Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, October 2, 1995 TAG: 9510020093
SECTION: MONEY PAGE: 6 EDITION: METRO
SOURCE: MAG POFF
DATELINE: LENGTH: Long
I bought into two funds in April 1992 and for a number of months contributed to both. Both have grown steadily, but for the past four months one has a 32 percent growth and the other a 44 percent growth. They say you should commit for five years, but I'm afraid the value will drop steadily before the end of five years.
If I should cash in some shares, what about taxes? We live mostly on our Social Security, a little income from our IRAs and my earnings from a part-time job. For the past four years, we have not had enough income to file a tax return.
We are rather conservative. We don't need the money, but I thought we should sell some shares and invest in something with a fixed rate. We have a gain of $2,841 for a total investment period of three years and several months on an investment of $5,000.
A: Simply because a fund has increased in price is not a good reason to sell it, according to David Cissel, a fee-only financial planner with Financial Solutions in Roanoke.
Even people in their 70s and 80s should have part of their money invested in stock, Cissel said. Having all your money in fixed-income investments can leave you vulnerable to erosion of your purchasing power by inflation.
Cissel said the most important question you need to ask yourself is when you anticipate you will need money from your mutual funds.
If you expect to need additional income within the next five years, he would recommend that you begin to sell some of your shares. Most funds have an automatic withdrawal plan that will liquidate your shares over time, sending you a check every month or calendar quarter or year, depending on your needs.
If, on the other hand, you do not expect to need additional income for the foreseeable future, he suggests leaving the money invested in stocks.
Considering the high growth rate of your funds over the past several months, he said, you may be invested in a fund that is too aggressive for your situation. Ciccel said you may want to check with your fund's representative to see if there is another stock fund available that is more conservative. If so, ask for a prospectus and check the history of the fund you are considering.
You also should ask about any charges for switching funds. He said most funds will let you switch to another fund in their family without charge.
Cissel said gains on the sale of mutual funds are taxable. This is true even when you invest the proceeds in another fund immediately. You will have to add any gains from the sale of your funds to your other income to determine whether you owe taxes.
Be sure to keep all your investment records, he said. If you have had dividends or capital gains reinvested, be sure to include those into the cost of your funds.
Paying hospital bills
Q: My son, age 13, recently had emergency surgery with some complications, so his hospital stay was eight days. We have no medical insurance, and our combined income is under $20,000. I have received some bills already, along with an application for a credit card to put these bills on. We sent in a form for financial assessment and were denied. This form was to set up payments and perhaps to forgive a portion of the bill.
Can the hospital legally make us get this credit card? The interest alone would be a great amount. I really do not want to do that. I also would like to know if it will ruin our credit rating if I do not get the credit card. I intend to make monthly payments. Is there anything Carilion can do to us as long as we are making some payment, no matter what the amount? His bills so far are about $17,580.
A: Ed Garretson, vice president of Consumer Credit Counseling Service in Roanoke, said his agency may be able to help you. The organization, supported by area merchants, helps people draw budgets and pay on their bills. In some cases, the agency handles the payments to creditors and may be able to curtail the interest.
He said Carilion Health System cooperates "pretty well" with the agency and its clients.
The hospital cannot make you take the credit card, and you should not sign for it if you don't want to, Garretson said.
But he pointed out that you likely signed a contract when your son entered the hospital that obligates you to pay the bills, and it probably provided for interest on the account.
It is a common misconception that a creditor cannot take action against you as long as you are making payments, Garretson said. He said creditors don't have to accept any amount you are willing to pay; they can go to court at any time and obtain a judgment for the full amount.
You should make an appointment with the agency by calling 563-0076 or 366-CCCS. The office of Consumer Credit Counseling Service is at 7000 Peters Creek Road, at the corner of Williamson Road. Its counselors may be able to help you to handle all of your debts and perhaps to finance medical insurance. They will counsel you about the advisability of bankruptcy, since your debt equals the amount of your annual income, although this is a move to avoid if you can.
by CNB