Letters to the Editor
To the Editors:
The 529 plans article imprecisely states the taxability of 529 plans [“529 College Savings Plans,” by Cara Scatizzi, May 2009 AAII Journal Offbeat Offerings column]. Withdrawn “contributions” are not taxable, nor are they subject to a penalty. Only earnings on contributions are, and 529 withdrawals consist of both contributions and earnings. The amount of the withdrawal that is not used for qualified college expenses is allocated proportionately between contributions and earnings, so typically only a portion of the earnings would be taxable. Also, in today’s environment the earnings are likely to be minimal, so the tax may be low. (Of course, we hope this changes in the future.) Further, there are a number of exceptions to the 10% penalty on withdrawn earnings not used for qualified expenses. Note that if the 529 plan is over-funded, the beneficiary can be changed to another member of the beneficiary’s ‘family’ (as defined by the IRS) to further use the money with no tax or penalty.
Comment Posted On-Line to “Investing in Stocks With DRPs: Adding Yield to Your Returns,” by Wayne A. Thorp, CFA, June 2009 AAII Journal.
Be warned: You have to be very careful about what you do with your money, and that goes for DRPs as well. I used this seemingly economic way to increase my investment in my favorite companies. I did it when brokerage fees were quite high. Then I discovered it was not as economical as I thought. In some cases, there were substantial charges for administrative costs by the
Irwin From New York
Comment Posted On-Line to “The First Cut: High Quality + High Yield + High Growth Stocks,” by John Bajkowski, June 2009 AAII Journal.
Each of these companies that I looked at more closely has an incredibly high percentage of institutional ownership. I thought that the only advantage the individual investor has is to stay away from the crowd. Warren Buffett stated he could make 50% per year if the size of his investments didn’t skew the market.
John From Florida
To the Editors:
“Bear Market Grads” was excellent, concise, and very clear [“Bear Market Grads: What You Should Learn From the Financial Crisis,” by William Reichenstein and Larry Swedroe, July 2009 AAII Journal]. I really think this should be basic reading for everyone. I also remember how good their article “Investment Products: If It Has to Be Sold, Don’t Buy It!” was [November 2007 AAII Journal]. These two authors are great. The other best business/money advice my husband and I ever read was in a farming journal: If you can’t figure out a deal or investment on the back of an envelope, then it is too complicated and don’t do it. That works really well for us.
To the Editors:
Microsoft recently announced that they are discontinuing all Money products related to what I call portfolio downloadable services (and the ability to keep your consolidated financial data downloaded on your own personal computer). Instead they have decided to go to an on-line format where all your financial information has to be kept on a chosen single on-line Web site, such as a broker or third-party Web site that will offer a consolidated portfolio tracking service.
As a long-term individual investor, I am very saddened by these developments and believe this to be a very important issue among long-time market investors like me who would prefer to keep consolidated investment portfolio information loaded and backed up on a personal computer rather than some public Web site. I am fearful that all the on-line brokers and third-party software suppliers are being pushed by government regulators to encourage this future trend, which is a gross invasion of pe