With the prime tax season over, I've been thinking about issues which arose this year. One of the most troubling occurred on the very last day of my volunteer work at a TaxAide site. A 70ish woman provided me with her tax information, which included a 1099-R for an IRA -- marked as a total distribution. She told me this was tax exempt, and to prove it, she showed me a statement of her "new" bank CD into which it had been "rolled." The only problem was, the CD was shown as simply in her name, with no indication the bank was TTEE for her IRA. I advised her that it appeared she had "rolled" her IRA into a simple CD, and that the event was taxable. "But," she said, "the person at the bank said it was exempt, because I was putting it into another CD." I carefully explained the difference between a CD, and an IRA. Fortunately, the dollars involved were modest (the total IRA value was a little more than $5K), so she wasn't _destroyed_ financially. However, she then asked me a stunning question: "Who can I go to, to get advice about these things? I trusted my bank, and they seem to have let me down. Can you tell me where I should go? I was mute, for a considerable time. I finally stammered that this was an extremely difficult question, that -- first of all, _I_, as a volunteer tax preparer, should not direct her to any specific vendor, broker or financial advisor. "But," I said, "my first suggestion would be to seek advice from close relatives or good friends who are financially savvy. Ask them, if nothing else, where you might go to obtain a review of your overall finances." "But I've just moved to Florida in the past 6 or 7 years, my husband is dead, and all our old friends are back home in Kentucky." "Wow," I replied. "That's a difficult situation." I proceeded to think for what seemed a very long time, but was probably only a few minutes. I finally said, "Well, if you don't know anyone well enough to classify them as a trusted friend, and you have reason to be wary of your financial contacts, I guess you might ask your best _acquaintances_ for a referral to their Financial Advisor. Lacking any specific help there, the best thing I can think of, is to check for licensed CFPs (Certified Financial Planners). Contact a few of them to see if they offer a discounted introductory session to briefly review your personal finances." I went to to suggest that she resist "free" advice, and be prepared to spend a "couple of hundred dollars" for a professional's time. I further suggested that her _payment_ was about the only "guarantee" she might have, since that would at least put any licensed professional at risk, should they give bad advice. And, toward that end, I suggested she request the "review" conclude with a brief written summary of the professional's overview of her general situation. But I was astounded at the difficulty I had coming up with a good answer. And I wondered if my friends at misc.taxes.moderated might share their combined wisdom, so the next time I'm hit with that question, I'm better prepared. Just _where_ should someone go, when they're not financially savvy, and they don't have deep roots or close relatives in the community? Ideas?
Bill
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