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Subject: persfin-digest V4 #92
Date: Mon, 13 Oct 1997 21:26:22 -0400 (EDT)
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persfin-digest Monday, October 13 1997 Volume 04 : Number 092
IN THIS ISSUE:
ADVERTISEMENT: MCI FAX REPLY SERVICE
Re: early retirement
Re: Real Estate Arbitration
Re: Early Retirement
why Roth IRA is better in every case...
Re: 3 Car Accident Question
Re: Sunset For The Index Funds? :)
RE: Nursing Home Insurance / Keeping Insurance Proceeds
Zero Coupons -- sell off early maturity or late maturity?
Re: Can You Separate Deductible from Nondeductible IRA Money?
Re: Deductible IRA vs. Roth IRA
Re: Roth IRA Or Nondeductible IRA?
Parents help in financing home purchase
Re: Where to put $50,000 (JWallace@karta.com)
What it Takes to be a Financial Planner
Re: Can You Separate Deductible from Nondeductible IRA Money?
re: questions about life insurance beneficiary and estate tax
RE: questions about life insurance beneficiary and estate tax
Re: Confusing Car Accident
Roth redux
Re: Splitting Rollover IRA Account Advisable?
Re: mortgage dilemma
Speed Reading?
Roth IRA vs deductible IRA
GE Interest Plus Gripe!
Re: Wade Cook
Re:Travelocity Horror Story
Re: nursing homes - Anyone Really want To Live In Them?
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Date: Mon, 13 Oct 1997 20:55:57 -0400 (EDT)
From: BOB FORD <BOB_FORD@compuserve.com>
Subject: Re: early retirement
>My question is indirectly related to personal finance. I desire to
>retire at the age of 50. The only thing I see that would make this
>difficult is the issue of affordable health insurance for me and my wife.
>Does anyone have any suggestions or advice about this subject which
>would assist me in my goal?
Join every organization you can. Many of them have arrangements with
insurance companies for reduced cost health insurance.
GOOD LUCK
BOB FORD
BOB_FORD@COMPUSERVE.COM
------------------------------
Date: Mon, 13 Oct 1997 20:57:58 -0400 (EDT)
From: BOB FORD <BOB_FORD@compuserve.com>
Subject: Re: Real Estate Arbitration
>>I have been a real estate investor for many years. When I purchase
>>property, I NEVER agree to have disputes settled by arbitration. There is
>>no way you can assure arbitration will be fair. It there is a dispute, I
>>want my attorney to present my side of the dispute to a judge who must
>>follow the law.
>What about juries? It is they who decide the case, NOT the judge! So, you
>can take your chances with a possibly unfair abritration panel or a
>possibly unfair jury- doesn't expect the judge and "the law" to rescue
you.
I am not an attorney and the following is not legal advice. It is just my
opinion. It is based on my experience in California. If my experience is
not typical, I invite other people with more knowledge of law to correct
me.
A large percent of civil cases are tried WITHOUT a jury. This is
especially true in urban areas where it takes a long time to get a trial
date. Even if a case has a jury, it is the judge that gives the jury
instructions on the law and what the jury can consider to decide the case.
It is the judge who makes the decision on what a jury can hear. It is the
judge who can issue a directed verdict. That is, a judge can tell the
plaintiff that they have no case and dismiss the case.
Most civil cases are about money. If a jury awards a plaintiff money, say
10 million dollars, a judge can change the amount to 1 dollar. I will
take my chances with a judge anytime to be fair. Even if a judge is not
fair, you can appeal the verdict to a higher court.
BOB FORD
BOB_FORD@COMPUSERVE.COM
------------------------------
Date: Mon, 13 Oct 1997 20:59:02 -0400 (EDT)
From: Avrum Lapin <avrum113@cyberg8t.com>
Subject: Re: Early Retirement
>
>My question is indirectly related to personal finance. I desire to
>retire at the age of 50. The only thing I see that would make this
>difficult is the issue of affordable health insurance for me and my wife.
>
>Does anyone have any suggestions or advice about this subject which
>would assist me in my goal?
Affordability is in the eye of the beholder. One thing that is clear is
that that premiums increase with age. e.g. a good HMO runs about
$130/mo/head at age 42 and $160/mo/head at age 52.and even more at age 62
in the LA region. The Blue Cross PPO plans run about $50/mo/head higher.
Plans with low deductibles and infinite provider choices have higher
premiums than plans with high dedeductibles and restricted access to
providers. See your Yellow pages for insurance brokers.
