Go to Jeff Salisbury LWGate Home Page.From: persfin-digest <owner-persfin-digest@shore.net>
Subject: persfin-digest V4 #69
Date: Tue, 5 Aug 1997 13:37:27 -0400 (EDT)
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persfin-digest Tuesday, August 5 1997 Volume 04 : Number 069
IN THIS ISSUE:
ADVERTISEMENT: MCI InfoSource [Oppenheimer Software <Connect-Sales@mcima]
Misleading article about wills & trusts in Knight-Ridder newspapers ["Mar]
Step up in basis at death for Joint Tenants? ["Ken Meinken" <kmeinken@one]
Why not Treat Everything as Income? [Jim Garcia <jimgarci@pacbell.net>]
NET COST Comparisons for Life Insurance [John_Mahony@lamg.com (John Mahon]
Commission vs. Fee-Only Financial Planners [John_Mahony@lamg.com (John Ma]
More Tax Law Change Info Web Site [Randy Barnes <rbarnes@atl.mindspring.c]
Driving across country, AI fraud prevention [maness@iip.ucsd.edu (Jay Man]
Article re: Estate & Gift Changes in 1997 Budget Acts ["Mark J. Welch, Es]
Home loans, marriage, etc. [Brian James <bjames@rocketmail.com>]
Psychic Hotline Scams? [Mike Morehouse <mikemore@rocketmail.com>]
Long Term Care and Car Rental Insurance Questions [Steven Klein <SKLEIN@s]
Tax rates and Bill Gates vs Dave Martin [Jim_Shoenfelt@USFG.COM]
Roth IRA rollover question [GeorgeS <pip@shore.net>]
Why not Give a Tax Free Gift? [Jim_Shoenfelt@USFG.COM]
Re: Tax rates and Bill Gates vs Dave Martin [owner-persfin-mod@shore.net]
Re: Under New Tax Law, Bill Gates' Tax Rate is Less Than Mine [David Mart]
Re: money market Fund [Robb Warren <rwarren@MIS.Net>]
budgeting-averages/benchmarks [Gary Shaivitz <ShaivitzG@furash.com>]
[none] [Steven Klein <SKLEIN@snm.org>]
Re: X-Country Driving and Savings Bond Wizard ["Carl C. Fields" <fieldscc]
Re: How are these mutual funds ? ["Ken Meinken" <kmeinken@one.net>]
Re: Under New Tax Law, Bill Gates' Tax Rate is Less Than Mine ["Ken Meink]
Re: Software to Track US Savings Bonds? [Avrum Lapin <avrum113@cyberg8t.]
Thanks for the Digest And for Cross-Country "Trip" [Kevin.O'Donohue@parex]
Estate and long term gains taxes [Frank Wagner <wagner@ececs.uc.edu>]
US Bonds Web Site [Richard Havranek <havranek@sunyit.edu>]
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Date: Tue, 5 Aug 1997 11:22:40 -0400 (EDT)
From: Oppenheimer Software <Connect-Sales@mcimail.com>
Subject: ADVERTISEMENT: MCI InfoSource
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------------------------------
Date: Tue, 5 Aug 1997 11:35:04 -0400 (EDT)
From: "Mark J. Welch, Esq." <markwelch@ca-probate.com>
Subject: Misleading article about wills & trusts in Knight-Ridder newspapers
An article that appeared in many Knight-Ridder
newspapers yesterday contains some serious false
statements about wills, living trusts, probate,
and estate taxes. (The article appeared in the
"Money Matters" section in the Contra Costa
Times on 8/4/97, but appeared in the Sunday
edition of many other papers.) The article was
written by Greg Melikov of the Miami Herald
(I'm sure the mistakes were not intentional).
First, the article states, "If you die in 1997
without a will, your estate most certainly will
be reduced by taxes." Unfortunately, this is
misleading: a will has virtually no effect on
taxation of your estate. And as Jane Bryant
Quinn notes in another article that appeared
today in many of the same newspapers, "only
1.6 percent of estates were large enough to
owe federal [estate] taxes last year."
Second, the article praises the tax benefits
of living trusts, but neglects to note that
ANY TAX BENEFIT IN A LIVING TRUST can also be
accomplished with a will. By incorrectly
linking "tax savings" with "living trusts,"
the article plays into the hands of unscrupulous
"trust mills" which sell living trusts using
deceptive marketing.
