MONEY Ask the Expert

Here’s How to Make Leaf Clean Up Easy This Fall

For Sale sign illustration
Robert A. Di Ieso Jr.

Q: I’m debating whether to invest in some high-quality equipment to help pick up the leaves in our yard this fall, or hire a pro to tackle the job. How much would I need to spend on tools if I go the DIY route?

A: The problem with hiring a landscaper to do your fall leaf cleanup isn’t necessarily the $250 to $500-plus price tag, it’s that this is not a once-a-season job. In many regions of the country, autumn lasts weeks and weeks, so it takes a handful of cleanups to keep your property neat and tidy. (This is especially true if you have a neighbor who waits until absolutely every branch is bare before he’ll lift a rake, ensuring that his leaves continue to blow onto your lawn until the first frost glues them to the ground.)

The good news is that do-it-yourself leaf removal doesn’t have to be a blister-raising, hamstring-stressing effort. With the right tools, the leaves can be gone before the first afternoon football game kicks off. Here’s what you need to make that happen.

Lawnmower: Throughout the spring and summer, setting the mower to maximum height is one of the best things you can do for your lawn’s health. But come fall, drop it down as low as it’ll go without scalping the turf. Short grass gives leaves less to get caught on as they drift around the neighborhood. It also means the mower will vaporize any leaves that have already fallen (assuming a light coating). Use a mulching mower—meaning the kind without a bag that pulverizes clippings and drops them back into the turf to feed it—such as the Toro 20370 ($309 at Home Depot).

Leaf Blower: Raking is hard work, but so is using a wimpy hand-held leaf blower. The typical plug-in version isn’t powerful enough to extinguish a birthday candle, never mind move a pile of damp leaves—or a single well-nestled acorn. If you’re of strong enough body to rake, you’re probably of strong enough body to handle a gas-powered backpack blower, such as Husqvarna’s top-of-the-line 356BT ($439 at amazon.com). These machines have flexible hoses and variable speed triggers, so you have plenty of power to remove those leaves stuck in your azaleas and also a gentle enough touch for cleaning up around a screen porch without sending dirt inside. (Just please wear ear protection, because even this quieter-than-most version is quite loud.)

Tarp: Don’t try to transport a big pile of leaves all the way to the woods for disposal- or the curb if your municipality picks them up with a vacuum truck— using a blower, not even a backpack one. Instead, rake or blow them onto a tarp and drag them to their destination or, better yet, blow them onto the EZ Leaf Hauler, $40 from plowhearth.com, which has three sidewalls to help corral and relocate large piles.

Bagger: If you need to pack your leaves into brown paper bags for municipal curb pickup, check out the Leaf Chute ($9 at Lowe’s or Home Depot). It’s a low-tech, three-sided plastic tube that props open the empty bag and has a wide mouth for easy loading. Once the bag is full enough to stand on its own, remove the chute and pack in as many more leaves as you can stamp down.

Your Kids: Leaf pickup is an ideal chore for the young people who are eating you out of house and home. Start them with rakes—and quality, well-fitted work gloves—and let them learn the old fashioned way. Then, once they’re capable rakers, understand the basics of the job, and are ready for power tools, let them grab a hold of that sweet new blower.

 

Got a question for Josh? We’d love to hear it. Please send submissions to realestate@moneymail.com.

MONEY home improvement

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MONEY Ask the Expert

Here’s How Social Security Will Cut Your Benefits If You Retire Early

man holding calculator in front of his head
Oppenheim Bernhard—Getty Images

Whether you retire early or later, it's important to understand how Social Security calculates your benefits.

Q: I am 60 and planning on withdrawing Social Security when 62. Due to a medical condition, I am not making $16.00 an hour anymore but only making $9.00. Do you know how income level is calculated on early retirement? Thank you.

A. Social Security retirement benefits normally may be taken as early as age 62, but your income will be substantially higher if you can afford to wait. If you are entitled to, say, a $1,500 monthly benefit at age 66, you might get only $1,125 if you began benefits at age 62. Defer claiming until age 70, when benefits reach their maximum levels, and you might receive $1,980 a month.

Still, most older Americans are like you—they can’t afford to wait. Some 43% of women and 38% of men claimed benefits in 2012 at the age of 62, according to a Social Security report. Another 49% of women and 53% of men took benefits between ages 63 and 66. Just 3% of women and 4% of men took benefits at ages 67 and later, when payouts are highest.

