Go to Jeff Salisbury LWGate Home Page.From: persfin-digest <owner-persfin-digest@shore.net>
Subject: persfin-digest V4 #73
Date: Wed, 13 Aug 1997 20:34:01 -0400 (EDT)
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persfin-digest Wednesday, August 13 1997 Volume 04 : Number 073
IN THIS ISSUE:
ADVERTISEMENT: MCI FAX BROADCAST SERVICE [Oppenheimer Software <Connect-]
Efficiency of New vs. Used Home Appliances? ["Richard E. Machado" <richma]
Restrictions on Marriage of Canadian Citizen to US Citizen? [Ric Candor <]
Re: Is 35 year old's Retirement Savings Plan On Target? [jeff@scrooge.csd]
"Real Early" Retirement Question ["Holly ;-D" <hollyd@informix.com>]
Re: Limit Order Strategy? ["jon.r.lomme" <jon.r.lomme@ac.com>]
Can A 65 Year Old Retiree Benefit from the Roth IRA? ["Joseph Brouillette]
I Lost An Intel Trade Using Ira's Limit Order Strategy [zucker@epix.net (]
Re: VA Mortgage & Paying for Daughter's College [Stephan <stephan@xmail]
What Happened When I Notified My Credit Card Company of My Trip [georgene]
Caveat on Twentieth Century GiftTrust ["Narasimhan, Seshadri" <Narasimhan]
Eating Luxury Lobster [Stephen Brodeur <sbrodeur@draper.com>]
"Double Taxation" of Car Sales is Not Unconstitutional [Francesca Pardo <]
We're Missing the Point of the Reason for Sales Tax [Greta Taglieri <gret]
Re: Borrowing to Pay for Daughter's Education? [Greta Taglieri <greta.tag]
Dangers of Ira's Limit Order Strategy [Greta Taglieri <greta.taglieri@iis]
Online mortgages? [Mike Machnik <machnik@tiac.net>]
Re: If we all bought Index Funds ["Ken Meinken" <kmeinken@one.net>]
Investment note Co. went chapter 11 [rrk@aps.anl.gov (Robert Kalt)]
Debit cards Article [JessBLee@aol.com]
Re: Fairness in Taxation ["Billy Barrington" <bbarrington@poboxes.com>]
Re: Government Coercion and Property Rights [Susan Mangiero <mangiero@sh]
Re: VUL cash value ["Cal Lester C.L.U." <Cal_Lester@msn.com>]
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Date: Wed, 13 Aug 1997 19:57:58 -0400 (EDT)
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------------------------------
Date: Wed, 13 Aug 1997 19:59:40 -0400 (EDT)
From: "Richard E. Machado" <richmac@ici.net>
Subject: Efficiency of New vs. Used Home Appliances?
My question is only semi finance related but maybe someone can
help with answers.
I'm buying an old house that has built in appliances plus a
refrigerator the owners are leaving. It also has a central air
conditioning unit. All of these are 20 to 25 years old.
I've been pricing new appliances and I know they are much more
energy efficient than old models, but does anyone know of a way
to tell how MUCH more efficient they are than ones 20 years
old?
The appliances from back then didn't have energy ratings
like manufacturers are required by law to tell you these days.
How much electricity will I save by replacing each thing?
I plan to replace them all eventually but I want to base
which one I replace first on the energy savings I should realize.
Am I better off from a expense/savings standpoint waiting
until they die to replace them?
The appliances in question are a Windsor 17 cu ft refrigerator,
a drop in electric stove, and a builtin dishwasher, plus the
air conditioner. I estimate replacement costs at $800, $500, $400,
and $1700 respectively.
I'm looking for numbers, statistics, or easy ways to measure the power
consumption of the appliances.