The article also states that "The average
probate can take from one to two years." While
I have no experience with probates in Florida,
where the writer and his sources live, most of
my probates in California are wound up in less
than a year, unless there are good reasons to
delay (in which case the same delay would occur
if probate had been avoided).
The article states that with a trust, heirs "can
collect 24 hours after the death certificate is
presented." This is usually not true, and in
any event the successor trustee will normally
need to delay distributions pending review of
bills and other obligations of the estate.
I am always upset to see misleading information
about estate planning, especially when an
article is written so that it can be copied
and distributed by unscrupulous people to sell
"products" to people who really won't benefit.
I certainly recognize the benefits of living
trusts for many people -- I prepare them for
more than half of the clients who retain me
to do their estate planning work -- but I do
NOT use "scare tactics" or misleading
information to "sell" my services.
I know that this article got wide "play"
nationwide, because it also included a
"sidebar" article about "wills of the
rich and famous" which included a link
to my "Wills on the Web" page, and I got
about 15,000 more visitors than usual to
that page yesterday.
- -- Mark J. Welch (510) 462-8483 http://www.ca-probate.com/
- -- Web Site Banner Ads (Networks, Brokers, Exchanges, Software, PSAs):
- -- http://www.markwelch.com/bannerad.htm
- -- Web Counters: http://www.markwelch.com/counter.htm
------------------------------
Date: Tue, 5 Aug 1997 11:37:07 -0400 (EDT)
From: "Ken Meinken" <kmeinken@one.net>
Subject: Step up in basis at death for Joint Tenants?
A question for the tax experts on the list:
I recently read in "Better Investing" that the "step up in basis"
that happens upon death does not apply to assets held in "joint
tenancy". I was under the impression that there was a 50% step up at
death in such situations. Am I wrong?
thanks,
Ken
------------------------------
Date: Tue, 5 Aug 1997 11:38:10 -0400 (EDT)
From: Jim Garcia <jimgarci@pacbell.net>
Subject: Why not Treat Everything as Income?
> 3) Actually, it would be best if they treated all forms of income the
> same, whether from wages, interest, or capital gains. It is not the
> government's job to influence how people spend and save their money.
I e-mailed my congressman about 3 months ago with this same idea.
Treat everything as income. No deductions. No social engineering.
The first 15-20K no taxes, the next 30-50K at some percentage, and
everything else at a little higher percentage. Put the whole thing
on a postcard. If they want to give be a tax break, reduce what it
costs me to do my taxes. I haven't heard back. He must be busy.
Jim Garcia jimgarci@pacbell.net
> Editor's Comment - I thought we had a deficit.
> How does this tax cut decrease it? -IK)
Most analysts I've heard say that the budget would be balanced
sooner if the budget & tax bills didn't get passed. The budget
would probably be balanced in 18 months if the economy stays
this strong. The budget bill is supposed to balance it by 2001.
The bills increase spending and reduce revenue.
But politicians want to be able to say that they cut taxes.
What amazes me is that they were able to make it MORE complicated.
Jim Garcia jimgarci@pacbell.net
------------------------------
Date: Tue, 5 Aug 1997 11:38:51 -0400 (EDT)
From: John_Mahony@lamg.com (John Mahony)
Subject: NET COST Comparisons for Life Insurance
CL> The "premium" [for a Term Life Insurance policy] will be less [than
CL> it would be for a comparable Variable Universal Life policy], but the
CL> NET COST in every comparison that I have run is higher.
JM> Every NET COST comparison made by a life insurance agent that I have
JM> ever seen has ignored the "time-value of money."
CL> Why do you make unfounded assumptions??? Did it not occur to you that
CL> I and the industry programmers might understand the time value of
CL> money, and have included it in the calculations. For shame........
I did not make an assumption, unfounded or otherwise. I have seen
"NET COST comparisons" made by life insurance agents, and NOT ONE of
them took into account the time value of money. I am certain that the
"industry programmers" understand the time value of money very well. I
am not so sure that the people who ARE SOLD Whole Life Insurance
Policies do.
But, if you are telling me that industry practices have changed
(notwithstanding the enormous financial settlement recently paid by
MetLife as a result of the false and misleading statements made by its
agents),then I am willing to be educated. Would you be willing to
post one of your representative NET COST comparisons so that we may
all learn from it?
- -- John K. Mahony, M.B.A.
