Sunday, August 22, 2004
_____________________________________________________________
In This Issue...
* 3,379 VERY SIMPLE WAYS TO MAKE YOUR HOME MORE LOVABLE
* ED SLOTT, IRA EXPERT, ANSWERS YOUR IRA QUESTIONS
* THE FOUR MOST DANGEROUS WORDS IN MODERN MEDICINE!
* BREAKTHROUGH THERAPIES
* WHEN MEDICINE FAILS... WHEN DOCTORS FAIL... YOU'RE ON YOUR OWN
* EVENING WORKOUTS
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Dear Friend,
Star Trek captured our imaginations with its creed to
"boldly go where no man has gone before." I sometimes
feel like Captain Kirk when searching for the latest and
best information for you.
Recently, we talked with Ed Slott. He's the premier expert on
IRA accounts. He shares his wisdom with Bottom Line
subscribers about their retirement accounts.
Plus, the medical world is evolving so rapidly that some new
tests may seem like science fiction. But these tests are all
fact. How to use the latest breakthroughs to improve your
health...
Jessica Kent
Editor
BottomLineSecrets.com
Special Offer
** 3,379 VERY SIMPLE WAYS TO MAKE YOUR HOME MORE LOVABLE **
Household tricks... garden secrets... indoor and outdoor
projects that require low effort and little money -- but
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BOTTOM LINE has teamed up with America's legendary home and
garden experts, John and Martha Storey -- and their 30 years
of wisdom -- to help Americans do "the impossible." Plus,
the best from more than 100 of their expert home and garden
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*************************************************************
Ed Slott, IRA Expert, Answers Your IRA Questions
Ed Slott, CPA
Ed Slott's IRA Advisor
Special from Bottom Line/Personal
Individual retirement accounts (IRAs) are complicated. It's no
wonder that when we invited you, our readers, to send us your
questions on these retirement vehicles, the response was huge. Bottom
Line/Personal turned to Ed Slott, America's leading IRA expert, to
tackle as many of your questions* as space permits.
ROTH VS. TRADITIONAL IRAs
I have a traditional IRA and a Roth IRA. Which one should I
contribute to each year?
The Roth wins. While you won't receive a tax deduction for
contributions, you won't be taxed when you withdraw money in
retirement. The Roth allows your investment to grow tax-free. If you
don't use it all, future generations can enjoy the money tax-free,
too.
You may get a tax deduction for contributions to a traditional IRA,
but you will owe income tax when you cash it in.
I'm a 61-year-old retiree with a traditional IRA. I don't expect to
need this money. Should I convert it to a Roth IRA?
Converting a traditional IRA to a Roth IRA is a great idea. For
income eligibility, see box below.
There's no limit to how much you can convert, but you will have to
pay income tax on the amount. To stagger the tax burden, convert
pieces of your traditional IRA to a Roth over a period of years.
Keep in mind that an inherited Roth IRA is far more valuable than an
inherited traditional IRA. Your heirs won't pay income tax on
withdrawals. For instance, say you leave a $100,000 Roth IRA to your
40-year-old daughter and she takes the required minimum distributions
(RMDs) annually. If the money earns a 10% return, she will receive
$1.5 million income tax-free by age 82. Note: Spouse beneficiaries do
not have to take RMDs.
I will be 70 years old this year and must start taking withdrawals
from my traditional IRA, which is worth $30,000. Should I convert it
to a Roth first?
Not if your aim is to avoid paying tax on your RMDs. Assuming that
you're in the 25% tax bracket, converting to a Roth would generate
$7,500 in tax. With a traditional IRA, you will pay $274 on your
initial annual RMD of $1,095. You can find the formula for
calculating RMDs in IRS Publication 590, Individual Retirement
Arrangements (IRAs), available from the IRS at 800-TAX-FORM or
www.irs.gov.
DEDUCTING LOSSES
I rolled over a 401(k) to an IRA and invested in mutual funds. The
value dropped by $6,000. Can I deduct the loss?
It rarely makes financial sense to deduct IRA losses. The IRS
requires you to cash in every IRA you own. You then can claim the tax
loss as a miscellaneous itemized deduction -- but only if such
deductions exceed 2% of your adjusted gross income (AGI). See IRS
Publication 590, noted above.
