R.S., via e-mail
A: You should have little trouble finding buyers for those coins through anyone from a high-end jeweler to a coin dealer to a pawnshop. But to maximize your profit, Alan Olsen, a certified public accountant in Fremont, Calif., with Greenstein, Rogoff, Olsen & Co., offers a few tips:
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• Call around, as prices to buy can vary greatly — and change continually throughout the day, so try to get a time commitment for how long a quote will be valid.
• Be wary of TV, Internet, and “get cash fast” advertising.
As for taxes, Olsen notes that collectibles sales can be subject to a steep 28 percent federal capital-gains rate.
There are two other tax issues to consider, says Olsen. The first relates to the valuation of gold coins. When they have a numismatic value that exceeds their face denomination, the amount realized is the numismatic value of the coins, not the face value. Second, if you want to invest in the price of gold rather than the coins’ collectibility, consider investing in gold strictly as a precious metal, such as through gold-mining stocks. Any profit realized by selling it is subject to full capital-gains treatment for stocks.
Are callable CDs safe?
Q: What is a callable leveraged spread CD? Is it a safe investment?
J.H., via e-mail
A: Callable CDs are a variation on the traditional certificate of deposit theme. At their onset, they typically pay a considerably higher interest rate than traditional CDs, but they also carry extra risks.
Rita Cheng, a financial planner in Bethesda, Md., says these CDs are issued by banks and carry FDIC insurance. They commit your cash for a specific period of time – often a decade or longer. But they can be redeemed, or “called,” by the issuer prior their maturity. The terms of the CD will stipulate when the redemption can occur, which can be anytime after a call protection period expires.
Further, after the interest rate period lapses on a callable leveraged spread CD, the rate varies. The value of the CD will then depend on that new interest rate, which is based on a special, complicated calculation called a spread, Cheng says.
The investor thus assumes the interest-rate risk with a callable leveraged spread CD, says Cheng. The principal may be protected only if the CD is held to maturity, so these CDs aren’t suitable for savers with a short investment time horizon. Those who are wary of their inherent uncertainties would be wise to steer clear, as well, she says.
Should I sign up for an indexed deferred annuity?
Q: I recently found a new financial adviser who has signed me up for a deferred or indexed deferred annuity that guarantees a 7 percent return and income for the rest of my life. I’m also receiving a $21,000 signing bonus. I’m changing advisers because of the hefty management fees I’ve been paying. The new adviser is putting all the money contained in my rollover IRA and Roth contributory IRA into this annuity. Is this a wise move for me?
R.Q., San Francisco
A: Rest assured this annuity carries a commission, which will be paid to the person who’s advising you.
Nicholas Yrizarry, a certified financial planner in Reston, Va., strongly suggests that before you commit to this annuity you consult with someone who can deliver some objective advice. “I have yet to see an annuity that has a guarantee for life that doesn’t have some other tradeoffs,” he warns.
It may be just a case of a financial adviser who may not be able able to justify a fee by service or performance.
One other thing, says Yrizarry, you may want to leave money to heirs. That won’t happen with this type of investment.
Got a question? Submit it to Steve Dinnen at money@csmonitor.com. Dinnen’s Financial Q&A column appears the first and third weeks of each month.
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