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Subject: persfin-digest V4 #100
Date: Sat, 8 Nov 1997 16:10:52 -0500 (EST)
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persfin-digest Saturday, November 8 1997 Volume 04 : Number 100
IN THIS ISSUE:
ADVERTISEMENT: MCI FAX REPLY SERVICE
?mortgage loan thoughts?
Re: Money Market ?
Re: Mortgage Worksheet?
Roth IRA Question
Re: Free Service to Email Stock Quotes
Re: Loan Amortization Worksheet
Re: Money Market
Re: Money Market ?
Re: Money Market ?
Re: mortgage worksheet?
Re: Convert non-deductible ira to roth?
Prepay mortgage 1, mortgage 2, or 401(k) loan (or not at all)?
re: Mortgage Prepay Calculator?
30-yr Treasury bonds for college -- NOT!
Historical data on advertising?
Re: Stock Email Quotes? / Text Listing of Stock Company Names?
Re: IRA this year?
Re: Another Roth IRA Question
Re: Roth IRA contributions
Re: Heartland High Yield Municipal Fund?
Re: Convert non-deductible ira to roth?
Wall Street Stock Simulator Game
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------------------------------
Date: Sat, 8 Nov 1997 15:18:22 -0500 (EST)
From: "Lloyd Colston" <colston@viagrafix.com>
Subject: ?mortgage loan thoughts?
Well, I have done done it.
I am getting a 125% loan on my home in order to clear the vast
majority of consumer debt. Lord willing, I will be cold turkey on
plastic.
I think my house underappraised but I can see how they reached the
figures. I know the detractors are (1) house hard to sell should I
need to do so and (2) non-deductiblity of interest over a certain
amount.
The BIG plus is that I can deduct interest on my income tax AND
slowly get out of debt (well, if I live long enough <g>).
Someone please tell me what I should do differently or tell me I am
doing great. (yes in the midst of this I am going to be able to set
aside a little for retirement (government employee with State
retirement, Social Security, and government thing that looks like a
401K while wife is also professional with a 401K and Social
Security).
Thanks.
Lloyd Colston Success comes in cans, not can'ts
Pryor, OK USA social worker, writer, editor
Member: International Small Business Consortium
KC5FM Home page http://www.viagrafix.com/colston
------------------------------
Date: Sat, 8 Nov 1997 15:18:58 -0500 (EST)
From: "L. Chen" <am302@FreeNet.Buffalo.EDU>
Subject: Re: Money Market ?
> I want to put $10,000 into a money market account. It seems like all the banks
> here in Northern VA are paying between 2%-3% interest. However one of the
> brokerages (Charles Schwab is paying 4.71% in there money market account).
> Scwab offers free check writing and no fee visa debit card with the account.
>
> The question is, does anyone know of a reason why I should use bank instead of
> Schwab?
>
> Steve Klein
I have not read your literature from Schwab; but I would guess that, at
Schwab, it is a money market MUTUAL FUND, which is different from a bank money
market account. The bank account is FDIC insured; the mutual fund is not
(although the probability of a loss is minimal). Also, Schwab may have a
money market mutual fund that invests solely in U.S. Treasurys, which will
have a slightly lower rate than the regular MM fund.
Lily Chen
am302@freenet.buffalo.edu
------------------------------
Date: Sat, 8 Nov 1997 15:19:58 -0500 (EST)
From: Chris Arp <ancalagon@sprintmail.com>
Subject: Re: Mortgage Worksheet?
Not on a Website, but Microsoft Excel 4.0 has an excellent amortization
table spreadsheet all set up in the "Examples" folder if you have that
software on your computer.
Chris
------------------------------
Date: Sat, 8 Nov 1997 15:20:44 -0500 (EST)
From: "Jackson, Anthony D." <JacksAD1@central.SSD.JHUAPL.edu>
Subject: Roth IRA Question
The question is? I have non-deductible IRA in several mutual funds.
Can you covert these IRAs to ROTH IRA without having to pay any taxes?
Or do you pay taxes on the gains? If you pay taxes on the gains only
then should I only convert the mutual funds that have low gains?
Tony
------------------------------
Date: Sat, 8 Nov 1997 15:21:32 -0500 (EST)
From: dollymadis@megsinet.net
Subject: Re: Free Service to Email Stock Quotes
>Does anyone know if there are any free services that will >automatically
>email daily stock quotes out to you?
