By Scott Burns

Q. Our newspaper has ads for “FDIC insured,” “no fee” CDs paying over 5 percent interest. The ads even have a Better Business Bureau logo. Since the highest yield CD I can find is at 2.2 percent, I was wondering if these companies are legitimate and are there hidden risks? —D. G., Houston TX

A. This is being done all around the country. An insurance marketing agency places the ads and subsidizes the yield on an FDIC insured CD from a bank. You will note that the CD is short term and there is a limit to the amount you can invest. While some people will actually get to make the investment once and earn the subsidized interest rate, most will soon be offered a high-commission insurance-based product.

Some would call this a “bait and switch” offer. A reasonable person might not trust anyone who used such means for sales leads. Others would just consider the offer a way to find “prospects” that have money to invest. Here is a link to a 2010 column I wrote about responding to such an ad and the product I was offered on my second visit: http://assetbuilder.com/7D3LRJ

Q. Any suggestions for our tax situation? 
For tax year 2012, my wife and I will lose our 22-year-old twin daughters as dependents. They both graduated college last May, so we will lose tuition deductions as well. My wife works for a non-profit hospital and participates in her 403(b). I am recently employed at a non-profit and have a 403(b) available, though I do not yet participate.

I am 62, and my wife turns 60 next month. We earn just shy of $100,000 yearly. We are 8 years into a 15-year $90,000 mortgage, so we aren’t paying a bunch of interest. We have about $45,000 in debt on a home equity credit line, mostly related to college expenses. We tried to minimize the girl’s loan debt. We have no credit card debt or car payments.

In 2009 we took the Standard Deduction; for 2010, the home equity interest allowed us to itemize. We’re on the edge there. How much do we need to increase our tax deferred savings to offset the loss of 2 dependents? Neither my wife nor I anticipate retiring any time soon. Her employer has a traditional pension plan which will not pay until she reaches 65. My employer offers nothing but the 403(b). I love my job and hope to continue working as long as I am able. I anticipate some inheritance (maybe $300,000) in the next year or so, but I’m not counting on it. —A.R., by email

A. The answer here comes straight from the basic tax code. The personal exemption for 2011 is $3,700, but will increase slightly for the 2012 tax year with an inflation adjustment. Using the current amount, the graduation of your daughter’s means you'll need to increase your retirement account savings by $7,400 to avoid an increase in your taxable income. Saving this money is important because taxable income over $69,000 on a joint return (this year) pays at a tax rate of 25 percent. It also should be relatively easy to do since it's a pretty good bet that the girls were costing over $7,400 a year.

For most middle/upper-middle income Americans the jump from the 15 percent tax bracket to the 25 percent tax bracket is the most important tax line they will ever cross. (Taxable income has to double before your tax rate rises from 25 percent to 28 percent.) As empty nesters, the only buffers you can be certain of are (1) the combination of two personal exemptions and (2) the standard deduction of$11,600, which totals $19,000. So any income over $88,000 will be taxed at a 25 percent rate unless you make it disappear by making large contributions to your retirement accounts.

This, by the way, is what makes tax deferred accounts really pay off for people in your position— you save money that would have been taxable at 25 percent but are very likely to pay no more than 15 percent taxes on it when you withdraw it in retirement.