MONEY Ask the Expert

When It Pays to Pay for Advice—and When It Doesn’t

Investing illustration
Robert A. Di Ieso, Jr.

Q: I’m 42 and have $210,000 in my retirement account, invested in the Vanguard Target Retirement 2025 fund. Vanguard offers an advisory service that costs 0.30% of assets annually. Is it worth it? – Name withheld

A: Based on your age and current strategy, you probably could use some help planning for retirement, notes Daniel P. Wiener, editor of The Independent Adviser for Vanguard Investors. But don’t expect to get a whole lot of extra hand-holding from Vanguard’s low-cost advisory offering.

First, let’s talk about your current approach.

Target-date funds are a great solution for people who want an all-in-one retirement portfolio that automatically grows more conservative over time as the target date (a.k.a. retirement date) approaches.

While they’re not a perfect strategy, target date funds beat the alternative — investing too aggressively or too conservatively on your own because you’re not sure which approach to take.

Plus they’re cheap. Vanguard’s target date funds charge less than 0.20% of assets a year for managing your money.

You don’t have to pick a target date that matches perfectly with the year in which you plan on retiring. Investors who want to play it more conservative, for example, can opt for a closer target date fund, while those who want to be a little more aggressive might pick a target date fund that is a few years past their actual retirement date.

In your case, however, the Vanguard Target Retirement 2025 fund VANGUARD TARGET RETIREMT 2025 FD VTTVX 0.94% is probably too conservative for you. It is, after all, designed for someone who will be retiring in just 10 years. “Someone who is 42 should probably be looking at a 2040 target date,” says Wiener.

In addition to rethinking your target date, Wiener says you may want to look at adding one or two complementary funds to the basic offerings in the Vanguard target retirement series.

For instance, you might look at adding a dividend-growth fund “focused on large, battleship, balance sheet companies,” says Wiener. If you want to stay in the Vanguard family of funds, take a look at the Vanguard Dividend Growth fund VANGUARD DIVIDEND GROWTH FD VDIGX 1.6% .

Need a little more handholding?

That’s where advisory services come in. Vanguard’s advisory service is an inexpensive alternative to the typical 1% management fee charged by financial advisors.

The catch? “The advice is pretty cookie cutter,” says Wiener. What’s more, “the ‘planners’ are not independent and follow a strict Vanguard model.” In fact, the end product may look a lot like the allocation for a target-date fund pegged to your age and risk profile.

“If you don’t want to think about this stuff you could do a lot worse than pay 0.30% for a little extra help,” says Wiener.

That said, for many individuals it’s worth it to pay an advisor who can offer soup-to-nuts advice about retirement planning and more.

MONEY Medicare

How to Shop for Medicare Drug Coverage

Q: I have a retiree medical plan sponsored by my former employer. It is a PPO with a $400 deductible per person and 20% co-insurance. The plan’s costs are reasonable, and it covers a wide range of drugs. There’s a $1,000 annual out-of-pocket maximum and one month of free maintenance drugs when you buy a 90-day supply from the preferred pharmacy. I will be Medicare eligible in 2016, and I do not think that my former employer will continue to offer a retiree health plan. Is there any insurer that will offer similar drug coverage to what I have now with no penalty for pre-existing conditions? How can I find such a plan, regardless of annual cost? Is there any way to avoid the $5,000 per year out-of-pocket cost that I hear is standard with Medicare Part D plans? Thank you. — Gary, N.Y.

A: Gary’s question is a great opportunity to talk about the challenges that more and more retirees face as they shift from employer-sponsored group health plans to Medicare.

As retiree health benefits have become increasingly expensive, many companies are dropping this coverage. In the best case scenario, the employer gives these retirees a lump sum, which is deposited into a health reimbursement account (HRA). The retiree can use the HRA funds to help buy an individual Medicare policy. But all too often, the employer may simply end the retiree health plan and provide no further support.

Still, there is some good news. Gary won’t face pre-existing condition limitations as long as he signs up for Medicare on a timely basis. If he meets the enrollment deadlines, any pre-existing conditions he has will not affect him when purchasing Part D, or when signing up for Original Medicare (Parts A and B) or Medicare Advantage (Part C).

