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Subject: persfin-digest V4 #93
Date: Wed, 15 Oct 1997 21:17:09 -0400 (EDT)
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persfin-digest Wednesday, October 15 1997 Volume 04 : Number 093
IN THIS ISSUE:
ADVERTISEMENT: MCI CONNECT FOR CC:MAIL
re: Rich Carreiro's IRA Calculations
Re: Education IRAs - Not Crazy About It
RE: Parents help in financing home purchase
Re: Can You Separate Deductible from Nondeductible IRA Money?
Re: Zero Coupons -- sell off early maturity or late maturity?
Barry Kaye Plans?
Re: Car Accident
Can I do a 401K and a Roth IRA?
Roth IRA comparisons - Roth is Better than NonDeductible IRA
Re: GE Interest Plus Gripe!
Forgot Form 8606 But Made Nondeductible IRA Contributions
Re; Parents helping finance house purchase - DO IT!
: RE: Interested in a certified financial planner career
Zero coupon bonds - which to sell (riker@worldweb.net)
Re: Speed Reading?
Re: Parents help in financing home purchase
Parents help in financing home purchase - Pitfalls
Consulting question - 1099 or W-2?
re: zero coupon bonds
re: parents help in financing home purchase
starting a home health care business
Re: Roth IRA vs deductible IRARe:
Re: Zero Coupons -- sell off early maturity or late maturity?
tuition and IRA
Working in The Netherlands
Subdividing alternative
Rental Property Forumlas Needed
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------------------------------
Date: Wed, 15 Oct 1997 20:33:24 -0400 (EDT)
From: knightp@dg-rtp.dg.com (Philip Knight)
Subject: re: Rich Carreiro's IRA Calculations
>
> I've performed some pretty simple spreadsheet calculations with
> Excel. Using the same tax rates applied to both the Traditional
> and Roth IRA, they do not have "exactly the same value after all
> taxes are paid". In fact, no matter what tax bracket, comparison
> period, rate of return, etc. I plug in, the Roth comes out ahead
> when all things are created equal.
>
>
> ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
>
> Traditional Roth IRA
>
> Amount Invested $2,000 $2,000
>
> Tax Bracket 28.00% 28.00%
> Capital Gains Bracket 20.00% 20.00%
> Comparison Period 10 10
> Annual Rate of Return 10.00% 10.00%
>
> Future Value
> after 10 years $5,187.48 $5,187.48
> FV after taxes $3,734.99 $5,187.48
>
> Amount of Tax Savings $560 $0
> FV of tax savings $1,452.50 $0.00
>
> FV after taxes
> of tax savings $1,162.00 $0.00
>
> Total Return on
> Investment $4,897 $5,187
>
> ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Unfortunately, this example doesn't present an accurate picture because
you forgot to take into account that the Roth IRA contribution is not
tax-deductible. In order to contribute 2000 to the Roth IRA, you will
need $2778 ($2778 * 28% tax = 778, which leaves $2000 to be invested).
Or another way to look at it: If you use $2000 for a traditional IRA,
you get to invest the whole contribution today. If you invest it in
a Roth IRA, you get to invest only 72% of that contribution ($1440), the
remaining $560 is paid in taxes.
Despite that, however, the Roth IRA still comes out quite a bit ahead with
all other things being equal (don't have the exact numbers, but I went
through this recently with my financial planner).
Here's another additional advantage my financial planner pointed out to me:
One fact that many people are not aware of is that 401K and traditional IRA
accounts are not treated in the same way as other assets on an estate.
According to my CFP, there are potentially different types of taxes on
inherited 401K and IRA accounts:
1) Regular income taxes. Heirs who inherit your 401K or IRA account have
to pay taxes on that money as though it were all personal income in
the year in which they inherited it, which means they can potentially
be kicked into an extremely high tax bracket for that year.
2) "Excess accumulation tax." This must be paid if the account value is
over over a certain amount. (Can't remember the amount.)
3) If I remember correctly, the third tax he mentioned was regular estate
tax.
[I can't remember in which order the three types of taxes are applied. Also,
I'm not sure which, if any, of these taxes are state-specific (I live in North
Carolina.) Perhaps someone out there can provide additional information.]
The CFP mentioned that he has some clients where in the event of their death,
their heirs would only receive around 20% of the money from their retirement
accounts--the rest would be have to be paid out in taxes!
According to him, the Roth IRA (currently :-) is different and is simply
lumped in with the rest of the assets of an estate for the purpose of taxes.
Of course, as was pointed out in another post, the government can always
change the laws, so nothing's guaranteed.