------------------------------
Date: Tue, 5 Aug 1997 11:39:30 -0400 (EDT)
From: John_Mahony@lamg.com (John Mahony)
Subject: Commission vs. Fee-Only Financial Planners
JM> ...WHEN [A FINANCIAL PLANNER] IS PAID ON COMMISSION, then there is a
JM> built-in incentive for him (or her) to sell THOSE PRODUCTS WHICH PAY
JM> THE HIGHEST COMMISSIONS, even if those products are not necessarily
JM> the best ones for the client.
CL> Would you therefore be inferring that if the payment was based on
CL> something other than a "commission" that the seller or agent would be
CL> " more honest "[?]
I feel strongly that Fee-Only Financial Planners have the "right
kinds" of incentives: they do better (i.e., make more money) when
their clients do better (i.e., make more money). Salesman who are
paid on commission, on the other hand, make the most money when they
sell you the product that pays the highest commission. Their best
interests do not necessarily coincide with your best interests. And
we all know that, in general, people behave differently when they are
given a different set of incentives.
CL> A successful Life Insurance [Salesman], one that has been in the
CL> industry for a number of years, and has attained the designation of
CL> CLU, ChFC, or CFP would have certainly learned that it is always in
CL> the best interest of the agent to provide the best product for the
CL> client, regardless of commission structure.
There is now lots of evidence that even Medical Doctors, who make
enormous sacrifices in order to pursue their sincere desires to help
people, behave differently when they are given different financial
incentives. Doctors in traditional fee-for-service health plans, who
are paid for each procedure they perform, end up performing lots of
procedures. Doctors in HMO's, who are paid a "capitation fee" for
each patient assigned to them, perform a much smaller number of
procedures. Their compensation plans apparently influence their
judgments about "what is best" for their patients.
- -- John K. Mahony, M.B.A.
------------------------------
Date: Tue, 5 Aug 1997 11:40:18 -0400 (EDT)
From: Randy Barnes <rbarnes@atl.mindspring.com>
Subject: More Tax Law Change Info Web Site
For a nifty capital gains calculator/evaluator and more tax change info
check this out:
http://money.com/features/capgains/
------------------------------
Date: Tue, 5 Aug 1997 11:40:42 -0400 (EDT)
From: maness@iip.ucsd.edu (Jay Maness)
Subject: Driving across country, AI fraud prevention
If you plan to leave your normal residence location and use your credit
card as you travel across country, it is my understanding that the new AI
(Artificial Intelligence) programs may sense possible fraud. If the bank
calls your home to check about the card usage, and you're not home, then
the card may be "stopped."
It is best to notify your CC company before you begin your trip about the
fact so you aren't inconvenienced.
Jay Maness
------------------------------
Date: Tue, 5 Aug 1997 11:41:27 -0400 (EDT)
From: "Mark J. Welch, Esq." <markwelch@ca-probate.com>
Subject: Article re: Estate & Gift Changes in 1997 Budget Acts
I have posted an article summarizing the estate and gift tax law
changes that are made by the 1997 budget acts (all actually in
the "Taxpayer Relief Act of 1997"). The article is posted at
http://www.ca-probate.com/a_budg97.htm
Don't believe everything you read in the papers. The estate
and gift tax "exemption equivalent" (currently $600,000) has
NOT been raised to $1 million as reported: instead, the
legislation simply "promises" to raise it in $25,000 increments
in 1998, 1999, 2000, and 2002. Thus, seven years from now
in 2003, the estate tax exemption will still be $700,000. Since
the budget only needs to balance for seven years, Congress
can promise much bigger increases in the 8th, 9th and 10th
year, for an exemption of $1,000,000 in 2006, but I think it
is unlikely that these accelerated increases will actually take
effect. (Congress has even retroactively repealed estate tax
cuts: in October 1993, it retroactively reinstated a 55% top
tax bracket for all decedents dying in 1993, instead of the
50% top bracket that had been in the prior year's law.)
The new law does contain generous provisions that
increase the exemption to $1.3 million for certain owners
of closely-held businesses, starting in 1998; thus, in 1998,
the "exemption equivalent" would be $625,000 for most
people but $1.3 million for certain business owners. (It's
interesting to see that politicians still reward their best
campaign contributors with special tax breaks, even in
these times of witch-hunt campaign-finance hearings.)
The law does include provisions that allow the $10,000
annual gift exclusion amount, and the $1 million generation-
skipping transfer tax exemption, to be increased with the
cost of living starting AFTER 1998, but the gift tax will
only be increased in $1,000 increments and thus is not
likely to rise until 2001. There is NO indexing provision
for the "exemption equivalent" (which is based on the
"unified credit"), nor for the $1.3 million exemption
available to certain business owners.