ROLLING OVER LUMP SUMS
I recently started collecting a pension. This year, I received a
payment for accrued vacation and sick leave. Can this money be rolled
over to my IRA?
No. Severance, vacation and sick pay are considered wages, so they
can't be rolled over. However, you can use this money to contribute
to an IRA this year. For contribution limits, see box below.
SMALL BUSINESS IRAs
I own a business. Which is the best tax-advantaged way to invest
earnings -- in an IRA, a Roth, a Keogh or something else?
If you want to shelter income as a self-employed person, a good
choice is either a simplified employee pension (SEP-IRA) or a savings
incentive match plan for employees (SIMPLE IRA).
You can set up a SEP-IRA if you earn as little as $450, but these
plans are best for those who earn $50,000 or more. The maximum yearly
contribution is 25% of your salary or $41,000, whichever is less.
If you earn between $5,000 and $50,000, you'll be able to tuck more
money into a SIMPLE IRA -- up to $10,500 if you are age 50 or older.
In contrast, since you can contribute only a percentage of your pay
to a SEP-IRA, someone making $10,000 could shelter the entire $10,000
in a SIMPLE IRA but only $2,500 in a SEP-IRA.
You can set up either of these plans at any financial institution.
Keoghs involve a lot of paperwork. Only consider one if you would
like to shelter more than $41,000.
Even if you have a SEP- or a SIMPLE IRA and a 401(k), you can
contribute to a Roth, as long as you don't surpass the income ceiling
(see box below).
My father died and left me $100,000. I want to shelter as much as I
can and let it grow. I'm a self-employed physician's assistant who
earns $75,000 a year. I have $80,000 in savings. An investment
adviser recommended whole life insurance, a SEP-IRA and a Roth IRA.
What's the best approach?
A SEP-IRA is a wonderful tool for sheltering income if you're
self-employed. If you contribute to a SEP-IRA, you can and should
contribute to a Roth IRA if you don't exceed the AGI ceiling (see box
below).
A whole life policy may be prudent, depending on your needs. Such
policies typically are used to cover projected estate tax, which
kicks in only when assets surpass $1.5 million.
TIMING IRA WITHDRAWALS
When can I take tax-free withdrawals from my Roth IRA?
You can withdraw contributions -- but not earnings -- at any age
without repercussions. Suppose you contributed $3,000 to a Roth and
then you needed the money the next month to repair your car. You
could pull out the $3,000 without taxes or penalties.
To withdraw earnings tax-free, you must wait five years from January
1 of the year in which you made your first contribution and be at
least 59� years old.
Example: If you made your first contribution in August 2000, you
could begin withdrawing earnings no sooner than January 1, 2005.
I'll be 70� on December 20. Must I take my first yearly IRA
distribution this year or by April 1, 2005?
You aren't required to take your first required minimum distribution
(RMD) until April 1 of the year after you turn 70�. In your case, if
you wait until 2005 to take your initial RMD, you will have to take
two RMDs in one year -- one for 2004 and one for 2005.
Instead, take the first distribution in 2004 to stagger your tax
liability.
Exception: If you expect to have large income in 2004 and little
income in 2005, postpone taking both distributions until 2005 because
your tax bracket is likely to be lower.
Can I roll my 401(k) funds directly into a Roth IRA?
No. You must first roll over to a traditional IRA and convert later.
As long as your income does not exceed the maximum (see box below),
there is no limit on the amount you can convert.
INHERITING IRAs
I'm 38 years old and just inherited a traditional IRA from my father.
Do I have to wait until I'm 59� to take withdrawals without penalties?
Absolutely not. The 10% early withdrawal penalty doesn't apply to
inherited IRAs. The law requires that beneficiaries begin taking RMDs
in the year after the benefactor's death. Because you inherited a
traditional IRA -- not a Roth -- you will owe income tax on
withdrawals.
What are the advantages or disadvantages of making your IRA
beneficiary a living trust?
There are no tax benefits to naming a trust as an IRA beneficiary.
The only reason to do so is when a beneficiary is a minor child or an
adult who should not handle money.
I am due to receive an inheritance from my uncle. His IRA is worth
$50,000. Can I roll it into my IRA?
No. The IRS requires you to keep it separate and leave the deceased
owner's name on the account. An inherited IRA also can't be converted
to a Roth. These rules don't apply to spouse beneficiaries.
