Dave Dodson <dave_and_darla[at]juno.com> writes:

- quote -

This is a very important point. When one takes a distribution
from a taxable IRA account, one usually owes taxes on it. The
amount of that distribution which is taxable depends on whether
the contributions which funded your IRA - not that particular
account, but the sum of all of your IRA accounts - were deductible.

Example:

Contribute $2000 to a traditional IRA, but do not deduct it.

Rollover $10000 from a 401k into another IRA account.

Both accounts double in value. You now have two IRA accounts
whose total value is $24000.

Now, pull $1000 out of the smaller account (for anything -
to pay college expenses for your kid, as regular retirement
income, whatever). Your "basis" for that $1000 is based on
the ratio of the deductible contributions you've made versus
your total IRA amount: $2000/$24000 = 0.08333, so multiply
that by the $1000 you took as a distribution to get $167 of
the distribution is not taxed, but the remaining $833 is taxed.

It makes no difference that the accounts were kept separate.

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On Sep 26, 10:40*am, Mike <mklosterme...[at]gmail.com> wrote:
- quote -

A couple of people have pointed you to Pub 590. Also note that while
there are deductible IRA contributions and non-deductible IRA
contributions, there is no such thing as a deductible IRA.

Dave

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- quote -

contributions do not get deducted at federal level, but some 529's do
offer state tax deductions.

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Mike <mklostermeyer[at]gmail.com> writes:

- quote -

See IRS Pub 970
<http://www.irs.gov/publications/p970/ch09.html
However, you can take distributions from your IRAs for qualified
higher education expenses without having to pay the 10% additional
tax. You may owe income tax on at least part of the amount
distributed, but you may not have to pay the 10% additional tax.
...
Qualified education expenses. For purposes of the 10% additional
tax, these expenses are tuition, fees, books, supplies, and
equipment required for enrollment or attendance at an eligible
educational institution. They also include expenses for special
needs services incurred by or for special needs students in
connection with their enrollment or attendance.

- quote -

Yes - you pay income taxes, but not early-distribution penalties.

Most folks should be maximizing all IRA and 401k plans
before putting anything into education-specific savings.
(note the "most" - that's not "all" folks. Just a lot more
than are currently doing so now.)

That said, 529s have an additional advantage over IRAs -
if you're concerned with estate planning, contributions
to 529s are considered completed gifts and are outside
of one's estate. This may be of more interest to wealthier
folks and/or grandparents, but it's worth noting.

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Ron Peterson wrote:
- quote -

Does XLE contain all energy stocks?

- quote -

You may be right, but I agree with Sandra, 10% - 20% is a big chunk of
the OP's portfolio.

- quote -

<snip
- quote -

So then if the OP shouldn't buy an index, how then does he match market
cap percentages? Are you suggesting that the OP buy a whole series of
ETFs to approximate the total stock market sans financials? How many
ETFs would this require him to manage?

-Will

william dot trice at ngc dot com

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On Sep 26, 11:40*am, Mike <mklosterme...[at]gmail.com> wrote:
- quote -

"Higher education expenses. Even if you are under age 59½, if you
paid expenses for higher education during the year, part (or all) of
any distribution may not be subject to the 10% additional tax. The
part not subject to the tax is generally the amount that is not more
than the qualified higher education expenses (defined later) for the
year for education furnished at an eligible educational institution
(defined later). The education must be for you, your spouse, or the
children or grandchildren of you or your spouse. "

I searched for word education in the pub and this was third or fourth
hit.

http://www.irs.gov/publications/p590/ch01.html#d0e3521

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Mike wrote:
- quote -

Tax at one's regular marginal rate. Just no 10% penalty. The tax
treatment of a 529 more resembles a Roth, post-tax money in, all growth
tax free if used for College. (Tax and 10% penalty if not)
Joe
www.blog.joetaxpayer.com

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- quote -

I knew Roth IRA contributions could be withdrawn for any reason, but I
didn't know that deductible IRA monies could be withdrawn for
education purposes. Does this include contributions and earnings?
Any tax penalties at all? Surely you would have to pay income taxes
on what you take out (assuming it was a deductible IRA), correct? I
just want to make sure I'm not missing anything.

Mike

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On Sep 25, 7:10*pm, Will Trice <n...[at]monitored.net> wrote:
- quote -

No. Many energy stocks aren't in the S&P 500. In addition, there is
the additional knowledge that crude oil is becoming more expensive to
find, making already found reserves more valuable. So, it makes sense
to be overweight in energy.

- quote -

No. I am suggesting that some sectors should be overweight, but not to
the point of generating excessive risk.

- quote -

No. I don't believe the market is efficient. If a company doesn't
have assets and isn't making money, don't buy it even if it is in an
index.

--
Ron

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Ron Peterson wrote:
- quote -

Hmmm. Maybe I missed your point. Are you suggesting the 10% - 20%
energy ETF allocation only if the OP does not use an S&P 500 index fund
(or said another way, he shouldn't buy the ETF if he already owns an S&P
500 index fund)?

- quote -

Doesn't this statement assume that the market is efficient?

