Money Management Q&As

August 4, 2006



Targeting savings for college

Q. In this column in your Jan. 6 issue you mentioned that target retirement funds could also be used for funding a child's future education costs. What should I consider when choosing such a fund?

A. These funds all aim to lower investment risk as the "target" date approaches, by gradually shifting a greater percentage of the invested amounts out of equities and into bonds. But the stock-bond balance-and thus the potential risk and return-can still vary considerably among funds with the same target dates. So can the types of stocks the funds emphasize. One target fund may invest heavily in foreign holdings while another focuses on domestic large-caps. So look beyond the target dates to make sure the strategy suits your investment style.

Can you freeze your credit files?

Q. I've heard that it may be possible for me to freeze my credit files so that they can be accessed only with my permission. That sounds like a great way to prevent identity theft. What are the details?

A. So far, 17 states have passed laws allowing either all consumers or victims of identity theft to prevent credit bureaus from releasing their credit reports or scores without their permission. Victims of identity theft usually don't pay a fee for requesting a freeze, but other consumers do. The cost varies, but $10 for establishing the freeze or lifting it is typical. You can find out whether your state permits security freezes by visiting http://www.consumersunion.org/campaigns/learn_more/003484indiv.html. But keep in mind that freezing your account could delay the processing of any credit card, loan, or insurance applications that are in the works.

Preserving art for the long haul

Q. I recently inherited some potentially valuable paintings. I don't plan to sell them, but in case I change my mind later I'd like to have them cleaned and preserved. How do I go about it?

A. Enlist the aid of a conservator. He or she will determine what signs of aging must be addressed to preserve the paintings, and will employ professional methods to help protect them. Displaying or storing the paintings in a place where temperature and humidity remain as constant as possible will also help extend their life. You may be able to find a conservator in your area through the website of The American Institute for Conservation of Historic and Artistic Works, at aic.stanford.edu. If not, see if a local museum can recommend one.

Illness buys time to make amends

Q. My mother was recently diagnosed with lupus and has been too ill to handle her finances, so I helped her complete her 2005 tax return. While reviewing some investment transactions listed on her past returns, I noticed that she overstated her 2002 capital gains by several thousand dollars. Is it too late to file an amended return to get her a refund?

A. Maybe not. A taxpayer generally must file an amended return within three years of filing the original return or within two years of paying the tax for that year, whichever is later. So normally your mother would be out of luck, assuming she filed and paid on time for 2002. But the three-year time limit is suspended when a person can't handle his or her finances because of a physical or mental illness that's apt to last for at least a year or end in death. That buys you some extra time.