If Gary chooses Original Medicare, he may want to buy a Medicare supplement policy, which also is called Medigap. Original Medicare pays only 80% of insured expenses, after beneficiaries pay annual deductibles and co-pays; policyholders must pay the other 20%. Medigap policies will pay that 20% plus other services that Medicare does not cover. If you purchase Medigap coverage at the time you become eligible for Medicare, you have guaranteed issue rights—you cannot be penalized for pre-existing conditions.

So Gary has two basic options. He can enroll in Original Medicare, with or without a Medigap plan, and then get a stand-alone Part D drug plan. Or he can purchase a Medicare Advantage plan, which will pay for everything that Original Medicare does, including (in most cases) Part D drug coverage and often additional benefits as well.

There are some drawbacks to Medicare Advantage. Unlike fee-for-service Original Medicare, most Medicare Advantage plans are health maintenance organizations (HMOs), which require people to get their care in the plans’ provider network of doctors, hospitals and other providers. So be sure you’re comfortable with the health-care network before you sign on.

Now for bad news. Neither Original Medicare or Medicare Advantage is likely to offer Gary Part D coverage that is as good a deal as his employer-sponsored drug plan. Still, the costs may not be as steep as Gary fears. There are ceilings on Part D drug expenses, but they differ by plan. And despite what he heard, out-of-pocket costs for many policies are less than $5,000.

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It may also help Gary that shopping around for affordable drug coverage is getting easier. Medicare now offers an online tool called Plan Finder—just plug in your ZIP code, and you’ll see a list of all Part D plans from private insurers that are offered where you live. The list will include the premiums and other rates, as well as out-of-pocket maximums.

The Plan Finder tool also will let you enter your list of prescription medications and compare the costs of these drugs under different plans. If a plan does not include a specific drug in its roster of available drugs (called a “formulary”), you will see this as well. You can connect directly to plans that interest you and ask any additional questions you might have.

Read next: Why Medicare Premiums May Jump 50%

Philip Moeller is an expert on retirement, aging, and health. He is co-author of The New York Times bestseller, “Get What’s Yours: The Secrets to Maxing Out Your Social Security,” and is working on a companion book about Medicare. Reach him at or @PhilMoeller on Twitter.

MONEY Ask the Expert

How to Control How Heirs Spend Your Money

Ask the Expert - Family Finance illustration
Robert A. Di Ieso, Jr.

Q: I’m 71 and my estate will be divided between my daughter and son; there are no grandchildren. My son and I differ radically on some political views. Is there any way to stipulate that none of my money will go to his causes? — Janet S.

A: The only way you can influence how heirs spend your assets from beyond the grave is with a trust, says CPA and financial planner Dina Lee, managing director of the Colony Group’s New York offices. This document goes beyond a will in that it not only outlines who will receive your property (and how much of it), but also helps guarantee your legacy and your intentions.

You can control the trust while you’re alive by drafting a living will with an estate planning attorney, but you will need to carefully appoint someone — be it a friend, family member, or third party like a bank — to manage the assets and distribute funds to beneficiaries after your death, following your instructions.

Beyond determining who inherits how much, a trust lets you include additional instructions to create hoops for heirs to jump through. An incentive trust, for instance, might force an heir to meet certain requirements — earning a degree, say, or passing a drug test — to receive funds. Staggered trust distributions allow your estate to pay out money incrementally over a certain timespan; such instructions are often aimed at allowing more money to be disbursed as heirs mature.

In theory, you can make the trust as restrictive as you like as long as those restrictions don’t break any laws — forbidding an heir from entering an interracial marriage, for instance.

But this is where your specific restriction may run into trouble. While you can specify that you don’t want heirs to give any of their trust funds to a specific political party, or certain political causes, your son could challenge that restriction in court — and the court could overturn it by finding it to be a violation of freedom of expression.