Based on what I've learned, I'm planning to start dividing my retirement
contributions between 401K and the Roth IRA.
+-----------------------------------+--------------------------------------+
| Philip Knight, Data General Corp. | knightp@dg-rtp.dg.com (919) 248-5982 |
+-----------------------------------+--------------------------------------+
------------------------------
Date: Wed, 15 Oct 1997 20:46:30 -0400 (EDT)
From: Hope Feinglass <hfeinglass@earthlink.net>
Subject: Re: Education IRAs - Not Crazy About It
>From: "Wiedwald, Dave" <wiedwd@WHQPOS3A.DAYTONOH.ncr.com>
>>As most of you know, saving in the kids' names adversely impacts the
>>financial aid process. If a parent is aware of this and still wants to
>>save in a child's name, I would generally recommend an UGMA or an UTMA
>>before an Education IRA. Here's why:
>>2. In spite of the "kiddie tax" rules, a child under age 14 can still
>>have up to $1300 per year of income at no/low rates (650 is taxfree, next
>>650 is taxed at 15%). If a parent only sets aside $500 per year, the
>>child will be over 14 before that pool of money is generating 1300 per
>>year of income.
>>3. Similarly, in an UGMA/UTMA, a parent can set aside more than $500, if
>>they want to. At a 10% earning rate, a child can accumulate 13,000 of
>>assets in his/her name (1300 divided by .10) before the income is taxed
>>at the parent's higher rate.
>>4. UGMA/UTMA assets are more flexible--they just need to be used for the
>>child's benefit. That means a new computer or summer camp, if needed.
>>The Education IRA proceeds, on the other hand, must be used strictly for
>>higher education costs.
>I was under the assumption, this wasn't an either or situation. Why
>would it not be in the best interest of the parent to annually fund $500
>into the child's Education IRA and where necessary supplement with gifts
>to the child via UGMA/UTMA?
I see where my points could be taken as an either/or. You are absolutely
correct--you can do both.
My point was to simply compare some features of these two investment
vehicles, and if a parent had only a limited amount of funds to invest,
that the Education IRA isn't necessarily the way to go. (Although, it is
important to understand that some of the education tax credits could be
in jeopardy if the Education IRA is used--that's not an issue with a
custodial account.)
Comparing the pros and cons of this choice, like any other, is crucial
*before* decisions are made.
Sometimes we see people taking an action, simply because they are
*allowed to*. The classic example of this is rolling a former employer's
401(k) plan into their new employer's plan, because they are allowed to,
when, in many cases, rolling it into an IRA may be more beneficial. It
seems like the education IRA has that potential, too.
Hope Feinglass, CPA, CFP
Money Minds
http://www.money-minds.com
------------------------------
Date: Wed, 15 Oct 1997 20:47:05 -0400 (EDT)
From: "Schafer, Rick" <schaferr@eng1.otis.com>
Subject: RE: Parents help in financing home purchase
This is my opinion...
The banks may not give you a loan knowing that you are financing 100% of
the purchase, 20% from your parents & 80% from them. I can think of a
couple of options.
1. If your parents don't need REALLY need the $150k in cash, ask them to
lend you the entire purchase price & pay them back at BELOW current
rates. The interest difference will be considered a gift by the IRS.
If it amounts to more than $10k/yr, they must file a gift tax statement.
2. Ask your parents to let you finance the downpayment over a period of
time. If they'll give you a 15 yr loan with a balloon payment at 6
years, you'll have given them approximately 30% of the purchase price by
the time the balloon is due. At that time, any bank should lend you the
remaining $100k since you will have 33% equity (assuming property value
reemains the same). If the 15 yr rate is too large a monthly payment, a
similar scenario can be worked out for 30yrs (tho' it'll take longer).
Good luck,
Rick Schafer
------------------------------
Date: Wed, 15 Oct 1997 20:48:00 -0400 (EDT)
From: Rich Carreiro <rlcarr@animato.pn.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
Correct. And the inseparability is across all IRA accounts, not
just the one the contribution was made 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
Yes and no. Since there are no taxes on Roth distributions once
the qualifications are met, it is a moot point. However, it appears
that rollovers into a Roth from a traditional IRA will be calculated
the same way as a distribution from a traditional IRA.
> Do you need an earned income to establish an Roth IRA
Yes, except that you can also convert some or all of an existing IRA
account(s) into a Roth, subject to an income cap, even if you have
no earned income.
> Can you take a partial distribution from a regular IRA and create a
>Roth IRA?
