Do I have to take an IRA distribution if I'm still working?

Q. Must you take mandatory government-required minimum distributions from either an IRA or a 401(k) account after you are 70 1/2 if you are still working?

A. Yes on the IRA, maybe on the 401(k). IRA distribution requirements are not affected by your employment status. However, you can delay distributions from your 401(k) or other employer-sponsored plan if all these conditions are met:

1. You are still working for the employer sponsoring the plan.

2. You are not more than a 5% owner of the company.

3. The plan rules allow you to delay distributions until after you retire.

If all of these are met, you do not have to take your first minimum distribution until April 1 of the year after the year you retire.

Retirement Investing Institute gets off the ground

I recently had the pleasure of interviewing Don Cassidy, who has launched the Retirement Investing Institute. In Sunday's column I wrote about his plans for making investment education widely available without any accompanying sales pitch.

He's got a tough challenge, but it's a much-needed and worthwhile undertaking. If you have some ideas for him or just a question about investing, you can email him (LAKE28WH67@hotmail.com).  

If you want to learn more about investing, you don't have to wait for Don's group to get going. Two other organizations dedicated to investor education are the American Association of Individual Investors and the National Association of Investors Corp.

(Photo credit: St. Petersburg Times)

How can I turn in my Checkers stock?

Q.  I know my Checkers stock has been called, but I don’t know where to send it. I tried writing the company and the transfer agent, but my letters were returned.

A. Checkers says you can send in your certificates and directions for payment of your $15 per share to Computershare. Mail should be addressed to P.O. Box 43014, Providence, RI 02940-3014 or overnight delivery to 250 Royall St., Canton, MA 02021 to the attention of “Corporate Actions.” The toll-free phone number is (877) 282-1168.

(Photo Credit: Checkers)

Using savings bonds to buy a Florida Prepaid Plan

Q. Is it possible to purchase a Florida Prepaid College Plan using money from savings bonds without paying taxes on the money? Also, can any member of the family do this--aunts, grandparents, parents?

A. Yes and no. For parents it's not only possible, but a great idea to cash savings bonds tax-free to buy a Florida Prepaid Plan for a child. However, the bonds must be in the name of the child's parent(s) and purchased in 1990 or later. Bonds in the names of other relatives don't get the tax break. Also income restrictions apply. Here are the rules for using savings bonds for education.

(Photo credit: Getty Images)

Savings bond interest rates reset Nov. 1

Savings bonds interest rates will reset next week, as they do every six months. Lately there's been speculation that I bonds in particular will become a better deal. The interest rate on these bonds is set in two pieces - a fixed rate that remains the same for the 30-year life of the bond and an fluctuating rate that adjusts every six months based on the rate of inflation. Right now the fixed rate is 1.4% and the inflation rate just 1% for 2.4% total. Expectations are that the new inflation rate will be 3.1%. If the fixed rate stays the same, I-bonds look like they could be worth owning once again. But if it's reduced, you might not want to buy them at all since competing investments like CDs pay higher rates.

For more info, here's an article from Bankrate.com and another from USA Today. Or visit the I-bond Web site.

(Photo credit: St Petersburg Times)

Do I have to apply every year to defer property taxes?

Q. I read your column about tax deferral in Sunday's Times. I was unaware of this option. I am 79 years of age and live on a fixed income.  I am intensely interested in deferring my property taxes.  My financial position meets the criteria for a tax deferral. The last paragrah of your article says, "Tax collectors in every Florida county take applications for tax deferral between November 1st and January 31st each tax season. 

If I make application for this deferral after I receive my tax bill in the first week of November, will the deferral apply to this year's 2006 taxes?  Do I have to make a separate application for a deferral each year thereafter?

A. The Nov. 1 to Jan. 31 application period is for tax deferral of the tax bill you will get in November. Once your application has been approved, the deferral continues for as long as you own the property and maintain your homestead status. However, you must apply each year for the current year's taxes to be deferred.

Taking required IRA withdrawals

Q. I soon will have to start taking required minimum withdrawals from the $250,000 I have in my IRAs. What is the best philosophy to take to lessen taxes? I have no debt and I want to leave as much as possible to my two grown children. I am thinking I should pay the tax and buy blue chip stock in my children's names. Is there a better way?

A. The only way around taking taxable required withdrawals is to give your IRA money to charity, an option available for 2006 and 2007 for those 70 1/2 or older. The trustee of your IRA will have to make a direct transfer to the charity for you to avoid taxes. Here's a sample form for that developed by the University of Minnesota. Donated money counts as part of your required minimum disribution. Of course money that's donated is not preserved for your children.

