What's My House Worth?

I live in a reasonably small house that was probably worth a bit more than $600,000 at the market's peak and is worth maybe $550,000 now. But my home-owners insurer says I need only $454,000 in replacement coverage. Can the insurance value of my house really be that much less than its market value?

Andy Sprung, South Orange, N.J.

A home's market value and insurance value are two different things. Home-owners insurance pays to rebuild your house; you still own the land even if the building is destroyed. If you live in an area with valuable land, it can cost a lot less to rebuild than to buy.

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That's my situation. I live in a row house just down the street from the Capitol in Washington, D.C., and the location of my little plot adds a lot to the home's value. My insurer calculated my rebuilding cost to be much less than the market value. But just to be sure, I bought an endorsement that adds as much as 25% to the insured amount if rebuilding costs end up higher than expected. The endorsement cost me $160 per year, which is about the same amount I saved by boosting my deductible from $500 to $1,000.

The opposite may also be true. If you live in an area where land is cheap or the housing market has tanked, it could cost more to rebuild your house than to buy it -- especially if your home has a lot of special features, high-end materials and expensive architectural details. It's also important to let your insurer know if you've added on or made any major upgrades, which can boost rebuilding costs.

To estimate your cost of rebuilding, go to www.accucoverage.com, which is run by the company that provides rebuilding-price estimates to the insurance industry. For $7.95 you can get an immediate estimate of your home's insurance value. If that number is very different from your insurer's estimate, it might be worthwhile to get an appraisal from a local builder or appraiser.

Buying Dodge & Cox.

I have a Roth IRA with Fidelity Investments and would like to know if I can invest in the newly reopened Dodge & Cox Stock with money from my Fidelity account.

Tina Bastien, Dayton

It's a good news-bad news story. Yes, you can buy Dodge & Cox Stock (or any of the other D&C funds) if you have a Fidelity brokerage account. But you'll have to pay a $75 transaction fee to purchase the fund, no matter how much you're investing (there's no charge for selling). If you invest the minimum $2,500, that's 3% of principal. If you invest $50,000, that's 0.15% of principal.

Dodge & Cox doesn't participate in brokerage firms' no-transaction-fee programs because its fees are so low. Funds usually pay brokers 0.25% to 0.35% of their assets to participate in these arrangements. With a low management fee of 0.50% a year (and low overall expenses of 0.52%), Dodge & Cox would either have to surrender at least half of its management fee or tack on a 12b-1 fee (for marketing expenses) to participate in NTF programs.

Can I open an HSA?

I am 60 and retired with income from investments and pensions but no earned income. Would I qualify for a health savings account if I took out high-deductible health insurance?

E. Catman; Clearwater, Fla.

Yes, and it's a good idea. You do not need earned income to open an HSA or to take advantage of the tax deduction for contributions to an HSA. To qualify, you do need a health-insurance policy with a deductible of at least $1,100 for individual coverage or $2,200 for families. In 2008, your contributions are deductible up to $2,900 for an individual and up to $5,800 for a family.

The money will accumulate tax-deferred, and you can use it for medical expenses in any year tax-free. After you sign up for Medicare at age 65, you may no longer contribute to an HSA, but you can use the HSA money for anything without penalty. However, it's still better to reserve the account for out-of-pocket medical expenses, such as Medicare co-payments, deductibles and premiums, and to pay a portion of the premiums for qualified long-term-care insurance.

401(k) distributions.

Do the required-distribution rules apply to 401(k) accounts as well as IRAs? And do I calculate my minimum withdrawal based on the total year-end balance in all my retirement accounts?

Amelia Shea; Ridgewood, N.J.

In general, the required-minimum-distribution rules apply to both kinds of accounts, but rules vary on how you calculate the minimum withdrawal for IRAs and 401(k)s. And there's another difference: You must start taking IRA withdrawals by April 1 of the year after you turn 70, whether or not you are retired. However, if you're still working, you don't have to begin taking distributions from a 401(k).

To calculate your minimum IRA distribution, add up the balances in all of your accounts, including traditional IRAs, SEPs and SIMPLE IRAs (but not Roth IRAs), says Ed Slott, author of Your Complete Retirement Planning Road Map. Then divide the total by the IRS's life expectancy for someone your age (find the number in IRS Publication 590, or use our calculator. You can withdraw the money from any one of your traditional IRAs or a combination of accounts.

