Dear Harry: My brother lives in a small town in Wisconsin. His local bank is offering a five-year CD with a guaranteed interest rate of 2 percent with a neat little twist. It will pay the larger of the 2 percent or 90 percent of the Standard and Poor's 500 Index increase. This looks like a heads-I-win, tails-you-lose proposition. Could it be that it's just too good to be true?
What Harry says: This is a class of security known as "structured retail products." They've been around for a long time with a rather checkered history. You are really limiting the return you're going to get by going this route. There are a lot of variations on this theme, some of which do not offer the protection of government insurance on the instrument. The big problem is the limit on your gains which are reduced by all kinds of fees. You would be a lot better off buying an index mutual fund for half your money and a regular CD for the other half.
Dear Harry: My car was repossessed last week. I called the towing company to tell them I wanted to get my personal belongings from the car. I got someone who said I could come and get my stuff between 8 a.m. and noon and "to be sure to bring a $75 property fee" in cash only. What do these leeches want? I'm sure they get paid by the finance company for the towing and storage. Why do they want money for doing nothing from a person who is obviously in a tough financial situation?
What Harry says: What a dirty deal. You're going to have to give them the $75 to get your stuff back. I hope you can get a receipt, but I'm doubtful. In any event, sue these toads in Small Claims Court. In view of the "cash" requirement, I get the distinct feeling that this money is not reported on their tax returns and that they will settle with you before the case is heard in a courtroom.
Dear Harry: In 1987, my father bought me one share of Berkshire Hathaway stock as a birthday present. I never knew about this until a few weeks ago. Afterward, I had a very serious falling out with him, and we don't even speak to each other. Now that I'm over 18, I'd like to get him to give me the stock. It's in his name as custodian under the Uniform Gifts to Minors Act. He won't respond to my e-mail and snail-mail requests. Do I have to take legal action to get this stock? Would writing to the company with a copy of my birth certificate do it? I sure could use the money.
What Harry says: In those days, Berkshire had only one class of stock: the present A shares. Today, they are worth more than $100,000 per share. (Those five zeroes are correct!) Unfortunately, being more than 18 doesn't cut it with custodial accounts. You have to reach 21 in order to force a transfer. Perhaps you could get the stock if you patched things up with your father. He could make the transfer willingly before you hit 21. That's a lot of dough for a young guy to handle, so be careful with it when you receive it.
Dear Harry: My father became permanently disabled back in December 2005 when his diabetes led to an amputation and kidney failure. He was 57 and held down two jobs at that time. He began to receive two disability checks under his employers' workers-comp insurance, one for about $2,000 a month and another for about $1,400. After a few months, he became eligible for Social Security disability payments of about $1,500 a month. The insurance company that was paying him $1,400 got back an overpayment, and it is now cutting his payments down to $200. The other company stopped paying him until they find out just what their repayment and reduction will be. Can they both cut his payments by the $1,200 a month? Social Security could not give me an answer. Neither insurance company had the answer. A local lawyer didn't have the answer. Everyone said that this was a situation that they had never seen.
What Harry says: You caught me, too. However, one of my insurance gurus had seen this situation before, and he came up with the perfectly logical answer. If your father had one job that paid him the amount that he got from the two jobs, he'd have only one reduction. Therefore, that's all his present insurers can deduct, and they should do it proportionately. Since one company had been paying 58.82 percent of his total and the other company 41.18 percent, the SS reduction should be split in the same way. If $1,200 is the total reduction, it should be split $494 and $706. If the $1,200 is the proper reduction for the $1,400, then the reduction for the $2,000 payment should be $1,714.
Dear Harry: You have often written about reverse mortgages and how they can be used to help elderly people stay in their homes. I agree that they can be a great help psychologically and financially, but there are costs that can be very heavy. My uncle's closing costs were almost $19,000! In addition, the "loan origination fee" was 2 percent, and he had to pay an up-front mortgage insurance premium of another 2 percent. Then, there's the 1/2-percent annual mortgage- insurance premium. Most of these charges were added to the mortgage, so he wasn't hurt at settlement, but they'll be paid ultimately.
What Harry says: I always recommend that any applicant have a lawyer. This is a matter of safety as well as cost. Too many vultures are out there looking to take advantage of the elderly, especially the needy.