Another key change, not widely reported, is the repeal of
the "excess accumulations" and "excess distributions"
provisions (IRC 4980A); the lifetime distribution portions
of this law were suspended temporarily by last year's
budget act.
In addition, a last-minute provision inserted into the
law denies any charitable deduction for contributions
to any "charitable remainder trust" whose "remainder"
is computed to be less than 10% of the property being
contributed; this will effectively prohibit anyone under
age 50 from creating a CRT with reasonable annuity
payout rates.
My article summarizing these provisions and others
is at http://www.ca-probate.com/a_budg97.htm; you
can read the full text of the Taxpayer Relief Act of 1997
at http://speakernews.house.gov/taxfull2.htm
My understanding is that President Clinton has NOT
yet signed the budget act or TRA'97 but is expected to
do so (the line-item veto power does not apply to the
tax provisions of TRA '97, so I feel quite confident that
the bill and my article accurately reflect what the law
will be after President Clinton signs it).
- -- Mark J. Welch (510) 462-8483 http://www.ca-probate.com/
- -- Web Site Banner Ads (Networks, Brokers, Exchanges, Software, PSAs):
- -- http://www.markwelch.com/bannerad.htm
- -- Web Counters: http://www.markwelch.com/counter.htm
------------------------------
Date: Tue, 5 Aug 1997 11:43:53 -0400 (EDT)
From: Brian James <bjames@rocketmail.com>
Subject: Home loans, marriage, etc.
First of all, thanks to all who responded to my modem problems. We're
up and running again now, as long as the cordless phone is off the
hook while the modem is dialing. Don't ask, I don't know either!
Anyway, my girlfriend and I have been discussing the possibility of
purchasing a home or condo so we can quit throwing rent money away.
Here's the lowdown-
We both just graduated, roughly $14,000 apiece in student loans. She
makes around $42,000 (before taxes), and I have just accepted a
position in a broker trainee program with NatCity Investments, making
$24,000 in the first year, and then whatever I can pull down in
commissions once I am fully licensed and turned loose on the market.
Current lease is up after June 1998, and we'd like to avoid another
rent paying period if possible. Not engaged yet, probably by December
of this year, (shhhh...), but in any case, we will likely not be
hitched until after the lease is up and we need a new place. (in the
Dayton, Ohio area, BTW)
Questions-
What is the effect of us not being married (ownership, taxes, etc.)?
Can anyone make a rough guess of what size loan we'll be eligible for?
I only accepted the job 24 hrs. ago so i'm not sure about NatCity
helping me out, but is there a possibility of getting a good rate from
them as a perk? (I could ask them, but I don't want to start out by
hounding about my benefits)
My mother is a public school teacher, which gives me access to her
credit union, which does home loans. (Not sure of rate) Any thoughts,
experiences? Also, does anyone have any thoughts/ opinions about
NatCity?
TIA,
Brian James
(Editor's Comment - Why not ask about benefits? It never hurts to ask and
it shouldn't affect your job evaluation, at least if the company is run
properly. -IK)
------------------------------
Date: Tue, 5 Aug 1997 11:44:21 -0400 (EDT)
From: Mike Morehouse <mikemore@rocketmail.com>
Subject: Psychic Hotline Scams?
Once in June and once in July, my son stupidly called a couple of
these TOLL FREE psychic hotline numbers for fun. This weekend we
received 2 charges on our phone bill - each for 9.95 + .30 tax. One
was listed as service provider "Capital Gains" also listed as Total
Integretel, Inc. The other was listed as service provider "Vision
Telemedia" also listed as Total Int'l Telemedia Associates.
My wife called and they indeed did have a vocie recording of our son
so I know he did call. He swears that it was a toll free call but
apparently they charged him because he signed up for lifetime psychic
readings.
They told my wife that they could not deduct the charges. My son has
learned an expensive $20.00 lesson. Has anyone else heard of these
companies and this scam? I don't know if it is illegal but it sure
seems to be shady. Any advice on how to handle this?
Thanks for any replies.
Mike Morehouse
mikemore@rocketmail.com
Opelika, AL
Ephesians 2:8-9
------------------------------
Date: Tue, 5 Aug 1997 13:16:49 -0400 (EDT)
From: Steven Klein <SKLEIN@snm.org>
Subject: Long Term Care and Car Rental Insurance Questions
Two questions:
At what age should someone consider long term care insurance (the
kind that will pay for nursing home care)?