- quote -

Didn't you just do that?

Confused,
-Will

william dot trice at ngc dot com

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On Sep 25, 5:06*am, Jay <jay6...[at]hotmail.com> wrote:
- quote -

$Y towards education, let me know (I have not found one). That is why
I came up with the 15%-5% technique posted above.

Remember that IRA monies can be tapped for education expenses penalty
free. Education monies cannot be transferred to retirement accounts
without incurring taxes or penalties.

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Thanks All - Very helpful information on setting the "Goals".
Something that I have missed in my investment plan - something more
than saying "I have money set aside for the future for education,
retirement etc... and I want good returns on it".

I will go through one of those online tools - do they give information
on how much I should be setting aside for retirement, children's
educaton etc.....For example, if your gross is 70K, you should be
putting aside X every year, you should aim at Y for childrens
education to be used 10 years from now, Z for retirement....

Thanks.

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On Sep 24, 6:45*pm, Will Trice <n...[at]monitored.net> wrote:
- quote -

Energy is 12.9% of the S&P 500(Dec, 2007).

- quote -

I would hope that there would be some attempt to match the market cap
percentages of the whole stock market.

- quote -

That would be assuming the stock market is efficient. There are ETFs
that short various sectors such as financials.

An S&P 500 fund would also miss all the mid-caps and small-caps.

--
Ron

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Jay <jay6447[at]hotmail.com> writes:

- quote -

I'm not sure that's what folks have been saying. Or perhaps
that it's just not clear to me that that's actually necessary.

In your original post, you didn't talk about goals clearly
enough to really answer. You said, basically, this:
50% equity, split between various asset classes, including REITs
40% money market
7% bonds
3% gold

But what is all that money for? How long off are the goals?

You mentioned that you're married, have two kids, and don't
expect to need most of this money for 10 years. All well and
good, but you're probably not planning on retiring in 10 years,
and you may have some large expenses coming up at or just
after that 10 year mark - you may want to plan for different
goals (and time horizons) with different allocations.

For example - how much of that money do you expect to spend
on college for the kids? How much is retirement money? How
long until those two events take place? Is some of it
actually money for the purchase of your next car?

Money for very long goals - say, retirement 20 years from
now, and with the expectation that the retirement itself
will take place over 30 years or so - that money may be
invested more aggressively, and perhaps get more conservative
as you approach the actual retirement (but not very much so,
since in order to last 30 years and keep up with inflation,
you'll almost certainly want to retain at least some equity
exposure well into that retirement itself).

But suppose that half of that money is for your kids college
costs. Those costs may be coming up soon (not clear, but
I'd assume less thatn 15 years), and when it does come up,
it'll probably all get spent in the space of 4-6 years.
That money probably needs to be a lot more conservative
than the retirement money, and when the actual spending date
comes up, even more so - by the time the kids start school,
it'll get spent down very quickly - not over 30 years like
retirement, so a much larger proportion of the college
money should be in cash and/or short-term bonds by the
time college starts.

The new car fund? The vacation fund? Both should probably
be all cash and/or short-term bonds.

- quote -

Munis may or may not make sense depending on whether the
money is in a taxable account or not, and depending on your
marginal tax rate.

- quote -

Bear in mind that broadly diversified equity funds inherently
have some exposure to commodities. Some folks feel like adding
more in a straight commodity asset (ie. your GLD, or other
ETFs or ETNs which often hold futures), but I'd be very wary
of any advice to put more than a couple of percent into any
of those. The very-long-run return of commodities is only
about the same as inflation (ie. around the same as t-bills).
Along the way, they sometimes zig when the market zags, but
it's not clear that they add enough non-correlation benefits
to make them very worthwhile unless one adds a lot of them -
and thus lowers overall portfolio return in the long run.
Gold has had a great run lately. Sure. And it did in the
70s, too. But between '82 and just a couple of years ago,
what a dog! A 20+ year of not even holding its own value
or even keeping up with inflation - I wouldn't want much of
a portfolio there, and I don't know of any way to reliably
time that market.

- quote -

The overall economy is doing a lot better than the banks.
Nobody knows how much the weakness of banks and the credit
markets will creep out and hit the rest of the markets, but
we've certainly survived (and prospered) through some
horrible things before. 9/11, the 70s, some world wars
all come to mind.

And frankly, the indices have dropped a good bit, but only
barely more than one standard deviation. The market is not
pricing this "crisis" nearly as badly as, say, it priced
some recessions. It may get worse, it may get better, but
so far, for all the yelling and screaming and headlines and
fear, the thing to do is keep your head straight and look
at the bigger picture and the longer run.

This has been a great reminder for folks to really assess
their actual risk tolerance. How much can your portfolio
go down before you give in to fear? In good times, folks
think they are very risk tolerant. When their portfolios
go down by 40% or more (see, say, a few years ago at the
beginning of this century!), maybe they realize they
aren't as risk-tolerant as they thought they were while
watching their portfolios in '99.

So I'd say - really think hard about what kind of volatility
you can tolerate. But don't panic, certainly not over
the news headlines. And clarify your goals.


