Take advantage of bump-up option now


Q: I have two 42-month certificates of deposit that will mature June 30, 1996. Their interest rate is 5.25 percent. I have the option of bumping up the interest rate once within the 42 months. Right now, I could get 6.0 percent interest. Should I bump up the interest rate now or wait to see if the interest rates will go higher?

A: By all means, bump it up now! You have 16 months to go before your CDs mature. So, even if rates go up to 6.5 percent in four months, you'll only have 12 months more of the higher rates.

And at least for the moment, it appears that interest rates have stabilized. Even Mr. Greenspan agrees on that point.

Q: My wife and I are retired. We paid off our mortgage four years ago and have few tax deductions, so for the past five years, we've taken the standard deduction rather than itemize on our tax returns.

In reviewing our investments, I noticed that some of our funds have gone down quite a lot. I'd like to sell them, but because we don't itemize, I believe we won't be able to take advantage of capital loss. Am I right?

A: Yours is a common misconception. Investment gains and losses have little to do with itemized or standard deductions.

Just as you have to pay taxes on capital gains, you can use investment losses to offset gains and up to $3,000 of income each year. If your losses exceed your gains plus the $3,000 of income, you can carry forward the losses into the future until they are all used up.

Write to Susan Bondy in care of The Sun, 501 N. Calvert St., Baltimore, MD 21278. All letters will be treated confidentially.

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