We've teamed up with the Dallas-Fort Worth Financial Planning Association to answer your financial questions.
March 2010
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March 12, 2010
Question: How does one value the amounts in 401k and IRA accounts when calculating Net Worth. All Net Worth calculators show the full amounts in those accounts in the total. Why are they treated in the same manner as cash or non-taxable assets. --Jean "Click below for Answer" ![]() ![]() The entry "Valuing a Retirement Plan" is tagged: Net Worth Calculators March 11, 2010
Question: My company laid me off in 2009, while still at the company I had contributed to the company's SEP. Can I take deductions from my 2009 taxes? If so, do I need to send any records to IRS? I am using 1040A. --Wesley "Click below for Answer"
Question: If you turn 70 years of age with a 401K, do you have to start withdrawing it when you are still employed and contributing to it? -- Don "Click below for Answer" ![]() ![]() The entry "401k Question" is tagged: 401k , Required Minimum Distribution (RMD) March 9, 2010
Question: Hello. My husband and I are 48 years old and have just recently sold both our business and our home. We are currently leasing a home. We have about 60K in retirement savings, 35K debt on a credit card and 200K debt to the IRS which we are currently working on an installment payout. We have 2 children in college and 2 more in high school. We do have Texas Tomorrow purchased for them so tuition is not a worry (one of the ONLY things we have done right. My husband expects to earn about $200K this year, so we see ourselves basically starting over. Obviously the IRS tax burden is devastating, but we hope to be able to dig ourselves out with some very hard work. "Click below for Answer" March 8, 2010
Question: I itemize medical expenses each year as part of my itemized tax deductions. On my tax return for 2008, I claimed the amount I paid for a medical test. At the end of December, 2009, my medical insurance refunded some of the amount I paid for this test after correcting an error in coverage that they made. The check was dated December 29, 2009 but I received the refund check during the first week of January 2010. Should I reduce the amount of medical expenses claimed for 2009 by the amount of the refund since the check was issued in 2009, or should I reduce medical expenses claimed for 2010 since I did not receive and cash the refund check until 2010? I made a cash donation at work to a Salvation Army Angel Tree Christmas campaign. Can I count this donation as part of my itemized deductions. I do not have a statement from the Salvation Army for the donation, but I can get a statement from the coordinator at work who collected donations. Is that sufficient documentation of the donation? "Click below for Answer" ![]() ![]() The entry "Two Itemized Deduction Questions" is tagged: Tax Deductions
Question: My husband and I are 55 and 57 - we have been invested in the market directly and also in mutual funds. We are being approached about investing in annuities which I find somewhat hard to understand - do you think annuities are a good investment. -Janie "Click below for Answer"
Question: I am considering doing a partial IRA to ROTH IRA conversion and I'm concerned about the 5 year rule impact on future withdrawals. Here is my situation. I established and funded my ROTH IRA prior to 2003, so it is now over 7 years old. I made investments in it for all 5 years prior to 2003. My original investments have grown substantially. For argument sake, let's say my original $20,000 contributions are now worth $100,000. I am now age 62 and am considering converting a stock worth $30,000. How will the 5 year rule affect the following: 1. My original $20,000 investment My research on the internet has resulted in two answers. The one I like best is that the 5 year rule does not apply at all since I'm over 59 ½ when I do the conversion. The other is that I will be subject to the 10% penalty if I withdraw anything other than the original $20,000 and the $30,000 conversion before 5 years have expired. I'm concerned about being locked out of my $80,000 earnings to date. Can you clarify? Regards -- Thomas "Click below for Answer" ![]() ![]() The entry "Roth 5 Year Rule" is tagged: Five Year Rule , Roth Conversion March 7, 2010
Question In the not too distant future we will inherit a house valued about $125,000 that would lease for approx. $1,000 per month. We would like to know which would be the best return over the long run, sell and invest proceeds or lease it out? We were also considering the tax advantages of either choice. Thank you for your time and thoughts on this. Arthur ![]() ![]() The entry "Inherited Property" is tagged: investing , investments , real estate March 4, 2010
Question Hello, I have approximately $40,000 from cashing in a life insurance policy. I plan to use it for my high school junior's college education next year. Right now, it's sitting in our B of A savings account earning very little. What do you recommend I invest in for about a year until it (at least some of it) will be needed for college expenses? Thanks, Peggy ![]() ![]() The entry "Best place for yearlong investment" is tagged: College Funding , investment March 2, 2010
Question: We have about $136,000 in flexible premium deferred annuities. The rate of new money is 3.50%, however it quickly becomes "old" money and is giving about 1% of interest. Can we annuitize this money and roll it over to an IRA or Roth IRA without having to pay taxes on it? We are 65 & 64 and retired educators working part-time with an annual income of about $115,000. We live debt free and own a home valued at about $200,000. We have CD's and an emergency fund totaling about $150,000 Kaye Click below for answer ![]() ![]() The entry "Shoud I Annuitize an Annuity to Roll it Over to an IRA?" is tagged: Annuitize , Annuity , Investment , IRA , Retirement , Returns , Roth IRA
Question: We recently inherited a life annuity and two IRA's, total amount about 400,000. Both were purchased by my Father in Law with after tax funds. He purchased the funds in the 1990's. He was 89 years old at the time of his death, and has been taking the mandatory withdrawals. The funds show as equal beneficiary's his three children, one of which wishes to withdraw their portion this year. It is my understanding that an immediate withdrawal will make the amount the fund or annuity has earned taxable, while the original amount is not taxed. Is this correct? My wife and I wish to avoid paying any unnecessary taxes, not to mention increasing our tax rate for the year. We are considering continuing the IRA and Life Annuity with our portion of the inheritance, which I understand we can do. Will you please provide us with advice on what you think our next step should be? Horace Click below for answer ![]() ![]() The entry "Tax treatment of an inherited annuity and IRAs" is tagged: Annuity , Inheritance , IRA , Taxes March 1, 2010
Question I got laid off in 2009. At the time, I had been contributing to a SEP. I still have money in it. Can I take deductions from my 2009 taxes for contributions made to the SEP in 2009? Thank you ![]() ![]() The entry "Deduction of SEP contributions" is tagged: income tax , SEP , SEP IRA
Question Would you recommend? Thanks for your help. L.R.