Pete
rpalma@msai.mea.com
------------------------------
Date: Wed, 13 Aug 1997 20:00:52 -0400 (EDT)
From: Ric Candor <riccan@icanect.net>
Subject: Restrictions on Marriage of Canadian Citizen to US Citizen?
hi...
my fiance and I want to be married in the Niagara Falls, NY area... I hope
you can provide the information we need to do this... She is a Canadian and
I am a U.S. citizen... we don't know what restrictions there are (if any)
or what documentation or tests or waiting period... and so on...
if you could either provide info or forward this to someone you think might
provide the info, we'd greatly appreciate it...
thank your for yout time and attention
riccan@icanect.net
enjoy it all,
ric
------------------------------
Date: Wed, 13 Aug 1997 20:02:33 -0400 (EDT)
From: jeff@scrooge.csd.sdl.usu.edu (Jeff Salisbury)
Subject: Re: Is 35 year old's Retirement Savings Plan On Target?
Steve,
I haven't read any of the replies to your posting, so forgive me if I am
repeating...
Check out the web page at:
http://personal.fidelity.com/toolbox/fiirg/retire.html
It is a "Retirement Planning Calculator" that lets you run a bunch of "what-if"
scenerios regarding your nest egg, saving rate, return on investment,
inflation, retirement age, etc. It is pretty well done, IMO, and designed to
answer the very questions you ask...
Best Regards,
Jeff Salisbury
------------------------------
Date: Wed, 13 Aug 1997 20:03:34 -0400 (EDT)
From: "Holly ;-D" <hollyd@informix.com>
Subject: "Real Early" Retirement Question
I'm about to "retire" a little early (OK, OK, about 25 years early!).
I have significant funds stashed away in a 401k that will have to
be rolled over, I assume into an IRA, as I am dropping out of the
work force. I intend to use some of this money to buy some land
and a house, to which I will be "retiring" to homestead.
What with all the tax changes being bandied about, I'm no longer
sure of the best way to handle this. I was thinking of going
land contract and taking out a few thousand dollars every year
to avoid being taxed on the withdrawal (or at least taxed very
much), but I'd still have to pay the 10% early withdrawal penalty.
However, I have been told that according to the new tax laws, I
may be able to do one of the following to avoid paying the 10%
penalty:
1) Withdraw from a 401k for the purpose of buying a home
2) Withdraw from an IRA for the purpose of buying a home
3) BORROW against a 401k for the purpose of buying a home
4) Borrow against an IRA for the purpose of buying a home
So my questions are: Are ANY of the above rumors true? And
what do I have to do with my 401k disbursement - is an IRA
rollover the only option?
Thanks.
Holly ;-D
By the way, for the person asking about homesteading (I haven't
been following the list, only saw the one reply in this newsletter)
here are a couple of homesteading links:
http://www.homestead.org/
http://www.webfirst.com/homestead/
As far as I know, the Federal Homestead Act was repealed in the
70's, although I've been told that there is still a state
sponsored program in Alaska.
------------------------------
Date: Wed, 13 Aug 1997 20:08:07 -0400 (EDT)
From: "jon.r.lomme" <jon.r.lomme@ac.com>
Subject: Re: Limit Order Strategy?
Well, in literature I have received from the American Association of
Individual Investors (AAII), they recommend a strategy of not using market
orders at all for the very reasons you mentioned; i.e. losing $$$ because
of the spread.
They suggest using a limit order for a price halfway between the bid and
asked price, and in addition to that, you are to use an order that is
'Good for the day' as opposed to 'Good until canceled'.
Since we are talking about spreads, can someone explain to me exactly how
that works? All the literature I have been able to find says only that it
is the difference between the bid and asked prices. Who is doing this
bidding and asking?
If I place a market order to buy, does that mean that I am going to have
to pay the asked price? And if I just paid the asked price, then didn't I
just raise the bid?
I have heard that the advantage of a smaller 'tick' size is that the
spread winds up smaller, and that we ultimately may go to a decimal
system instead of fractions so the spread would be minimal. I have also
read where there is some resistance to this from people who make money off
the spread. Who would that be?
Thanks in advance,
Jon
(Editor's Opinion - If everyone placed limit orders (both on buy and sell
side), this would limit the "flexibility" of the market maker trading on
his/her own account to the detriment of the buyers and sellers. -IK)
------------------------------
Date: Wed, 13 Aug 1997 20:09:20 -0400 (EDT)
From: "Joseph Brouillette" <Broutek@worldnet.att.net>
Subject: Can A 65 Year Old Retiree Benefit from the Roth IRA?