Availability is another issue: Recent history of cancer may make you
uninsurable. Too many Blood pressure pills may result in a vascular
exclusion (what else is there). Note that if you ever submitted a claim
against your health insurance its on file in some giant database accesible
to insurers.
If you are employed your company may allow you (or may be required to allow
you) to buy the companies health insurance at their cost + 2% for the first
18 months after retirement. Note though that beyond the 18 months you are
on your own (a commitment to allow access can be revoked).
Avrum Lapin
Upland., CA
------------------------------
Date: Mon, 13 Oct 1997 20:59:56 -0400 (EDT)
From: "Dalmia, Bipin K." <DALMIABK@phibred.com>
Subject: why Roth IRA is better in every case...
hello all: i have been reading a lot lately about comparisions of the
Roth IRA with deductible and non-deductible regular IRAs. I have come to
the conclusion that a Roth IRA is better IN EVERY CASE, and here's why.
1. it is a no-brainer that a Roth IRA is better than a fully
non-deductible regular IRA.
2. fully deductible versus Roth IRA: if the tax rate stays the same then
it is clear that both these will end up with exactly the same amount of
money available upon retirement. but the comparision makes the
assumption that the amount invested in a deductible IRA is $2000 and
that invested in the Roth IRA is $1440 ($2000 after 28% taxes for most
people). but the thing is, you CAN invest upto $2000 in a Roth IRA which
translates into being able to invest $2778 into a fully deductible
regular IRA, WHICH IS NOT ALLOWED. so by meeting the $2000 limit for
Roth IRA most people will be 'forcing' themselves to save more for
retirement, which is a good thing. arguments that people may not have
the extra money are not valid because most people generally complain
about the $2000 cap.
3. partially deductible IRA: similar arguments apply as above to the
deductible and non-deductible portions. also, the hassle of complex
paperwork, rollovers, pro-rata withdrawal etc. is just too much (you may
want to put a money value to your time in figuring all this out).
the only case when a Roth IRA is not as good is if the tax rate lowers
substantially in the future. but since noone knows what the future
holds, given the current situation, a Roth IRA is the better option for
everyone.
one other thing, i read somewhere that withdrawals from a Roth IRA
before retirement are only taxable, with penalty, to the extent that the
distributions are in excess of all the contributions (cost basis, if you
will). if that is true, then it just strenthens the argument that a Roth
IRA is better in every case.
comments?
bip
------------------------------
Date: Mon, 13 Oct 1997 21:00:58 -0400 (EDT)
From: Gigi Kent <gkent@postbox.acs.ohio-state.edu>
Subject: Re: 3 Car Accident Question
Sounds like Ben and John are working together to milk your insurance. One
of the TV magazine shows last week had a segment on a similar scam. The
confusing part is that Ben admitted to the police officer that he was at
fault. You should probably talk with your insurance company. I doubt that
they will pay the claim without a thorough investigation (including the
police report).
Gigi
------------------------------
Date: Mon, 13 Oct 1997 21:01:48 -0400 (EDT)
From: Sreeni Tellakula <sreeni@isi.com>
Subject: Re: Sunset For The Index Funds? :)
> In fact, if you want to properly evaluate your actively managed funds,
> you should construct a custom benchmark. For example, pretend fund
> XYZ consistently is 50% large-cap, 20% small-cap, and 30% long-term
> Treasuries (or it swtiches things around, but over time averages to
> that allocation). It would be totally inappropriate to compare it to
> the SP500, Russell 2000, or a long-term bond index.
>
> However, if you created your own "index" such that the rate of return
> of your "index" was equal to 50% of the RoR of the SP500 plus 20% of
> the RoR of the Russell 2000 plus 30% of the RoR of a long-term bond
> index, then the difference between the return your fund got and the
> return of your "index" would tell what value-added your fund manager
> was giving you.
>
> Rich Carreiro
> rlcarr@animato.pn.com
>
There is a website, which exactly does this calculation:
http://www.fundstyle.com/
It compares the large cap holdings of funds with S&P500,
middle cap with S&P400, small cap holdings with Russell2000.
Then it calculates the return for this combination of
indexes and the difference between this return and the
actual funds' return is the manager's contribution.