Alternate Strategy

A wiser tactic, suggests Washington estate planning attorney Bill Sanderson, would be to “only permit that which you want to permit.” Rather than trying to exclude certain activity, simply spell out which expenses you feel comfortable supporting, he suggests; the list could include such items as mortgage payments and rent, healthcare bills, insurance, and education costs.

This strategy is easier on the trustee, adds Sanderson, because he or she can simply ask beneficiaries to show proof of an expense and then issue a reimbursement — without having to play detective.

Understand, however, that such restrictive arrangements can cause resentment from heirs.

And there’s another issue. Lee points out that even if you craft the trust in a way that limits its use for political donations, simply giving your son money will increase his wealth, and thus free up more funds that he can give to those causes you disagree with.

Says Lee: “Indirectly, you are still enabling him to support his political beliefs — and accepting that the trust can’t change his behavior is part of letting go.”

Read next: I Paid Off $45,000 in Debt as a Stay-at-Home Dad

MONEY Social Security

How Social Security Spousal Benefits Can Boost Your Tax Bill

Ask the Expert Retirement illustration
Robert A. Di Ieso, Jr.

Q: If my wife takes the “spousal benefit” on my Social Security, which I have suspended until age 70, do we have pay taxes on that income? – Ron

A: Yep, you do. Social Security benefits are taxable if they exceed certain levels, and this applies to spousal and other benefits as well as your own retirement benefits. The rules can be a bit tricky. If you file a joint tax return, and your “combined” income is less than $32,000, you will owe no federal income tax on your Social Security benefits. If it’s between $32,000 and $44,000 a year, you will owe taxes on 50% of your benefits. Above $44,000, you would owe taxes on 85% of your benefits. Under current rules, you will never owe federal taxes on more than 85% of your benefits. These income brackets are not adjusted for inflation each year, so over time more and more people will owe taxes on their Social Security benefits. To determine your combined income as defined by Social Security, take your adjusted gross income (AGI) from your tax return, add any nontaxable interest you receive (from, say, a municipal bond), and then add half of your household’s combined Social Security benefits.

Q: After reading your article in Money, I thought the Start-Stop-Start strategy might work for me. I have called Social Security and they have never heard of this. Can you tell me the part of their regs which allows this method of claiming benefits? Thanks. —Phil

A: Start-Stop-Start is not an official name but a short-hand reference to a way of using Social Security’s rules for Suspending Retirement Benefits. If you have begun receiving benefits (the first Start), these rules permit you to suspend them (the Stop part) when you’ve reached your Full Retirement Age. Then, they will increase due to Delayed Retirement Credits until you resume them (the second Start part). Your suspended benefits will reach their maximum amount at age 70.

Read next: How to Time Medicare and Social Security Claims for 2016

Q: My wife and I are both high earners. I am 68 now and am not taking Social Security benefits. My wife will be 66 in June 2017. Can I file for benefits and suspend and if I do, can she then receive half of my benefits now, even though she is not yet 66? What effect will this have on her own benefits, which she would like to defer until age 70? — Rao

A: If your wife files for a spousal benefit before she reaches 66 (which is defined as Full Retirement Age) she will not be able to file just for her spousal benefit. Under Social Security’s “deeming” rules, she will not be able to suspend her own benefits but will be required to file for them and her spousal benefit at the same time. She will not get both benefits but an amount that is roughly equal to the greater of the two. Also, because she is filing before her FRA, her benefits will be hit with Early Claiming Reductions, meaning that she will get an amount that is roughly equal to the greater of two reduced benefits! Unless you are in dire financial straits or facing a health or other family emergency, she should wait to file for a spousal benefit until she is 66. At that time, and assuming you have filed for and suspended your own benefit, she can file what’s called a restricted application for just her own spousal benefit. She will receive the full value of this benefit, which will equal half of your benefit as of your FRA. And she will be able to let her own retirement benefits increase by 8 percent a year until up to age 70.

Philip Moeller is an expert on retirement, aging, and health. He is co-author of The New York Times bestseller, “Get What’s Yours: The Secrets to Maxing Out Your Social Security,” and is working on a companion book about Medicare. Reach him at or @PhilMoeller on Twitter.