Question Debt free Is this company ok to work with bulldoze my debt. ![]() ![]() The entry "Debt free" is tagged: debt settlement companies February 26, 2010
Question: My father-in-law is 85 yrs old and has 12,000 dollars that he wants to put into something relatively "safe" but that gains more interest than a CD. Do you have any recommendations maybe some sort of mutual fund? This is not money that he needs at the moment for income. He also has 20,000 in an annuity that is about to expire. Again, he doesn't really need the monthly income from his annuity. Would it be better to take the 20,000 out of the annuity and put it somewhere else or should he leave it in and start taking monthly payments? What are the tax implications? --Gary "Click below for Answer" ![]() ![]() The entry "Advice" is tagged: annuity taxation , Emergency Fund , Retirement Income February 25, 2010
Question My wife and I have had our taxes done by H&R Block Premium the last few years, after having our first child and hiring a nanny for childcare. Our tax preparer was providing us info on how to handle the tax implications of being an employer, but after much confusion this tax season, we feel our preparer is not adequately informing us and is really just preparing our taxes instead of guiding us to the most financially beneficial decisions regarding how we deal with our 'employee'. Josh ![]() ![]() The entry "Taxes and Nanny Issues" is tagged: financial planning , income tax , tax planning
Question I want to provide a steady monthly income for my wife. I have 150,000 plus to start with but can add $2000 per month if it is possible. The problem I face is that I am 79 years old (30 years older than her) and in good health I do not owe any debts the house is paid for and clear. My income will stop upon my death and I want to provide approx. $2000 per month. I have been adding the maximum to an IRA for her each year but she will not be able to use this due to her age. Louis ![]() ![]() The entry "Income for wife" is tagged: budgeting , investing , money income February 24, 2010
Question I have a short question, should I pay all my utilities for the rest of year, and therefore pocket my social security, check, knowing it is mine, till December 2010 ![]() ![]() The entry "Prepay Utilities Bills" is tagged: budget , prepay February 19, 2010
QUESTION: We are 59 and need help with our large debt. My husband is currently unemployed and we have only $30,000 in savings. I have about $65,000 in mutual funds. We have 2 kids in college and have taken a lot of student loans. We have a lot of debt on credit cards. We now cannot sell our house worth about $360,000 and down size because we can't get a loan. We have already taken a lot of equity out of our house. I am a school counselor making about $60,000. I know there are consolidation programs and people that can help but I don't want to go through a lot of history and it end up costing us money. Where can you direct us? A. G. Click below for answer ![]() ![]() The entry "What Should We Do With Our Debt Situation?" is tagged: debt , mortgage , Unemployed February 18, 2010
Question: In 2009, my company laid me off in March. I got a W-2 for January through March. With the work that I had done while employed during that time, will I be able to take the EITC credit? Click below for answer
![]() ![]() The entry "Earned Income Tax Credit" is tagged: Earned Income Tax Credit February 17, 2010
QUESTION: This year I will have to take my first RMD for my traditional IRA. Should I sell stocks that have gained or lost for the distribution? P. W. Click below for answer ![]() ![]() The entry "What Should I Sell To Provide For My Required Distribution?" is tagged: IRA , IRA Withdrawals , required minimum distribution , RMD February 16, 2010
Question: My daughter is a full time student and has Series EE savings bonds Jo Ann Click below for answer ![]() ![]() The entry "Higher Education Tax Benefits for Series EE Bonds" is tagged: benefits , Higher Education , Tax , U.S. Series EE Bonds
Question: I was laid off from my job in 2009. I applied to my mortgage bank for a loan mitigation. After 6 months my bank turned my request over to a loan mitigation processing company. The loan mitigation company reviewed my application and determined that I do not qualify for a loan mitigation according to Fanny Mae rules. They will not explain why I do not qualify and are reluctant to give me written notice. Is there any way to get access to the rules? Thank you. Click below for answer ![]() ![]() The entry "Loan Mitigation Rules and Procedures" is tagged: Foreclosure , Mitigation , Modification , Mortgage , Refinance February 15, 2010
Question I am using TurboTax to file my taxes and generally don't have a problem understanding the interview questions but not on this issue. My wife and I both work. I answered the questions on the interview noting that neither of us received SS, railroad or veterans benefits from Nov 2008 - Jan 2009. TurboTax shows my wife and I are eligible for $689 in Making Work Pay Credit. It goes on to say that most people already benefit from this credit by lower federal income tax deductions on payroll. I work for a major company but have no idea if my company has already figured the tax reduction in my withholding or not and I don't know how TurboTax would know that either. Based on what I entered it says I'm eligible for the credit. Is there something I'm missing here or just more of the government handing out money to us we will eventually have to pay back with higher taxes? Thank you Confused in Rockwall
![]() ![]() The entry "Making work pay credit - 2009 Income Taxes " is tagged: IRS , Making Work Pay credit
Question: I know that the limit for an HSA contribution for 2009 was $5950 and I contributed the full amount. ![]() ![]() The entry "HSA Question" is tagged: Heath Savings Accounts |