- --
Sreeni Tellakula
sreeni@isi.com
------------------------------
Date: Mon, 13 Oct 1997 21:04:55 -0400 (EDT)
From: "Cal Lester C.L.U." <Cal_Lester@classic.msn.com>
Subject: RE: Nursing Home Insurance / Keeping Insurance Proceeds
>From: "Richard A. Bauer" <owowo@netguard.net>
>Subject: Re: Nursing Home Insurance
Here is my 2 cents worth:
Insurance covers the average cost for the average case, plus a profit for
the insurance company. 80% of people never enter a nursing home. 80% of
those that do enter have a total stay of less than a year. (My
statistics may be off a bit, I mention them from what I recall). The
point is, very few people have a long stay in a nursing home.
>>>> True, so far
My advice: Let your Mom spend down and be independent. If she runs out
of money, there is always Medicaid.
>>>> Still true
My father was in a nursing home for 3 years. My mother has been in 7.5
years. She is still financially able to pay her way - my father was a
blue color worker and invested wisely! Learn a spreadsheet program and work
out the cash flows yourself. Be sure to consider inflation, etc.
>>>> Here is where you show the fallacy of your concept. If she were
financially able to pay then, and still able, then she most certainly could
have afforded a good policy, which would have paid most is not all of her
expenses.
Your mother has already spent 7.5 years of cost ( and may live quite a few
years longer ), which could have been invested or gifted to YOU and the rest
of your family.
If I was your grandma and I was entering a nursing home from which I did
not expect to leave except through death I would consider taking my assets
and disappating them in a Waldorf type nursing home and then going on
MediCal at minimal comfort because that is the only way I will ever recover
my investment in taxes over the years - yes I'm selfish
>>>> More importantly, dollar conscience. If she had gifted a major portion
away over the first few years, it too would have qualified her.
Insurance makes sense only you think that you will leave the nursing home
and be able to return home to resume your "normal" life, or if you have a
spouse at home to consider or you really want to leave an estate.
Not necessarily true. A Good LTC policy will provide the necessary dollars
to pay for needed care, without dissipating savings.
>re: Nursing home experience of Jim Reed
Yes, David, I understand how this could happen. My father said the same
thing about 6 years ago. All of my family members (including me) agreed
that he would never go to a nursing home. We committed to one another that
we could always work something out, so his wishes could be carried out.
Well....things don't always happen the way we want.
Here we have a MUCH MORE typical situation. Unfortunately Jim has already had
to live the experience
After over two terrible years of trying to care for my father in his home,
the whole family was spent, stressed, and my mother's health suffered. For
the last year, we even had a live-in that could take up the slack when we
could not perform the care. That still wasn't enough. David, I think it would
be worthwhile for you and your family to take a good look at exactly what it
takes for someone to die at home.
PLEASE heed Jim's advice ! ! ! ! !
I
My father is now in his third year of nursing home care. We learned that
good nursing homes can be found if you are willing to look hard
enough......and the quality of my father's care is much better now.
It is very difficult to outfit a house in a way that high quality medical
care can be provided. I believe what we did was the most kind thing we
could do for my father and our family. Of course, your situation could be
different.
Although Hospice will assist with some things such as a walker, special bed
or such, it is still a tremendous strain on the caregivers
Cal Lester CLU
______________________________________________________________________________
I recently had flood damage in my home, and was paid for damages by
my insurance carrier. Now I have decided to keep 2 of the damaged
items (a sofa and dresser) for which we were paid by our carrier.
I intend not to give the money back to the insurance carrier.
Can I do this?
(Editor's Opinion - Yes. Just like when you collect from your insurance
company after an auto accident, you're under no obligation to repair your
car. -IK)
>>>> Am I to understand that Ira is suggesting that an insured keep money
that should rightly be returned to that caring insurance company, that
cheerfully paid this claim??
( L.O.L. ) ( T.I.C. )
------------------------------
Date: Mon, 13 Oct 1997 21:05:45 -0400 (EDT)
From: riker@worldweb.net
Subject: Zero Coupons -- sell off early maturity or late maturity?
My Mom has a healthy sum of zero coupon bonds. We are planning to sell
some of them off to buy stocks. Others we will keep in the account.
I feel that the ones we sell should be those that are nearly at maturity.
After all, they are nearly at their full value anyway. The longer-term
bonds (not due till 2005, 2010, even 2020) are obviously not even close to
their full maturity value. We want to wait for some more value to accrue
to those bonds. And keeping some of them in the account could provide some
long-term stability.
The broker argues that the longer term bonds have a higher beta
(variability, I think), so we should ditch them now. I'm not sure I follow
his logic, if there is any to follow.
Thanks in advance for all replies.
