Kiplinger\'s Personal Finance - 10.2019

10/2019 KIPLINGER’S PERSONAL FINANCE 17

PATRICK GEORGE

a less aggressive HSA portfolio as

you age, which means decreasing the

amount in stocks and increasing your

cash and bond holdings. If you’re

likely to need to use the money soon,

keep some funds in the HSA’s money

market or checking account to protect

it from market f luctuations.

Fees and investments vary among

HSAs, but you often get a choice of

stocks, bonds and funds. Find HSA

administrators and compare fees and

investments at HSAsearch.com.

FDIC coverage. I’m handling an estate with

more than $250,000 in cash. Is it safe to

leave the money briefly in a bank account

with only $250,000 of FDIC insurance?

D.D., PUEBLO WEST, COLO.

It’s highly unlikely that a large bank

will go under, and your risk is even

lower if you don’t leave the excess

deposits in the bank for long. But if

you want peace of mind, you can open

accounts under different ownership

categories. If you and, say, your spouse

have joint accounts at an FDIC-insured

bank, you’ll each receive $250,000 in

coverage for your joint-account bal-

ances, plus $250,000 per person for

individual accounts you have, for a

total of up to $1 million. Or you can

spread the money among multiple

FDIC-insured banks. ■

I’ve heard that stocks should be held

in a Roth IRA and bonds should be held

in a traditional IRA. But for tax effi-

ciency, shouldn’t it be the reverse?

R.M., BALDWINSVILLE, N.Y.

Given the tax characteristics of both

IRAs, it’s usually better to hold invest-

ments with the greatest growth poten-

tial—typically stocks—in a Roth, and

assets with more moderate returns—

usually bonds—in a traditional IRA.

Here’s why: You invest in a Roth

with after-tax dollars, and later in

retirement your withdrawals will be

tax-free. And unlike a traditional IRA,

you don’t have to take minimum with-

drawals after age 70½. That means

your Roth investments can continue

to grow, possibly for decades. “Having

your most aggressive or riskiest in-

vestments in your Roth is designed to

maximize that tax-free growth,” says

Michael Peterson, a certified financial

planner in Chambersburg, Pa. If you

don’t need the money, you can leave

the Roth to your heirs, who will enjoy

tax-free withdrawals, too.

Withdrawals from a traditional IRA

are subject to ordinary income tax;

so is bond income outside of an IRA.

But by putting taxable bonds in a tra-

ditional IRA, you’ll get tax-deferred

growth until you must make with-

drawals. Bonds tend to have moderate

returns, so the tax bite might also be

less than if you were forced to liqui-

date greatly appreciated stocks in

the account, Peterson says. Also, if

you hold stocks in a regular IRA, you

might have to sell them for a loss if the

market tumbles when you are taking

a required distribution. There’s lower

risk of that happening with bonds.

Dropped as an autho-

rized user. Years ago,

my parents made me

an authorized user on

one of their credit

cards. I have my own

cards now, and they

are taking me off their account. Will this

affect my credit score?

S.M., BROOKLYN

It can, but maybe not much if you’re

managing your cards well. “You might

see a bit of a dip in your score because

there’s been a significant change. But

if you’ve established a strong credit

history otherwise, that score will re-

bound,” says Rod Griffin, with credit

bureau Experian. If your parents’ card

has a record of late payments, being

removed as an authorized user could

even lift your score.

Be aware, the credit line on your

parents’ card will no longer factor into

your utilization ratio (what you owe on

your cards as a percentage of available

credit). This is a key score component;

the lower the utilization, the better for

your score.

Your parents’ card also might disap-

pear from your credit report; if so, the

age of their account won’t factor into

your score. Length of credit history

counts for 15% of a FICO score. If your

other cards are newer than your par-

ents’ account, your score may dip.

HSA investing. How should I invest in my

health savings account after age 65?

A.M., LAS VEGAS

As with your retirement accounts,

you’ll generally want to shift toward

Why Stocks Belong in a Roth IRA

Put bonds and securities with less growth potential in a traditional IRA.

ASK KIP

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