I rent cars frequently (sometime 15 days a month), however I do not own
my own car (as parking by my house is expensive). Does anyone know
of any insurance companies that provide car rental (primarily bodily injury
insurance) for people that do not own their own automobile? I know I can
buy this from the renatl company, but it tends to be expensive.
steve klein
------------------------------
Date: Tue, 5 Aug 1997 13:19:19 -0400 (EDT)
From: Jim_Shoenfelt@USFG.COM
Subject: Tax rates and Bill Gates vs Dave Martin
David Martin wrote: it would be best if they treated all forms of income
the same, whether from wages, interest, or capital gains. It is not the
government's job to influence how people spend and save their
money. Right now, between income taxes, direct social security taxes,
and social security taxes paid by my employer, my tax rate is about
33%. Under the new tax bill, Bill Gates, who makes most of his money
from selling his shares of Microsoft stock, will pay 20% of that to
the government
David, I identified with your sense of fairness (flat tax) and a craving
for simple tax law, but I may disagree with your conclusion that Bill Gates
pays less income taxes (percent-wise) than you.
To the extent that Gates derives the shares of Microsoft as the CEO of the
Corporation, wouldn't the securities he earns as such be treated as regular
income i.e. 33% (even though it was offereed in the form of stock or
options rather than cash.)? Ofcourse, to the extent that that stock
increases in value he would pay only 20% of the difference in value from
the price of the security that it was issued at vs the value of that
security at sale date.
Given that I, like you, crave a simpler tax code and I, like you, don't
think it's the government's role to encourage the masses to derive our
income from capital gains rather than your regular paying-job or
vice-versa, why would a guy like me think that capital gains rates should
be lower than regular income rates? My answer: *** capital gains taxes
wealth, not income *** The appreciation in stock price reflects the change
in the demand for the equity left in the company *after* all taxes
(including corporate tax of 35%) have been paid. So, Bill Gates pays the
same *income tax* as the rest of us.
As a stock-holder (the owner of company), he is already paying taxes
(including corporate tax tax of 34 or 35%) etc. When he pays capital
gains tax he is paying taxes on what is left over after he has paid income
tax, i.e. wealth. (Ironically, to the extent that more of his wealth is
tied up in securites, he is paying a higher percentage of "wealth tax"
than those of us who have our wealth tied up in other places, like a
depreciating automobile ; )
(Editor's Comment - Corporate dividends are taxed twice, at the corporate
level and to the individual recipients. -IK)
------------------------------
Date: Tue, 5 Aug 1997 13:19:33 -0400 (EDT)
From: GeorgeS <pip@shore.net>
Subject: Roth IRA rollover question
I recently changed job and have money in the old company 401K plan. It was
my intent to roll it over directly into my IRA (no tax payments or
withholding this year with a direct roll over).
Now that the Roth IRA is there, and has a preferred treatment of gains, I
wonder if I can roll over the 401K directly into the Roth IRA ( again with
no tax payments or withholding this year with a direct roll over).
------------------------------
Date: Tue, 5 Aug 1997 13:21:27 -0400 (EDT)
From: Jim_Shoenfelt@USFG.COM
Subject: Why not Give a Tax Free Gift?
MArk Welch wrote: I also wonder how much scrutiny the IRS will impose if
Grandma and Grampa use their IRA to pay a grandchild's
$18,000 tuition (if that's a proper exempt use) and then
Mom and Dad coincidentally give Grandma and Grampa
a tax-free gift of $18,000 in the same year.]
MArk, Why wouldnt mom and dad just give the tax-free gift to their kiddies
instead?
------------------------------
Date: Tue, 5 Aug 1997 13:22:11 -0400 (EDT)
From: owner-persfin-mod@shore.net
Subject: Re: Tax rates and Bill Gates vs Dave Martin
>To the extent that Gates derives the shares of Microsoft as the CEO of the
>Corporation, wouldn't the securities he earns as such be treated as regular
>income i.e. 33% (even though it was offereed in the form of stock or
>options rather than cash.)?
I think since he is the original owner of the stock, it is
considered a capital gain. Obviously, if it is treated as short term
income, then my argument doesn't amke any sense.
>vice-versa, why would a guy like me think that capital gains rates should
>be lower than regular income rates? My answer: *** capital gains taxes
>wealth, not income *** The appreciation in stock price reflects the change
>in the demand for the equity left in the company *after* all taxes
>(including corporate tax of 35%) have been paid.
