Jewish World Review August 18, 1999 /6 Elul, 5759
DEAR W.S.: Up to $250,000 in profit for singles or $500,000 for a couple if the home is a primary residence (not an income property) that has been occupied for over two years -- safely excluding everything that you may gain on this transaction.
DEAR BRUCE: In a recent column you mentioned that a brokerage account could earn a little over 5 percent on about $40,000. You also mentioned that one can earn 8 percent in interest and growth with little risk in the marketplace. What is a brokerage account, how does one get such an account, and what is the safety level? Is it the same as a mutual fund? -- S.P., via e-mail
DEAR S.P.: Money market mutual funds are operated by brokerage houses as parking places for money. There are dozens of such funds where the value of the share is $1, and they are currently offering interest in the range of 5 percent. While there may be instances of these funds going "belly up," I know of none -- most are covered by insurance. With regard to your second query, mutual funds might be one choice, and direct equity purchases might be a second. It is my view that an intelligent investor in today's world can do a great deal better with middle-of-the-road investments than an 8 percent return calculated by growth and dividends. If it were my money, and I wasn't spending it, I would rather have growth, which is tax-deferred, as opposed to a dividend, on which taxes must be paid.
DEAR BRUCE: My husband died 13 years ago. I have been receiving Social Security benefits for a daughter who will soon be 16. My benefits will be dropped, but she will continue to receive hers until she is 18. I work several part-time jobs and put in a lot of hours to make ends meet. I am afraid of losing my house when the benefits are dropped. I am 48 and I have 13 years before I can draw on my husband's Social Security. I did own an apartment house for 10 years, but when I sold it I ended up paying close to $10,000 in capital gains taxes. I don't ever want to make this costly mistake again. Can you help me? -- B.H., via e-mail.
DEAR B.H.: It seems to me that you are doing all the right stuff, but you just aren't earning enough money. I don't think that you made a mistake in selling the apartment house, because the capital gains would eventually have to be paid, whether it was then or later. Given the information that you have passed along, I cannot determine whether or not it was a good investment. Unfortunately, in the absence of a substantial amount of life insurance, which your husband apparently did not carry, his unexpected death left you in a hole that you'll have to claw your way out of. The only way I know to do that is to continue to work those part-time jobs and at the same time hone your skills to prepare yourself for higher-paid employment. These are not attractive answers, but they are the best I can come up
08/16/99: Thinking about PMI