Hello everyone - I am 65 years old, retired, and on Social Security since
62.
I have $24,000 in and IRA account with Fidelity Investments. Is there any
way that I can use and benefit by a Roth IRA?
Thank you very much - - - Joseph
------------------------------
Date: Wed, 13 Aug 1997 20:10:58 -0400 (EDT)
From: zucker@epix.net (David Zucker,M.D.)
Subject: I Lost An Intel Trade Using Ira's Limit Order Strategy
I used to think that way, till an 1/8 point kept me from aquiring 100
shares of Intel 2 years ago. I kept waiting for the execution that never
came. Now I just place market orders. My strategy makes more sense for
buy and holders of large liquid companies. If you are a trader or like to
play small caps with low stock prices and high spreads limit orders
probably make more sense.
David Zucker
------------------------------
Date: Wed, 13 Aug 1997 20:11:47 -0400 (EDT)
From: Stephan <stephan@xmail.org>
Subject: Re: VA Mortgage & Paying for Daughter's College
Amy asked about down payment, etc:
Not only compare returns on your downpayment invested elsewhere but
also consider the possible rate of inflation over a 29 year period.
My favorite strategy is still to get as much leverage on well-chosen
real estate with as little down as managable and then pay off the loan
using "pre-inflation" dollars.
ps. I recommend using a lawyer for all real estate transactions.
I-forgot-who-started-this asked about tuition vs gift to daughter
attending college in California:
Here's what I did for a friend a few years ago -
I made a _donation_ to a special scholarship fund for which my friend
qualified (determined before the donation was made!)...my friend got
tax-free assistance and I got a tax deduction for two years.
Good Luck,
Stephan
- --
at http://members.tripod.com/~RoundWorld
------------------------------
Date: Wed, 13 Aug 1997 20:13:07 -0400 (EDT)
From: georgene@secular.org (Georgene Harkness)
Subject: What Happened When I Notified My Credit Card Company of My Trip
>>able to contact me as they did, that they'd _stop_
>>the card, not cancel it -- and have me verify it from
>>the next retailer at which I tried to use it.
>>
>>Anyone else have such an experience with any other
>>cards?
After reading this original post, and since I was planning a
three-week trip, I called my credit card (MBNA Bancard Services) to
warn them that I'd be on an extended trip and to expect some unusual
charges. The friendly lady seemed a bit startled that I'd call for
that reason, but in their usual nice manner said of course she'd make
the notation on my account. What she _failed_ to do, and it's a bit
alarming to me -- is ask for any identifying information, such as my
mother's maiden name, my ssn, or anything to verify that I was indeed
me.
------------------------------
Date: Wed, 13 Aug 1997 20:15:36 -0400 (EDT)
From: "Narasimhan, Seshadri" <NarasimhanS@bernstein.com>
Subject: Caveat on Twentieth Century GiftTrust
>From: "Michael P. Griffin" <mgriffin@ici.net>
>Any suggestions on the best mutual funds for college education funds?
>Mike
>Michael P. Griffin
>UMASS DARTMOUTH
>(Editor's Comment - People seem to like Twentieth Century GiftTrust. -IK)
Good point Ira. Today's Wall Street Journal has a great description
(Section C: Money and Investing) about the caveats with respect to
investing in either American Century GiftTrust or Royce GiftShares Fund.
* Sai
(Editor's Comment - One problem is that your children's assets are counted
heavily against them in the financial aid calculation, and a GiftTrust
account is in this category. -IK)
------------------------------
Date: Wed, 13 Aug 1997 20:17:16 -0400 (EDT)
From: Stephen Brodeur <sbrodeur@draper.com>
Subject: Eating Luxury Lobster
Bill Jones <JONESW@CCSUA.CTSTATEU.EDU> wrote:
>But if a person eats lobster, that is spending
>their "profits" not obtaining the nourishment necessary to produce their
>labor.
At one point in colonial Boston, lobsters were so plentiful (and so cheap)
that it was against the law to feed lobster to servants more than a maximum
number of times a week. "Oh, no! Lobster again!! There ought to be a law,
Hester......" <grin, wink>
sbrodeur@draper.com
standard disclaimer. just me. opinion, not advice.