MONEY Ask the Expert

Do Shareholders Still Get Perks from Companies?

Investing illustration
Robert A. Di Ieso, Jr.

Q: Are there still stocks that give shareholders perks — for instance, discounts to Disney World for Walt Disney stock owners? — Melissa, San Antonio

A: There are, “but they are fewer and far between these days,” says Mariann Montagne, a chartered financial analyst with Gradient Investments in Arden Hills, Minn. “I remember a time when the annual report for McDonald’s MCDONALD'S CORP. MCD 2.75% or Starbucks STARBUCKS CORPORATION SBUX 3.29% contained a gift card,” she says. “But those days are gone.”

Many companies, she says, concluded that it was too costly and cumbersome to handle these requests, especially now that so many shareholders own their stock through brokerage accounts. “It’s different than it was when people had actual stock certificates,” she says.

Walt Disney WALT DISNEY COMPANY DIS 2.44% no longer gives shareholders discounts to its U.S. theme parks, and earlier this year Euro Disney suspended issuing new memberships to its Shareholders Club. Existing members are still privy to discounts on passes, dining, merchandise and more at Disneyland Paris.

While there are still some holdovers, perks typically don’t kick in unless you own at least 100 shares, and shareholders need to provide proof of ownership to claim their perks.

The major cruise lines, including Carnival Corporation CARNIVAL PLC CCL 3.47% , Norwegian Cruise Line Holdings NORWEGIAN CRUISE LINE HOLDINGS NCLH 2.59% , and Royal Caribbean ROYAL CARIBBEAN CRUISES RCL 3.3% all offer on-board certificates to qualified shareholders.

For all three companies, the perk is worth $50 on short cruises and $250 for two-week cruises. At today’s valuations, says Montagne, best to pass on the stock, even with the freebie. “Cruise lines have been riding high because of low fuel prices, but they are looking fairly valued,” she says. “We would not be buyers.”

Berkshire Hathaway BERKSHIRE HATHAWAY INC. BRK.B 1.39% shareholders who attend the company’s famous shareholder meeting in Omaha each year can pick up giveaway and discounts on products from Berkshire-owned companies.

But Berkshire shareholders typically aren’t in it for the breaks on Geico insurance or samples of See’s Candies, says Montagne. The biggest perk may be going to the meeting and “breathing the same air as Warren Buffett,” she quips.

Investors who have owned at least 100 shares in Ford Motor Co. FORD MOTOR COMPANY F 1.09% for a minimum of six months can participate in the company’s X-Plan, which they can use to buy Ford autos at discounted prices. Caveat: “It excludes some of the more popular cars and trucks,” says Montagne.

But if you’re in the market for a Ford, she says, the deal could yield several hundred dollars in savings. “We also like Ford as an investment,” she says.

Even so, investors shouldn’t let the promise of a deal drive their investment decisions. Ever.

MONEY early retirement

Do This If You Want to Retire Early

Ask the Expert Retirement illustration
Robert A. Di Ieso, Jr.

Q: I’m married, and we are in our early to mid-50s with just under $700,000 in savings. My husband makes around $55,000 a year, and I make $135,000 a year. We would really like to retire before 65 (our full retirement age for Social Security is 67). I have a pension that will pay out $1,132 a month with a 50% survivor’s benefit for my husband. But we’re not sure whether we can pull it off. I max out my 401(k) but never seem to have any extra money to put into savings. How we can get to where we want to be? – Elizabeth, Lisle, Illinois

A: Achieving your dream of early retirement may be doable. But you’ll need to step up your savings and control your expenses, says Ray Lucas, senior vice president of planning at of Integrated Financial Partners. “It all comes down to the lifestyle you want to lead,” says Lucas.

First, let’s take a look at where you are now. If you are saving the max amount of $18,000 annually in your 401(k)—not including catch-up contributions, which we’ll get to in a moment—that’s 13% of your salary or 10% of your combined incomes. If you continue saving at that rate and get a 6% annual rate of return, you’d have about $1.1 million in five years at age 60.

