Long-Term Care, Cash Windfall, Roth IRAs for Kids

ANSWER: Forty is definitely on the early side, although you won't find a shortage of agents eager to sell you a policy. The average age of purchase for long-term-care insurance — which covers the cost of care should you need prolonged help with basics like bathing, dressing, eating and so on — is 61, according to the trade group America's Health Insurance Plans. That's down from age 69 about a decade ago. Most folks, however, should consider purchasing it in their 50s, since rates can start to increase fairly substantially after that, says Sandy Praeger, president-elect of the National Association of Insurance Commissioners. Right now family history isn't considered as far as eligibility or rates are concerned, but the early onset of a debilitating disease would likely prevent you from getting coverage. (Group plans offered through employers often have more-lenient underwriting policies, making it easier for those with less than perfect health to qualify.) Keep in mind, LTC insurance isn't right for everyone: If you have little in the way of assets, Medicaid will eventually pick up the tab. Medicare won't cover long-term-care, though, which is why buying LTC insurance makes sense for many people. For advice on choosing the right policy, click here.

QUESTION: I have a $275,000 cash windfall to invest for retirement. Does it make sense to invest all the money into the stock market on a day when it drops considerably?
— Dale Maxwell, Columbus, Ohio

ANSWER: Market timing is no easy feat, and while waiting to make your move, you could miss out on gains. A better strategy, once you know how you want to invest the money, is to plunge in regardless of current valuations, says Fort Lauderdale, Fla., financial planner Benjamin Tobias. That may sound nuts — especially when the markets are swinging more wildly than Tarzan with a caffeine buzz — but the idea is to avoid prolonged inaction.

True, dollar cost averaging — making regular, fixed contributions over a long period of time — into your investments can reduce risk, but a lump-sum investment is likely to deliver better returns. "If you're a betting person, the sooner you put it in, the better it will be," says Tobias, since the markets generally trend upward. Dollar cost averaging makes more sense when investors contribute over many years — and ultimately, economic cycles. That doesn't mean you should be foolish — don't go all-in the day after the market soars to a record high. But don't sit back waiting for the perfect moment while lots of okay ones pass you by.

QUESTION: If I pay my kids (who are minors) to help me out with my real estate investment properties, can I use their earnings to fund Roth IRAs for each of them?
— Jason Lee, Irvine, Calif.

ANSWER: Age has no bearing on IRA contributions; earned income is the sole factor in this case. So as long as your kids are doing legitimate work and getting paid an appropriate amount for it, this should pass muster with the Internal Revenue Service, says Maggie Doedtman, a tax expert with H&R Block. In other words, you can't pay them $4,000 each (the maximum 2007 IRA contribution amount) for making their beds or washing the occasional dish, but paying them minimum wage for filing paperwork or answering phones should be all right. If it's tough to convince your teens to fund their sunset years, you can contribute their earnings directly to an IRA. The idea is a good one: $4,000 would turn into more than $127,000 if invested for 45 years earning 8% annually. Assuming your kids earn less than $5,350 each (the standard deduction for 2007), they don't need to file their own returns. But do keep careful records of their hours and the type of work they perform just to be on the safe side.