------------------------------
Date: Wed, 13 Aug 1997 20:18:09 -0400 (EDT)
From: Francesca Pardo <fp10@cornell.edu>
Subject: "Double Taxation" of Car Sales is Not Unconstitutional
>Mark Coulter <coulter@csonline.net> wrote
>Subject: Sales tax on used cars
>I couldn't agree more on the comment about sales tax being paid
>multipule times on an auto. This is by definition "double taxation"
>which is constitutionally forbiden. If a car changes hands twice a
>year for it's entire life expectancy, imagine the tax that is
>collected. This should be eliminated, not only for cars but for all used
>merchandise.
I can't find anywhere in the U.S. Constitution anything forbidding
"double taxation" and in any case sales tax is administered by the states.
Perhaps your state constitution forbids "double taxation"?
The government provides the framework within which contracts can be formed
and upheld. Each time the car changes hands there's a new party who has
access to the legal system if something goes wrong with the deal. From the
standpoint of taxes being used to pay for government service, I think
charging sales tax on every sale is one of the more sensible charges.
- -Francesca
------------------------------
Date: Wed, 13 Aug 1997 20:19:31 -0400 (EDT)
From: Greta Taglieri <greta.taglieri@iis.varian.com>
Subject: We're Missing the Point of the Reason for Sales Tax
Bob Ford wrote:
>I know state laws differ but I think the sales tax collection system above
>is true for all states that collect state sales tax. Somebody tell me if I
>am wrong. What determines whether sales tax should be paid? The dealer
>does not pay sales tax even though they own the car and can use if for a
>demonstrator and then sell it as a used car. Very few people buy a car
>and never plan to sell it. So if follows that when you buy a new or used
>car, you plan to sell it someday. You just do not know when that day is.
>Is there any limit to the number of times sales tax can be paid on a car?
Mark Coulter wrote:
>I couldn't agree more on the comment about sales tax being paid
>multipule times on an auto. This is by definition "double taxation"
>which is constitutionally forbiden. If a car changes hands twice a
>year for it's entire life expectancy, imagine the tax that is
>collected. This should be eliminated, not only for cars but for all used
>merchandise.
People seem to be forgetting one basic fact about the whole tax system. The
government doesn't care if a car gets sold (and taxed) a million times.
They are only looking for one thing - money. Whether they get it from
somebody buying a car, earning income, selling a stock at a profit, or
somebody earning dividends on a stock doesn't matter much. If they stop
getting it from one source (such as if a person trades in a car,
effectively reducing the net cost of the new car and sales tax due) they'll
simply increase the amount they charge on another.
When you buy a car, you have to pay sales tax. When you just keep your car,
the state charges excise tax (granted they're generous enough to prorate it
if you don't own the car the whole year). One could look at this and say
that people like Bill Gates (who I presume owns multiple, expensive, newer
cars) actually pay higher taxes.
>1. Joe Schmo is 20 yrs old. Gets a job in the local factory, buy a
>fixer-upper house for 20K.
>2. Over the next 40+ yrs he builds on/renovates/landscapes and otherwise
>improves his property.
>3. Joe is now retired and living on a fixed income.
>4. The problem is he can't afford to live in his house anymore. The
>increased valuation from the improvements and inflation plus the general
>tax increases over the years have priced him out of the home he worked so
hard
>for.
Two comments:
1. Joe could do absolutely no "builds on/renovates/landscapes and otherwise
improves" (sorry about the grammar errors) and his taxes would still go up.
Cities need a certain amount of money (though I STRONGLY disagree with the
amount) regardless of how much somebody has improved their house. Somebody
can either make their house more livable by improving it, thus driving up
the valuation, or the city will raise the tax rate. Personally, I'd rather
make the house more livable. I was looking at my house real estate tax bill
from around 1988 for just over $1500. It is now over $2000, without our
even doing any renovations. The water bill is no different - if people
really cut back on the water they use, the rate per cubic feet just goes
up. The total amount the city wants to collect is somewhat fixed.