That sounds like a tidy sum, but it may not go as far as you think over a long retirement. Let’s assume you want to replace 75% of your pre-retirement income, which would come to $140,000. It helps that you have a pension that will give you $13,000 a year. And there’s also Social Security—the average annual benefit for a couple who claim at full retirement age is $25,000 a year. But to provide an additional $100,000 in annual income, you will need to save at least $3 million. Assuming a 3.5% withdrawal rate, that portfolio would likely last you until age 95, or 35 years.

Even if you wait till 65 to retire, you are on track to amass “only” $1.6 million. So you will need to dramatically boost your savings rate to meet those goals, says Lucas. That may be tough since you say you are already have trouble putting away more.

But even if you can’t reach those savings targets, you may be able to enjoy a comfortable lifestyle on less than a six-figure income—most people do. In which case an early retirement is still very possible.

The first step is to analyze your retirement spending needs. Start by completing an expenses worksheet such as this one, which covers everything from your mortgage and property taxes to eating out and buying groceries. Be sure to factor in health care costs too. You can’t enroll in Medicare till you’re 65, so if you retire earlier, you will need to buy private health insurance for a few years. Also take into account whether you will be helping anyone else out financially, such as children or an elderly parent.

Next, make a full assessment of all your sources of income. Use a retirement calculator to see how much income your savings and pension will provide based on the year you want to retire. And be sure to consider the best possible claiming strategies for Social Security—married couples often have more options for taking Social Security, such as file-and-suspend, which can boost their income. The Social Security calculator available online at Financial Engines will run thousands of scenarios to help you identify the best choices.

And even though you may find it difficult, look at ways to increase your savings. In your 50s, you can make catch-up contributions to your 401(k), which can raise your total savings to $24,000 a year. Be sure to jump on opportunities to do bursts of savings—socking away big chunks of money when large expenses fall away, such as paying for college for your kids. And practice now for retirement by living on a smaller budget, which will enable you to sock away more.

If none of this gets you closer to your goals, consider working another year or two or taking on a part-time job after you retire. Another smart move may be to downsize to a smaller home or relocate to a lower-cost area, which will enable you to build your portfolio—plus, the lifestyle will be easier on your budget after you stop working.

“Retiring early often means making trade-offs, now and later,” says Lucas. “But with smart planning and disciplined saving, you can make it a reality.”

Want to fast-track your retirement savings? Check out MONEY’s Ultimate Retirement Guide

MONEY Medicare

How to Time Medicare and Social Security Claims for 2016

Q: I read your informative article on the increased Medicare Part B premium hike that may occur next year, but for only certain groups of Medicare enrollees, mainly those not paying the cost out of Social Security. Of course it seems inherently unfair to charge an individual like myself who has decided to delay Social Security for a higher benefit at age 70 and pay my Medicare out of pocket till then.

My question is can I avoid this increase by taking my Social Security this year and have my Medicare deducted from my benefit, and then next year suspend or withdraw my retirement and start again paying Medicare out of my pocket? When I suspend or withdraw my retirement will I continue to pay the same Medicare benefit as I paid while receiving Social Security, or will my Medicare premium increase because I again would be paying out of pocket?

My birthday is in November and I’ll turn 67 so I would just take the Social Security benefit till early 2016. Your help in answering this question will assist me in deciding to apply for benefits before November. Thanks. –Mike

A: Mike asked the most intriguing question I received on that article, but lots of readers chimed in following the recent disclosure that Medicare Part B premiums are projected to rise for some people by more than 50% next year. The projections were contained in the Medicare trustees’ recent annual report.

And, as it turns out, Mike’s questions involve detailed Social Security rules that can have broader implications for many filers.

The “Hold-Harmless” Rule

First, though, let’s recap the news about next year’s Part B premiums, which cover doctors, outpatient expenses and other services. The rules say that these premiums must be deducted from Social Security payments if someone is receiving Social Security and Medicare. Since those costs are expected to rise more next year than they have in recent years, Medicare must boost premiums that it will begin collecting next January.

However, overall inflation this year is expected to be low. Current levels of inflation determine whether Social Security beneficiaries will receive a cost of living adjustment (COLA) in 2016. The way it looks now, the trustees said, there likely will be no COLA at all.