Go to http://www.infobeat.com. You can set up a portfolio and have
results e-mailed. Tom Gilbertson
------------------------------
Date: Sat, 8 Nov 1997 15:23:38 -0500 (EST)
From: dollymadis@megsinet.net
Subject: Re: Loan Amortization Worksheet
If you have Microsoft Money in Win 95 you can do many of these
calculations. Tom Gilbertson
------------------------------
Date: Sat, 8 Nov 1997 15:24:35 -0500 (EST)
From: dmak@tma-net.org
Subject: Re: Money Market
The only advantage I see of putting money into a 2-3% bank money
market account (versus Schwab's MMMF @ 4-5%) is that the money in the
bank is FDIC insured. MMMFs are not insured and you are subject to
losing some of your capital (very slight risk, but risk
nevertheless). Personally, I would go with the higher rate and
forget about FDIC insurance!
------------------------------
Date: Sat, 8 Nov 1997 15:45:36 -0500 (EST)
From: dulnev@jhu.edu (Jason Dulnev)
Subject: Re: Money Market ?
>I want to put $10,000 into a money market account. It seems like all the
>banks here in Northern VA are paying between 2%-3% interest.
>However one of the brokerages (Charles Schwab is paying 4.71% in
>there money market account). Scwab offers free check writing and no
>fee visa debit card with the account.
>
>The question is, does anyone know of a reason why I should use bank
>instead of Schwab?
No such reason, Schwab money market isn't bad and it has no fees for
an account of this size. BUT the yield on Schwab money market fund is
very far from the best. I know of at least two better yielding money
market accounts, both with on-line banks: SFNB (www.sfnb.com) and The
Internet Bank (forgot the URL). Both pay 5.50% but SFNB pays lower
rate for balances under $25,000 (4.50% on $10,000-25,000). The
Internet Bank pays this high rate on pretty much any balance.
Jason Dulnev
dulnev@jhu.edu
(Editor's Question - SFNB is a publicly traded company. Is it a
worthwhile investment? -IK)
------------------------------
Date: Sat, 8 Nov 1997 15:49:01 -0500 (EST)
From: David Meyers <dmeyers@panix.com>
Subject: Re: Money Market ?
There is no reason to use a bank isntead of a Money Market
Fund, unless you get a CD, or a FDIC insured product.
You may want to look into other MMFs besides Schwab, though.
I personally would never get a debit card attached to any
account, especially one which has such a large amount of
my savings.
IBC publishes lots of info about MMFs, and they have
a web page listing the highest-yielding MMFs:
http://www.ibcdata.com/topper.htm
You can definately do better than Schwab's MMF that you
listed, but to do so, you probably have to deal with some
minor restrictions, like a limited number of checks
or a minimum check. Also be careful about those funds
which are enhancing their current yield by _termporarily_
waiving all or a portion of the fund's expenses.
- --D
------------------------------
Date: Sat, 8 Nov 1997 15:50:33 -0500 (EST)
From: stockr1@juno.com (Russ Stock)
Subject: Re: mortgage worksheet?
try the website : www.prismmortgage.com
it has some good features like that
(and yes, I do work for that company as a loan officer)
Russ Stock
Mortgage Banker
Stockr1@juno.com
Stockr1@aol.com
------------------------------
Date: Sat, 8 Nov 1997 15:51:19 -0500 (EST)
From: Dennis_Vik@somasf.unm.edu (Dennis Vik)
Subject: Re: Convert non-deductible ira to roth?
>I have a question about the Roth IRA. I am thinking of opening
>up a "non-deductible" IRA (I have a 401K at work, so I can't have a
>deductible IRA) for $2000 in the next few weeks for 1997. Then
>in Jan. 1998 I will convert it to a Roth IRA.
I have just opened a non-deductible IRA and plan to convert it to a
Roth IRA in January. The only taxes I will owe will be on the increased
value of the account between opening and conversion. This is because in
my case I don't have any other IRAs. I will then be able to add another
$2000 to it in 1998.
In your case, since you already have an IRA worth $18,000 (that was
tax-deductible), you won't be able to do it like this. The IRS lumps
all of your accounts together and treats it as one IRA. So if you
opened a second IRA with a non-deductible contribution of $2,000, you
would have one IRA worth $20,000, 10% of which would be from
non-deductible contributions, and 90% of it would be taxable on
withdrawal. If you then transfer $2,000 to a Roth IRA, you would have
to pay taxes on $1,800 (90% of your IRA transfer is taxable) and you
would still have $1,800 in your regular IRA that is from non-deductible
contributions.
------------------------------
Date: Sat, 8 Nov 1997 15:52:10 -0500 (EST)
From: "R. Bharat Rao" <bharat@scr.siemens.com>
Subject: Prepay mortgage 1, mortgage 2, or 401(k) loan (or not at all)?