In general, yes. However, if your AGI is $100K single or married
jointly ($0 married separately) then you are barred from doing this.
> 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.
That is a very good question. Stay tuned to the upcoming "technical
corrections" law and IRS regulations for the answer...
Rich Carreiro
rlcarr@animato.pn.com
------------------------------
Date: Wed, 15 Oct 1997 20:50:59 -0400 (EDT)
From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: Re: Zero Coupons -- sell off early maturity or late maturity?
>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
That makes some amount of sense. Their yield from this point in time
to maturity will be less (possibly significantly) than the zeros with
a lot of time left on the clock.
>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.
On the other hand, you might have to wait a long time for any "value
to accrue" on those bonds. The only guaranteed thing about zeros is
that they will pay face value at maturity. All bets are off before
then. If interest rates were to spike up, your mother will take a
huge bath on those long-term zeros (though of course she'll get it all
back if she holds to maturity). For example, a $10,000 zero maturing
in 25 years would be worth around $2,170 today (assuming a 6.3% rate).
If rates were to rise to 7.3%, the zero would drop in value to $1.718
giving a 21% loss.
Long-term zeros are hardly stable. With the possible exception of
junk bonds, they are the most volatile kind of bond there is. Just
because something is a "fixed-income instrument" doesn't mean that it
can't cause you lots of sleepless nights before it matures.
>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.
He's definitely right that the longer-term ones have more volatility.
As for what's the right thing to do, it depends :-). See what the
yield to maturity for the zeros is as of right now. Your money is
guaranteed if you hold to maturity. Keep in mind that wild swings
could happen in the interim. Now make an *honest* assessment of how
you think you'll do in equities. Keep in mind that there are no
guarantees there, either in the interim or at the end. All that
coupled with your mother's risk tolerance can hopefully lead you
towards a decision on which (if any) of the bonds to sell to raise
cash for equity purchases.
Rich Carreiro
rlcarr@animato.pn.com
(Editor's Comment - Interest rates have fallen recently, resulting in
significant gains for long term zeros. If you think interest rates will
rise, why not cash in the long term zeros and invest in 6-10 year Treasury
bonds? You'll lock in a gain and get a regular interest stream. This
will protect you from loss of the gain if interest rates rise. -IK)
------------------------------
Date: Wed, 15 Oct 1997 20:51:48 -0400 (EDT)
From: Avrum Lapin <avrum113@cyberg8t.com>
Subject: Barry Kaye Plans?
Barry Kaye has a nationally advertised insurance plan which somehow
"creates unusual wealth" for high networth individuals with wording which
suggests that his plan is somehow unique.
His latest full page ads aimed at individuals with net-worths of >$2M (not
me) somehow strains credibility. Some of his claims include Tripling your
net estate, Increasing the $10K tax free gift to $1M, Buying life insurance
paying nothing now and when you die and Selling appreciated property
without capital gains taxes.
I wonder whether he is selling seminars ($500 to insurance professionals)
and videos ($72) or whether he has some new idea.
>From the ads it appears that that the plan only works if your net worth
exceeds the estate deductable ($600K now increasing to $1M) or whether it
has some real value to with individuals with lower net-worth.
Looking for some comments
Avrum Lapin
Upland., CA
(Editor's Comment - Sounds like an extraordinary wealth building
opportunity for Barry Kaye. -IK)
------------------------------
Date: Wed, 15 Oct 1997 20:52:22 -0400 (EDT)
From: dmak@tma-net.org
Subject: Re: Car Accident
I got confused reading your story - who is John (and did you really
mean Ben)??
Anyway, my wife got into an accident where the car in front was
stopped trying to make an illegal left turn. My wife stopped and the
car behind hit her, driving her car into the car in front. In the
end, my wife was responsible for her car's damage, despite the
illegal left turn and getting hit from behind - go figure!
------------------------------
Date: Wed, 15 Oct 1997 20:53:14 -0400 (EDT)
From: tgreaves@notes.primeco.com
Subject: Can I do a 401K and a Roth IRA?
I've read a lot of information about the Roth IRA, but have not seen anyone
address whether I can max out a 401K and do a $2,000 Roth IRA in the same
year. Anyone know?
Tom Greaves
------------------------------
Date: Wed, 15 Oct 1997 20:54:55 -0400 (EDT)
From: Shankarprasad.Venkoba-Rao@Eng.Sun.COM (Shankar Prasad)
Subject: Roth IRA comparisons - Roth is Better than NonDeductible IRA
There has been a lot of discussion about comparing deductible IRAs vs.
