Retirement, Investment Scams, Mutual Funds, Restaurants, Travel
|Jump to:||Choose article section...Retirement: A welcome makeover for pension-plan rules Investment Scams: SEC warns of pump-and-dump schemes Mutual Funds: A top rating can be here today, gone tomorrow Restaurants: We're eating out more Travel: The best online agents The best online agents|
The Treasury Department has introduced a sweeping overhaul of the arcane rules governing distributions from Individual Retirement Accounts, 401(k)s, and most other tax-favored retirement plans. The proposed regulations do away with key deadlines, create simplified distribution tables, and eliminate traps that have cost retirees and their families millions in income taxes.
The news is particularly auspicious for doctors who won't be entirely reliant on their retirement funds when they quit work. Not only does it make the calculation of their minimum distribution easier, but it extends the life-expectancy period, which means minimum distributions get smaller so their retirement funds last longer.
Under the old rules, the IRS required every owner of a qualified plan, by age 70 1/2, to choose one of three complex formulas for determining how much to withdraw annually. Once the method was chosen, it couldn't be changed. In many cases, the inflexibility adversely affected the beneficiary after the plan owner died. Often he had to accelerate distributions. And when the beneficiary died, his own beneficiaries were required to take a one-time distribution of the entire amountoften resulting in a big tax bill.
Under the new rules, there's one calculation methodand no forced lump-sum distribution. Beneficiaries have years to receive the money and pay tax on it. What's more, you can change beneficiaries after 70 1/2from your spouse to your children, for exampleand the children don't have to take distributions based on your spouse's shorter life expectancy; they can calculate it based on their own.
If your spouse is more than 10 years younger than you, he or she can opt for either set of rules, old or new. The old, joint-life expectancy method might be more advantageous for calculating distributions, for instance, because they'll occur over a longer period, reducing the tax bill, and allowing the funds more time to grow.
Of course, if a beneficiary is strapped for the money, he can always take more than the minimum each year. Though the new rules are still called "proposals," they're already in effect and retroactive to last Jan. 1. Taxpayers are permitted, not required, to follow them.
Online newsletters, message boards, and chat rooms can be great places to get investing ideas, but they can also be a gold mine for scam artists who thrive on stock-price manipulation. Using false information, they pump up excitement about a stock, watch its price rise, then dump their shares. When the dust clears, the price collapses, and legitimate investors lose their money. The Securities and Exchange Commission is cracking down on online stock fraud, and has filed enforcement actions against 33 individuals and companies who've made more than $10 million in illegal profits.
Now the SEC offers a new online brochure to help investors avoid being victims of pump-and-dump schemes. Its message: Be wary of financial information you find on the Internet. "Never, ever, make an investment based solely on what you read in an online newsletter or bulletin board posting, especially if the investment involves a small, thinly traded company that isn't well known. And don't even think about investing on your own in small companies that don't file regular reports with the SEC, unless you are willing to investigate each company thoroughly."
Be careful as well with small stocks that trade in the over-the-counter market, because they, too, are easily manipulated. Research any stock before you invest by reading the prospectus and checking the SEC's EDGAR database of public companies.* "The difference between investing in companies that register with the SEC and those that don't is like the difference between driving on a clear sunny day and driving at night without your headlights," the SEC warns.
Some small companies aren't required to register with the SEC, so check with the state securities regulator at the North American Securities Administrators Association's Web site (www.nasaa.org) The SEC's investor brochure is available at www.sec.gov/consumer/iemmtips.htm.
*See "Stocks: Find out more about mergers and acquisitions before they happen," Financial Beat, Jan. 10, 2000.
Don't be too quick to buy a mutual fund with a top rating from Morningstar. There's an almost even chance that the rating won't last. Of the more than 2,000 mutual funds given a four- or five-star rating by Morningstar in January 1999, 45 percent had dropped to a lower rating by the end of the year, according to a study published by the Journal of Financial Planning. For variable annuities, the drop-down rate was 53 percent.
The odds that a top-rated fund will maintain its standing are higher for older funds. Of those that have been rated for 10 or more years, 36 percent fell in 1999, compared with 46 percent for 5- to 10-year-old funds, and 77 percent for those rated for only three to five years. Morningstar doesn't rate funds that are less than 3 years old.
Some kinds of funds and annuities have better sticking power than others. The lowest drop-down rate in 1999 was 42 percent for top-rated capital appreciation mutual funds, while hybrid variable annuities were the most likely to tumbleas 72 percent of them did.
The Zagat Survey, the hospitality ratings firm, has announced its choices for the top restaurants in the country. Of the more than 1,200 restaurants rated, none scored a perfect 30, and only nine scored 29. The top places, according to Zagat's 100,000 surveyors are Le Bec-Fin and Fountain, both in Philadelphia; Xaviar's, New York City; Xaviar's at Piermont, NY; Le Français, Chicago; The French Room, Dallas; Inn at Little Washington, Washington, VA; Genoa, Portland, OR; and French Laundry, Yountville, CA.
The survey also found that as a country, we're eating out more often3.4 meals per weekdespite the rising cost of dining. In 2000, the average price of a meal ($25.55) rose 5.8 percent, while the 20 most expensive restaurants in each of the 44 markets surveyed increased their meal tickets to $54.54, a 6.9 percent jump.
Not everyone has embraced the idea of booking an entire trip through an online travel agent. That's not surprising, given the unreliability of some Web sites, and the recent complaints about hidden fees and poor customer service surrounding Priceline.com's online bidding site for bargain-basement airfares and hotel rates. Less than half the folks who surf the major travel sites actually order plane tickets or reserve a hotel room online, according to Gomez.com, an e-commerce ratings firm in Lincoln, MA.
So, where's a traveler to turn? Gomez analysts ranked the largest online agents according to ease of use, consumer confidence, online resources, and customer service. Expedia.com, which ranked first among business, leisure, and bargain travelers, scored the most kudos for its ease of use.
|Agent||Overall score (out of 10|
|American Express (Travel & Entertainment) (||5.78|
|Yahoo! Travel (||4.77|
|Carlson Wagonlit Travel (||4.20|
|Airlines of the Web (||4.10|
Source: Gomez.com, Lincoln, MA
Yvonne Wollenberg. Financial Beat. Medical Economics 2001;3:12.