Money Management

Investing abroad without leaving home

Q I want to put some money into American Depositary Receipts, because I think some foreign stock markets may do better than ours during the next few years. I believe in investigating before investing, but my time is limited. Where can I do productive research online?

A An excellent place to start is www.adr.com , operated by the investment banking firm of J.P. Morgan. There you can obtain detailed financial information about overseas companies whose securities are available in the form of ADRs issued by US banks and traded on American markets. Moreover, you can find out which companies, industries, and regions particular mutual funds favor, and the size of those funds' holdings.

If you prefer to invest in ADRs directly rather than through a mutual fund, consider Global Invest Direct, a Morgan subsidiary. The firm will arrange purchases and sales for you as the registered owner and safeguard the certificates. You'll pay a $15 one-time fee for each company you invest in, plus $5 per transaction and 12 cents a share commission to Morgan. Local brokerage fees are extra. You can make same-day sales of up to $10,000 by phone.

The Bank of New York also offers a wealth of information on various types of depositary receipts worldwide. For data on companies, markets, and services, visit www.adrbny.com.

Getting sales tax refunds when you buy goods abroad

Q We're taking a trip to England and the Continent next month. Can you update us on the rules for getting refunds of the value-added taxes on purchases we make?

A In general, you can claim VAT refunds on goods you buy for personal use, but not on hotel and restaurant bills. Shopkeeper participation is voluntary, and you must spend a minimum amount in the store. The minimum amount can vary, depending partly on the local currency exchange rate. In Britain, for instance, it's about $50; in Switzerland, $340. Ask the retailer for the necessary documents at the time of purchase.

After your final stop in a European Union country, you must show the VAT refund documents and your purchases to the customs agent at your point of departure. (You may have to endure long lines in tourist season.) If some items are too large or heavy to carry with you, the seller or shipper can advise you what to do, but high-value goods such as jewelry and furs must accompany you.

To get the refund, you typically mail the customs certificate to the store, which then sends you a check or credits the amount to your charge card account. Or you may be able to turn it in at the airport for an immediate refund. To save trouble, you may prefer to shop in stores affiliated with an international VAT refund service.

Lowering tax on a pension payout

QI'll retire in November, when I turn 66. If I take my $500,000 pension account as a lump sum, will I be eligible for income averaging, and if so, can I roll the after-tax balance into a Roth IRA?

A Yes and no. Because you were born before 1936, you can use 10-year averaging to figure your tax, provided you've participated in the retirement plan for at least five years and never rolled over a previous distribution from the plan into an IRA. But you won't be allowed to roll the balance—$356,000 after taxes, with averaging—into a Roth IRA. To do that, you'd have to forgo averaging and transfer the entire $500,000 tax-free into a traditional IRA. Then you could make a Roth IRA conversion, but all of the converted funds would be taxable on top of your regular income for the year.

Edited by Lawrence Farber,
Contributing Writer

Do you have a money management question that may be stumping other doctors, too? Write: MMQA Editor, Medical Economics magazine, 5 Paragon Drive, Montvale, NJ 07645-1742, or send an e-mail to memoney@medec.com (please include your regular postal address). Sorry, but we're not able to answer readers individually.

Lawrence Farber. Money Management.

Medical Economics

2001;19:104.