistently paid on time, then your credit should be positively impacted. I advise women that if they are going to be a joint card holder, rather than have a credit card in their own name, then they should take charge of making sure the bill is paid on time and monitoring the credit utilization percent – that way the credit card doesn’t unknowingly have a negative impact on her credit score.
Q: I am retiring in 6 months, I would like to retire “debt free” and I find that I have a few “bills,” really nuisance credit cards that I might not be able to otherwise pay off before then. Would it be beneficial to tap into my TSP savings plan (government’s 401K) to pay them off before retirement where my pay will be somewhat less?
A: I would recommend you pay off all outstanding credit card balances, as soon as possible, beginning with the credit cards which have the highest interest rate first, but would not recommend that you utilize your TSP (or any other retirement account monies) to do so. It would be better to use the money you are currently earning from employment, to pay off the credit cards – rather than to borrow or withdraw from funds which are specifically earmarked for use once you retire. If cash flow is especially tight, the first thing I would suggest is that you compile a detailed list of all your expenditures so that you can see, in detail, exactly where all of your money is being spent. Then, look for places you can save money and immediately allocate the savings, no matter how small, towards paying off the outstanding credit card balances.
In-service withdrawals are withdrawals you make from your TSP account while you are still actively employed in Federal service or a member of the uniformed services. The TSP permits two types of in-service withdrawals: financial hardship and age-based. When you take an in-service withdrawal from a TSP, you are subject to income taxes on your withdrawal (except on any portion that consists of tax-exempt contributions, Roth contributions, or qualified Roth earnings). Also, if you are younger than 59½, you may have to pay a 10 percent early withdrawal penalty tax. I recommend this website to learn more about financial hardship and age-based in-service withdrawals.
A: It depends. The things you must consider are the interest rate on your credit cards, the earnings rate on your investments and the income taxes and penalties you may incur by withdrawing from the TSP. My suggestion would be to do some retirement planning to help understand what your expenses and resources will be in retirement, and how best to generate the cash flow to pay off the debt. Of greatest importance will be to not incur the debt again once you are retired.
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