Why are people taking Social Security early? The report didn’t ask people why they claimed benefits. But academic research suggests that the reasons are pretty much what you might expect—retirees need the money, and they also worry about leaving benefits on the table if they defer them. There is also strong evidence that most Americans are not fully aware of the advantage of delaying benefits. A study last June sponsored by Nationwide found that 40% of early claimants later regretted their decisions.

So before you quit working, it’s important to understand Social Security’s benefits formula. To calculate your payout, Social Security counts up to 35 of your highest earning years. It only includes what are called covered wages—salaries in jobs subject to Social Security payroll taxes. Generally, you must have covered earnings in at least 40 calendar quarters at any time during your working life to qualify for retirement benefits.

The agency adjusts each year of your covered earnings to reflect subsequent wage inflation. Without that adjustment, workers who earned most of their pay earlier in their careers would be shortchanged compared with those who earned more later, when wage inflation has caused salary levels to rise.

Once the agency adjusts all of your earnings, it adds up your 35 highest-paid years, then uses the monthly average of these earnings (after indexing for inflation) to determine your benefits. If you don’t have 35 years of covered earnings, Social Security will use a “zero” for any missing year, and this will drag down your benefits. On the flip side, if you keep working after you claim, the agency will automatically increase your benefits if you earn an annual salary high enough to qualify as one of your top 35 years.

The figures below show how Social Security calculated average retirement benefits as of the end of 2012 for four categories of worker pay: minimum wage, 75% of the average wage, average wage, and 150% of the average wage. (The agency pulls average wages each year from W-2 tax forms and uses this information in the indexing process that helps determine benefits.)

  • Worker at minimum wage: The monthly benefit at 62 is $686 and, at age 66 is $915.50. The maximum monthly family benefits based on this worker’s earnings record (including spousal and other auxiliary benefits) is $1,396.50.
  • Worker at 75% of average wage: The monthly benefit at 62 is $975 and, at age 66 is $1,300.40. The maximum monthly family benefits based on this worker’s earnings record (including spousal and other auxiliary benefits) is $2,381.20.
  • Worker at average wage: The monthly benefit at 62 is $1,187 and, at age 66 is $1,583.20. The maximum monthly family benefits based on this worker’s earnings record (including spousal and other auxiliary benefits) is $2,927.40.
  • Worker at 150% of average wage: The monthly benefit at 62 is $1,535 and, at age 66 is $2,047. The maximum monthly family benefits based on this worker’s earnings record (including spousal and other auxiliary benefits) is $3.582.80.

In short, claiming at age 62 means you’ll receive lower benefits compared with waiting till full retirement age. But given a lifetime earnings history and Social Security’s wage indexing, receiving a lower wage for your last few working years will not make a big difference to your retirement income.

Philip Moeller is an expert on retirement, aging, and health. His book, “Get What’s Yours: The Secrets to Maxing Out Your Social Security,” will be published early next year by Simon & Schuster. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

Related:

How does Social Security work?

When can I start collecting Social Security benefits?

Why should I wait past age 62 to start collecting benefits?

MONEY Ask the Expert

How To Find Out What You’re Paying For Your Retirement Account

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Robert A. Di Ieso, Jr.

Q: How can I find out how much I am paying in fees in my 401(k) retirement plan?

A: It’s an important question to ask, and finding an answer should be a lot easier than it is right now. Studies show that high costs lead to worse performance for investors. So minimizing your expenses is one of the best ways to improve returns and reach your retirement goals.

Yet most people don’t pay attention to fees in their retirement plans—in fact, many don’t even realize they’re paying them. Nearly half of full-time employed Baby Boomers believe they pay zero investment costs in their retirement accounts, while 19% think their fees are less than 0.5%, according to a new survey by investment firm Rebalance IRA.

Truth is, everyone who has a 401(k), or an IRA, pays fees. The average 401(k) investor has 1.5% each year deducted from his or her account for various fees. But those expenses vary widely. If you work for a large company, which can spread costs over thousands of employees, you’ll likely pay just 1% or less. Smaller 401(k) plans, those with only a few hundred employees, tend to cost more—2.5% on average and as much as 3.86%.

