Your Finance: Money moves that can wait
If you ever have 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 opportunity.
There are many financial decisions best made by procrastinators. The longer the wait, the better they turn out.
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 midcareer, 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.
Buying TIPS, or Treasury inflation-protected securities, which 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.
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."
Buying a fixed annuity. Annuities are like flat-screen TVs -- 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.
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.
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. There's solid research behind the idea that people are happiest when they spend their money on experiences. It's a limited-time offer.