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Show Sunday. January 1 2005 DAILY HERALD E3 THE WALL STREET JOURNAL LOVe d Momy By EllCOre Jeff D. Opdyke This Year, As a rate that will help her gain ground on me. Because Amy has followed my job all these years, she has changed employers frequently and hasn't accumulated nearly as much retirement money as I have. So, I'll be setting up her account so that she saves about 7 of her salary to start with, and we'll nudge that up yearly until she hits the annual ceiling. to save at 2005 kicks off, my wife and I have been in what has become a family tradition: chatting about what we want to achieve in the new year to improve our family's financial security and quality of life. In truth, the effort stems from one of those corny motivational posters that I saw years ago and that has stuck with me: If you can see it, you can be it. The message, to me, was that if you can define your goals and implement a realistic plan for attaining them, you can reach whatever aspiration you can dream up. Reread that last sentence and focus on one word: realistic. Too many people set reasonable goals for themselves, but it all falls apart because the path they prescribe is totally unreasonable. For instance, they may establish an absurd budget that squeezes all the fun out of life-a- nd which they have no hope ' of adhering to. As an Eddie Murphy character once remarked in a movie: You can't fly into flying; you first must learn to walk. It's the same with money. Whether your goal is your family's first $1,000 or its first million, the journey begins with the first buck. In hopes of encouraging others to spend a little time planning their own future, this is how Amy and I have outlined our financial journey through 2005: To a certain degree. Amy and I face an easier road this year than last. Amy's new job as a hospital administrator bumped up her pay and gives us greater flexibility in planning. There's a temptation to take advantage of our good fortune and live it up. We'd love to have a TV for the family room, or get a new car to replace Amy's Durango with 108,000 miles, or splurge on that New Zealand vacation I've coveted for years. Lots of my friends do that: They get a little extra money, and their first inclination is to buy something instead of saving it for later. But neither of us wants to give in to that temptation. My feeling is that you can live on caviar now, so Inn ct op imii stAn'i minrf pot fnrA later. college-saving- college-saving- tween $35,000 school expenses ;:id $40,000 Neither sum is likely to be enough to fund a diploma. But that misses the point. We're saving what we can afford just to have something-anything- -to help pay for tuition and books and whatnot when college arrives. Because the truth is, numerous options exist to pay for college if ultimately you can't cover the whole nut. Kids can work, for instance. They can apply for scholarships and grants. They can borrow, then use their own working years to repay the debt. By and large, however, your own retirement cannot be financed once you've reached it, and retirement is more important than a fully funded college nest egg. That sounds put your needs above your kids'-b- ut in reality it helps them as much as you. A parent's financial means that in retirement you won't impose a de facto tax on your kids' income when you realize you saved poorly and start hitting them up for your living expenses. Amy and I see that our own fully funded retirement is the best gift we can ever give our kids. Thus, money we might be tempted s to stick into a account is instead going into our 401(k) plans. To that end, Amy wants to begin saving in her 401(10 early in 2005, when she's eligible to contribute at Her new job. And she wants college-saving- tn Expert with Your Digital ""i the 'slick' sales pitches, I made decision! Demystified -- Do You Really Need Three Megapixels? And Wh&J Is a Megapixel, Anyway? Bv VVai.tek S. Thank you FPS,Milford,CT IF Wall Street Journal readers save their own time and money through the pages of the Personal Journal section. Our technology coverage is extensive and helps you make the best choices in products. Start your Journal subscription today. for new suUcribarc in the continental only. Offer food righu reserved. 3SD289 jj( 3-- DOW ley Ho, long monopoly. The SandS Ca- sino in Macau Kelly Greene writes for "Encore," The Wall Street Journal's quarterly guide to retirement. Write to her at encore6wsJ.com netian. The IPO shares were priced at $29 but they've shot up to $48, giving the company a market value of $17 billion higher than MGM Mirage's $10 billion. The Street generally values casino companies on pre-ta- x cash flow. Las Vegas valuation Sands' stock-markmeans that it is fetching 27 times cash flow of projected 2005 pre-ta- x $625 million. MGM Mirage, at a recent $72, stood at about 11 times sources that are By Tom IPO (LVS) 50 estimated 2005 cash flow. Las Vegas Sands' cash flow is expected to boom in 2007, when 40 35 : ; pro price (T - ffm 11 II 17 $29 ill31 II m 11 dm.'M Source: TtwmsonBaseline designer clothing. the nation's biggest company, sells H&R Block, ductionPro," saying it values items from clothing and baby accessories to furniture and electronics. Details are at www.taxcut.com online. Also, some charities may offer their, own general estimates. For details on giving, including when you need qualified written appraisals, see IRS Publications 526 and 561. Bary is a senior editor of Barron's magazine, which is available online at www.barrons.com Andrew indi- bought a home In Florida In It for about a $35,000 profit In 2004. To date, I have not bought another home. What are the tax Implications? J.B., Bonlta Springs, Fla. Based on what you've told me, you shouldn't owe Uncle Sam tax on that sale. I any capital-gain- s hear often from readers who remember there once Was a law allowing home sellers to defer capital-gain- s tax by rolling over the proceeds into a new home. But Congress changed the rules in the late I Q, 2000 and sold A, 1990s, effectively eliminating capital-- tax for most people, who sell a primary residence. Now you generally can exclude as much as $250,000 of your gain if single and as much as $500,000 if married filing jointly. To qualify for the full exclusion, you must own the home and live in it as your primary residence for at least two of the five years prior to the sale. Details are in IRS publications 17 and 523. gains I purchased a car for my niece Qa this year for $4,000. Will I be able to deduct that from my Income tax as a gift? CM., Colorado No. The IRS instructions are very clear on this point: "You can deduct your contributions only if you make them to a qualified or- "ItsDe-ductibl- e including clothing, toys and sporting goods. 