Roth IRAs. In all cases, non-ded IRAs are worse than Roth, so if you
cannot get a deductible, go with a Roth is a no-brainer decision. The
decision on deductible vs Roth is not all that straightforward. In the
first case, almost every analysis I see takes the tax savings from the
deductible and invests it in a regular taxable account. I don't think
that that is correct. Now you are winding up comparing on one side
(ded. IRA + regular taxable a/c) vs Roth on the other side. Instead,
as someone else has pointed out, consider the out-of-pocket investment
cost, i.e. an investment of $A in deductible is the same as an investment
of $A(1-Tp) in a Roth (where Tp is your current federal+state tax rate).
For simplicity, let us also assume that the Roth IRA is tax-free for state
purposes, just like it is for federal.
Now the deductible IRA grows to A(1 + r)**N. (r is the return, N number
of years)
The Roth grows to A(1-Tp)(1+r)**N.
When making withdrawals from the deductible IRA, tax is to be paid. Everyone
seems to assume that, at the time of withdrawal, the tax will be the Tp. This
is uncertain. Let us not worry about what happens to TAX RATES in the future
- - that is quite unpredictable, and the rates may increase or decrease. Instead,
let us assume that the same current (inflation-adjusted) rates and brackets
exist. Now, when making withdrawals at the time of retirement, (assuming
the retiree has the oft-recommended 70-80% of regular income), the effective
tax rate will be lower than the marginal tax rate (Tp), due to the standard
deduction, personal exemptions, (maybe some tax credit), and part of the income
is taxed at lower brackets. So, in this case, the ded. IRA will come out
better because the tax applied to it will be lower than Tp. Then, the
variables about future states comes in. If you are currently in a high-tax
state (like me in CA), it looks like the state rate can only decrease by moving
to a low-tax or no-tax state. Again, in this case, the ded. IRA wins. On the
other hand, if you are currently in a low/no-tax state and move to one with
higher rates, then the Roth MIGHT be better.
Let me illustrate this with an example. Let us say that the tax payer is
currently in 28% Fed + 9.3% CA bracket. (Tp = 0.373) Let us say, that
at retirement he has $500K in ded. IRA. If he had chosen Roth IRA all the
way, the current value would be 500K (1-Tp) = 313.5K. Assumptions:
a. he withdraws 8% of the IRAs value for his expenses
b. he continues to live in CA and has to pay CA tax (this favours the Roth)
c. he does not have significant other income (if he has other income, there
is not much reason to make large IRA withdrawals)
d. Fed & CA tax assumes non-inflated 1997 Single rates and brackets and
standard deduction and one exemption. The ded. IRA will be even more
favourable if you assume inflation-adjusted rates or M-F-J rates.
Ded. IRA Roth IRA
Value 500K 313.5K
Annual Income 8% 40K 25.08K
Fed. Tax 6.1K -
CA. Tax 1.9K -
After-tax income 32K 25.08K
Things work out even better for the Ded. IRA if we assume that the
after-retirement-state has lower taxes than the before-retirement-state.
This result is not surprising. If you have only tax-free income at
retirement (which you have already "paid-for" by a non-deductible Roth)
then you are not making use of the standard deduction/exemptions and the
lower-rate tiers during your retirement years. So, you must try to have
enough taxable income to "soak up" the standard deduction / exemptions
and the lower brackets. Beyond that amount, it might be better to go
with a Roth IRA.
There is also another issue with regard to withdrawals. Let us say that,
for some reason, you need to make a withdrawal which is liable to penalty
(and in case of ded or Roth, it is also taxable). Now, in this case, you
will be better off with the deductible, because you have already got your
tax break. Just run the numbers. And then, there are withdrawals (like
for higher-education expenses) which are penalty-free but are still taxable
for both Roth or ded. Again, in this case, in the ded. IRA you got both
ded. + tax-deferred growth, whereas with the Roth, you got just tax-def.
growth (exactly like a non-ded. IRA). The Roth has a small break for
withdrawals (counting that the contributions are withdrawn first, tax-free)
but other than that, the taxes for non-qualified Roth withdrawals are higher.
Finally, there is a psychological issue. The Roth is tax-free today. Can
we be certain that it will remain tax-free until our retirment 30 years
or so hence ? Future congresses may try to get some tax money out of the
Roth withdrawals. The Roth's tax-benefit is in the future, we have not yet
taken advantage of it, it might be taken away easily. On the other hand,
with the ded. IRA, we already have the tax-benefit in hand (i.e. deduction).
