WASHINGTON Feb 20 If you have ever been pitched
an investment, you've probably been on the receiving end of a
"limited time" offer - the kind where you have to act now or
forever lose your chance of participating in a great
In fact, there are many financial decisions best made by
procrastinators. The longer the wait, the better they turn out,
like some fine wines.
Here are some financial moves that are just as well delayed.
-- Transferring from a traditional individual retirement
account to a Roth IRA. When you move money from a tax-deferred
IRA to a Roth, you have to pay income taxes on the amount you
move. If you do that at mid-career, you're likely to be paying
at a top tax rate, and perhaps even limiting the amount of new
money you can invest while you pay taxes.
That is why many financial advisers tell their clients to
wait until they retire to move the money to a Roth. Your taxable
income (and income tax rate) is apt to be lower. You can move
just enough IRA money over every year to keep yourself in your
lower tax bracket, and still have years and probably decades to
allow the Roth money to grow tax-free throughout your
-- Buying TIPS. Treasury inflation protected securities are
designed to do what they say - protect your money from rising
prices. So the rates these bonds pay are derived by putting
together one rate, set at U.S. Treasury auction, and a second
rate that is based on the rise in the Consumer Price Index. But,
guess what? Even though consumer inflation has been extremely
moderate of late (it went up 1.7 percent for all of 2012), bond
buyers are so worried about inflation and financial security
that they have bid up these Treasury bonds to the point where
they have a negative yield. If you wanted to sell TIPS before
maturity, you'd get less back than you paid for them.
"It's hard to see the benefit of most TIPS now," Michael
Fredericks, a managing director at investment management firm
BlackRock Inc recently told me in an interview.
The solution? Wait until you see bond buyers stressing less,
inflation showing up and better TIPS prices before you buy, says
Jack Otter, author of "Worth It...Not Worth it? Simple &
Profitable Answers to Life's Tough Financial Questions." He
says, "Odds are you are not going to get punished for waiting on
TIPS and if fear subsides, there might be a much better
-- Buying a fixed annuity. Annuities are like flat-screen
televisions. They keep getting better and cheaper. As baby
boomers move into retirement, the insurance industry keeps
improving the quality of retirement-focused products they sell.
Fixed-rate immediate annuities, which allow retirees to trade a
sum of money for guaranteed income for life, have been improving
in quality and their fees have been falling. Because of the
current low-interest-rate environment, however, they aren't
offering much in the way of payouts.
Furthermore, the older you are when you buy a fixed annuity,
the bigger your monthly benefit. If you think you want to
annuitize part of your retirement, set aside the money now and
watch rates. The longer you wait, the more likely you are to
find higher payouts, lower fees and a better constructed
annuity. If you can't afford to wait, take a portion of your
kitty and buy a small annuity. Wait a few years to buy your next
-- Paying off that mortgage. Should you hurry to kill your
loan by paying extra principal every month? Not usually.
Homeowners who have been able to refinance now are sitting on
long-term loans at rates around 4 percent, 3 percent or even
less. Hold that loan as long as possible, make the regular
monthly payment and use extra cash to build a rainy-day fund or
invest. At the end of the day you are likely to end up with more
money than if you just paid it off early. And you'll be able to
use those emergency funds without paying higher interest to
borrow new money next time you need to fix the roof.
-- Buying the new car. Unless your car is actually rusting
out from under you and costing you thousands of dollars a year
in maintenance, there's little harm in replacing it later. Otter
tells readers to defer the car purchase and use the extra cash
to take a vacation. While that may sound like a questionable
financial decision, it isn't. There's solid research behind the
idea that people are happiest when they spend their money on
experiences, instead of things, so don't put off that family
trip. It's a limited time offer.