Steve
riker@worldweb.net
------------------------------
Date: Mon, 13 Oct 1997 21:07:31 -0400 (EDT)
From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: Re: Can You Separate Deductible from Nondeductible IRA Money?
> If you have both deductible and non-deductible IRA money in prior
>accounts, how do you specify which money is going to be transferred to a
>Roth IRA?
We won't know for sure until the IRS tells us, but for what it's
worth, many of the pros on misc.taxes.moderated say it'll be done with
a Form 8606 or the equivalent. And remember, there is no way to
segregate before-tax and after-tax money in a regular IRA. The Roth
aside, you only have a single IRA in the eyes of the IRS for almost
all tax purposes.
So, in other words, you'll add up the total value of all your IRA
accounts (including SEP-IRAs). You'll add up the total value of all
the non-deductible contributions you ever made to any IRA accounts.
You will then divide the non-ded total by the IRA total and multiply
that by the amount transferred to the Roth, regardless of from which
IRA account the money came from.
That product will be deemed to be the amount of non-ded contributions
transferred to the Roth (and thus will incur no income tax) and the
balance of the transfer will be considered pretax contributions and
earnings (and thus will incur income tax). The non-ded amount will
also be subtracted from the total of non-ded contributions deemed to
be remaining in the regular IRAs.
Example:
IRA account A has never received any non-ded contributions and
is currently worth $10,000. IRA account B has received $8,000 of
non-ded contributions and is currently worth $10,000. Taxpayer
transfers $6,000 into a Roth:
non-ded part = $6,000 * ($8,000/$20,000) = $2,400.
taxable part = $6,000 - $2,400 = $3,600
So the taxpayer would have to pay income tax on $3,600 of the $6,000
transfer. Also, the amount of non-ded contributions left in the regular
IRAs will be reduced by $2,400. So let's say next year IRA A is worth
$15,000 and IRA B is worth $12,000. And let's say that the taxpayer
transfers $10,000 into his Roth. There are now only $8,000-$2,400=$5,600
of non-ded contributions left in the non-Roth IRAs, so the calculation
would go:
non-ded part = $10,000 * ($5,600/$27,000) = $2,074
taxable part = $10,000 - $2,074 = $7,926
Obviously, if you transfer all your IRA money into a Roth, you will
pay income tax on the amount transferred minus the total of non-ded
contributions.
Rich Carreiro
rlcarr@animato.pn.com
------------------------------
Date: Mon, 13 Oct 1997 21:07:55 -0400 (EDT)
From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: Re: Deductible IRA vs. Roth IRA
>Here, I have to disagree. You have to consider the time-weighted value of
>the initial deduction that you receive, which could amount to a lot more
>than a tax liability (at the same rate) 20 years in the future.
Which I did. In my calculation I assumed that one invested the tax
reduction one received from the deduction. That's what makes it close
to even. Without that (i.e. a non-deductible IRA), the Roth wins
handily.
Rich Carreiro
rlcarr@animato.pn.com
------------------------------
Date: Mon, 13 Oct 1997 21:09:00 -0400 (EDT)
From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: Re: Roth IRA Or Nondeductible IRA?
>It's legal now, but may not be for long. According to an article in
>the Journal last week, the IRS and Congress see a potential for abuse
[description of using a Roth to avoid the 10% penalty on an early withdrawal
from a regular IRA snipped]
It'll probably never be legal. Congress knows about it and is working
on a fix to be included in a "technical corrections" supplement to be
passed before the year ends. This loophole will probably be closed
before Roths even come into existence on 1/1/98.
Rich Carreiro
rlcarr@animato.pn.com
------------------------------
Date: Mon, 13 Oct 1997 21:09:32 -0400 (EDT)
From: Melba@interaccess.com
Subject: Parents help in financing home purchase
Hi everybody....
I'd really appreciate any advice on this situation.
My parents own a home in Michigan worth about $150K. They now live in
Florida and would like to sell it to me (I'm renting an apartment nearby).
Trouble is, I don't have the 20-percent down to buy the house outright
and avoid paying PMI insurance. I do have the income to qualify.
They have suggested that I borrow 80% percent from the bank, and they'll
finance the other 20% at current rates. This would all be put in
writing, etc.
I wonder if this is a good idea and if there are any pitfalls I need to
watch out for before entering in this kind of arrangement.
Thanks in advance!