I'd like some feedback on which of 3 options would be the best to pre-pay,
assuming I'm going to pre-pay. Then, I can decide whether I should pre-pay,
versus investing the $$s elsewhere. (I know that I should put the max into
401(k), IRA, etc., first.)
I have a $200K mortgage which is split into 2 parts
a) $182K (80%) at 7.75%, 30-year fixed -- tax deductible
b) $18K (10%) at 7.75%, 10-year fixed (to avoid PMI) -- tax deductible
If I was going to pre-pay on of these which would be a better option, or
are they exactly equivalent? My gut-instinct is that it is better to
pre-pay the 10-year loan, since a 30-year loan at the same rate is cheaper.
Alternately, the principal on the 10-year is already being "pre-paid" faster,
than the 30-year.
Finally, I have a loan on my 401(k) for $11K (had to really stretch:-).
c) 401(k) loan for $11K at 6.5% for 8 years (NOT tax-deductible).
All 3 loans (a), (b) and (c), have been in effect for 3 years, so
their maturity dates are (a) 2025, (b) 2005, and (c) 2003. Also,
(c) needs to be paid off in full, rather than a part at a time. I
have also heard the in 401(k) loans, you are "paying the interest
to yourself" so it doesn't matter, but that seems a fallacy -- however,
at 6.5% interest, it seems a pretty good deal.
Should I consider my tax bracket as well? Last year, I was (thanks to big
mortgages & taxes) in the 15% bracket, and will possibly be there as well
next year. However, in a year or two I anticipate getting back to the
28% bracket again.
Thanks for any feedback,
Bharat
R. Bharat Rao, E-mail:bharat@scr.siemens.com [PGP WELCOME]
Adaptive Information & Signal Processing, Siemens Corporate Research
------------------------------
Date: Sat, 8 Nov 1997 15:54:06 -0500 (EST)
From: Randy Barnes <rbarnes@atl.mindspring.com>
Subject: re: Mortgage Prepay Calculator?
Brian, Ken and anyone else...
I've been out of the mortgage biz for over a year (thank God) but should
be able to find my Lotus spreadsheet I created to answer such questions.
I may also have it in Excel format. If anyone wants it I'll send the
file to you. It's fairly simple to set up and use. tell me which
version you want.
mailto:rbarnes@mindspring.com
Personally I would NEVER prepay a mortgage with the alternitives being
so attractive. I am much happier putting money into investments that
will grow much bigger over the long haul. Then I can cut a check and pay
off the house whenever I'm in the mood. Your leverage on the house
works great. I will always have at least 75% of market value borrowed
against real estate. If you're working on getting to this point it's a
good idea. Eliminating the PMI is a worthy goal, but once it's gone,
I'm heading to wall street. Even Treasury Bonds have returned over 30%
apr in '97. Go Bull Go!
- -Randy Barnes
- ---
From: Brian Michalak <brianm@pdt-cav.com>
Subject: mortgage worksheet?
Does anybody know of a website worksheet that will not only
amortize a mortgage loan, but tell you how much you will be shedding off
the life of the loan by plugging in certain additional principal
payments?
Subject: Mortgage Prepay Calculator?
There has recently been discussion on the list about prepayment of
mortgage principle. Does anyone know of a handy calculator that one can
use
to assess different scenarios? Perhaps an online calculator? Part of a
financial software package (eg. Quicken)? Or is there an simple formula
that someone can share with the rest of us?
Thanks,
Ken
------------------------------
Date: Sat, 8 Nov 1997 15:57:06 -0500 (EST)
From: "R. Bharat Rao" <bharat@scr.siemens.com>
Subject: 30-yr Treasury bonds for college -- NOT!
Leafing through Time Magazine last night, I saw an advertisement
(public service message) in which the US GOVT. informed parents
about rising college costs (good), encouraged them to begin saving
now for college (good) and suggest we buy GUARANTEED SAFE 30-year
US Treasuries to SAVE FOR COLLEGE EDUCATION (bad).
Correct me if I'm wrong, but 30-year Treasuries are GUARANTEED SAFE
(though IMHO too conservative) ONLY if you are saving for 30 years away.
They are INCREDIBLY RISKY and SPECULATIVE if you may need to cash them in
early -- which you quite probably will need to do, if you are putting them
aside for college -- which is at most 18 years away. Too bad if interest
rates have risen a lot -- you could lose almost half your principle.
It irritates me because a number of people may just go ahead an buy
these bonds for college, say for their grand-children because "Uncle
Sam said it was the thing to do." OTOH, the Govt. could very responsibly
have suggested as a safe investment for college, to get a NON-CALLABLE
zero-coupon on Treasury bond that would mature right before (and during)
the child's college-going years.