Regardless of what the money represents or how it is made, it
is still income to you. Whether you make it by creating wealth,
digging ditches, making the right bet on commodities, winning the
lottery, etc., it is income. I do agree that since corporations are
taxed, the capital gains and interest have already been taxed once. It
would be better if corporations didn't pay income taxes, and instead
the government got its revenue solely from individual income
taxes.
-David Martin
------------------------------
Date: Tue, 5 Aug 1997 13:22:54 -0400 (EDT)
From: David Martin <dmartin@seabreeze.hc.ti.com>
Subject: Re: Under New Tax Law, Bill Gates' Tax Rate is Less Than Mine
>I don't think it's really fair to include SS taxes in the discussion,
>it is a separate issue. And very complex. SS is supposed to be more
>of a (poor performing) annuity than a tax.
I agree that SS isn't fair. I don't expect to get anything
back from the SS taxes I'm paying. As soon as the government stops
making me pay SS taxes, I'll stop considering it in my tax
calculations.
>Why do you feel that Bill should pay more dollars in taxes than you
>do? To pick a number out of the air, he probably pays $10 million a
>year in taxes. Why should he, as an individual, subsidize other
>people's taxes.
The government's main and only job _should_ be to protect my
life and my property. I think a fair tax might be to charge every
person (or their legal guardian) the same amount L (representing the
cost of protecting their life), plus a percentage P of their income I
(representing the cost of protecting their property). So, one's taxes
would be equal to L + PI. It might be more fair to tax the wealth
rather than income, but that presents a number of practical
difficulties (like putting a fair value on illiquid wealth). L + PI
should be set to equal the government's total expenses; the actual
ratio between L and PI is left as an exercise for the reader.
>I think the only way to really make things fair is to abolish the
>income tax and go to a consumption tax (e.g. sales tax). Of course,
>Washington will try to sneak that in **in addition** to the income
>tax.
I like certain aspects of the consumption tax, but I oppose it
for the very reason you mention.
I agree that politicians couldn't care less about what
government _should_ do and the most logical way to do it, only about
their own re-election.
-David Martin
------------------------------
Date: Tue, 5 Aug 1997 13:23:33 -0400 (EDT)
From: Robb Warren <rwarren@MIS.Net>
Subject: Re: money market Fund
GE Financial has a good one; high rate, free checks, no minimum check
amount, low minimum, and they give you $25 to sign up!
------------------------------
Date: Tue, 5 Aug 1997 13:24:02 -0400 (EDT)
From: Gary Shaivitz <ShaivitzG@furash.com>
Subject: budgeting-averages/benchmarks
I am in the process of preparing household budgets for myself and two
other families. Annual incomes are approximately 70K, 85K, and 100K.
Where can I find averages for household budget categories for families
in these income ranges? All families live in the Baltimore area
(county). Will take national data if available instead or in addition.
Thanks!
------------------------------
Date: Tue, 5 Aug 1997 13:24:32 -0400 (EDT)
From: Steven Klein <SKLEIN@snm.org>
Subject: [none]
My employer has recently given us employees the chance to participate
in a 401K plan. I asked my personnel manager if we can borrow against
the 401K plan if necessary. He stated that the govt does not allow
borrowing until you have at least $10,000 in the plan.
Is this true (that the govt. does not let you borrow until you have the
$10,000) or is this simply something my employer has made up?
Also, my company pension plan does allow borrowing. I will need to
borrow about $7000.00 for home improvements. The rate to borow from
the pension is 9% annualy. The rate at my local bank for unsecured loan
is 11%. Does it make any sense to borrow from the bank instead of the
pension?
Steve Klein
------------------------------
Date: Tue, 5 Aug 1997 13:25:19 -0400 (EDT)
From: "Carl C. Fields" <fieldscc@home.ifx.net>
Subject: Re: X-Country Driving and Savings Bond Wizard
X-Country Driving:
>Tony Babb wrote:
>Relax and enjoy the trip, the US is a great country to drive across.
Amen. And its a great country in lots of other ways too!
Savings Bond Software:
I downloaded Savings Bond Wizard and entered my "portfolio" into it last
month (these are fairly old bonds from the days when my employer's
tax-deferred savings plan required that a certain fraction of the
employee contributions be in savings bonds -- this was in the 1970s,
before 401(k)'s I imagine).