2. Regarding Mr. Schmo's "living on a fixed income" - aren't we ALL living
on a fixed income? I don't care if Joe is now over 60 or not. If he wanted
to retire, he should have been saving so that his income would be fixed at
a high enough level. My great aunt uses the "fixed income" excuse all the
time for why she can't make long distance phone calls (we must call her),
why she can't fly without buying tickets very far in advance (she has to
get the discount), etc. (and why she needs to collect social security - but
that's another discussion). Her income, however, is fixed over $100,000.
She doesn't get much sympathy from me.
Greta Taglieri
Beverly, MA
------------------------------
Date: Wed, 13 Aug 1997 20:20:09 -0400 (EDT)
From: Greta Taglieri <greta.taglieri@iis.varian.com>
Subject: Re: Borrowing to Pay for Daughter's Education?
>i could borrow the money on a home equity loan, and get a small deduction
>on the interest.
>i could then give her the money as a gift, which would be non-taxable
>for her $10,000 year?
>can i do both, getting sort of a double advantage?
I understand where the first advantage comes from (the tax deduction on the
home equity, available if you're itemizing). But where would the second,
double advantage come from?
Yes, I know somebody can give somebody else up to $10,000 and the recipient
doesn't have to pay tax on it. But if you don't give your daughter the $10k
to begin with she also doesn't have to pay tax on it. What am I missing?
>alternatively, if i just paid her bills for her, i.e., write a check to the
>university for tuition, books, etc., would she still have to claim that as
>income, even though i'm paying it directly to the school?
Whether you give the money to the university or not, I don't believe she
has to claim it as income. But, as Lester M. Levy pointed out, if she is
the official "owner" of the money, she might not be eligible for as much
financial aid and therefore it would not be wise.
Greta Taglieri
Beverly, MA
------------------------------
Date: Wed, 13 Aug 1997 20:20:56 -0400 (EDT)
From: Greta Taglieri <greta.taglieri@iis.varian.com>
Subject: Dangers of Ira's Limit Order Strategy
I usually like to do limit orders because I do feel like I have more
control. But the difference is fairly minimal - you are really not talking
about a large amount of money. If you're looking at buying 100 shares, in
the above case 8 1/2 would be $850 bid and ask of $875 (commissions
notwithstanding). Personally, I usually split the difference and enter my
order for 8 5/8, or about $862.50. Notice we're talking about $12.50.
Presumably you're buying the stock because you expect it to appreciate by
quite a bit. $12.50 is rather minimal in the grand scheme of things, it
just makes you feel a little better. Of course, if the stock starts going
up immediately, and you missed out on buying it over $12.50, you'll
certainly be kicking yourself.
Greta Taglieri
Beverly, MA
------------------------------
Date: Wed, 13 Aug 1997 20:22:18 -0400 (EDT)
From: Mike Machnik <machnik@tiac.net>
Subject: Online mortgages?
We're looking for a house, and a couple of months ago we went to a mortgage
broker recommended by a friend. We went to see him, applied and were
pre-approved, and received a good faith estimate in the mail from the bank.
At the time I thought the interest rate and fees involved seemed high.
Many of the so-called "garbage fees" were there, for example. We also
asked for the APR on the loan and the percentage we were quoted seemed high
- - often nearly 1.0% or higher than the loan's interest rate (even for 0
points).
This seemed in line with the high and/or questionable fees/rate
that were on the GFE. I know that fees and APRs (including the way they
are calculated) vary from lender to lender, but this seems excessively high.
Recently we have started to look elsewhere, and one of the places I have
looked is on the Internet. I've seen some rates quoted that seemed much
more reasonable - lower than the ones we received from the mortgage broker
(compared same-day numbers) and with a more reasonable APR.
I'm wondering, does anyone have any experience, good or bad, with going
through an online mortgage application? Any places that you found
especially good or that we should stay away from?
We have plans to contact one or more other local places as well, but here
I'm primarily interested in experiences that people have had on the net.
thanks,
- ---
Mike Machnik
machnik@tiac.net
------------------------------
Date: Wed, 13 Aug 1997 20:23:04 -0400 (EDT)
From: "Ken Meinken" <kmeinken@one.net>
Subject: Re: If we all bought Index Funds
> .... Even the largest holding in the Index 500 is only 2% of the
> total holding. As long as there is a recognised index there is no problem.