Bharat (doing his own public-service announcement:-).. or is this wrong?
R. Bharat Rao, E-mail:bharat@scr.siemens.com [PGP WELCOME]
Adaptive Information & Signal Processing, Siemens Corporate Research
(Editor's Comment - Your entirely correct and giving wise advice. I'm
appalled by many investment advisors recommending "diversifying" into
bonds as a hedge against stock market collapsing. If interest rates rise,
bonds *and* stocks will both take a bath. Gold and real estate are a more
realistic hedge. -IK)
------------------------------
Date: Sat, 8 Nov 1997 15:59:09 -0500 (EST)
From: Susan Mangiero <mangieros@sacredheart.edu>
Subject: Historical data on advertising?
Does anyone know where I can access historical data about how much a
company spends on advertising? I'm looking for quarterly data and also
hope to get the data for different types of media (tv, print, etc.).
I'm trying to get this data for many companies. I'm trying to
ascertain the relationship between advertising and stock price. If you
know of any studies on this topic, I'd also appreciate getting the
name of the article(s). Thanks.
Dr. Susan M. Mangiero, CFA
Sacred Heart University
------------------------------
Date: Sat, 8 Nov 1997 15:59:58 -0500 (EST)
From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: Re: Stock Email Quotes? / Text Listing of Stock Company Names?
>Does anyone know if there are any free services that will automatically
>email daily stock quotes out to you?
Check out InfoBeat (nee' Mercury Mail) at www.infobeat.com and follow
the "finance" link.
Rich Carreiro
rlcarr@animato.pn.com
------------------------------
Date: Sat, 8 Nov 1997 16:00:45 -0500 (EST)
From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: Re: IRA this year?
[Disclaimer: this is my opinion, not advice. I am not a professional.]
>I am contributing 15% to my 401(k). I may be eligible to contribute to a
>Roth next year, but don't plan on converting any of my existing IRA's since
>they have all been deductible and I believe I will be in a lower tax bracket
>when I retire (I'm in the 31% bracket this year).
>
>My question is should I make a non-deductible IRA contribution this year or
>would it needlessly complicate my life?
>
>If I did, could I convert only that IRA account to a Roth? I had thought
>that if that were possible, to contribute to a money market account in Jan,
>then convert it in Feb. Then I would have to pay taxes on only a few dollars
>of profit.
In your case I think it would be a bad idea. Not because of any
complexity thing but because you cannot convert just non-deductible
contribution. As I said in a previous article, conversions to Roth
IRAs are treated exactly like IRA distributions but with the penalty
waived. This means that the non-taxable/taxable portions of a
distribution are allocated in proportion to the ratio of non-ded
contributions to total IRA value, across all IRA accounts (see Form
8606).
So let's assume you made a $2000 non-ded contribution to an IRA,
planning to roll it over to a Roth next year. If $2000 is small
compared to the value of all your IRA accounts, then most of the
conversion will be taxable regardless of which account you take it out
of.
One other note -- remember that if your AGI is over $100,000 single or
married jointly (or over $0 married separately) you cannot perform an
IRA to Roth IRA conversion.
Rich Carreiro
rlcarr@animato.pn.com
------------------------------
Date: Sat, 8 Nov 1997 16:01:17 -0500 (EST)
From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: Re: Another Roth IRA Question
[Disclaimer: this is my opinion, not advice. I am not a professional.]
>Me: 40 years old, State of CA employee, gross $60K/year, covered by
> State of CA retirement, currently maxing out my 401K, no IRAs,
> misc. mutual funds, member of an investment club
>
>Situation: I was considering opening a $2000 non-deductible 1997 IRA
> near the end of December, then rolling it over into a 1998
> Roth IRA at the beginning of January and adding another
> $2000. This would allow me to have $4000 growing tax-free
> in the Roth IRA while having to pay very little taxes on
> the amount I roll over into the Roth IRA.
>
>Question: Is this a good idea?
Since you look to be well short of the $100,000 AGI bar on conversions
and since you don't have a large amount of pre-tax IRA money sitting
around (none, in fact), then yes, you can do it and I personally think
it would be a good idea for the very reasons you gave.
Rich Carreiro
rlcarr@animato.pn.com
------------------------------
Date: Sat, 8 Nov 1997 16:02:29 -0500 (EST)
From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: Re: Roth IRA contributions
[Disclaimer: this is my opinion, not advice. I am not a professional.]
>I am currently making monthly contributions into my non-deductible IRA.
>I am going to convert it to a Roth IRA next year. Should I stop my
>contributions at the end of this year and wait until it is converted to
>make contributions for 1998? It seems that this will keep the paperwork
>cleaner and reduce the gains that will be taxed.