'You can buy an electronic version (as I did a few days ago at Staples in Torrington, Conn., for about $20) or a "workbook" in a paperback booklet form. Company officials say they base their valuations on "extensive research of re-sale outlets across the country" and recent, data from eBay auctions. "I use ItsDeductible myself, and I think they do a good job," says Stephen W. DeFilippis, owner of West Suburban Income Tax Service ' it in plans to open new casino-resort- s Macau and Vegas. But even if it can reap $1.5 billion of cash flow in 2008, the stock looks pricey. The IPO probably has made the Mr. Adelson very happy. His 88 stake is valued at $15 hil lion, making him one of America's richest men. But investors who , don't already own Las Vegas Sands stock might be happier if they wait for a pullback before placing a bet. marked for relief to a particular vidual or family. Herman in Wheaton, III. A colleague of mine who used it says she was pleasantly surprised to see how much she could deduct, especially for fairly inexpen- sive. Consider TurboTax's Sands opened in May and already is hugely profitable. The Las Vegas Sands takes its name from a hotel popular with Frank Sinatra and the rest of the Rat Pack in the late 1950s and early 1960s. Sheldon Adelson, CEO and controlling holder, bought the Sands in the late 1980s and destroyed it to make room for the Ve (www.ltsdeductlble.com), . x 45 a casino operator who had a decades- t Jones li- - held by Wynn Re- sorts and Starv a product that values many items THE WALL STREET JOURNAL Inc. All casino-resor- Las Vegas stock price since $55 censes there. The others are A, zoom," with no mention of battery life. Here's a guide to deciphering i some of that techno-ba- Business. And the Business of Life. Sands holds one of only three casino R.E.L., Oro Valley, Ariz. I'm sorry to hear about your husband. The Internal Revenue Service doesn't have a publication that values used clothes, golf clubs, furniture and other such items that people donate to charity. The IRS says you typically can deduct an item's value, but it doesn't provide much help in figuring out what that might be. But there are some excellent put-sid- e "2.1 megapixel digital 3X optica!3X digital t the account until your spouse would have turned 70S years old, Mr. Lockwood notes. At that point, if you're older than that, you would have to start taking withdrawals. But if you're younger, you could roll the assets into your own IRA "and let it sit there until you turn 70S," he says. Either way, when you roll the money into your own account you get to stretch those payments across your life expectancy. Finally, make sure you don't miss this tax break: You can deduct estate tax already paid on an IRA you inherit from your income-ta- x bill, Mr. Lockwood says. To do so, get the accountant who handled the estate-tareturn to calculate what part of the overall bill was due to the IRA. Then you can deduct that portion from your federal tax bill, offsetting the taxes on the IRA withdrawal you make for the same year. By Andrew Bary husband passed away in I wish to donate his clothing and expensive golf equipment to a local charity. How can I find out the value placed on these articles by the IRS? a digital camera, there lots of things to consider, but three key factors stand out as most important: megapixels, zooming and batteries. An advertisement for a digital camera are not completely satisfied, write "cancel" on the invoice and owe nothing. Or, receive an additional 13 weeks for only $59. That 's the regular price of a subscription...your first 4 weeks are FREE! Company, Jeff Opdyke covers personal finance for The Wall Street Journal. Write him at lovemoney6wsJ.com My If you i protect and expand your savings. And that's our map for 2005. The journey starts today. Q, June. Trial Subscription! ek O 2003 Dow Jones along your path that you might try to sidestep if you can in order to - Mossbekc for Your FREE Call - fooling with finances. The point, however, is that we all generally save rather mindlessly for retirement, but it's prudent every now and then to look out for potholes Ask YOU'RE IN THE MARKET might read: camera with If you're the inheriting spouse, you don't have to do anything with The Sept. 30 deadline is even more important if you inherit an IRA jointly with a charity, since a charity has a life expectancy of zero. If the charity doesn't take its share of the account by that date, and if the original owner died before starting required distributions (at age 70S), a tax rule kicks in that would force you to cash out the entire account in five years. (The clock starts the year after the IRA owner's death). If the original owner already was making required withdrawals when he or she died, you would have to spread your withdrawals on the Vegas Strip behind industry leader MGM Mirage's Bella-gio- . It also operates a new casino in Macau, a former Portuguese colony near Hong Kong that China's government is trying to turn into Asia's Vegas. Macau is the only place in China with legal gambling. Wall Street is excited about Macau because of the big pent-u- p demand for gambling