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Jewish World Review Jan. 24, 2000 /17 Shevat, 5760

Bruce Williams

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Should early retirees contribute to SEP?


http://www.jewishworldreview.com -- DEAR BRUCE: My husband and I are both 24. We have over $55,000 in our SEP and IRAs, and we continue to put the maximum into our SEP plans. We also have savings in mutual funds and money markets worth $22,000. We have our own home, work in the family business in which we get paid on commissions and will eventually have an interest in the company.

I know it is many years before retirement, but I am looking forward to that day already. We would like to retire in our early 50s or sooner.

What I am wondering is, should we continue to put money into the tax-deferred accounts when we will have to pay a penalty to access the money if we take it out before we are 59-and-a-half? -- E.T., Lake Mary, Fla.

DEAR E.T.: I wouldn't sweat it at this point. Your idea of retirement may look different when you reach 50. I can't envision a situation in which it would pay you to start drawing it down before 59-and-a-half, given the 10 percent penalty. It would take a long time to overcome that.

Why not shoot for 60 instead of 50? Maybe you can change jobs and do some part-time work. You would be amazed at how much your attitude about a lot of things will change between now and the time you turn 50.

DEAR BRUCE: We have several mutual funds, and one has done very poorly this year -- it is one of the big funds. A representative told us that the reason it performed so poorly was because of low prices in the bond market. Another said that they are putting more capital into stocks now. A magazine financial columnist said that this company, among others, was putting more of its money into growth-driven, interest-generating investments.

What do you think? -- M.R., Topeka, Kan.

DEAR M.R.: I think that it's possible that all of the above is true. Not every mutual fund has earned money. In fact, there have been a great many that have done poorly.

If you are not happy with the performance of a given fund, go elsewhere. There is no guarantee that everything is going to go up all of the time. A good many will go down or up and down. If you are not tolerant for that kind of risk, unfortunately you are going to have to settle for a great deal less return on your overall investments.

DEAR BRUCE: My wife and I have been looking at a home that has been on the market for some time. It is in a wonderful area -- a large wooded lot -- and it has had some considerable updating and can be purchased well below the asking price.

The catch is that numerous tennis courts have been built adjacent to the back yard and the adjoining property. The neighbors tell me that there is a problem with noise and profanity from the tennis courts. The courts belong to an organization that does not fall under local zoning restrictions. The owners have not been responsive to pleas that a sound-absorbing wall be constructed.

As a long-time reader of your column, my initial thought was to pass on this, but perhaps you can think of some way to turn this sow's ear into a silk purse. -- R.G., Marquette, Mich.

DEAR R.G.: If the solution to your problem is some kind of sound-absorbing wall, it would seem to me that if you're getting such a bargain on the house, the cost of a wall could be factored in there and still make the house a bargain.

In addition to the wall on your side, you could have some fast-growing greenery planted to mask the look of the wall. You might even suggest to the other neighbors that they join you in putting up the wall. They may argue that it's not their responsibility, but the reality is that it's an easier thing for them to do than to fight it out in the courts.

When you put up your own wall, you have a guaranteed win. If you fight it in the courts, you will spend a great deal of money and there are no guarantees.



Send your questions to JWR contributor Bruce Williams by clicking here. (Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.) Interested in buying or selling a house? Let Bruce Williams' "House Smart" be your guide. (Sales of the book help fund JWR).

Up

01/21/00: Strategies for paying off debt
01/20/00: Is 15-percent growth achievable?
01/19/00: Selling a second home
01/18/00: Running from a time-share
01/14/00: Don't be a spendthrift!
01/13/00: Who gets the house?
01/11/00: It all depends on size of estate
01/06/00: Check references before hiring an advisor
01/04/00: Savings bonds a bad investment
12/31/99: Out of state ain't that great
12/29/99: Warranty rip-offs
12/27/99: Checking up on investment handlers
12/23/99: Options good only when company's strong
12/20/99: Capital gains tax sometimes best
12/17/99: Don't give up your nest egg
12/15/99: Small-claims court no panacea
12/13/99: Termite company not liable for termites?
12/10/99: Services provided must be paid for
12/06/99: How do we minimize house-sale gain?
12/06/99: Maximize your tax shelter!
12/02/99: My neighbor won't maintain even a modicum of civility
12/01/99: Long-distance rentals a bad idea
11/29/99: Mortgage strategy A-OK
11/18/99: Students can work and learn
11/16/99: Value is what will sell
11/11/99: Y2K: No big deal for real estate
11/08/99: Real life is tough luck
11/03/99: The right time to cash a savings bond
11/01/99: Slow road for savings accounts
10/29/99: What do you want from insurance?
10/27/99: You have a right to see your tax forms!
10/25/99: Why own a house at 65?
10/22/99: Online fine, but CDs?
10/20/99: Love, honor -- and separate credit
10/18/99: Find the value of your stocks
10/15/99: Property lien prevents trade
10/13/99: Clear up debt, only then tie the knot
10/11/99: If it ain't broke...
10/04/99: Should I stick with the company IRA?
10/04/99: Get a financial education!
10/01/99: Insurance: Not much one person can do
09/30/99: Lost tickets are lost cash
09/29/99: Trusting only one financial planner
09/27/99: Adult children should help out
09/24/99: Tips for first-time home buyers
09/21/99: Use the rule of 72s!
09/17/99: Legal strategy can be a pain
09/15/99: Teen drivers drive up insurance
09/13/99: Always use an attorney!
09/10/99: Whose taxes are they, anyway?
09/08/99: How do I roll over my 401(k)?
09/03/99: How can I work out my IRS payments?
09/01/99: When your company can't pay you
08/30/99: Beware of shady viatical investments
08/26/99: Landlords vary on security deposits
08/25/99: Educational IRAs must be spent on education
08/23/99: Finding out the value of old stocks
08/20/99: How to get an FHA refund
08/19/99: 100 percent financing is a scam
08/16/99: Will I have to pay a capital gains tax?
08/16/99: Thinking about PMI
08/13/99: Short-term mutual funds a-OK
08/11/99: It's your job to shop around
08/10/99: Sometimes, roots need to be uprooted
08/09/99: 'Pre-approved' doesn't mean a thing
08/06/99: Only you can determine your investments
08/04/99: Bank IRA the lowest-risk option
08/03/99: Reverse mortgages good for the elderly
08/02/99: Get the survey BEFORE you buy the house!
07/28/99: Get a lawyer -- it's worth it!
07/27/99: If it ain't broke...

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