When this happens, Social Security’s “hold harmless” provision kicks in. This rule says that no existing Social Security beneficiary paying the basic Part B premium ($104.90 this year) can be forced to receive a smaller Social Security benefit in one year than they did the previous year. These folks, roughly 70% of beneficiaries, would therefore continue paying $104.90 a month next year in Part B premiums.

Yet Medicare must raise about 25% of total Part B expenses from its recipients. So the program will have no choice but to collect all of this required revenue from the remaining beneficiaries, who will not be held harmless.

This group includes new Social Security beneficiaries, existing beneficiaries who have modified adjusted gross incomes above $85,000 ($170,000 if filing joint tax returns), and those who pay their Part B premiums directly to Medicare instead of having them withheld from their monthly Social Security payments. This last group represents people on Medicare such as Mike who have not yet begun receiving Social Security.

Medicare officials have said they will work to reduce the projected 52% hikes in Part B premiums faced by these three groups. But if the Social Security COLA does come in at zero when it is announced in October, the hold-harmless provision will trigger a big increase in Part B premiums for this sizable minority of Medicare recipients.

Suspend and Avoid

To return to Mike’s question, there’s some good news. Dorothy Clark, a spokeswoman for Social Security, says it looks like he can, indeed, avoid getting dinged with a big Part B increase by suspending benefits. She said there are four conditions that must be satisfied (the bold words are hers):

The individual is entitled to (i.e., actually receiving) Social Security benefits for the months of November and December,

Medicare Part B premiums for December and January are deducted from those benefits,

The individual receives a cash benefit for November, and

Solely because the increase in the Part B premium is so high compared to the Social Security benefit payable, the Social Security benefit payable would be lower in January than in December.

Mike’s November Social Security payment is lagged a month, meaning he won’t receive it until December. When he does, his Medicare Part B premium for December will be deducted from that initial Social Security payment. By beginning Part B deductions before the end of 2015, Mike will qualify to be held harmless in 2016.

So far, so good. But can Mike then suspend or withdraw his Social Security payment in 2016, and resume paying his Part B premiums to Medicare at the same hold-harmless rate he was paying in 2015?

Short-Term Gain

We have a split decision here. Ms. Clark said he absolutely can suspend his benefits in 2016 and continue to be held harmless. However, he cannot withdraw his benefits and receive this treatment. The reason is that suspending benefits maintains a person’s eligibility to receive them, while withdrawing from Social Security ends it. Without that eligibility, there is no basis for the person to be held harmless.

(Not to get too detailed, but if Mike withdrew his benefits, he would need to repay any payments from Social Security, and he would effectively get a do-over, meaning he would be regarded as never having filed for Social Security benefits at all. And when Ms. Clark uses the word “eligibility” she means Mike has currently filed to receive benefits. If he were not receiving benefits but was qualified to file for them, he would be considered “entitled” for benefits.)

To summarize, Mike can file for Social Security in time to receive his November payment in December, qualifying him to be held harmless against any Part B premium increase in 2016. He then can suspend his Social Security early in 2016 and continue to be held harmless in 2016. While his Social Security benefits are suspended, they will qualify for delayed retirement credits, permitting them to rise in value at the rate of 8% a year.

Mike will need to go to a lot of trouble to be held harmless, however, and the savings may be short-term. Even if Part B premiums do rise for the unlucky minority, they are likely to be rolled back once Social Security starts paying COLAs again. Back in 2010 and 2011, there were no COLAs either, and the hold-harmless provision raised the lowest Part B premium from $96.40 a month in 2009 to $110.50 in 2010 and $115.40 in 2011. With the reinstatement of a COLA in 2012, Medicare could spread the financial pain to everyone, and the premium dropped to $99.90 a month.

Philip Moeller is an expert on retirement, aging, and health. He is co-author of The New York Times bestseller, “Get What’s Yours: The Secrets to Maxing Out Your Social Security,” and is working on a companion book about Medicare. Reach him at or @PhilMoeller on Twitter.