Anyhow, the Wizard program is OK. I got a few errors where the computer
kicked me off when trying to edit dates and bond denominations using the
mouse. That stopped when I decided to use only the keyboard for data
entry.
------------------------------
Date: Tue, 5 Aug 1997 13:26:02 -0400 (EDT)
From: "Ken Meinken" <kmeinken@one.net>
Subject: Re: How are these mutual funds ?
> I have a couple of questions on mutual funds. I am looking to
> invest in two types of funds:
> I find (from www.stocksmart.com, www.morningstar.net) that
> FSFSX (Invesco Financial Services Fund) & OAKSX (Oakmark Small Cap Fund)
> respectively have done well (STAR rating from stocksmart,
> 4 or 5 stars from morningstar). They also have reasonably
> low minimums ($1000). The expenses for OAKSX (1.50%) seems
> slightly on the higher side, but in range for small-cap funds.
Remember, the rankings only apply to looking backward and usually
have no relation to the future. It could be that the best years for
the financial services industry is behind us...how much lower can
interest rates go? (Some studies have shown that Morningstar 5*
funds do not outperform the market going forward.)
Oakmark Small Cap is a reasonably small fund which means that the
expenses have a smaller base to be spread over. It also means that
they are small enough to still effectively manage the fund.
Unfortunately for you, I'm pretty sure that the fund recently closed
to new investors. I got in late last year :-)
> I am looking for suggestions / opinions from people about two
> issues:
>
> 1. Are the two sectors I am looking at (financial, small cap) good
> ones for the future ? I know that this is sort of asking for
> predictions, but I am looking for opinions and ideas.
I don't know about the financial sector. I think the big gains are
past. Small cap is due to outperform, but they've been saying that
for a couple of years while it continues to underperform. It
wouldn't surprise me if it continues to underperform as people rush
to the "safety" of the big names and the index funds (the same big
names.) I'd almost guess that small cap will underperform until we
have a bear market.
>
> 2. How do these specific funds rate within these sectors ? Are
> there other better (cheaper in terms of operating expense, or
> other reasons) funds in other families ?
As usual, the Oakmark funds do well. They seem to do it "the old
way" with fundamental research. Invesco Financial was in the right
place at the right time. I don't know what the future will be for
it.
------------------------------
Date: Tue, 5 Aug 1997 13:26:41 -0400 (EDT)
From: "Ken Meinken" <kmeinken@one.net>
Subject: Re: Under New Tax Law, Bill Gates' Tax Rate is Less Than Mine
>
> the taxes will go up. If the government really wanst to lower taxes,
> they can simply increase the standard deduction or lower the tax
> rates.
Where did you get the idea that the government wants to lower the tax
rates? (Realize the difference between **appearing** to lower, and
actually lowering them.)
> complicated. The current bill is just a step towards the bad old
> system of lots of complicated deductions and high incremental tax
> rates.
What else would you expect out of Washington?
>
> 3) Actually, it would be best if they treated all forms of income the
> same, whether from wages, interest, or capital gains. It is not the
> government's job to influence how people spend and save their
> money. Right now, between income taxes, direct social security taxes,
> and social security taxes paid by my employer, my tax rate is about
> 33%. Under the new tax bill, Bill Gates, who makes most of his money
> from selling his shares of Microsoft stock, will pay 20% of that to
> the government. (I am ignoring state income taxes here.) I resent the
> fact that I pay a higher percentage of my income to the government
> than does the richest man in the world. I would not mind a flat tax
> system where both Bill and I paid the same percentage, but having Bill
> pay a lower percentage does not seem fair.
Realize that what you get OUT of SS is based on your earnings. In
theory, you will get a much higher percentage back than Bill will.
Furthermore, Bill's SS income will be taxed more heavily than yours.
I don't think it's really fair to include SS taxes in the discussion,
it is a separate issue. And very complex. SS is supposed to be more
of a (poor performing) annuity than a tax.
Why do you feel that Bill should pay more dollars in taxes than you
do? To pick a number out of the air, he probably pays $10 million a
year in taxes. Why should he, as an individual, subsidize other
people's taxes. Yes, he gets more in government services than you do
(it takes more fire equipment to protect his house than yours), but
does he get 1000 times more from the government than you do? I doubt
it.
This gets into an obviously philosophical discussion. Clinton thinks
the rich should pay a higher rate "just because they can" and low
income people should get a rebate even if they don't pay income
taxes. That's welfare! Cinton promised to "end welfare as we know
it". Yep! He is now replacing it with IRS operated welfare!