Calculate your required minimum distribution from each 401(k) separately -- and then withdraw the required amount from each account. Use the same life-expectancy figures as you would with an IRA.

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Reducing Medicare premiums.

I've been paying extra for Medicare Part B because my income exceeds the current limits. Can I get my Part B premiums reduced after I retire in August and my income goes down, or do I need to wait until 2009 for the premiums to be readjusted?

B.B., via e-mail

You can get your Part B premiums reduced as soon as you retire. In 2007, Medicare imposed premium surcharges for Part B coverage for higher-income beneficiaries. Now, joint filers who earned $164,000 or less in 2006 (including tax-exempt interest income) and single filers who earned $82,000 or less pay the current base rate of $96.40 each per month for the year (2008 premiums are based on 2006 income because those were the most recent tax returns on file with the IRS). Everyone who earned more pays more; joint filers who earned more than $410,000 and single filers who earned more than $205,000 pay the top monthly rate of $238.40.

But certain so-called life-changing events -- and retirement is one of them -- can qualify you for a premium adjustment (other events include death of a spouse, marriage, divorce, and a reduction in income due to the loss of income-producing property or the loss of certain forms of pension income).

Contact the Social Security Administration at 800-772-1213, or visit your local field office. You'll need to file Form SSA-44, which includes detailed instructions about the supporting information you'll need to submit. If retirement brings your 2008 income below the surcharge cutoff, your 2008 premiums will be recalculated and any excess you've already paid will be refunded.

For more information, see Medicare Part B Premiums: New Rules for Beneficiaries with Higher Incomes.

Fees for ADRs.

On my monthly statement from TD Ameritrade, I noticed a $6 ÒADR service feeÓ on 300 shares of Tata Motors. When I called TD Ameritrade, the representative told me that charge was showing up on some foreign stocks but couldn't give a reason for it. In the future, will I pay a fee on any ADRs I own?

Edward Wood; Raleigh, N.C.

You won't have to pay a fee for all American depositary receipts, but there's nothing you can do about the one TD Ameritrade is charging you. ADRs, which represent shares of ownership in a foreign company, trade in the U.S. in dollars. Some ADRs come with a contractual provision that allows the broker, in this case TD Ameritrade, to levy "depositary services fees."

The charges, commonly 2 cents per share, are intended to cover the cost of coordinating overseas investments. For ADRs that include this provision, the broker can levy the charge at any time, but no more than once a year. Your broker should be able to give you a list of ADRs with these fees. They're most likely to be tacked on to companies based in developing countries, where it's more expensive to operate.

Prepaid-tuition plans.

When our 15-month-old son was born, my wife and I opened a mutual fund account for him, where we put any gift money he receives. Because the success of the fund depends on the stock market, we're leaning toward enrolling him in the Florida prepaid-tuition program as well, which is guaranteed by the state. Is this a good idea?

T.T., Orlando

You're on the right track. Having some money invested in a strong prepaid-tuition plan and some in a mutual fund can be a good way to diversify college savings. Plus, you're lucky you live in Florida, which is one of the few states that still has a prepaid-tuition plan that has not been modified or scaled back, says Mari Adam, a certified financial planner in Boca Raton, Fla. As long as you or your child has been a Florida resident for at least 12 months, you're eligible to sign up.

The plan promises to cover the cost of tuition at a public college in Florida, but you can use the money at almost any accredited private or public college throughout the U.S. The downside is that the prepaid amount covers the entire cost only at public institutions in Florida, which have some of the lowest tuition charges in the U.S.

Because the plan might not cover the full bill for tuition, room and board -- especially at an out-of-state or private college -- you could supplement the prepaid plan with other investments. One good option is a state-sponsored 529 college-savings plan. Money in a 529 can be withdrawn tax-free for college costs, and about half the states offer a state income-tax deduction for 529 contri-butions. Because Florida isn't among them, Adam generally recommends that her clients go with Utah's plan, which has low fees and invests in a variety of Vanguard funds.

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