Melba
------------------------------
Date: Mon, 13 Oct 1997 21:10:47 -0400 (EDT)
From: TaxPlanner@aol.com
Subject: Re: Where to put $50,000 (JWallace@karta.com)
When you (1) have a time horizon of 6 months to two years, and (2) are
willing to take on a little more risk and (3) are seeking higher returns than
those typically available from money market funds: Consider an ultra
short-term bond fund. The value of the principal of an ultra short-term
bond fund tends to fluctuate by a cent or two, but the interest income tends
to be higher than that afforded by money market funds.
If you prefer the relative safety of money market funds (i.e., you don't
want to risk losing any of your principal) and you are in a relatively
high income tax bracket, consider a U.S. Gov't money market fund or a
municipal money market fund.
Each of these investments can be purchased directly from certain mutual fund
companies on a no-load basis. Study the fund's prospectus and become
familiar with its management's track record before parting with your $$.
Unlike money in a bank account, none of these funds are insured by the FDIC,
But when you invest in a money market with a reputable fund company, it's
almost like "money in the bank."
Edie Silvestri
TaxPlanner@aol.com
------------------------------
Date: Mon, 13 Oct 1997 21:12:54 -0400 (EDT)
From: BOB FORD <BOB_FORD@compuserve.com>
Subject: What it Takes to be a Financial Planner
>From: Lawrence Wang <lwang@qal.berkeley.edu>
>Subject: Interested in a certified financial planner career
LARRY
I am not a financial planner. However many years ago, I thought about
becoming one. I had been a successful investor for some time and I
thought I might be good at helping others with financial planning as my
financial plan had done so well for me. I had all of the technical skills
that a financial planner needed but I DID NOT have one essential skill
that all of the successful financial planners at the time had.
That skill is SALES ABILITY. I could not successfully do cold calls
trying to get people to buy my services. Ask any person that sells a
service what their biggest problem is and I bet you will get the answer
"Most of the time I get rejected when I try to sell my service". A
successful sales person does not let that get to them. They know it is
not personal. Rejection is part of the business of selling.
GOOD LUCK
BOB FORD
BOB_FORD@COMPUSERVE.COM
------------------------------
Date: Mon, 13 Oct 1997 21:14:24 -0400 (EDT)
From: Avrum Lapin <avrum113@cyberg8t.com>
Subject: Re: Can You Separate Deductible from Nondeductible IRA Money?
I've always been under the impression that once non-deductible
money was in an IRA it was no longer seperable. When it came time to
calculate taxes on a distribution (or partial distribution) you could only
exempt a pro-rata portion of the distribution from taxes - (see form 8606).
Did the Roth IRA change that rule. (I do know that you can separate non
deductible contributions from a 401k plan before or at rollover.
Nou for my Roth IRA questions:
Do you need an earned income to establish an Roth IRA
Can you take a partial distribution from a regular IRA and create a
Roth IRA?
If you add money to your Roth IRA on an annual basis how will you
establish that the money you take out comes from money you put in over 5
years ago.
Avrum Lapin
Upland., CA
------------------------------
Date: Mon, 13 Oct 1997 21:14:54 -0400 (EDT)
From: "Mark J. Welch, Esq." <markwelch@ca-probate.com>
Subject: re: questions about life insurance beneficiary and estate tax
Helen Chang asked:
>I have these questions regarding life insurance and taxes:
>(1) What is the tax consequences for naming one's parents or siblings as
>life insurance beneficiary?
The beneficiary may owe a share of estate taxes, but unless they
paid to be named as beneficiary, the distribution of proceeds is free
from U.S. income taxes.
>(2) Once estate taxes are paid, does the beneficiary also need to pay
>income tax on top of what he/she actually receives?
No.
>(3) Is it correct that if a life insurance is purchased by someone
>other than the insured, there will be no applicable estate tax?
>Can one buy the life insurance for one's spouse, or parents to avoid
>future estate tax? (Assuming in a community property state such as Texas.)
This is correct. If the insured does not have any "incidents of ownership"
over the policy, the proceeds are distributed free of any estate tax OR
income tax.
See http://www.ca-probate.com/chap10.htm and
http://www.ca-probate.com/chap11.htm for more discussion.
- -- Mark J. Welch, Esq. (510) 462-8483 http://www.ca-probate.com/
- -- This message is NOT legal advice, and is NOT confidential.
- -- Web Site Banner Ads and Web Counters: http://www.markwelch.com/
- -- Small Office / Home Office Consumer: http://www.sohoconsumer.com/
------------------------------
Date: Mon, 13 Oct 1997 21:16:21 -0400 (EDT)
From: "Cal Lester C.L.U." <Cal_Lester@classic.msn.com>
Subject: RE: questions about life insurance beneficiary and estate tax
(Question by Mr. Chang)
Hi,
I have these questions regarding life insurance and taxes:
(1) What is the tax consequences for naming one's parents or siblings as
life insurance beneficiary?