No true!!! The S&P Index is capitalization weighted and the biggest
companies account for a significant percentage. I don't remember the
exact numbers, but the largest 20 stocks account for 40-50% of the
S&P index. So essentially you are investing in a very small number
of companies (I think GE accounts for 5% of the S&P)
Ken
kmeinken@one.net
------------------------------
Date: Wed, 13 Aug 1997 20:23:43 -0400 (EDT)
From: rrk@aps.anl.gov (Robert Kalt)
Subject: Investment note Co. went chapter 11
Hello Ira & all,
This spring I wrote asking if anyone had info on Welco Securities
offering thrift certificates for Walnut Equipment Leasing Co.
The notes had very high fixed rates of return and only $100 minimum.
Welco is a member of NASDR & SIPC but of course the notes are not FDIC
insured like a CD.
Last night I got a letter in my monthly statement saying Welco is declaring
chapter 11. Does this mean all is lost?
I went in fully aware of risk vs reward----------Bob----------thanx
------------------------------
Date: Wed, 13 Aug 1997 20:24:19 -0400 (EDT)
From: JessBLee@aol.com
Subject: Debit cards Article
Financial Planning Magazine Daily News from August 11, 1997 ran a story
relevant to the discussion on debit cards. The article was titled <Credit
Where Credit's Due> and it was written by Gary Gentile. I am quoting the
relevant paragraph:
<Under federal law, owners of traditional credit cards are responsible for no
more than $50 in unauthorized charges while owners of debit cards can be held
liable for purchases of up to $500 if the loss is not reported within two
days. Debit cards deduct purchases automatically from a consumer's checking
account. In July, MasterCard International said it would apply the same
protections across the board to all its card holders, limiting liability to
$50 for unauthorized use of its MasterMoney debit cards. In August, Bank of
America, the nation's largest debit card issuer, went one better and said it
will not hold its customer's liable for any unauthorized charges when the
card is lost or stolen. Bank of America issues cards that carry the Visa
logo.>
Financial Planning Magazine's website address is www.fponline.com (I have no
affliation with them, I am just a subscriber).
Other comments on debit cards... Obviously, all of the concerns previously
mentioned apply in spite of the above limit in liability for loss with debit
cards, i.e., the money has already been deducted from your account which may
cause other headaches. Also, my mother uses her debit card frequently and
was surprised to discover that for her protection there is a daily limit on
usage (her bank sets it at $1,000 daily regardless of her checking account
balance). She discovered this in trying to pay for an extended hotel stay
that exceeded this limit. To have used her debit card to pay for this hotel
bill, she would have had to pay down the bill over a day(s) so that her
balance on check-out day was less than $1,000. So be aware of daily limits if
you plan to use your debit card for larger purchases.
Jessica Lee
------------------------------
Date: Wed, 13 Aug 1997 20:24:50 -0400 (EDT)
From: "Billy Barrington" <bbarrington@poboxes.com>
Subject: Re: Fairness in Taxation
From: JONESW@CCSUA.CTSTATEU.EDU
> As to whether rates should be graduated (say 15% for the first 20K and
> 30% thereafter), above that 10K exemption for workers and total-cost
> exemption for companies, whatever is done is fair, as long as it is
> done for both workers and companies. Both should pay their fair share
> of taxes.
An interesting analogy, but what is your logic concerning this last
sentence. Why should a company (as a separate taxable entity) also pay
income tax? Why not tax at the individual level "only" and do away
with the hidden consumption tax (corporate taxation).
It would allow the individual to better evaluate what he really pays in
taxes and eliminate the double taxation of corporate earnings.
Billy Barrington
Houston,Tx
------------------------------
Date: Wed, 13 Aug 1997 20:26:36 -0400 (EDT)
From: Susan Mangiero <mangiero@shu.sacredheart.edu>
Subject: Re: Government Coercion and Property Rights
In response to Bill Jones' comments:
First, I do not believe in anarchy (no government) but rather
the de minimis government supported by the U.S. constitution and the
founding fathers who believed in the Lockean idea of natural rights.