Congress is already taxing IRA withdrawals. It would take a pretty bad
situation for Congress to tax ded.IRA withdrawals at a significantly higher
rate than regular income. On the other hand, it would be quite palatable
politically to tack on a 5% or 10% "excise" tax or "excess" tax or some such
thing to Roth withdrawals.
Given all of these factors, I don't think that the ded. vs Roth issue is a
no-brainer decision. In my personal case, I cannot get a ded. IRA, so I
am going to start a Roth (Roth is never worse than a non-ded. IRA). On the
other hand, my wife would be eligible for a ded. IRA (in 1998) and we are
going to start a ded. IRA for her. So, it looks like I would wind up with
a foot in both camps!
One significant benefit of the Roth is that the limit is effectively
higher. The 2000 after-tax limit on a Roth works out to about 2777 (3225
in CA) in a ded. IRA (which is, of course, not permitted). This does
indeed have some impact if you are trying to max out retirement savings.
I really wish that the 2000 limit on an IRA would be raised. That limit
is too small and has not even been adjusted for inflation in a long time,
I believe. Will 2000/year for 30 years at 10% give enough money to
retire on ? I don't think so.
- --
Regards
Shankar Prasad
------------------------------
Date: Wed, 15 Oct 1997 20:55:17 -0400 (EDT)
From: David Martin <dmartin@seabreeze.hc.ti.com>
Subject: Re: GE Interest Plus Gripe!
> 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??
Chicago is notorious for having slow mail delivery. I don't
know if this is actually the cause of the GE delays, but it is
possible.
-David Martin
------------------------------
Date: Wed, 15 Oct 1997 20:56:24 -0400 (EDT)
From: Elizabeth Kennard <kennard.3@osu.edu>
Subject: Forgot Form 8606 But Made Nondeductible IRA Contributions
hello persfiners
In 1991 and 1992 (in less self-educated times) I made non-deductible
contributions to an IRA. I did this for 2 years without filing form 8606
with my taxes.Then I realized the error and began filing form 8606 in
subsequent years. Still being uneducated I queried my accountant about
ammending my past tax returns to include form 8606. He thought this was
'not worth the trouble and possible penalties". I took his advice. (Ok Ok
Ok now don't waste everyone's time lambasting me on that one)
What are thoughts about my current situation? I'd like to switch the
money to Roth IRA but I'll be paying taxes on contributions which were
made with after tax money. Since there aren't any 8606s I'll always have
this problem. Having said that, am I better off dealing with this now or
30 years from now? (am only 37 years old)
Elizabeth A. Kennard, M.D.
Assistant Professor
Ohio State University
------------------------------
Date: Wed, 15 Oct 1997 20:57:15 -0400 (EDT)
From: Christy Rohrig <cr1q@rocketmail.com>
Subject: Re; Parents helping finance house purchase - DO IT!
I have done this type of thing successfully before. You probably want
to look around at what lenders require. I leveraged very heavily to
afford my house in California and to avoid PMI with a second mortgage
being held, the company would only finance 75% vs. the normal 80%
without PMI. For me this wasn't a problem since the seller was
willing to carry a larger loan.
As for borrowing from your parents. They may be willing to "gift" you
$20k/year. My parents have done this twice. The first time, I agreed
to pay 8%/year and this time I'm paying 8.5%. They wrote a gift
letter for the lender and I wrote them a promissary note.
I would however recommend paying off your parents ASAP! I hate owing
my parents money. If you think interest rates will stay about the
same and that your house value will increase, you may want to get a
ARM and then refinance in a year or two. I happen to be paranoid
about rate increases and always get fixed rate loans. When I bought
my first house, it was at 8.5%. About 18 months later rates were down
to 6.5% for a 15 year loan so I refinanced and the appraisal of my
home value was up enough that I could pay off my parents.
I'm on my second home and this time I borrowed from my parents knowing
that I can pay them off in 4 years. I like to send larger than
expected payments and get out from debt early. (If I sell my first
house, they'll get paid off very soon.)
Best of luck in what ever you choose to do!
- -Christy
------------------------------
Date: Wed, 15 Oct 1997 20:58:46 -0400 (EDT)
From: "David W. Vaughan" <david_vaughan@ibm.net>
Subject: : RE: Interested in a certified financial planner career
>From: Jeff Morgan <Morgajs@parsec.com>
>Subject: RE: Interested in a certified financial planner career
>College For Financial Planning
>(National Endowment for Financial Education)
>4695 S. Monaco St.
>Denver, CO 80237
>(303) 220-1200
What is the relationship of the College to the National Endowment?