>>>> Are you referring to Income Tax or Federal Estate Tax????
There is generally NO Income Tax liability for the Death Proceeds on the part
of a Named Beneficiary, regardless of family relationship. Death proceeds paid
to a Named Beneficiary are considered Income Tax Free.
(2) Once estate taxes are paid, does the beneficiary also need to pay
income tax on top of what he/she actually receives?
>>>> FEDERAL Estate Taxes are charged to the ESTATE of the Decedent (
may have to be paid by a beneficiary ), however they are NOT the direct
responsibility of the heirs.
(3) Is it correct that if a life insurance is purchased by someone
other than the insured, there will be no applicable estate tax?
Can one buy the life insurance for one's spouse, or parents to avoid
future estate tax? (Assuming in a community property state such as Texas.)
>>>> The policy MUST be OWNED by someone other than the INSURED in order for
it to NOT be included in his.her ESTATE. Generally speaking a policy owned on
the life of a Spouse would in all probability still be included in the ESTATE.
However a policy purchased and OWNED by ANY third party, such as a child,
would in all probability remain OUTSIDE of the ESTATE.
Cal Lester CLU
Insurance Course Coordinator
Broward Community College
------------------------------
Date: Mon, 13 Oct 1997 21:17:30 -0400 (EDT)
From: hrj@juno.com (Harold R Justice)
Subject: Re: Confusing Car Accident
This is the most confusing story I have ever heard. Let's see, there was
Ben, Frank, John and the author. Were there four cars involved? Who was
in front? At first it sounded like Frank and then it sounded like Ben.
What really happened?
Harold
------------------------------
Date: Mon, 13 Oct 1997 21:17:54 -0400 (EDT)
From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: Roth redux
Here's a brief analysis I did on a single investment into a Roth vs. a
traditional IRA.
Assumptions:
* Contribution to either is $2000.
* Current tax rate is Tn, tax rate at withdrawal time is Tf
* Pre-tax rate of return is Rp, after-tax RoR is Ra
* Contribution to regular IRA is deductible (if not, the Roth always wins).
* The reduction in taxes from the IRA deduction is invested (if it isn't,
the Roth always wins).
* Is invested for N years.
Value of Roth = $2000*(1+Rp)^N
Value of Traditional = $2000*(1+Rp)^N*(1-Tf) + $2000*Tn*(1+Ra)^N
^^^^^^^^^^^^^^^ ^^^^^^^^^^^^
final after-tax value final after-tax value
of contribution of invested tax reduction
Look for conditions such that Roth < Traditional:
$2000*(1+Rp)^N < $2000*(1+Rp)^N*(1-Tf) + $2000*Tn*(1+Ra)^N
(1+Rp)^N < (1+Rp)^N*(1-Tf) + Tn*(1+Ra)^N
(1+Rp)^N - (1-Tf)*(1+Rp)^N < Tn*(1+Ra)^N
(1+Rp)^N*(1 - 1 + Tf) < Tn*(1+Ra)^N
Tf*(1+Rp)^N < Tn*(1+Ra)^N
So,
Tf / 1 + Ra \ N
---- < | ------ |
Tn \ 1 + Rp /
is the necessary condition under the given assumptions for a
Roth to be worth less than a traditional IRA.
Rich Carreiro
rlcarr@animato.pn.com
------------------------------
Date: Mon, 13 Oct 1997 21:18:42 -0400 (EDT)
From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: Re: Splitting Rollover IRA Account Advisable?
[Disclaimer: this is my opinion, not advice. I am not a professional.]
>My question is, are there are compelling tax, legal, accounting etc.,
>pros and cons if I split the current _single_ rollover IRA account into
>_two_ such new rollover IRA accounts, upon moving the existing account
I assume by "rollover IRA" you are referring to an IRA that was funded
by money rolled in from a 401(k) or other qualified plan?
There shouldn't be any problem at all in any domain, as long as the
new account is clearly marked as being a rollover/conduit IRA. There
are no tax consequences, no legal consequences, and no real
recordkeeping consequences (other than now getting two statements
instead of one) of splitting the IRA up.
The only time there are "problems" is when a conduit IRA is mixed with
contributory IRA money. If that happens, you can never roll the money
back into a 401(k) or other qualified plan.