If you use your IRA proceeds to buy stock for your children, the stock should be in your name, not theirs. If the stocks go up, having them titled in your name will save them money on future capital gains taxes. When you die, stock held in your name receives a stepped-up basis to the market value at the date of your debt. The simplest way to achieve your objectives would be to open a brokerage account to hold your shares and fill out the forms to make the account payable on death to your children.

(Photo credit: Getty Images)

Can I get a tax break for building a house?

Q. I am in the process of having a home built and want to put up some monies along with a construction loan towards the building the house. I was told that any monies used to lower the principle loan amount of the construction loan is not tax deductible. I am having this house built on land that is vacant. Can I claim this money that I want to put down for the building of this house as a tax deduction? Also, I have savings bonds that I have been collecting for many years. If I were to cash them in, they will more than cover my down payment.  Should I cash them in and use the proceeds as my downpayment? Is there a tax deduction for this?

A. It would be nice if down payments were deductible, but alas, they are not. If you cash in your savings bonds, you will owe tax on the accrued interest.

Before cashing a significant horde of savings bonds, it's a good idea to consider the impact this extra income will have on your tax liability. You can find out what your bonds are worth and how much interest they currently are earning at this site.  Look at your taxable income from last year's return and the tax brackets on this site to determine the rate at which any additional income (your bond interest) would be taxed. If you can't figure this out for yourself, you might ask a tax preparer to help you. It might be worthwhile to cash some bonds this year and some next year to spread the liability over two years.

Of course you also need to look at what other options you have. For example, if your alternative is to take money from a money market that's paying more than your bonds are earning, cashing the bonds looks like a better idea. Keep in mind that you have to pay the taxes on the bonds eventually. They pay interest for 30 years.

(Photo credit: Getty Images)

Can I defer taxes on my savings bonds?

Q. I have some HH bonds that will soon expire. I converted these from EE bonds on which I never claimed the interest on my taxes, although I have been reporting the interest earned since the conversion. When they mature, can I convert the HH bonds to something else and continue tax deferral?

A. No. When the bonds mature, you'll have to pay taxes on the accrued interest. In fact, it's no longer possible to defer taxes on EE bonds by converting them to HH bonds as you did. No new HH bonds have been issued for the past two years. When currently outstanding bonds stop paying interest (20 years from issue), that will be the end of the HH line.

The good news is that you can earn a lot more on your money since HH bonds pay a lousy 1.5 percent interest.

Tampa Bay Banks: Here are the biggest, but who's the best?

Two big banks - Bank of America and Wachovia - control more than 40% of the market in the Tampa Bay area and statewide. Here's a look at how the banks rank based on size. The question for you is how do they rank based on service? Are you a satisifed customer of one of the big guys? Or do you eschew them in favor of the little guys? Since Wachovia bought out Golden West Financial, parent of World Savings, combined deposits now exceed those of Bank of America statewide.

Rank

'06 ('05)  Institution   Tampa Bay deposits  Market share

1 (1) Bank of America    $10.6-billion            23.50%

2 (2) Wachovia               $7.8-bil.                 17.11%

3 (3) SunTrust                $5.8-bil.                 12.82%

4 (4) AmSouth                $3.5-bil.                  7.66%

5 (5) World Savings        $1.8-bil.                  3.89%

6 (8) Raymond James     $1.4-bil.                   3.19%

7 (6) Colonial Bank          $1.4-bi.                    3.13%

8 (7)  BB&T                    $1.2-bil.                    2.72%

9 (9) Third Federal         $1.1-bil.                    2.38%

10 (11) Fifth Third          $1.1-bil.                   2.36%

Source: Federal Deposit Insurance Corp.

(Photo credit: Getty Images)             

Pinellas residents may be able to get help hurricane-proofing homes

Pinellas families with qualifying incomes (no more than $43,500 for a family of four) who own their homes may be eligible for help making their property better able to withstand a hurricane. Improvements such as roof bracing and garage door reinforcement will be offered, but the program is limited to 75 homeowners. To apply call Vickie Justice at (727) 538-7370, ext. 337. More information is available at My Safe Florida Home and the Florida Hurricane Fund.

(Photo credit: Getty Images)

Is a paralegal the same as a lawyer?

Q. My next door neighbor asked me as a favor to witness his signature for a will, power of attorney and trust. Instead of going to a lawyer, he went to a paralegal because it was cheaper. I would like to do the same, but I want to be sure that a paralegal is the same as a lawyer. Is it?