I don't think the person earning $10,000 a year should get a free
ride and I don't think Gates owes a higher percentage than anyone
else. I think he really owes something between the same dollar
amount (say $1000/yr) and the same percentage as everyone else.
I think the only way to really make things fair is to abolish the
income tax and go to a consumption tax (e.g. sales tax). Of course,
Washington will try to sneak that in **in addition** to the income
tax.
The bottom line is the need to stop the unchecked growth of a
government that is nothing but a bottomless pit. Unfortunately, the
current revisions continue to shovel in more money for Washington to
squander. I have absolutely no faith that the budget will ever get
balanced. Washington (and the states, too) is addicted to tax money
and we haven't figured out yet how to treat that sick addiction. I
really want to make Washington go "cold turkey".
This promise of a balanced budget is nothing but fantasy to get the
problems past the next election. Nothing else matters to the
politicians.
I think there is a difference between income that **comes in to me**
as in a salary, and income that comes from selling a stock where the
money is just moved from one investment to another. I'm not
convinced that the later should be taxed until it is used for
something else (again, tax consumption, not paper gains.)
Ken
------------------------------
Date: Tue, 5 Aug 1997 13:28:05 -0400 (EDT)
From: Avrum Lapin <avrum113@cyberg8t.com>
Subject: Re: Software to Track US Savings Bonds?
Gil Friese; 1132 El Camino Drive; Costa Mesa, CA 92626 publishes shareware
(an Excel Template) which does this.
This spreadsheet (EEBOND30.XLS) and "Savings Note & Series E Savings Bond
VALUES" (EBOND12.XLS) is available for MAC from the usual archives (and
probably available for PC's as well)
Avrum Lapin
Upland, CA
------------------------------
Date: Tue, 5 Aug 1997 13:29:18 -0400 (EDT)
From: Kevin.O'Donohue@parexel.com
Subject: Thanks for the Digest And for Cross-Country "Trip"
Ira, I just want to thank you for the digest. I'm 36 with a wife and 2
1/2 year old son (and a daughter due in Sept.!). I'm not involved with
the stock market yet, and my only investments are through 401(k)s at
work. I don't have enough life insurance and I'm not set up for
retirement. We live paycheck-to-paycheck on one salary. All that being
said, I've learned so much through the newsletter (been subscribing
since #23) though that I'me starting to change things and get more set
for the future. One of my first investments--soon, I hope--will be to
send you $20!
The reason I'm really, finally writing (actually I tried two other
times and the e-mail got rejected--maybe this will get through to one
of the addresses) is that the post "Driving across country from
[Tony_Babb@notes.pw.com]" was really refreshing. I sent him a personal
note to thank him for the post. It just shows what a great forum the
digest is! I know his intention was to provide vacation tips, but I
felt like hitting the road and going cross country after I read it. It
relaxed me!
Thanks, Ira!
--Kevin O'Donohue
------------------------------
Date: Tue, 5 Aug 1997 13:30:05 -0400 (EDT)
From: Frank Wagner <wagner@ececs.uc.edu>
Subject: Estate and long term gains taxes
Four questions:
1. The news stories I have read about the new budget bill, talking about
raising the exemption on estate taxes from $600,000 to $!,000,000 say
that this will be "over ten years." What does this mean? That it will
only last for ten years? That it will be phased in over a ten year period?
And if the latter, what is the schedule for doing this?
2. Is an estate taxed according to pre- or post taxes. If part of an estate
includes equities and if no income tax has yet been paid on these equities
or their returns, what is taxed? Their value before taxes are paid or
after?
3. Under the current law if I leave an estate of $600,100, will the estate
be taxed on $100 or on $6000,000?
4. On long term gains, I buy stock A, pre-tax. Seven years later I roll
this over into stock B. Two years I sell stock B. As far as the tax law
is concerned on a two- or a nine-hear holding basis?
Thanx!
------------------------------
Date: Tue, 5 Aug 1997 13:30:47 -0400 (EDT)
From: Richard Havranek <havranek@sunyit.edu>
Subject: US Bonds Web Site
Go to: http://www.publicdebt.treas.gov/sav/sav.htm
A great Web Page, you'll be happy to see your tax dollars at work. Among
other things provides free software to download which tracks US Savings
Bonds as well as providing for disks via mail for a price. The programs
are commercial quality.
------------------------------
End of persfin-digest V4 #69
****************************
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