Please enable JavaScript to view the comments powered by Disqus.

Buying & Leasing a Car

Should You Buy a GM?

This month answers questions about buying a GM vehicle, investing in a managed futures, undoing a Roth conversion and handling an HSA after a layoff.

I'm in the market for a new car. General Motors filed for Chapter 11 bankruptcy in June, and now I'm wondering whether this is a particularly good or bad time to buy a GM vehicle. J.S., via e-mail

As GM restructures into a leaner company by shedding brands and dealerships, you can get some great deals. Expect to find the best bargains through the fall at dealerships that are closing, says Jesse Toprak, an analyst at (the site has a list of GM dealers that are going out of business). The deals may get better as the closing dates get nearer, but you will also have fewer choices and may have to compromise on color and options. By late fall, dealers will work through excess inventory and prices are likely to rise.

To target a fair price, research incentives. For example, in June GM was offering $1,000 cash back on both the 2009 Cadillac CTS and the Chevrolet Malibu. As for how much dealers are charging, price differences are wider than normal. And prices may vary by thousands of dollars even at the same dealer for the same model, Toprak says.

General Motors hopes to keep core brands, such as Buick, Cadillac, Chevrolet and GMC, and shed less-profitable brands. It already has buyers for Hummer and Saturn, and Saab is also on the block. GM will completely eliminate the Pontiac brand in the next few months. That means resale value will vary a lot depending on the brand you buy. Toprak expects Pontiac models to experience the biggest drop in resale value. Cars remaining in the GM lineup will take a resale hit over the short term, he says, but don't expect a big drop over, say, five years.


General Motors will continue to honor its warranties. And the U.S. Treasury Department has offered to back warranties for any GM vehicles bought during the restructuring period. So if the company doesn't ultimately emerge from bankruptcy, the government will pay for service.

Pros and cons of futures

I may invest with a commodity trading adviser (CTA) who deals in managed futures. What are the risks and benefits of this investment? Richard Lindemann, Long Beach, Cal.

Managed-futures strategies were one of the few investment approaches to make money through 2008, so giving them a look is understandable. The Barclay CTA index gained 14.1% in 2008, though it's down 0.75% year-to-date through early June.

A managed-futures strategy involves making bets on anything you can purchase futures on -- including energy, agricultural commodities, metals, currencies, interest rates and stock indexes. Some advisers base their decisions on economic fundamentals. But most follow a momentum strategy -- betting that the recent direction of the dollar's value, for example, will continue. Because futures traders can bet on prices either falling or rising, they can make money in any market that exhibits a strong trend. Thus, adding a futures-trading account to a stock-and-bond portfolio can be a wonderful way to diversify.


The problem is with access and costs: There simply isn't a cost-effective way to tap the area yet. To invest with a CTA, you must be an accredited investor -- that is, have a total net worth north of $1 million, or earn at least $200,000 -- and CTAs often require initial minimum investments of $250,000 or more. You'll also have to pay hedge-fund-like fees of 2% in annual expenses plus 20% of gains.

One mutual fund is taking a stab at mimicking the managed-futures approach. Rydex/SGI Managed Futures Strategy fund (symbol RYMTX) attempts to track Standard & Poor's Diversified Trends Indicator index, which replicates a common momentum approach. But the fund is young, untested and expensive. To invest in Class A shares, you'll have to pay a 4.75% sales charge plus 1.75% in annual fees.

Roth conversion do-over

I converted my traditional IRA to a Roth in November 2008, thinking it was a smart time to make the change because my account had lost value and the tax bill on the conversion would be smaller. But then my investments continued to lose money. Is there anything I can do? F.A., via e-mail

You're in luck. This is one case in which the IRS permits a do-over so you can lower your tax bill. If you converted a traditional IRA to a Roth in 2008, you can undo your conversion using a process known as recharacterization.


You have up to six months after the due date of your tax return to undo a Roth conversion. That means October 15, 2009, is the cutoff for conversions made in 2008, and October 15, 2010, is the deadline for conversions made in 2009. Ask your IRA custodian to put your money back into the traditional IRA by the deadline and you won't owe taxes on the original conversion. You then have to wait until the year after the original conversion was made to reconvert the account, or at least 30 days after recharacterizing, whichever is later.

If you recharacterize a 2008 contribution now but have already paid taxes on the original conversion, you can file an amended return to get your money back.

HSAs after a layoff

What happens to the money in my health savings account if I lose or leave my job? Kristan Alford, Susanville, Cal.

The money is yours. You can usually keep it in your former employer's HSA, or you can roll it over to another HSA administrator without having to pay taxes on the move -- a lot like an IRA rollover. But ask about any transfer fees, says Roy Ramthun, president of HSA Consulting Services, in Silver Spring, Md.


The money can then continue to grow in the account and may be used tax-free for future medical expenses in any year -- even if you no longer have a high-deductible health-insurance policy. But you must have a high-deductible policy to make new contributions.

You have until April 15, 2010, to make your 2009 contributions (and remove any excess contributions). The maximum HSA contribution for 2009 is $3,000 if you have individual coverage (or $5,950 for family coverage; if you're 55 or older, you can contribute an extra $1,000). But contribution limits are variable. For example, you can contribute only half of those amounts if you held an eligible high-deductible policy for just six months (special rules apply if you had an eligible policy on December 1).

HSA money usually can't be used to pay health-insurance premiums. But there's an exception for people who lose their job and are receiving unemployment compensation, says Ramthun.

My thanks to Elizabeth Ody for her help this month.