>They offer a CFP curriculum via both onsite courses and self-study
I think I read somewhere recently that the CFP training had been
sold to the University of Phoenix, which is apparently a for-profit
university which is a pioneer in offering online education. Do you know
what is the actual situation here?
TIA!
------------------------------
Date: Wed, 15 Oct 1997 21:01:34 -0400 (EDT)
From: NEGross@aol.com
Subject: Zero coupon bonds - which to sell (riker@worldweb.net)
The appropriate zeros to sell depend on answers to several questions: 1)
what cap. gains or losses might be realized through the sale of different
maturities (if these monies are in a taxable account), 2) what are your
Mom's other investments, 3) if you sell the long-term bonds, what will you do
with the money when the near-term bonds mature.
The broker is referring (I can only assume) to the fact that the price
(market value) of long-term bonds is more sensitive to interest rate changes
and would drop more, in percentage terms, if interest rates should rise than
shorter-term bonds. This is true, but not relevant if the bonds are held to
maturity (again, your Moms investment goals and income needs are critical
here).
Feel free to e-mail me directly with more details if you want to discuss this
further.
(Editor's Comment - If interest rates rise, you lose a capital gain. It's
just like a stock price decrease. Why are capital gains from bonds
differnt from capital gains from stocks? -IK)
------------------------------
Date: Wed, 15 Oct 1997 21:03:25 -0400 (EDT)
From: Ricky_Hatch@notes.pw.com
Subject: Re: 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
>>> Speed reading is primarily a mind set. You can implement your own speed
reading program immediately. By using the simple tips below, I was able to
nearly double my speed.
First, use your finger or a pencil as a guide for your eyes to follow. The
eyes naturally follow movement better than scanning across a fixed line of
typed text. Next, you need something to set the pace for each line. One
package I looked at used the sound of ocean waves. I'm guessing a metronome
would be equally effective. You should reach the end of the line with your
finger and eyes for each click of the metronome. As you get more practiced at
this, you can increase the speed of the metronome. Eventually, when you are at
a comfortable speed, you can turn off the pace-setter and keep the pace up
yourself.
Try this on a fairly short and non-technical book (up to 200 pages) to start
with. Every few pages, increase the speed. You'll be amazed at how quickly
you finish the book. Check what your comprehension level is and adjust the
speed accordingly.
Speed reading is great for documents where a thourough understanding is not
necessary. If you need to know ALL the details of a particular document, you
should slow way down. But for reading novels, newpapser, magazines, etc.,
speed reading can save you a lot of time.
Ricky
La Verne, CA
------------------------------
Date: Wed, 15 Oct 1997 21:04:21 -0400 (EDT)
From: Ricky_Hatch@notes.pw.com
Subject: Re: Parents help in financing home purchase
>>> A friend of mine obtained a first mortgage for about 80% of the home he
bought, he also simultaneously took out a second mortgage, which he used to
meet the 20% requirement to eliminate the need for PMI insurance. I don't know
how he did it and and don't know anything about how legal something like that
is, but it might be another option for you.
Ricky
La Verne, CA
------------------------------
Date: Wed, 15 Oct 1997 21:04:57 -0400 (EDT)
From: NEGross@aol.com
Subject: Parents help in financing home purchase - Pitfalls
Potential pitfalls: 1) The bank will insist on reviewing the loan agreement
with your parents (eg to ensure that it is subordinate to your mortgage with
them); 2) you may still not get the best rate due to 0% equity; 3) your
parents will have to calculate and recognize taxable interest income each
year, which is not difficult but is a bother; and 4) you will owe your
parents a substantial amount of money - that can be very difficult
emotionally in some cases, particularly if either party falls on difficult
financial times.
Do your parents need the cash out of their home in Michigan?
If not, you may want to consider one of the following: 1) rent the apartment
from your parents until you have saved enough for the downpayment; 2) have
your parents finance the entire purchase for you (pay P+I to them monthly,
and then "refinance" through a conventional mortgage when you have the
downpayment)
Other possibilities:
1) Your parents can "gift" $20,000 to you ($10,000 each) with no tax
consequences (or more, with the excess being a gift that must be reported but
will not require a tax payment). If there is excellent trust in your
relationship, they can sign forms for the bank stating that the money is a
gift (eg no obligation on your part to repay) and the bank will look more
favorably on your application - you can always have a separate, non-binding
understanding with your parents as to a repayment schedule
2) NOT A FAVORITE OF MINE - you may be able to borrow from your retirement
plan balance at work (if you have one); you then "repay" yourself with
interest
Finally, you can always pay the PMI insurance and pay as much extra for
additional equity as you can afford. You may wish to consider a variable
rate mortgage (or one that is fixed for 3, 5, or 7 years) to get the lowest
P+I payment - this will increase the amount of additional principal you can
pay each month. As soon as your total equity equals 20%, you can insist
that the private mortgage insurance be dropped. ALSO REMEMBER THAT IF THE
HOME APPRECIATES IN VALUE, YOUR EQUITY % INCREASES. If home values increase
in the next couple of years, it might be worth the cost of an appraisal to
see how close to 20% you are.