Just remember that you cannot convert just that IRA account even if
you take all the money from it. IRA->Roth conversions are going to be
treated just like an IRA distribution but penalty-free. Take a look
at Form 8606 to see how that is done. In short, if the total of all
your non-ded contributions is N% of the value of all your IRA
accounts, then only N% of the Roth conversion will be non-taxable.
Rich Carreiro
rlcarr@animato.pn.com
------------------------------
Date: Sat, 8 Nov 1997 16:03:27 -0500 (EST)
From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: Re: Heartland High Yield Municipal Fund?
>I'm thinking about investing in a municipal bond fund--
>Heartland Short Duration High-Yield Municipal Fund.
[snip]
>1 The income generated by the bonds in the fund portfolio
>is exempt from federal tax. Correct?
Correct.
>2 If I sell shares in the fund at a profit, I pay capital
>gains tax; if I sell shares at a loss, I can deduct this
>loss. Correct?
Correct.
>3 Do bond fund managers sell bonds, generating taxable
>capital gains that are passed on to the fund shareholders?
Absolutely.
>4 Some say to avoid bond funds because they "never mature"
>as contrasted with an individual bond. What does this mean
>and why does it matter?
If you buy a $10,000 bond it has a definite maturity date, at which
point you get all your principal back (barring default, of course). A
bond fund is constantly buying new bonds as bonds mature as well as
trading bonds. So the holdings of the fund always will be maturing in
the future, no matter when "now" is. Therefore, you can never be
guaranteed to get your principal back no matter how long you hold the
fund.
Rich Carreiro
rlcarr@animato.pn.com
------------------------------
Date: Sat, 8 Nov 1997 16:04:29 -0500 (EST)
From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: Re: Convert non-deductible ira to roth?
[Disclaimer: this is my opinion, not advice. I am not a professional.]
>I have a question about the Roth IRA. I am thinking of opening
>up a "non-deductible" IRA (I have a 401K at work, so I can't have a
>deductible IRA) for $2000 in the next few weeks for 1997. Then
>in Jan. 1998 I will convert it to a Roth IRA.
>
>1. Can I do this?
Probably. However, if your adjusted gross income (not counting the
amount of the IRA->Roth conversion) is more than $100,000 filing
singly or married jointly (or more than $0 [not a typo] filing married
separately) you *cannot* do the conversion. If there is any
uncertainty of whether or not you'll exceed this number, you'll
really, really want to wait until the very end of the tax year to do
the conversion (and remember to take end-of-Dec mutual fund
distributions into account), since it will be a royal pain if you make
the conversion and then end up going over the limit.
>2. If I can, what taxes & penalities will I owe? From my
> understanding, there are no penalities and I will only pay tax
> on any dividends/interest/capital gains I receive between
> the time I open the account and 12/31/97. For example, if
> I put the $2000 into a money market fund and I get $10
> in dividends, then I will only pay the tax on the $10. Is
> this correct?
>
>3. I also have approximately $18,000 in a "deductible" IRA that I
> set up before I started my present job. I do not plan to
> convert this money to the Roth IRA. Does this "deductible" IRA
> money have any affect on the $2000 that I plan to convert?
> Someone told me I had to pay a tax on this money even though I
> don't plan to convert it to the Roth.
That someone is right. The problem is this -- the Roth conversion is
treated *exactly* like an IRA distribution, except that the penalty is
waived. As you may know, you cannot take only non-ded contributions
out first when taking a distribution from a conventional IRA.
Regardless of which IRA account the money comes from, all non-Roth
IRAs are aggregated to determine the non-taxable amount of any
distribution, which is pro rata based on the ratio of total non-ded
contributions to total IRA value (see Form 8606).
In your case you have $20,000 is total IRA assets ($18,000 + $2,000) and
$2,000 in non-deductible contributions. You are taking out $2,000 to
convert to a Roth. The numbers are:
Non-taxable portion = $2000 * ($2000/$20000) = $2000 * 0.1 = $200
Taxable portion = $2000 - $200 = $1800.
So even though you plan to take all the money from the account holding
the non-ded contributions, you are only deemed to putting $200 of
non-ded contributions into the Roth. The remainder of the $2000
conversion is a taxable (though penalty-free) distribution.
Rich Carreiro
rlcarr@animato.pn.com
------------------------------
Date: Sat, 8 Nov 1997 16:05:42 -0500 (EST)
From: Baynon <Toothdoc@Liii.com>
Subject: Wall Street Stock Simulator Game
You can get a Wall Street stock simulator game from:
http://www.larax.com/
------------------------------
End of persfin-digest V4 #100
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