HW "Skip" Weldon's
Commentary
May, 2008
IN THIS ISSUE:
· FDIC maximums
· Global investment fees
· “Earned income”
· Real estate tax deductions
· Medicare premiums
· Money market funds follow
up
FDIC insurance
coverage on bank checking/savings accounts is generally limited to $100,000 per
person per institution. There are
several ways to increase the coverage, one of which is the Certificate of
Deposit Account Registry Service (CDARS).
With CDARS the saver opens an account at a participating institution
(not all banks offer CDARS) that spreads the deposit over enough other
participating institutions to get FDIC protection on every dollar up to $50
million. The saver then receives one
certificate, one statement and one rate on everything. For more information on CDARS, including a
list of participating banks, go to www.cdars.com
Vanguard has
filed to offer a GLOBAL STOCK INDEX FUND.
The fund’s management fee will be .45% (45% of 1%) annually with an
extra one-time .15% “purchase fee” on new shares. Even after taking the purchase fee into
account, this is one of the lowest costs for a global fund.
On the other
hand, some investors now believe that global/international investing falls
under the admonition “By the time the market becomes saturated with funds
emphasizing a particular investment theory or market segment, the party is just
about over”. Those who disagree can find
more information on Vanguard’s Global Index at <www.vanguard.com>.
“EARNED INCOME”
is a term associated with IRA eligibility (we need earned income to contribute
to an IRA) and the Social Security earnings limitation (having earned income
between age 62 and our full retirement age may reduce our Social Security
benefit).
At any rate,
“earned income” essentially refers to income from CURRENT EMPLOYMENT. Other income such as from savings,
investments, rent, retirement plan distributions and so forth are not considered
earned income.
One tricky area
of TAX DEDUCTIONS involves real estate.
A taxpayer may be eligible to deduct PROPERTY TAXES he/she pays on any
real estate they own without regard to the number of properties. But when it comes to deducting MORTGAGE
INTEREST, only the interest paid on 1st and 2nd homes
qualify for the deduction.
Until 2007
everyone age 65 and over paid the same premium for Medicare Part B. Now the premium is tied to income level. For example, joint filers with adjusted gross
income (AGI) under $164,000 (single under $82,000) pay the base premium of
$96.40 monthly. Above those AGI levels
Medicare’s premium increases.
Alert: Watch out
for those minimum distributions after age 70˝ from 401k and IRA plans as they
are included in AGI.
Last month we
mentioned that because of turmoil in the bond market caused by the mortgage
crisis and the fed cutting rates to fight the recession, TAX-FREE MONEY MARKET
MUTUAL FUNDS were paying almost as much as taxable money market mutual funds.
We should have
added that in most instances those same tax-free funds are paying MORE than taxable
money market accounts offered by BANKS.
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