Read next: Why Social Security Is More Crucial Than Ever for Your Retirement

MONEY Ask the Expert

How the Fed Affects Bond Prices and Returns

Investing illustration
Robert A. Di Ieso, Jr.

Q: Could you please explain how Fed interest rate policy influences bond prices and returns? — Dave

A: Interest rates that are set by the Federal Reserve don’t directly impact the prices and returns of the bonds that you own directly or through funds.

That’s because the Fed only sets rates on overnight loans that Federal Reserve member banks receive from the Fed itself or from one another, says Jay Sommariva, vice president and senior fixed income portfolio manager at Fort Pitt Capital Group in Pittsburgh, Penn.

As for the longer-term debt that you own in your portfolio, the state of the economy — or rather, the market’s perception of the economy — is what will ultimately determine their yields and conversely their prices. (Bond yields and prices move in the opposite direction.)

So why then are investors so fixated on the Fed’s every move?

By reducing or raising short-term rates, the Fed incrementally cuts or boosts the cost of capital to lending institutions. And that in turn can either nudge the economy toward faster growth by promoting lending or tap the breaks on economic activity if things are heating up.

In December 2008, for example, the Fed lowered its target for the so-called Federal Funds rate to near zero as one effort to stem a full-blown recession.

Now that the economy has turned a corner, investors expect that the Fed will raise its overnight target as early as next month, albeit ever so slightly.

Exactly how the market will initially react is anyone’s guess.

On the one hand, most investors have already factored such an increase into their models. Then again, “the Fed hasn’t raised rates in over eight years,” says Sommariva. “When they finally do, it could be an event.”

To be sure, just as important as what the Fed does is what the Fed says. Case in point: The “Taper Tantrum” of 2013.

When the Fed indicated that its stimulative campaign would soon be coming to an end, it wreaked temporary havoc on the bond market. Once the dust settled, prices recovered and bond yields fell again.

Bottom line: A Fed increase could translate to higher short-term interest rates — and that means a potential decline in prices. Longer-term rates, however, tend to hinge on what investors think about inflation and the economy, as well as what else is happening in the world. Sommariva adds that short-term rates could rise even as longer-term rates come down.

Then again, considering that the yield on 10-year Treasuries has, for the most part, been in steady decline for the last three decades, yields don’t have much room to fall.

At some point they will head higher, and when that happens prices could decline.

MONEY Ask the Expert

How to Invest for a Child — Without Using a 529 plan

Investing illustration
Robert A. Di Ieso, Jr.

Q: I recently had a child and I would like to invest money for her in something other than a 529 account. I want her to be able to use the money for anything she wants, not just for college. — Allison

A: If you plan to do some serious savings, it’s hard to beat the tax savings, parental control, high contribution limits, and financial aid treatment of a tax-advantaged 529 college savings plan, says Mike Slud, a chartered financial analyst and a managing director in Convergent Wealth Advisors’ Washington, D.C. office.

That said, there’s something to be said for setting aside some flexible funds to cover wants and needs beyond school, whether it’s a dream summer camp, a first home, or a budding business.

If flexibility is truly your priority, the easiest option is to set up a custodial brokerage account in your child’s name. If you have a brokerage account of your own, consider keeping your business in one place. If you’re starting from scratch, you might want to take a look at such low-cost brokerages as Charles Schwab, E*Trade, or TD Ameritrade.

Read Next: What’s the Best 529 Plan for Me?

These accounts, which are also known as Uniform Gift to Minors or Uniform Transfer to Minors (UGMA/UTMA), let you set aside up to $14,000 a year ($28,000 for spouses filing jointly) in your child’s name, sans gift tax. And while you won’t get the same tax benefits as a 529 plan, there are some tax breaks for kids.

The so-called Kiddie Tax doesn’t kick in until your child’s investment income exceeds $2,000, with the first $1,000 tax free and the second $1,000 taxed at the child’s rate. Anything after that is taxed at your marginal tax rate, until your child takes over the account.

Once you open an account, you can make your investment strategy as simple or as complicated as you’d like. Slud recommends starting with an index mutual or exchange-traded fund that tracks a diversified benchmark, such as the S&P 500 index of blue chip U.S. stocks.