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Ron Peterson wrote:
- quote -

I would think that 10% - 20% counts as a big chunk.

- quote -

By that reasoning the OP should then put 10% - 20% in each of 5 - 10
other sector ETFs that represent consumables? Cars, food, water,
firewood, computers, fertilizer, pet products, prescription drugs,
nails, and electricity, perhaps? Might be hard to find ETFs for all of
these. What does the OP do about toilet paper?

- quote -

If he were to buy an S&P 500 fund, why would the OP need to reduce
exposure to financials? The current troubles are priced in, right? If
not, why not short a financial ETF (not that I actually recommend this...)?

- quote -

This is the point that can't be stressed enough, unless there's some
item of info we're missing like he's going to get a big pension,
inheritance or something.

-Will

william dot trice at ngc dot com

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On Sep 24, 4:25*am, Jay <jay6...[at]hotmail.com> wrote:
- quote -

The rate of return on on money market funds and bonds is going to be
lower than that for equities. Equities suffer from market and
valuation risk, but that can be reduced through diversification,
options, and research.

- quote -

Yes Muni bonds are a good deal especially if you are in a high tax
bracket. My sister and her husband use those.

Pure commodity ETFs have the problem of greater volatility. I think
that DBC has a good mix of commodities. Commodity ETFs aren't going to
rise much faster than inflation on the average, so you will need to
sell covered calls against them to get a decent rate of return.

- quote -

The current crisis mainly affects financials, but the taxpayers are
going to be affected from the bailouts.

--
Ron

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"HW \"Skip\" Weldon" <skip5700removethis[at]yahoo.com> writes:

- quote -

Personally, my reaction to the "crisis" has been to postpone thoughts
of retirement a while longer. Last year I thought that I was close
enough that I could consider, say, cutting back to half-time work in
another year or two, but now it's looking like the best way to protect
my retirement is a stable full-time job in the meantime. :-) When I
realized that I was getting close to my savings goal, I'd already
tweaked my asset allocation a bit to be more conservative (I went from
75% equities to 65%), and that's still where I want to be until I have
a firm plan in place for retirement.

I *have* been doing a bit of rearrangement of my portfolio, though --
taking advantage of the down market to do some tax-loss selling and
consolidation of some of my holdings. And since I still have salary
coming in beyond my everyday needs, I'm still DCA'ing into the market
on the dips.

This would also be a good time to consider doing a Roth conversion on
an IRA -- less taxes due while the market is down.

-Sandra

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On Wed, 24 Sep 2008 04:25:37 -0500, Jay <jay6447[at]hotmail.com> wrote:

- quote -

I have mixed feelings about this. Experience teaches that the above
is correct (every bear market/recession/contraction in history has
ended). But that same experience also suggests that when the
"universal opinion" is that a particular thing will happen within a
particular timeframe, it won't.

I am proceeding as though both will prove true. (The bear market in
equities will end, but it will take longer than is commonly believed.)
Accordingly, from a financial planning perspective, investors with
less than a full 12-year investment horizon should pay attention to
their allocation.




-HW "Skip" Weldon
Columbia, SC

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On Sep 23, 3:57*pm, Jay <jay6...[at]hotmail.com> wrote:
- quote -

Is this 3X annual expenses in stocks and 3X annual expenses in cash?

When do you want to retire?
When do you expect to retire?
Your current age is 40, correct? Is wife about same age? Does she
work?

How much of cuirrent income do you contribute? 20%, 15%, 10% or
other?

My advice is you want 20% of gross income being set aside. Send 15%
into retirement accounts and 5% into short or mid term savings (kids
ciollege, family vacation, new car). This factor alone is probably
as important as the allocation you asked for.

I will suggest you have reasonable exposure to most asset classes. I
think 3% in commodities is about right. Maybe up this a percent or
two. The high cash exposure is the biggest issue. I think 60-40
would be most conservative allocation a person in your situation
(15-20 years from retirement) should consider. But another comment I
will make is do not let anyone tell you how much risk to take. Only
you can decide that.

Personally I am 35 yo and have 97% equities. 42% large cap, 15% mid
cap, 15% small cap, 15% foreign large, 10% foreign small cap and
emerging markets and 3% bonds. I increase bonds by 1% twice a year as
a slow rebalance to a 90-10 or 80-20 portfolio and I plan to retire in
18 years (age 53). I had close to 200k invested in this allocation
until recent events reduced it for me.

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One thing that I gather from the various posts is to allocate some
money out of Money Market Funds into Equity/Debt/Commodity.

Someone did suggest Muni Bond funds and I will look into them. I am
very interested in allocation to Commodities as well but can not find
any "pure" commodity funds apart from GLD. I think, most of the other
commodity funds/ETFs invest in stocks of commodity companies.

Interestingly, I am very concerned about the current crisis but none
of the people who replied spoke of it. Which tells me that this crisis
is just like any other we have experienced over the past 50 years and
we will come out of it soon. This seems to be a universal opinion
amongst the smart investors. There is no chance it fundamentally
changing how investors/planners look at equities as an asset class!

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