A percentage point or two in fees may appear trivial, but the impact is huge. “Over time, these seemingly small fees will compound and can easily consume one-third of investment returns,” says Mitch Tuchman, managing director of Rebalance IRA.

Translated into dollars, the numbers can be eye-opening. Consider this analysis by the Center for American Progress: a 401(k) investor earning a median $30,000 income, and who paid fund fees of just 0.25%, would accumulate $476,745 over a 40-year career. (That’s assuming a 10% savings rate and 6.8% average annual return.) But if that worker who paid 1.3% in fees, the nest egg would grow to only $380,649. To reach the same $476,745 nest egg, that worker would have to stay on the job four more years.

To help investors understand 401(k) costs, a U.S. Labor Department ruling in 2012 required 401(k) plan providers to disclose fees annually to participants—you should see that information in your statements. Still, even with these new rules, understanding the different categories of expenses can be difficult. You will typically be charged for fund management, record-keeping, as well as administrative and brokerage services. You can find more information on 401(k) fees here and here.

By contrast, if you’ve got an IRA invested directly with a no-load fund company, deciphering fees is fairly straightforward—you will pay a management expense and possibly an administrative charge. But if your IRA is invested with a broker or financial planner, you may be paying additional layers of costs for their services. “The disclosures can be made in fine print,” says Tuchman. “It’s not like you get an email clearly spelling it all out.”

To find out exactly what you’re paying, your first step is to check your fund or 401(k) plan’s website—the best-run companies will post clear fee information. But if you can’t find those disclosures, or if they don’t tell you what you want to know, you’ll have to ask. Those investing in a 401(k) can check with the human resources department. If you have an IRA, call the fund company or talk to your advisor. At Rebalance IRA, you can download templates that cover the specific questions to ask about your retirement account costs.

If your 401(k) charges more than you would like, you can minimize fees by opting for the lowest-cost funds available—typically index funds, which tend to be less expensive than actively managed funds. And if your IRA is too pricey, move it elsewhere. “You may not be able to control the markets but you do have some control over what you pay to invest,” says Tuchman. “That can make a big difference over time.”

Do you have a personal finance question for our experts? Write toAskTheExpert@moneymail.com.

More from Money’s Ultimate Retirement Guide:

How should I invest my 401(k)?

Are my IRA contributions tax-deductible?

Why is rolling over my 401(k) to an IRA such a big deal?

MONEY Ask the Expert

How to Help Your Kid Get Started Investing

Investing illustration
Robert A. Di Ieso Jr.

Q: I want to invest $5,000 for my 35-year-old daughter, as I want to get her on the path to financial security. Should the money be placed into a guaranteed interest rate annuity? Or should the money go into a Roth IRA?

A: To make the most of this financial gift, don’t just focus on the best place to invest that $5,000. Rather, look at how this money can help your daughter develop saving and investing habits above and beyond your contribution.

Your first step should be to have a conversation with your daughter to express your intent and determine where this money will have the biggest impact. Planning for retirement should be a top priority. “But you don’t want to put the cart before the horse,” says Scott Whytock, a certified financial planner with August Wealth Management in Portland, Maine.

Before you jump ahead to thinking about long-term savings vehicles for your daughter, first make sure she has her bases covered right now. Does she have an emergency fund, for example? Ideally, she should have up to six months of typical monthly expenses set aside. Without one, says Whytock, she may be forced to pull money out of retirement — a costly choice on many counts — or accrue high-interest debt.

Assuming she has an adequate rainy day fund, the next place to look is an employer-sponsored retirement plan, such as a 401(k) or 403(b). If the plan offers matching benefits, make sure your daughter is taking full advantage of that free money. If her income and expenses are such that she isn’t able to do so, your gift may give her the wiggle room she needs to bump up her contributions.

Does she have student loans or a car loan? “Maybe paying off that car loan would free up some money each month that could be redirected to her retirement contributions through work,” Whytock adds. “She would remove potentially high interest debt, increase her contributions to her 401(k), and lower her tax base all at the same time.”

If your daughter doesn’t have a plan through work or is already taking full advantage of it, then a Roth IRA makes sense. Unlike with traditional IRAs, contributions to a Roth are made after taxes, but your daughter won’t owe taxes when she withdraws the money for retirement down the road. Since she’s on the younger side – and likely to be in a higher tax bracket later – this choice may also offer a small tax advantage over other vehicles.