Neil Grossman, CFP
indfin@aol.com
------------------------------
Date: Wed, 15 Oct 1997 21:05:35 -0400 (EDT)
From: garg@IMPACT.xerox.com (Sanjiv Garg)
Subject: Consulting question - 1099 or W-2?
I'm going to leave my full time job and
start consulting soon. A consulting agency
which I am working with asked me if I want
to be a W2 or 1099 consultant.
Does anyone have any experience with this and
can note the pros and cons of each type.
The agency seems to be pushing the W2 type.
They indicated that the per hour payrate would
be the same for both.
Sanjiv
------------------------------
Date: Wed, 15 Oct 1997 21:07:08 -0400 (EDT)
From: BOB FORD <BOB_FORD@compuserve.com>
Subject: re: zero coupon bonds
STEVE
I am not a bond professional. I just invest in bonds.
In terms of yield you will get if you sell zero coupon bonds, if the bonds
are near maturity, you will get approximately the initial yield of the
bond when it was issued if you bought it when it was issued. Unless you
need the money now, why not just let the bonds mature and save the sales
commission.
Long term zero coupon bonds will give you the initial yield when they
mature assuming you bought the bonds when they were issued. However you
have an opportunity to make more than that yield if bond prices go up
(interest rates go down). If you have to sell these bonds before
maturity, you could also get a low rate of return if bonds prices go down
(interest rates go up).
The basic problem with zero coupon bonds is you must pay income tax on the
"INTEREST" each year even when you do not receive it unless you buy some
tax sheltered zero coupon bonds.
There is always a question you must ask if your broker makes a
recommendation. That is "Will the broker make more money if I follow
his/her recommendation?".
If the answer is yes, be careful.
BOB FORD
BOB_FORD@COMPUSERVE.COM
Conscripted editor of the 57-56-55 CHEVY list
------------------------------
Date: Wed, 15 Oct 1997 21:09:00 -0400 (EDT)
From: BOB FORD <BOB_FORD@compuserve.com>
Subject: re: parents help in financing home purchase
MELBA
Financially that is an excellent way for you to buy a house.
However loaning your children money (which what is really happening) can be
a problem for both parents and children. The usual problem is what
happens when the child does not make the payments when they are due. Does
a parent foreclose on a child?
You should have this all worked out with your parents before you do the
transaction.
GOOD LUCK
BOB FORD
BOB_FORD@COMPUSERVE.COM
------------------------------
Date: Wed, 15 Oct 1997 21:09:44 -0400 (EDT)
From: Leo Beilin <leo.beilin@pobox.com>
Subject: starting a home health care business
Could any of you point me to any web sites,books,organisations,etc. that
go into some detail on how to start a home health care business ?
------------------------------
Date: Wed, 15 Oct 1997 21:11:16 -0400 (EDT)
From: "L. Chen" <am302@FreeNet.Buffalo.EDU>
Subject: Re: Roth IRA vs deductible IRARe:
>
> 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.
There are usually more than one way to look at things. One can argue that
your comparison is also "skewed".
As you mentioned yourself, the objective is usually to max out the $2000. So
Andrea compared the $2000 in Roth -- with $1440 in a deductible IRA, plus $560
in conventional investments (totalling $2000), since we are limited by law to
$2000 contributions to IRAs (deductible or Roth).
I did not review Andrea's calculations in detail. But I gathered that, in her
calculations, the advantage in Roth results from the income tax effect on the
income from the $560 of conventional investments. But that is the tax
advantage of Roth -- sheltering more income/investments from income taxes!
With respect to the State income taxes, it is too early at this point, to
assume that States will not follow the Federal changes.
Lily Chen
am302@freenet.buffalo.edu
------------------------------
Date: Wed, 15 Oct 1997 21:12:13 -0400 (EDT)
From: "L. Chen" <am302@FreeNet.Buffalo.EDU>
Subject: Re: Zero Coupons -- sell off early maturity or late maturity?