Second, defending one's life and property rights with force is not at all
the same thing as the coercion involved in unprovoked force. Besides, a
military can be voluntary (no draft, voluntary funding).
Third, a frog put into boiling water jumps out. However, a frog put into
a pot of lukewarm water acclimates as the heat is gradually turned up until
it boils and causes the frog's death. Message: Once individual liberties
are lost, they are lost forever. Wasn't it Thomas Jefferson who advised
"eternal vigilance", i.e. preservation of individual liberties is an
ongoing activity?
------------------------------
Date: Wed, 13 Aug 1997 20:30:12 -0400 (EDT)
From: "Cal Lester C.L.U." <Cal_Lester@msn.com>
Subject: Re: VUL cash value
>>>
Cal Lester, you said,"However I would take exception to the last line
above," my line being, "Besides, the only way to avoid ALL taxes on the
VUL cash value is to die."
However, you then proceeded to indicate only that one can take out all of
the premiums, and much more besides as wash loans. I do not dispute that.
>>>
That does not make my statement false, because you must always leave a
substantial amount of the CASH VALUE in the policy. You can't get it all
out without paying income taxes.
Example: You pay premiums of $80,000 and the cash value grows to $200,000
free of income taxes, though not free of substantial expense charges
(typically more than 20% deducted for expenses, which is why the savings
part of a VUL is generally 20% worse than a deductible or Roth IRA). Say
you want to recover the maximum you can tax-free at age 65. That would be
only $170,000 or so, not the whole $200,000. The other $30,000 or so of
cash value you have to leave in the policy until you die. This $30,000
covers the premiums for the rest of your life on the built-in term
insurance of $75,000 (which I believe is the minimum death benefit you
have to keep in the policy).
>>>> Unfortunately, you continue to make enough UNTRUE/unsubstantiated
statements that I forced to continue this thread much further than I wanted
to.
A) You CAN get it ALL out, EXCEPT for $1.00 without paying any
taxes. The example that I gave earlier illustrated that. However, let's
take YOUR example above.
IF you were interested in taking it ALL out @ 65, ( which is probably
NOT a good idea ), then you would REDUCE the Death benefit to the MINIMUM
amount, which would normally be $10,000 above the remaining Cash Value
Account. However, the software ( or the Home Office ) will calculate the EXACT
amount that would be required to stay in the policy, to EARN sufficient
interest to maintain the policy to a Certain Point in time ( either age 95,
100 or 105 as you determine). The IRS will NOT impose any Income Taxes on
anyone, as long as there is $1.00 of NET DEATH BENEFIT paid at the insureds
death.
B) The more sensible way to use that $200,000 is to once again ask
the H.O. to calculate the MAXIMUM amount that can be withdrawn EACH &
EVERY YEAR INCOME TAX & INTEREST FREE, and still maintain the policy WITH
A MINIMUM DEATH BENEFIT, until you die.
Of course, if you retire at age 65 and determine that you no longer need life
insurance, you can eliminate the term insurance by reducing the Death Benefit
to that minimum $75,000, leave $75,000 in cash value in it, and thereafter
draw off the earnings on the 75K tax-free as wash loans. But then you
have $75,000 in cash value that you get no personal benefit from.
>>>> Once again, you show your misunderstanding about how Life Insurance
works. It does NOT require $75,000 of Cash Value to maintain a $75,000 Death
benefit. The minimum for most companies for a policy that has been in force
for many years is usually $10,000 of Net Death Benefit.
Cal, is this understanding wrong? And what VULs do you know of that have an
annual M&E expense ratio less than 1%?
Bill Jones
>>>> N O N E at all. Life Insurance should NOT be compared with ANY
companies Variable Annuity. Life Insurance is designed to provide a
specific number of dollars at a specific point in time, AT DEATH. Life
Insurance is NOT designed as an Investment Vehicle ( even though some
people feel that it is ).
- ------------------------------
I certainly hope that this finishes the thread, and I will be happy to respond
to any other questions that any one might ask.
Cal Lester CLU
Insurance Course Coordinator
Broward County Community College
------------------------------
End of persfin-digest V4 #73
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