Why not the annuity?

As you say, the goal is to help your daughter get on the path to financial security. For that reason alone, a simple, low-cost instrument is your best bet. Annuities can play a role in retirement planning, but their complexity, high fees and, typically, high minimums make them less ideal for this situation, says Whytock.

Here’s another idea: Don’t just open the account, pick the investments and make the contribution on your daughter’s behalf. Instead, use this gift as an opportunity to get her involved, from deciding where to open the account to choosing the best investments.

Better yet, take this a step further and set up your own matching plan. You could, for example, initially fund the account with $2,000 and set aside the remainder to match what she saves, dollar for dollar. By helping your daughter jump start her own saving and investing plans, your $5,000 gift will yield returns far beyond anything it would earn if you simply socked it away on her behalf.

Do you have a personal finance question for our experts? Write toAskTheExpert@moneymail.com.

MONEY Ask the Expert

What You Need to Know Before Choosing a Beneficiary for a Health Savings Account

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Robert A. Di Ieso, Jr.

Q: “What happens to the money in a health savings account when the account owner dies?”–James McKay

A: It’s up to you to decide.

But let’s back up a step: A health savings account offers those in high-deductible health insurance plans the opportunity to save pretax dollars and tap them tax-free to pay for qualified medical expenses, with unused funds rolling over from year to year. Unlike a Flexible Spending Account, you have the opportunity to invest the money. And once you hit age 65, the money can be used for any purpose without penalty—though you will pay income tax, similar to a traditional IRA. So for many people, an HSA also functions as a backup retirement account.

When you open an HSA, you will be asked to designate a beneficiary who will receive the account at the time of your death. You can change the beneficiary or beneficiaries any time during your lifetime, though some states require your to have your spouse’s consent.

Your choice of beneficiary makes a big difference in how the account will be treated after you’re gone.

If you name your spouse, the account remains an HSA, and your partner will become the owner. He or she can use the money tax-free to pay for qualified healthcare expenses, even if not enrolled in a high-deductible health plan, says Todd Berkley, president of HSA Consulting Services. Should your spouse be younger than 65, take a distribution of funds and use them for something other than medical expenses, however, he or she will pay a 20% penalty tax on the amount withdrawn plus income taxes (a rule that also applies to you while you’re alive).

Thus, Berkley warns against a spouse taking a full distribution to close the HSA. He says that it’s better to leave money in the account first for medical expenses, then later for retirement expenses both medical and non—since your partner gets the same perk of penalty-free withdrawals for other expenses after turning 65.

When the beneficiary is not your spouse, the HSA ends on the date of your death. Your heir receives a distribution and the fair-market value becomes taxable income to the beneficiary—though the taxable amount can be reduced by any qualified medical expenses incurred by the decreased that are then paid by the beneficiary within a year of the death.

Failure to name a beneficiary at all means the assets in your account will be distributed to your estate and included on your final income tax return.

MONEY Ask the Expert

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MONEY Ask the Expert

What You’ll Pay to Keep Your Power On This Winter

For Sale sign illustration
Robert A. Di Ieso Jr.

Q: I’m sick of candles, flashlights, and spoiled food. How much do I need to spend for a generator that will keep the power on no matter what Mother Nature throws at us this winter?

A: You’re smart to think about this now because by the time the first storm hits, you may find the local home center cleaned out of generators and face a long wait for an electrician. You have three basic generator options at three different price points, says master electrician Matt Tomis of Fairfield, Connecticut.

1) Portable Generator with Extension Cords

The lowest-cost approach is to simply purchase a portable, gasoline-powered machine, which will run $400 to $1,200 for 5,500 to 6,500 watts. You’ll also need several heavy-duty exterior-grade extension cords, which typically cost $30 to $40 each for a 50-foot cord.

Works for: Your fridge (you’ll have to roll it out of its cubby-hole to connect the cord) and some lamps and other plug-in devices.

What it won’t power: No hardwired equipment, meaning it doesn’t plug-in, such as the heat or ceiling lights. “And no sensitive electronic device, such as a TV or computer, because emergency generators produce dirty power, meaning it’s prone to mini-surges, sags, and spikes that can damage your equipment,” says Tomis. (If you want to safely plug in electronics, you would need to invest in what’s known as an inverter generator, which runs $2,000 to $4,000.)

