Jewish World Review March 29, 2000 / 22 Adar II, 5760
Pre-tax dollars in IRA taxed later
DEAR BRUCE: I have both a 401(k) from a previous employer and an IRA. The monies in these funds are pre-tax dollars. Upon retirement, when I begin making withdrawals, we will be taxed on capital gains from over the years, but what about the principal? -- K.A. (e-mail)
DEAR K.A.: Bad news. All of the money in your accounts will be taxed, given the fact that they were before tax dollars that were initially put in. This is unlike the Roth IRAs in which post-tax dollars are invested and no taxes are collected on any gains.
DEAR BRUCE: I had a car valued at $26,500 when I began the lease two years ago. They are asking $14,800 for the buy-out. I would like to know if there is any room for negotiation on the buy-out. -- John (e-mail)
Dear John: There is always room for negotiation, and you will never know unless you ask. The other side may just say this is our number and you are stuck with it. Whether or not they will negotiate depends on the buy-out price of the car. If it is in their favor, they surely aren't going to budge. If, however, the market has softened considerably and they were to take the buy-out number, which could lead to a beating for them, chances are they will negotiate with you.
This is clearly a case of nothing ventured, nothing gained. There is no absolute, firm formula you can use as a guide, though.
DEAR BRUCE: On two occasions I tried to go into business. I am an experienced baker, but I have very little money. On both occasions, the lack of capital made me stop pursuing what I thought were very good business opportunities.
I now need about $500,000 to open a new bakery. I could pay it off in four years or less, yet nobody wants to speak to me. -- C.W. (e-mail)
DEAR C.W.: You are learning what many of us have learned in small business. The only place you can get money to finance it is from friends and relatives who love you, or from your own assets.
You might try getting money from venture capitalists, who will extract huge sums because most of the projects they provide money for fail. While $500,000 may not seem like a whole lot of money, it surely is when the entrepreneur has little or nothing to put into it. Realistically, I see no reason why a venture capitalist would even wish to look into your proposal. Unfortunately, those are the facts of life.
If you have personal contacts that can offer you smaller amounts, I urge you to pursue that
Send your questions to JWR contributor Bruce Williams by clicking here. (Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.) Interested in buying or selling a house? Let Bruce Williams' "House Smart" be your guide. (Sales of the book help fund JWR).
03/27/00: Gambling on business ventures
03/22/00: Old cars as hobby, not investment
03/20/00: Tax on foreign gifts?
03/16/00: How to buy government bonds
03/13/00: Buying treasury instruments
03/09/00: Subcontractors must pay S.S.
03/08/00: Real-estate lawyers are essential
03/07/00: Don't expect compensation for ideas
03/06/00: Too rich for a Roth IRA?
03/01/00: Is time-sharing a scam?
02/29/00: Paying for nursing-home care
02/28/00: Rely on a real-estate lawyer
02/23/00: Keeping child's money safe from divorce
02/16/00: Just how important is a 401(k)?
02/14/00: Shaky partnership buying house
02/11/00: Protection by residential zoning
02/09/00: Benefiting from a reverse mortgage
02/07/00: Ensure your insurability
02/04/00: Absurd community zoning laws
02/02/00: Money or securities?
02/01/00: Can we KO a custodian?
01/31/00: Why sell a home you love?
01/26/00: Everyone needs a will
01/25/00: Will splitting stocks affect rollover?
01/24/00: Should early retirees contribute to SEP?
01/21/00: Strategies for paying off debt
01/20/00: Is 15-percent growth achievable?
01/19/00: Selling a second home
01/18/00: Running from a time-share
01/14/00: Don't be a spendthrift!
01/13/00: Who gets the house?
01/11/00: It all depends on size of estate
01/06/00: Check references before hiring an advisor
01/04/00: Savings bonds a bad investment
12/31/99: Out of state ain't that great
12/29/99: Warranty rip-offs
12/27/99: Checking up on investment handlers
12/23/99: Options good only when company's strong
12/20/99: Capital gains tax sometimes best
12/17/99: Don't give up your nest egg
12/15/99: Small-claims court no panacea
12/13/99: Termite company not liable for termites?
12/10/99: Services provided must be paid for
12/06/99: How do we minimize house-sale gain?
12/06/99: Maximize your tax shelter!
12/02/99: My neighbor won't maintain even a modicum of civility
12/01/99: Long-distance rentals a bad idea
11/29/99: Mortgage strategy A-OK
11/18/99: Students can work and learn
11/16/99: Value is what will sell
11/11/99: Y2K: No big deal for real estate
11/08/99: Real life is tough luck
11/03/99: The right time to cash a savings bond
11/01/99: Slow road for savings accounts
10/29/99: What do you want from insurance?
10/27/99: You have a right to see your tax forms!
10/25/99: Why own a house at 65?
10/22/99: Online fine, but CDs?
10/20/99: Love, honor -- and separate credit
10/18/99: Find the value of your stocks
10/15/99: Property lien prevents trade
10/13/99: Clear up debt, only then tie the knot
10/11/99: If it ain't broke...
10/04/99: Should I stick with the company IRA?
10/04/99: Get a financial education!
10/01/99: Insurance: Not much one person can do
09/30/99: Lost tickets are lost cash
09/29/99: Trusting only one financial planner
09/27/99: Adult children should help out
09/24/99: Tips for first-time home buyers
09/21/99: Use the rule of 72s!
09/17/99: Legal strategy can be a pain
09/15/99: Teen drivers drive up insurance
09/13/99: Always use an attorney!
09/10/99: Whose taxes are they, anyway?
09/08/99: How do I roll over my 401(k)?
09/03/99: How can I work out my IRS payments?
09/01/99: When your company can't pay you
08/30/99: Beware of shady viatical investments
08/26/99: Landlords vary on security deposits
08/25/99: Educational IRAs must be spent on education
08/23/99: Finding out the value of old stocks
08/20/99: How to get an FHA refund
08/19/99: 100 percent financing is a scam
08/16/99: Will I have to pay a capital gains tax?
08/16/99: Thinking about PMI
08/13/99: Short-term mutual funds a-OK
08/11/99: It's your job to shop around
08/10/99: Sometimes, roots need to be uprooted
08/09/99: 'Pre-approved' doesn't mean a thing
08/06/99: Only you can determine your investments
08/04/99: Bank IRA the lowest-risk option
08/03/99: Reverse mortgages good for the elderly
08/02/99: Get the survey BEFORE you buy the house!
07/28/99: Get a lawyer -- it's worth it!
07/27/99: If it ain't broke...