If you go with a mutual fund, you’ll likely need to meet a minimum investment requirement, which typically ranges from $100 to $3,000, depending on the fund. Because ETFs trade like stocks, there are no pre-set minimums, but you may be hit with brokerage commissions.

You’ll probably want to stick with a diversified fund to start, but down the road by all means to let your child pick out one or two stocks for his or her account. (One share is plenty.) “There is a tremendous educational element there,” says Slud, who notes that middle school is typically a good time to get your child involved.

Check out the new MONEY College Planner

While a custodial brokerage account offers maximum flexibility, both in terms of how you invest and how your child ultimately uses the money, that cuts both ways. “When a child reaches age of ‘majority,’ which is age 21 in most states, they can do anything they want with it,” says Slud. “Depending on how much you’ve contributed and who the portfolio has done, that can be substantial.”

Another drawback of investing in a custodial account is its impact on financial aid. Whereas 529 plan savings have a minimal effect on financial aid, the full value of a custodial account is considered fair game for financial aid purposes.

That likely won’t be an issue if your child uses the funds before college or if you’re certain that financial aid isn’t in the cards. Still, it’s all the more reason to think twice about plowing money into a custodial account.

Now, there are other ways to save for your kids outside of a 529 plan.

You could always tuck the money into your own taxable account and earmark it for your child. There are some practical benefits to going this route, even if some of the sentiment is lost.

There are also trusts and cash-value life insurance policies designed to help parents save for their kids. Of course, these come with additional costs and complexities.

And for most parents, the best bet is to keep it simple.

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MONEY Ask the Expert

What the Bond Market Says About Stocks — and Vice Versa

Investing illustration
Robert A. Di Ieso, Jr.

Q: Is there any relationship between the value of stocks and bonds? – E. Phong, Houston

A: Without a doubt, there is a relationship between equities and fixed income, but as you’d expect it’s complicated.

The explanation starts with the fact that stocks and bonds tend to move in different directions because they are competing for some of the same dollars that investors seek to deploy.

For example, when equities appear risky, investors will seek the relative safety of bonds — and that drives up fixed income values. And if stocks seem like a good bet, investors will dump lower-returning bonds for the promise of higher gains in stocks.

“When investors fear that growth opportunities will be scarce they are happy to have the fixed-income payments of bonds,” says Daniel Loewy, the chief investment officer and co-head of multi-asset solutions at AllinaceBernstein. “When growth fears abate and the reverse happens, stocks tend to appreciate and bonds tend to fall.”

Read next: Vanguard’s Founder Explains What Your Investment Adviser Should Do

For this reason, stock and bond values tend to have an inverse relationship with one another. This is why investors have, for the last couple of decades, counted on bonds to help reduce volatility in their portfolios. It’s also why a well-diversified portfolio holds both stocks and bonds.

Sounds simple enough. But here’s where things get more complicated: Despite this dynamic, there will be times when stocks and bonds move in unison. Yet it’s often difficult to predict when that will happen.

Following the financial crisis of 2008, for example, investors dumped equities and corporate debt with abandon – though bonds recovered faster than stocks. Likewise, there’ve been times, including over the past few years, where bond and stock prices appreciated in tandem.

The extent to which bonds and stocks move together – or do not – will depend on what’s happening in the economy and the type of securities you’re dealing with.

For example, because high-yield corporate bonds generally do well in a growing economy — when there is less risk of defaults — these securities often move in sync with stocks. Likewise, certain sectors of the stock market may move up and down with bonds. “A current example is REITs,” says Loewy, referring to real estate investment trusts, which trade like stocks but have many of the same qualities as bonds.

Inflation is another wildcard. When investors worry about inflation, it can be bad news for bonds – whose fixed payments will be worth less in real terms – and for sometimes stocks because future earnings aren’t as valuable when prices are rising.

In the near term, that double whammy is unlikely. “Inflationary pressures are low,” says Loewy, “and the Fed has made it clear it will raise rates slowly over a period of time.”

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