Inconvenience factor: High. You need to keep plenty of gas on hand (with gas treatment added to keep it from going stale), and you need to start the generator each month all year round and run it for a few minutes to keep it at the ready. Then when an outage strikes, you have to wheel out the generator, pull-start it, and run your cords—taking care to keep the generator 10 feet from the house to avoid letting carbon monoxide inside. You may also want to chain the generator to a tree if you think someone might take it in your area.

Total cost: $600 to $1,400.

2) Portable Generator with Transfer Switch

This approach combines a slightly more powerful gasoline-powered portable generator with a minor electrical rewiring project that allows you to jack the generator right into the side of your house and run certain, pre-selected household circuits. Figure the stronger 6,500 to 7,500 watt machine will run $600 to $1,500, plus you’ll spend $1,200 to $1,500 for the electrical work.

Works for: Your electrician will help you choose circuits for hallway and kitchen lights, heat, hot water, microwave, refrigerator, and sump pump—and tell you exactly what size generator you need to power them.

What it won’t power: Unless you spring for an inverter generator, the electricity still isn’t clean enough to safely operate computers, televisions and other delicate electronics. Also the portable generator isn’t powerful enough to operate your air conditioning, something you may care about if you live in a warm climate.

Inconvenience factor: Moderate. Similar to the first, less expensive option, you need to wheel out your gasoline powered generator (which you’ve been starting monthly all year long), keep fresh gas handy, and lock it for security. But attaching it to the house inlet is far simpler than running extension cords.

Total Cost: $1,800 to $3,000.

 

3) Automatic Whole-House Generator

Your best yet priciest option is a natural gas or propane powered generator that’s large enough—and produces clean enough energy—to run every single circuit in your house, and automatically takes over when you have a power outage. You’ll pay around $11,000 to $15,000 for one fit for a 3,000 square foot house, including the generator, wiring, and gas-line connection, or perhaps $22,000 to $26,000 for a large manor house.

Works for: The clean, steady power can run everything in your house—plus all of your neighbors’ phone chargers.

What it won’t power: Even with all of your electronics up and running, this generator can do nothing, of course, about phone, cable, and Internet service interruptions.

Inconvenience factor: None. There’s no gasoline to buy, no pull-cord to yank on, and the unit even starts itself every week and conducts a self check. You can even get a text if there’s any problem that requires a visit from a technician. Of course that convenience comes at a price.

Total Cost: $11,000 to $15,000.

 

Got a question for Josh? We’d love to hear it. Please send submissions to realestate@moneymail.com.

MONEY Ask the Expert

How Late-Life Marriage Can Hurt Your Retirement Security

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Robert A. Di Ieso, Jr.

Q: I am 66 and my partner is 63. We are thinking of getting married. How long must we be married for her to be eligible for spousal benefits based on my earnings? Neither of us have filed for Social Security yet. – Mark Sander, Indianapolis, IN

A: It’s wonderful to find love at any age. But for older couples, the decision to marry can have a big impact on your retirement finances, particularly when it comes to Social Security. Some experts say that may be one reason why co-habitation among older people is on the rise. According to the U.S. Census, nearly three million people age 50 and older live together, up from 1.2 million in 2000. “Many seniors live together instead of getting married because of money issues,” says Steve Vernon, author of Recession-Proof Your Retirement Years.

The good news is that if you do tie the knot, you only need to be married for one year for your wife to collect Social Security spousal benefits.

Still, it may not be a good idea for your wife to apply for benefits right away, says Vernon. At age 66 you are what Social Security deems full retirement age. But for your wife to collect full spousal benefits (50% of your full Social Security monthly payment) she will need to be full retirement age too.

If your wife files for Social Security before she reaches 66, she will get less than she would receive than if she waited till full retirement age. How much less? If your wife files for spousal benefits at 63, she will get 37.5% of your Social Security. At 64, that rises to 42% and at 65, 46%.

Waiting to collect benefits also means a higher payout for you. You can boost your Social Security paycheck by 8% each year you wait until age 70. A method called file and suspend allows you to file for your Social Security benefits so your wife can start collecting spousal benefits but you suspend receiving your benefits till you are 70.