Long-Term bonds are more volatile than short-term bonds -- whenever interest
rates changes (up or down). Zeros are substantially more volatile than
non-zeros -- percentage-wise. If you have enough cash reserve to weather the
ups and downs AND plan to hold the bonds to maturity, then the volatility
doesn't really matter.
Zeros does not provide any regular CASH income. In fact, it may even cost you
in terms of CASHFLOW. If you want income stability, you should switch to
non-zero bonds which will provide CASH income.
The interest rates have been going down for the last few year. So if you
mother has bought them for a while, she should have capital gains on them. It
is irrelevant whether the bonds are anywhere near their maturity value. What
you should consider is: (1) what is the CURRENT yield-to maturity on those
bonds; and (2) what is the "expected" return on the alternative investments
you have in mind. (Don't forget the taxes on sale of bonds.)
Lily Chen
am302@freenet.buffalo.edu
------------------------------
Date: Wed, 15 Oct 1997 21:12:54 -0400 (EDT)
From: Susan Mangiero <mangiero@shu.sacredheart.edu>
Subject: tuition and IRA
Is it true that one is able to withdraw up to $10,000 from an IRA without
the 10% penalty if it's for tuition? I asked my CPA who didn't think this
was the case, i.e. that one would still have to pay the 10% penalty.
Susan M. Mangiero
------------------------------
Date: Wed, 15 Oct 1997 21:14:29 -0400 (EDT)
From: Matthew_Moller@bmgmusic.com
Subject: Working in The Netherlands
I've seen some good advice in this group and was hoping that maybe some of
you could help me plan for an extended trip. I learned very recently that
my employer will be sending me to work in The Netherlands (about 30 minutes
outside Amsterdam) for the next 6-8 months. I'm very excited about the
opportunity, and I want to prepare for it as carefully as possible. I'm
looking for advice on working in Europe for an extended period. This would
include ideas on recording my expenses so I don't lose out on any exchange
rates, keeping my personal cash flows available so I can enjoy Europe when
I'm not working, and any other tips or suggestions you may have based on
previous experiences.
Thanks,
- Matt
------------------------------
Date: Wed, 15 Oct 1997 21:15:17 -0400 (EDT)
From: krupa@hanatc.akron.oh.us
Subject: Subdividing alternative
Sam,
in respnse to the folowing comments:
Small farming communities
tend to be very conservative and xenophobic.
then the next thing to happen is that the entire
community will be overrun with Shopping Malls / Drug
Pushers / Used Car
Lots / Strip Mines / Toxic Waste Landfills / Liberal
Democrats / etc.
consider this option:
an appropriate way to profit and also benefit the
community with a development proposal such as yours in
what I imagine as a somewhat bucolic setting would be:
market your development project as an eco-friendly
project. -- if you want 3 homes on this property,
cluster them together and leave the balance in green
space. better yet, if possible, link (easement) your
green space to the local conservancy district's.
or establish 5 acre homesteads with 1 acre cores to
privatize the homes, but have the balance (4 acres per
each) tied into the local conservancy, which will be
obligated to maintain the rural atmosphere as well as
the integrity of the naturalized land.
when you think about it there is a right way / wrong way
to do everything in terms of how it relates to the
surrounding areas. Hire an architect or environmental
designer who is sympathetic to both the natural and
built environments and make it a project that is both
unique, compatible and profitable. Probably more
profitable than some of the comments you have received.
Dennis Krupa, IDSA
------------------------------
Date: Wed, 15 Oct 1997 21:15:59 -0400 (EDT)
From: Jacqueline.D.Richardson@Hitchcock.ORG (Jacqueline D. Richardson)
Subject: Rental Property Forumlas Needed
Last night I was going through the MLS computer with a real estate agent
looking for multi-families. During the course of our conversation I told him
that the buildings needed to be able to pay for themselves in 10 years. He
looked at me and asked if this was a Carlton Sheets program. I said no, I just
want to retire in 10 years and want them paid off then. He then went on to say
that he had recently been working with another person that wanted to pay them
off in 10 years, but that person was doing a Carlton Sheets program. He then
started talking about different formulas for calculating return on investment
and how long it would take to get your initial investment back, etc., etc.
Unfortunately, he didn't recall the details of the formulas.
I don't use formulas, I just collect the various income and (realistic)
expenses and figure out if the building will pay for itself in 10 years, but
now I'm curious. Would anyone familiar with the various formulas for
calculating these things mind sharing them with me? I would really appreciate
it.
Also, what is the Carlton Sheets program?
Thanks
jackie
Jacqueline.D.Richardson@Hitchcock.org
------------------------------
End of persfin-digest V4 #93
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