Rich Carreiro
rlcarr@animato.pn.com
------------------------------
Date: Mon, 13 Oct 1997 21:20:35 -0400 (EDT)
From: BOB FORD <BOB_FORD@compuserve.com>
Subject: Re: mortgage dilemma
>From: "Philip E. Clark" <engarcon@ix.netcom.com>
>Subject: Mortgage Dilemma-HELP !!
>I am in the process of going to contract on a great house that the seller
>has been rigid in the contract wording. Anyway, the mortgage company that
>will be holding my mortgage (Residential First) the mortgage agent
>appeared very helpful since I was referred to her by the parent bank's
>vice-president who is a good friend of mine. Three weeks have passed
>since the inception of the process and I have begun to contact the
>creditors that have indicated negative information on my credit report.
>The creditors have been slow to respond to my letters, therefore causing
>me to delay the meeting with the mortgage agent. My questions is, if I am
>getting the feeling that my credit situation is causing the agent to be
>less than cooperative (friendly, concerned) should I go elsewhere?. The
>agent has become assertive by saying you've gotta get those
>letters...What can I do to make these creditors respond?..I've written
>and I've called and got no where. I am lost in this whole process and
>need to deal with someone that can help me understand the requirements
>and what it takes to correct them so the underwriting process goes
>smoothly.
>The agent was nice and not so,lately.I am applying for a FHA
>mortgage and if I had the choice will pay a higher interest rate and
>increase my down payment in order to push this process through. If this
>agent causes a delay in the contract and/or closing I will never forgive
>myself for not reacting sooner. Can anyone advise that has gone through
>this stomach turning process and felt close to losing their house ?
>Thanks to all
>Phil
PHIL
I am sorry to be the one to have to tell you this but you made a
fundamental mistake when you offered to buy a house. You should ALWAYS
get your mortgage approved BEFORE you make an offer on a house.
If you don't have a mortgage approved before you make an offer on a house,
you are at the mercy of many people including your creditors. If you have
negative information in your credit report that is in error, your
creditors must remove it.
However, they will always be slow in doing so. They do not like to admit
they made a mistake by putting it in there in the first place. If the
negative information is not in error, they will not remove it no matter
how many letters you write to them.
There is just not much you can do to speed the process along. If you have a
lot of negative information in your credit report, ask you mortgage agent
about B and C paper. These are loans designed for people with negative
information in their credit reports. Expect to pay a higher interest rate
and get a shorter term mortgage. Or you might try for a NO DOCUMENTATION
MORTGAGE. In this type of mortgage, you do not have to submit all of the
normal forms and credit is not checked as much. Again, expect to pay
higher interest rates.
It is in the mortgage agents own best interest to see that you get a
mortgage approved. They work on commission. No mortgage for you , no pay
check.
GOOD LUCK
BOB FORD
BOB_FORD@COMPUSERVE.COM
------------------------------
Date: Mon, 13 Oct 1997 21:21:14 -0400 (EDT)
From: Don Apodaca <dapodaca@flash.net>
Subject: Speed Reading?
I just watched an infommercial with Kevin Tredeau and Howard Berg. The
were selling Howard Berg's Mega Speed Reading System for $60 with an
unconditional guarantee. I almost picked up the phone, but I thought I
would write this group first to see if anyone has any experience with this
product, or others like it. Any and all help would be most appreciated.
Feel free to respond privately if you wish: dapodaca@flash.net Thanks,
Don in DFW
------------------------------
Date: Mon, 13 Oct 1997 21:22:15 -0400 (EDT)
From: JONESW@CCSUA.CTSTATEU.EDU
Subject: Roth IRA vs deductible IRA
Andrea offered a comparison between deductible and Roth IRAs that was like
comparing apples to oranges. Whenever I look at possible investments, I look at
how much it will cost me out-of-pocket and how much I get back. If I buy a bond
with a $2000 face value for only $1800 (because interest rates have risen), I
don't treat it as an investment of $2000, only of $1800.
Look at the example she had with 28% federal tax at deposit and also at
withdrawal. When I establish a deductible IRA with face value $2000, it only
costs me $1440; I get the $560 federal tax back when I buy it, or even before
(by having less withheld from my paycheck, or subtracting it from my quarterly
estimated tax, before I send the $2000 in). So I compare it with a Roth IRA
that costs me the same amount, namely, $1440.
