Welcome to Ask the Bills, where every two weeks Helaine Olen answers readers’ questions about their most nagging personal finance and financial etiquette dilemmas. Seeking advice on a money issue? Email email@example.com.
When I divorced my husband more than 10 years ago, we had a couple of joint credit cards. He was deemed responsible for one and I the other. Today, I’ve paid off and closed mine, while he still uses his—and it still has my name on it. He says he can’t remove me—that he would have to apply for a new one and transfer the balance to get it in his name only. It’s had a permanent balance of $10,000 since we’ve been divorced. How can I get my name off this thing? I’m wondering how it’s affecting my credit, and what would happen if he should die.
You’ve allowed your ex-spouse to keep using this card for 10 years? I won’t even ask why. But here’s what to do now, according to consumer credit expert Beverly Harzog, author of The Debt Escape Plan. Call the credit card company, explain the situation, and say you want to close the account. Then tell your ex what you’ve done—and that he needs to call up and apply for a balance transfer. It’s 2016: Credit card issuers know about the aftermaths of divorces, so as long as your ex’s credit is in decent shape, he should be able to manage the transfer in a few weeks. It is quite possible the issuer will want proof that you’re divorced, which should be easy enough to supply. If your ex won’t take action, call a lawyer. That’s not nice, but neither is his refusal to take your name off the card. Because yes—it can impact your credit score and record.
But what happens if your ex dies (gruesome thought!) before you’ve completed this process? Then, yes, you might be responsible for the debt. Harzog says it’s possible an attorney could argue that by not closing the account, your former spouse didn’t fulfill the terms of his agreement with you. But there’s no guarantee that would work—and even if it could, why go there? Better to deal with some unpleasantness now and put an end to this unwanted vestige of your late marriage.
My dad was recently forced into an “early retirement” and in the ensuing financial drama, he’s begun talking to a financial adviser who sounds incredibly shady. He couldn’t tell me what the adviser’s fees are—except that he recommended paying thousands of dollars up front in IRA fees. The adviser has promised to “double their money in seven to eight years” and invest it so my parents can live off just the interest and not touch the principal. (We’re talking about roughly $800,000.) Do you know of any resources that might be helpful here? Is it appropriate for me to criticize the adviser to my parents? They’re adults, and I certainly don’t want to control their finances—but watching this just feels wrong.
You’re right to worry. It sounds like your dad has found what Teresa Ghilarducci, the noted economist and author of How to Retire With Enough Money, calls, simply and perfectly, “a guy.” A guy is a guy—OK, sometimes she’s a woman—who claims to have a surefire strategy for beating the market. These advisers prey on folks like your dad. And because people are desperate, scared, and not as financially savvy as they think they are, they believe. By the time they work out the truth, it’s way too late. They’ve been had, and way too much money is gone.
Surveys show that almost one-half of us—at least—retire earlier than expected, usually due to illness or unexpected unemployment. People plan their retirements thinking they’ll keep earning money until a certain age. When that doesn’t shake out, they sometimes encounter shady financial advisers who deliberately target downsized, middle-aged former employees, making their payday from the misfortune of others.
So first, buy or borrow Ghilarducci’s book. Show your folks the chapter about “the guy.” And remind them how hard it is to beat the markets—and press them on why someone with some secret plan to do so would bother with their pissant $800,000. If you had a surefire investment strategy, wouldn’t you hold out for a billionaire—or a multimillionaire at the very least?
And don’t feel bad for interfering. Every red flag is here. How, exactly, is this adviser going to double your dad’s money in less than a decade? How does your father not know how much this advice is costing him? The adviser almost certainly has no legal duty to act in your dad’s best interests—if he did, your father would know what he’s paying.
Unfortunately, there’s no guarantee your dad will listen to you, and chances are there’s not much you can do if he doesn’t. The Obama administration is in the process of overhauling the laws governing Individual Retirement Accounts so that, going forward, advisers would need to act in their clients’ best interests. But it sounds like that’ll be too late for your dad—unless you intervene successfully, right now.
I have a diverse portfolio containing a couple of stocks that have lost 90 percent of their value—one in pharma, the other in oil. I think they’re good companies and don’t mind keeping them, but I’m also considering cutting my losses and selling them to buy something I might enjoy, like a good meal at a fancy restaurant. What are the chances of stocks like these (or any stock for that matter) bouncing back after losing so much value?
What’s diversification? It’s the idea that purchasing different classes of investments—small company stocks, large company stocks, bonds, etc.—helps you reduce the risk of investing. How many do you need? That’s a good question. Some say a mere 12 to 18 well-chosen stocks. Others say at least 100.
And picking the right stocks? You need to research companies and stay on top of events, something that takes a not-insignificant amount of time. Trading costs also add up. And even then, stuff goes wrong. The most recent example is the managers and directors of the renowned Sequoia Fund, a mutual fund famed for outperforming the market year in and year out. Notice the past tense. According to Bloomberg, the fund trailed 97 percent of similar funds last year thanks to one bad bet—Valeant Pharmaceuticals, whose stock has fallen by about 80 percent in the past year. No surprise, repeated studies have shown less than 1 percent of us have the ability to outsmart the markets on a regular basis. This 1 percent, by the way, includes people who run mutual funds or otherwise manage money for a living.
Will your stocks come back? Got me. I can’t predict the future. So what to do now? Well, duh. Stop futzing around, as my grandmother would say, with stock picking. In the future, invest in a nice group of diversified index funds. If you stick with stock picking, know that you’ll likely experience events like the one you’re describing again and again and again. And for goodness’ sake, treat yourself to a good meal.