Thorough research is key to wise stock selection

Q. Recently, you wrote that deciding whether to pay off a 3.25 percent mortgage was a no-brainer considering the ability to earn 8 percent on the money. Where can I get a guaranteed 8 percent? Treasury rates obviously do not pay 8 percent, and the stock market has quite a range.

Also, what happens if I don’t have enough deductions to take the interest rate deduction compared to the standard deduction?

A. First of all, you misunderstood me when I said your investments can earn 8 percent. I meant to say in the general area of 8 percent. There are times when you’re just not able to earn this much (even with dividends) over a number of years.

However, there are many times when the appreciation of a stock in the marketplace and the dividends can exceed 8 percent. It’s not every stock or deal. You’ll have to do a lot of research, but that is the price you pay. Trust me, it can be done.

Select companies that have been in business for a substantial period of years, religiously pay a decent dividend and whose stock has creeped up as it should. The time you spend doing the research can be very rewarding.

As to the last question, it’s simple. If you don’t have to list any deductions, then you’re obligated to take the standard deduction.

Q. A few years ago, my husband contributed $3,500 into a new standard IRA. When we filed taxes for that year, we found that the dollars invested could not be deducted because he had contributed to a company 401(k) and was over the maximum able to be declared. This past year, we cashed in the IRA for $2,900. My husband is 63 years old. However, when filing our taxes, the entire amount cashed out was taxable. Is this correct? The dollars were put in after tax.

A. Given the information you told me, I suspect that you did make a mistake, but it’s not unusual for the government to make one as well. I would go back to the office that made this decision and ask them to explain once again, in detail, how they arrived at their number. If you’re still in doubt, hire an attorney or CPA to work the numbers out. At least you’ll feel better knowing that they are accurate. In my opinion, it’s the best way to proceed.

Q. Following the recent hack of Equifax files, national news outlets highly recommended that everyone freeze their credit report. What is your opinion of doing this, and if you agree, how does one go about accomplishing this? Also, what happens if you want to apply for credit after your credit report is frozen? We are very confused as to what to do next, if anything.

A. You have every right to be confused. Yes, Equifax recommended that people freeze their credit reports for a small fee, but try to get them on the telephone. It’s an impossible task. My wife has been trying for a good many days to get through and she hasn’t succeeded. You might have better luck doing it online.

As to what happens if you want credit after your credit report is frozen, you’ll need to contact the credit agency and it will release your report completely or only for the persons you mention. It’s a confusing proposition, and the only way they’re going to straighten it out is to throw a heck of a lot more money into the problem.

Send questions to bruce@brucewilliams.com. Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.

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