Under the conditions she described, a 10% return for 10 years, the $1440 Roth
IRA grows to $3735. The $2000 face value deductible IRA grows to $5187 and 28%
taxes are owed on it, leaving $3735. The two are exactly equal in value. It is
true that one can make an effectively larger contribution to a Roth IRA than a
deductible IRA; but for the money that is actually put in an IRA, the $1440 in
this case, the have the same net outcome.
HOWEVER: That leaves out state income taxes. I live in Connecticut, which has
an 8% marginal tax rate on income over $50,000. So the deductible IRA only
costs me $1280 out-of-pocket. The $2000 in the deductible still grows to $5187,
and I pay 36% federal+state tax on it, leaving $3320. Putting that $1280 in a
Roth IRA would also grow to $3320; but then the state income tax on the $2040
of earnings reduces it by another $163, so the Roth IRA comes out even worse.
Earnings in a Roth IRA are free of federal income tax, but as far as I know,
no state has yet passed a law making them free of their state income tax.
But leaving aside state income tax, 90% of retired people are at the 15% tax
rate, so it is reasonable to project that the majority of people at the 28% tax
rate while working will be at the 15% tax rate after retirement. Those people
come out much better with a deductible IRA. In the example first cited, the
Roth IRA leaves them with $3735, but the deductible IRA leaves them with 85% of
$5187, which is $4409.
Steve Foulks said in effect that, if I have $18,000 in a deductible IRA with
one company and $2,000 in a nondeductible IRA with a different company (with a
cost basis if $1,000), and I convert the $2,000 to a Roth IRA, I cannot omit
the entire $1,000 from the taxable part, just a pro-rata amount of $100. I have
not been able to find a clarification of that in the official legislation, so I
would like to have a reference for that fact that I can check for myself.
Bill Jones
------------------------------
Date: Mon, 13 Oct 1997 21:23:16 -0400 (EDT)
From: dmak@tma-net.org
Subject: GE Interest Plus Gripe!
My one gripe about GE Interest Plus (and I'd like to know if others
have the same problem): deposits mailed (from Maryland) to heir P.O.
Box in Chicago have taken between 1-2 weeks to get credited to my
account. I complained to GE about this, but they blame it solely on
slow U.S. Mail to Chicago. Is U.S. mail to Chicago really to blame??
------------------------------
Date: Mon, 13 Oct 1997 21:23:39 -0400 (EDT)
From: dmak@tma-net.org
Subject: Re: Wade Cook
Personally, I was shocked when I first heard Wade Cook on a local
business radio station - that the radio station would agree to air
such overly inflated claims without any meaningful caveats. Although
I have not attended a seminar, I've read through his stock market
books. His claims may be true, BUT remember: past performance is NO
guarantee of future results. It may work for you; it may not. Most
likely, it won't work as well as Wade makes it sound!
------------------------------
Date: Mon, 13 Oct 1997 21:24:03 -0400 (EDT)
From: dmak@tma-net.org
Subject: Re:Travelocity Horror Story
Before attempting to go to small claims court, I'd suggest that you
put your complaint in writing to Travelocity (in a stern but polite
letter). I manytimes find that talking to someone on the phone goes
nowhere, but letters have some mystical aura that gets better
results!
You may also want to send a similar letter to Delta.
------------------------------
Date: Mon, 13 Oct 1997 21:24:43 -0400 (EDT)
From: Ken Stone <krstone@mindspring.com>
Subject: Re: nursing homes - Anyone Really want To Live In Them?
> > I was wondering if anyone has advice on the pro/cons of Nursing Home
> >insurance? My mother (78) is considering such and has asked me to look into
> >it for her.
>
> You may want to first see if there is any nursing home in
> which your mother is willing to live. My parents have specificly told
> me that they would rather die at home than live in a nursing home
> because the conditions in many of them are terrible. Your situation
> may be different, of course.
As a health care professional, I can tell you that this can result in very
unpleasant and unforeseen consequences. Some folks who survive a stroke, or
who are in terminal phases of cancer or some other fatal illness, can
develop mental and physical disabilities which are most objectionable. It
is very sad but I have seen this many times. Does the surviving, elderly
spouse really want to share a home with someone whose mental and
intellectual faculties do not allow them to recognize loved ones? Whose
bowel and bladder control are lost? Some even behave like a raving
two-year-old. I could go on but I will stop here.
This is not to defend nursing homes, whose poor reputation is sometimes
well deserved. Rather, you should realize that nursing home care may
actually represent the best solution for some individuals. Spend the 'good
years' researching for an acceptable institution should the unfortunate
need for one someday arise.
Ken
------------------------------
End of persfin-digest V4 #92
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