Close Mutual Funds? (Full Version)

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onemore4gsus -> Close Mutual Funds? (9/23/2008 9:30:18 AM)

I have lots of questions, so this will require the reader's patience!

Grandma opened mutual funds for our 3 kids' college funds about 10 years ago. Kids are now: college sophomore, high school senior and high school sophomore. Since our withdrawals from these funds are no longer long-term, I'm thinking of closing the funds and transferring the money to CD's. We have about 1/2 of fund monies left in our eldest child's fund (used 1/2 for first 2 years of college padded with her wages and her own college savings).

Is this a good idea, to change $ from mutual funds to CD's now?
How difficult would this changeover be? Fees? (Mutual of Omaha holds the funds.)
Can our credit union aid in the transaction, or do I need to do it? (Would probably put the funds in a credit union CD account.)

I appreciate your input on this.



JazTek -> RE: Close Mutual Funds? (9/23/2008 10:18:20 AM)

I would definitely get a financial advisor for this. Whatever you decide to do, make sure you roll it into another program immediately so not to get hit with taxes...



NoShow -> RE: Close Mutual Funds? (9/23/2008 10:38:37 AM)

What kind of mutual fund is it (i.e. what does it invest in)?

How are the mutual funds owned\held (i.e. whose name are they in)?

Yes, it's usually best to chose (switch) funds based on your "needs". With your short term time horizons, cash would probably make the most sense.

Contact the company (Mutual of Omaha) and ask them for the procedure to liquidate and distribute the funds. In regards to fees, it varies from company to company as to what they charge.

Depending on the type of mutual fund it is, taxes may or may not be owed.



GroupW -> RE: Close Mutual Funds? (9/23/2008 10:44:55 AM)

Really, the answer depends on a host of factors like others have said:
1) What are the assets in the funds? Stocks, bonds, money market?
2) What is your tax basis in those funds?
3) What is your own personal tax rate? Would the gains be taxed under your childrens rate or yours (I'm no tax person, so I have to ask.)
4) Are the funds in any sort of tax-protected vehicle like a college savings plan? (Did they even have those 10 years ago?)
5) Whose name are the holdings in?
6) Are the funds front-loaded or back-loaded or no-load



onemore4gsus -> RE: Close Mutual Funds? (9/23/2008 11:01:09 AM)

eeek...answering questions with questions!

I'm definitely going to take the advice and take the MofO paperwork to our financial advisor. I don't know the answers to most of these questions, except that the funds are in our names with the kids as POD so our taxes took a BIG hit last year on these funds. Sounds like another reason to close them out now with income tax likely to increase, even if we have to take a hit on the funds. It's kind of "invisible" money anyway, not tied to our monthly budgeting, and I'd rather have the funds in something I can understand (which is a rule of thumb for investing anyway, right?).

I do know that none of the funds are tied to college savings plans. The funds are diversified, but I don't have the statements here to list the particular holdings.

I appreciate all of your input already! Thanks so much.



GroupW -> RE: Close Mutual Funds? (9/23/2008 11:21:01 AM)

quote:

ORIGINAL: onemore4gsus

eeek...answering questions with questions!

I'm definitely going to take the advice and take the MofO paperwork to our financial advisor. I don't know the answers to most of these questions, except that the funds are in our names with the kids as POD so our taxes took a BIG hit last year on these funds. Sounds like another reason to close them out now with income tax likely to increase, even if we have to take a hit on the funds. It's kind of "invisible" money anyway, not tied to our monthly budgeting, and I'd rather have the funds in something I can understand (which is a rule of thumb for investing anyway, right?).

I do know that none of the funds are tied to college savings plans. The funds are diversified, but I don't have the statements here to list the particular holdings.

I appreciate all of your input already! Thanks so much.


Answering questions with questions is what I do best!

Don't panic on the taxes yet. Both McCain and Obama are talking tax cuts for most folks below $226k in income. Plus, you should be eligible for capital gains treatment on some of that. If this year is a low-income year for you, then consider it. Otherwise I wouldn't let tax considerations drive the decisions. Furthermore, I wouldn't expect major tax changes for fiscal 2009. It would be 2010 before most of those decisions had an impact.

Take your time - you have a couple of months before you have to make any tax-related decisions.



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