A. No. A paralegal is not the same as a lawyer. Personally, I would not take the chance of getting important legal documents from someone who is not a lawyer and who cannot give you legal advice without breaking the law. Here's what the Florida Bar says on the subject. The biggest problem with using a paralegal for estate planning documents is that you may not find out the documents are inadequate until it's too late - you're already dead and your heirs have problems with the handling of your estate.

Bank of America will offer free online trades

The latest news in the brokerage wars is that Bank of America will offer 30 free online stock trades a month to customers with at least $25,000 on deposit at the bank. Initially available only in the Northeast, the deal is scheduled to come to Florida and other markets early next year.

Bank of America is following another brokerage, Zecco Holdings, which began offering free trades last week. Stocks of other discount brokers were falling today on expectations that they'll either have to follow Bank of America's example or lose business.

Eventually free online trading could become the standard in the business, much like free online banking is today. The key is that brokerages want your assets.

Would free trading convince you to change brokers?

(Photo credit: Getty Images)

 

Serious financial troubles, but no money for a lawyer

Q. I am a elderly woman on a fixed income with no savings or assets. I've gotten myself into serious finanical trouble. I need advice and help but have no money to hire a lawyer. Can you give me some direction in order to get some help?

A. A good starting point would be to talk to a counselor at a consumer credit counseling agency. Find one affiliated with the National Foundation for Credit Counseling.

If you need legal help, you might make an appointment with the legal aid organization serving your community. Gulfcoast Legal Services serves Pinellas, Manatee and Sarasota counties, Bay Area Legal Services serves Hillsborough County and here are links to services in other areas. You also could call the local bar association serving your area and ask for a referral to a lawyer who has no charge for an initial consultation. Any of these approaches should get you started.

Since you have no assets, you probably are "judgment proof," which means there is nothing for creditors to seize or any way they can force you to pay. You can read more about it in this article about alternatives to bankruptcy. A lawyer who knows more about your circumstances can advise you on this.

Sales tax holiday starts today

Here's your chance to buy that new washing machine and avoid the sales tax. Florida's third sales tax holiday of the year starts today and runs through midnight Oct. 11. It applies to new dishwashers, washing machines, air conditioners, ceiling fans, dehumidfiers, programmable thermostats, refrigerators and light bulbs that cost less than $1,500 each and carry the Energy Star label. Only retail purchases are eligible.

You can find more information on the State Department of Revenue Web site and in my column from last Sunday.

(Photo credit: Energy Star)

What a great present!

Q. My mother is giving me $150,000. I plan to use about $100,000 as a down payment on a home and spend the rest on a truck, camper and small boat. Do I have to pay taxes on this money?

A. Nice present. You don't have to do a thing. Your mother needs to file a gift tax return, but will not owe any gift taxes until she's given away at least a cool million.

Do you have an emergency fund that could cover you for three to six months of living expenses if you were to lose your job? If not, you should fund that before splurging on the camper and boat.

(Photo credit: Getty Images)

I want to switch out of savings bonds

Q. I have been investing in savings bonds for many years. I consider myself a moderate risk taker, but I have not been investing as aggressively as I probably should for someone in their mid 40s, rapidly approaching retirement. I would like to cash out of these bonds as soon as practical and reinvest in something that would generate a higher return while maintaining the same level of liquidity. How can I safely liquidate these bonds without incurring a huge tax penalty? My wife and I both work. Our son is in college, with the majority of his expenses covered by the prepaid program.

A. You raise a lot of different issues. First, when you cash in the bonds, you will owe taxes on the interest earnings unless you qualify for the tax break for bonds used to pay college tuition. In addition to income restrictions, you have to have made qualifying tuition payments. It works like this: Start with the amount of tuition. Subtract the amount of any scholarships such as Bright Futures. What's left can be used for one of the following: the savings bond tax break, the Hope Tax Credit or the Lifetime Learning Credit. The same expenses cannot be used to qualify for multiple tax breaks. Your son's prepaid college payments remain taxfree so long as he has enough other college expenses (including books, room and board) to offset them. However, these other expenses cannot be used to claim the other tax breaks.

Money market accounts and mutual funds are very liquid. Someone your age should have some stock mutual fund investments. An index fund that tracks the market at large or the Standard & Poor's 500 Index would be a good start. However, I recommend that you do some reading about investments before jumping in. There are zillions of choices, but I like the simplicity of the "Dummies" books (Investments for Dummies, Personal Finance for Dummies).

(Photo Credit: St. Petersburg Times)