among Chi- na's 1.3 billion people. Las Vegas lnxff.i The Mossberg Solution: Jj Camera JJ The enough knowledge to challenge For the inheriting spouse Sharing With a Charity month's initial public offer-- ' Las Vegas Sands (LVS) turned two of the stock market's hottest themes casinos and China into a blockbuster success. But the shares' heady gains since then have made them seem overpriced to some investors, despite Las Vegas Sands' strong prospects. The company owns the Venetian, Gadgets and bought one. Armed with d I'm not implying that everyone should follow such a prescription. All families have different needs, different risk tolerances -- and different tolerances for the pain of the you know... it was Lock-woo- Lock-woo- Last by THE WALL STREET JOURNAL. digital cameras that I went out better-informe- If you decide, instead, to share withdrawals from the inherited account (to avoid the extra paperwork), you get stuck using the life expectancy of the oldest heir. Consider a situation in which there are three sisters, ages 40, 45 and 50. According to Steven president of Lockwood Pension Services in New York, "the payment would be based on the life expectancy of the and that payment would be divided three ways." This means the younger sisters would end up with larger withdrawals over a shorter time period sister (given that the would have the shortest life expectancy). So, they would enjoy less growth on the assets than if they were making withdrawals based on their longer life expectancies. Sizzling Las Vegas Sands May Be Too Rich a Game after reading your article on a Three Sisters rency. s FREE 4Weelt Trid 46 Just to let for ! BarrOn'S Insight What la Foremost for me is beefing up our emergency-casaccount. Because I now work remotely for my company, I'm at greater risk of losing my job in a round of budget cutting. As such, we need a larger cushion than is normally prudent. That means more money going into a savings account and into Treasury notes (the tea leaves I'm reading say higher interest rates and inflation are on tap for 2005). The lesson for all is to routinely your own family's financial safety net when life dishes up a change. Without question, increasing our retirement saving is on my list. But this year, a larger slug of our investments will go overseas as a way to protect our portfolio. I don't mean to sound like an investment geek here, but I'm concerned about the U.S. dollar for many reasons. So, Amy and I have agreed to increase the amount of money going into a foreign mutual fund. We also plan to open a small savings account at a Canadian bank to trim our exposure to the U.S. curtion-protected For Amy, an overriding goal is "to restructure our spending plan for 2005 so that we account for a second child." We adopted a baby girl from China in October, and now face all the costs inherent in raising another kid. Instead of just winging it financially. Amy wants to sketch out the expenses so that we can better plan for both the necessary and costs of nonessential outlays-t- he having two tuitions as well as the family trip to the beach. This way, we're not as likely to be surprised by our finances: We know what's coming in and we know what's going out. Amy's second goal: to ensure s acthat we fund a count early for our daughter. We had good intentions of saving early with our son...but we lollygagged. We always seemed to be putting it off until tomorrow because he was so young that we figured, what difference does a few years make? A lot, it turns out. I've noted previously that Amy s 529 and I opened a and for our that son, plan we pledged to increase the contributions each year by $10 a month. That means we should start saving $70 a month in 2005. This year, however, we're jumping to $150 a month-$1- 25 for our son, $25 for our daughter. Given the number of years each has before college, I calculate that each will have be across yqur benefactor's life expectancy (You could use your own life expectancy if the charity had been cashed out.) To avoid this potential snag, Mr. Lockwood says, he often advises clients planning to give part of their IRA assets to a charity to set up a separate IRA in the organization's name. Again, all these rules involve inheriting an IRA from someone other than a spouse. As we mentioned last week, the most basic rule of thumb in such circumstances is: Never roll the money into your own IRA. Spouses, by contrast, are allowed to roll over inherited accounts into their own. However, a spouse should take some time to think through the best strategy for making such a move. "You shouldn't do the rollover too fast, and you should keep in mino. inai you can ao a paruai rollover at any time," says Mr. you inherit an IRA jointly someone else, it pays to up the account. Last week, we highlighted the Dec. 31 deadline for starting withdrawals from an individual retirement account that you inherit from someone other than your husband or wife. But if you are named as one of two or more heirs, mark Sept. 30 on your calendar. You can divide an inherited IRA into separate accounts-one for each heir-- by that date in the year following the original owner's death, allowing each heir to spread withdrawals across his or her own life expectancy. h , n IRA Inheritance, Part 2 If Resolve to . . . "We By Kelly Greene A. . ' ganization." Examples would include churches, synagogues, schools, universities, the Red Cross and other charities. Also, you can't deduct any contributions unless you itemize instead of taking the standard deduction. Most people claim the standard deduction and thus can't deduct any charitable gifts. The IRS also says you can't deduct contributions ear- - Herman's "Tax Report" ,', appears Wednesdays in The Wall Street Journal. Send questions on finances, investments or taxes to: Tqm 8skdowJones.sundayO30wsJ.coin and include your name, address and a' daytime telephone number. Questions may be edited; we regret that we cannot answer every letter. |