IRA BASICS
How do I set up a Roth or traditional IRA?
You can start either type of IRA at just about any financial
institution -- a mutual fund firm, brokerage firm, credit union or
bank.
Are IRAs covered by FDIC (Federal Deposit Insurance Corporation)
insurance?
It depends on how they're invested. If your IRA is in a certificate
of deposit or a savings account, it is protected by FDIC insurance --
up to $100,000 per account. If your IRA is in mutual funds or stocks,
it is not FDIC-protected, but you might prefer to have higher-return
investments than the type that the FDIC insures.
IRA RULES AT A GLANCE
Annual IRA contribution limits
$3,000, under age 50
$3,500, age 50 and over
Income limits for...
* Contributing the full amount to a Roth: $95,000 (AGI)
single/$150,000 (AGI) married filing jointly.
* Converting to a Roth: $100,000, single or married filing jointly.
* Setting up a Roth: $110,000 single/$160,000 married filing jointly.
*Subscribers' names were withheld to protect their privacy.
-------------------------------------------------------------
Bottom Line/Personal interviewed Ed Slott, CPA and publisher, Ed
Slott's IRA Advisor, Rockville Centre, New York. www.irahelp.com.
He is author of The Retirement Savings Time Bomb and How to Defuse
It (Penguin USA).
http://www.amazon.com/exec/obidos/asin/0142003778/blpnet
Special Offer
***** THE FOUR MOST DANGEROUS WORDS IN MODERN MEDICINE! *****
"You are the doctor." Four simple words. A single, short
sentence that's repeated every day. Sounds innocent enough,
yet these four words can cost you your life. THE BIG BLACK
BOOK tells you why.
* Dangerous misdiagnoses: On page 94, you'll discover that
one in five patients is completely MISdiagnosed by their
doctor.
* Laboratory errors: Learn about how doctor-operated labs
have double the error rate of independent labs.
* Improper prescriptions: You'll learn how up to 20% of all
prescriptions you get in hospitals could be just plain
wrong.
* Toxic side effects of prescriptions: Three out of four
doctors fail to tell patients about them.
This and much more in the Big Black Book...
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*************************************************************
Breakthrough Therapies
Jeff Geschwind, MD
Heiko Sch�der, MD
Sheldon Sheps, MD
Special from Bottom Line/Health
Sophisticated radiologic techniques -- such as high-speed computed
tomography (CT) scans -- now are being used both as an alternative to
traditional surgery and as a new diagnostic tool for a number of
common ailments.
Typically administered by interventional radiologists, these
treatments are available at most medical centers across the US.*
Bottom Line/Health recently interviewed three leading experts about
these new therapies...
-------------------
Jeff Geschwind, MD, is associate professor of radiology, oncology and
surgery at Johns Hopkins University School of Medicine, and director
of cardiovascular and interventional radiology at The Johns Hopkins
Hospital, both in Baltimore.
CANCER TREATMENT
When surgical removal of a malignancy of the liver, kidneys, bone or
other organs is not an option, due to the size or location of the
tumor, patients may now receive a new therapy called radiofrequency
ablation.
What's involved: An interventional radiologist uses an ultrasound to
locate the tumor. A needle is then placed through the skin directly
into the malignancy. A radiofrequency current is emitted through the
needle to burn away the tumor without damaging surrounding tissue.
The treatment typically takes one to three hours and can be performed
as an outpatient procedure, without general anesthesia. Typical cost:
$13,000 to $20,000.
Important: Radiofrequency ablation is appropriate only for small
malignancies -- that is, tumors no larger than 3 cm to 4 cm in
diameter. This procedure is not a cure for cancer but can be used to
help control it.
VARICOSE VEINS
Approximately 25% of American women and 10% of American men suffer
from varicose veins. These occur when a vein's emptying mechanisms
malfunction, resulting in reflux (the pooling of blood), most often
in the legs or pelvis. Besides being unsightly, varicose veins also
can lead to chronic pain.
A new image-guided technique called vein ablation, done with
radiofrequency or laser heat, now makes it easier to destroy varicose
veins without surgery or the injection of chemical solutions.
What's involved: Guided by ultrasound, the radiologist threads a
small catheter into the varicose vein. The laser is then fired
briefly, which heats and seals the vein. The treatment takes less
than an hour, and the patient is up and walking 20 minutes later.