Also be aware that if either of you has been married before, remarrying could mean losing alimony or the survivor benefits of a pension. “You really need to think strategically about how to maximize your Social Security benefits,” says Vernon.

There are a number of calculators and advice services that can help you figure the claiming strategy that’s best for your situation. Earlier this year, 401(k) advice provider Financial Engines released a Social Security income calculator that’s free and easy to use. The calculator sifts through thousands of claiming strategies to come up with a recommended option. For $40, you can use the Maximize My Social Security online software to evaluate more detailed scenarios. You may also want to consult a financial planner who’s familiar with Social Security rules.

Marriage can have a hazardous effect on other parts of your financial life, says Vernon. You will legally be on the hook for your spouse’s medical bills, and there may be sticky issues when it comes to inheritance. In some cases, married couples also face higher taxes, depending on your income and tax bracket.

Whether you get married is a personal decision, but by choosing the right financial plan, you’re more likely to enjoy a happy retirement together.

Do you have a personal finance question for our experts? Write to AskTheExpert@moneymail.com.

More from Money’s Ultimate Retirement Guide:

How does working affect my Social Security benefits?

Will my spouse and kids receive Social Security benefits when I die?

Are my Social Security payouts taxed?

MONEY Ask the Expert

Can I Ladder Bonds Using ETFs?

Investing illustration
Robert A. Di Ieso Jr.

Q: I’ve heard that there are bond ETF’s that hold securities that mature on the same date. Can they be used to create a bond ladder?

A: Bond ladders are a time-tested tool for investors looking to lock in predictable streams of income. The idea is to buy bonds that mature at regular intervals. In a simple ladder, for instance, you might divide your fixed-income money evenly among securities maturing in, say, one, two, three, four and five years.

Not only does this approach spread your bets, it is particularly useful now that interest rates are expected to rise.

Why? Rising rates are a threat to bond investors. That’s because when market rates rise, the price of older, lower-yielding bonds in your portfolio fall, eating into your total returns.

However, investors who create a ladder of bonds with different maturities need not worry about short-term fluctuations in bond prices. As long as they hold all the securities in their ladder to maturity, investors will get their fixed payments and principal back (assuming a borrower doesn’t default) no matter what rates do. What’s more, as one batch of bonds comes due every year, investors will be able to reinvest that money into new, higher yielding bonds, thereby benefitting from rising rates.

“A bond ladder makes all the sense in the world right now,” says Ken Hoffman, and managing director with HighTower Advisors. “If you know what you’re doing, you can create a ladder that provides you with the interest payments and maturity that you need.”

Here’s the rub: Putting together a diversified bond ladder requires some serious dough. At a minimum, you’ll need about $10,000 to buy a single bond, and ideally you’d want more than one bond on each “rung,” or maturity date. “I typically don’t recommend a bond ladder unless someone has $500,000 to invest,” says Hoffman, adding that you can construct a ladder with Treasury, corporate, municipal bonds, and so on.

Why not turn to bond funds? Regular bond funds own hundreds of different securities that mature at different dates and that aren’t necessarily meant to be held to maturity. Therefore, it’s impossible to ladder with regular funds.

This is where exchanged-traded funds that hold bonds with the same maturity come in. Two big ETF providers, Guggenheim and BlackRock’s iShares, now offer so-called defined-maturity or target-date ETFs that can be used to build a bond ladder using Treasury, corporate, high-yield or municipal bonds.

Like traditional ETFs, they charge low expense ratios, hold a basket of securities, and trade like stocks. What makes them unique is that the portfolios are made of up a diversified group of bonds maturing at the same time. When those underlying securities come due, target-maturity ETFs liquidate and distribute their assets back to shareholders — much like an individual bond would.

Using Guggenheim BulletShares, for example, you could build a corporate bond ladder with 10 funds maturing every year from 2015 through 2024.

ETFs aren’t a perfect proxy. The coupon rate — or regular interest payment — and the final distribution rate aren’t nearly as predictable as they are with individual bonds. Still, for investors who want the benefits of a ladder but with more liquidity, more diversification, and lower minimums, they’re worth a closer look.

Do you have a personal finance question for our experts? Write toAskTheExpert@moneymail.com.

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