Jewish World Review July 10, 2000 /7 Tamuz, 5760
Making sense of retirement investing
DEAR BRUCE: What is the reason anyone contributes to a retirement plan if the principal and its earnings are taxed either when the money is put into the plan or when it's withdrawn? Except for the Roth, are both principal and interest taxed every year that they remain in the fund as well? -- H.S., via e-mail
DEAR H.S.: I think that you misunderstand.
Yes, it is true that, in a traditional 401(k), IRA or a similar plan, the money is taxed when it comes out. All of the earnings are left inside, and they continue to earn interest until the money is withdrawn.
In other words, a dollar that you might have paid in taxes in a conventional investment in the year 2000 may still be in a retirement account in the year 2040 earning for you.
In the case of a Roth, the $2,000 yearly deposit is after-tax dollars, but everything that it earns from that point forward is totally tax free, and the taxes on the original $2,000 are considered already paid.
DEAR BRUCE: My company filed Chapter 11, and now they are going out of business. The bankruptcy court says they will hold my 401(k) equity for six to nine months. Is there anyway that I can prevent this? -- C.N., via e-mail
DEAR C.N.: If the money is being held by the administrators in bankruptcy, there is very little that you can do to expedite the release.
You should feel content that the money is safe and will eventually be turned over to you to roll over into another savings vehicle.
DEAR BRUCE: I am interested in doing telecommuting. I heard of a company offering a software program to do e-billing for doctors at home. Is this a scam? I know that doctors are swamped in billing paperwork, so it sounds viable. I would have to set the accounts up, but the company would give me a database of doctors. -- M.D., via e-mail
DEAR M.D.: I would be reluctant to characterize what you have described as a scam. But I do believe that the people who are promoting it are very optimistic as to the viability of the idea.
There is no question that physicians require billing, but most physicians are in groups today and have full-time billing personnel on their payroll, which is a good deal less expensive and easier to control by having them work in their own office.
While there may be a need for this in your area, before I spent the money I would go out and canvas the local doctors in the area and see what their response would be. I think that you will find that most will have a satisfactory billing system and will have no need for someone like
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).
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