Typical cost: $2,000 to $3,000 per leg.
Another new technique uses image-guided therapy to eliminate varicose
veins in the pelvis. Some 9 million American women suffer from
unexplained chronic pelvic pain.
Known as pelvic congestion syndrome, this condition has traditionally
been difficult to diagnose and thought to be untreatable. Doctors now
believe many of these cases are caused by varicose veins in the
pelvis.
A venogram allows doctors to identify varicose veins in the pelvis.
During this procedure, a catheter is inserted and threaded through
the affected vein, and an X-ray dye is injected to highlight the
vein. An X ray is then taken. Next, small steel coils are implanted
to block blood flow through the abnormal vein. This causes the
varicose veins to shrivel and disappear. Typical cost: $7,000.
-------------------
Heiko Sch�der, MD, is assistant attending physician at Memorial
Sloan-Kettering Cancer Center and assistant professor of radiology at
Weill Medical College of Cornell University, both in New York City.
MALIGNANCY DETECTION
A new technology, known as PET-CT fusion, allows doctors to pinpoint
the precise location of cancer cells in the body (for all types of
cancer) without relying on additional imaging procedures and
examinations. The PET finds the small lesions, and the CT scan then
precisely pinpoints them.
What's involved: The patient first undergoes a CT scan, a
computer-enhanced X-ray study that produces two-dimensional images.
Then the patient undergoes a PET scan. For this test, a radioactive
substance called a "tracer" is injected into a vein. The patient next
is placed inside a ring-shaped PET scanner, which detects radiation
and records sites of high activity, where cancer is likely to be
present. The two tests take about one-half hour to perform.
Afterward, the radiologist "fuses" the results of a PET scan with the
detailed anatomical images of a CT scan. Typical cost: $2,000 to
$4,000 for both.
A study at Memorial Sloan-Kettering found that the use of combined
scans improved accuracy by 42% when diagnosing the location of tumors
of the head and neck.
-------------------
Sheldon Sheps, MD, is a cardiologist and emeritus professor of
medicine at Mayo Medical School in Rochester, Minnesota.
CORONARY ARTERY DISEASE
A new five-minute, noninvasive imaging test known as an electron beam
CT (EBCT) heart scan assesses the amount of calcium in your coronary
arteries. Because calcium is a major component of arterial plaque, a
high coronary calcium score indicates significant plaque buildup in
the blood vessels.
What's involved: A cardiologist or radiologist uses a recently
developed ultrafast-CT scanner that provides detailed pictures of
your heart. The procedure exposes the patient to relatively low
levels of radiation. Typical cost: $400.
A heart scan provides a quick and accurate assessment of heart attack
risk without the potential risks associated with an angiogram, in
which a catheter is used to inject a dye that can be seen on X rays.
* Interventional radiologists specialize in minimally invasive
treatments that use image-guided techniques. To find such a
specialist in your area, consult the Society of Interventional
Radiology, 800-488-7284, www.sirweb.org.
Special Offer
WHEN MEDICINE FAILS... WHEN DOCTORS FAIL... YOU'RE ON YOUR OWN
What if your doctor tells you there's nothing he can do to
help? That's what happened to Harry DeCamp. In response,
Harry went on an exploration that demonstrated the power of
the mind and spirit over scientific know-how. More than 10
years later, he wrote this story of how he overcame the
terminal cancer that he was told would doom him within
months.
Read on...
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*************************************************************
Answers to your questions from Bottom Line Experts...
I stopped exercising at night because my wife told me it
can cause insomnia. Is this true?
Answer from Shawn D. Youngstedt, PhD: Not necessarily.
Background: Strenuous exercise within two to three hours
of bedtime was once believed to lead to insomnia because
it elevates physiological arousal.
Now: New research suggests that working out even 30 minutes
before bedtime may not affect your sleep. This is good
news for exercisers who get home late from work or prefer
evening workouts.
Helpful: If you exercise close to bedtime, try moderate
aerobic activity (walking, swimming, etc.) for a few
weeks. If you're still sleeping well, slowly build up
your intensity.
Our inside source: Shawn D. Youngstedt, PhD, assistant
professor of exercise science, Arnold School of Public
Health, University of South Carolina, Columbia. His study
was published in Medicine & Science in Sports & Exercise.
*************************************************************
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