Investment Question

[Ted Hart]

Hi, So I'm about to run into about $65k dollars because of some stock
that was given to me, and I will be forced to sell for one reason or
another. I will have to pay taxes on that of course so it will amount
to something less.

I want to invest it into some type of interest bearing account but I
know very little about what exists. I have heard about high interest
savings accounts, Money Markets and CDs. My question is, what is the
best way to go? I know that is pretty general but like I said, this is
just a first step. Some general information would be appreciated.

Thanks. Ted

[John A. Weeks III]

In article >,
Ted Hart > wrote:

> Hi, So I'm about to run into about $65k dollars because of some stock
> that was given to me, and I will be forced to sell for one reason or
> another. I will have to pay taxes on that of course so it will amount
> to something less.
>
> I want to invest it into some type of interest bearing account but I
> know very little about what exists. I have heard about high interest
> savings accounts, Money Markets and CDs. My question is, what is the
> best way to go? I know that is pretty general but like I said, this is
> just a first step. Some general information would be appreciated.

It sounds to me like you have some life events that are happening.
My suggestion is to park the money for a while, and let you get
these life events sorted out. Put the money into a money market
account, perhaps at your local bank or credit union. Don't let
anyone try to talk you into something else, don't buy insurance
with it, and don't take any fliers.

After 4 or 6 months, when life gets sorted back out, then you
have time to figure out something better. You might have time
to do some reading in the mean time. At that time, you will
want to figure out your retirement options, and how to best
invest the rest.

The only exception to this advice would be to take the money
you need to max out your IRA or ROTH for 2006. If you have
someone do your taxes, they can tell you how much you need.
Again, go to your bank, and open the right kind of account,
and put the funds into a money market to buy some time.

The benefit of the money market is that it has a pretty good
return for a safe investment, and it is safe. It also has
no restrictions, so you can get at it any time. You are
not locked in.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708
Newave Communications http://www.johnweeks.com
================================================== ====================

[kastnna]

On Mar 1, 4:00 am, Ted Hart > wrote:
> Hi, So I'm about to run into about $65k dollars because of some stock
> that was given to me, and I will be forced to sell for one reason or
> another. I will have to pay taxes on that of course so it will amount
> to something less.

What is the source of the funds? Managing the tax consequences of the
scenario might be the best first move you could make.

After that, I'd listen to Mr. Weeks

[FranksPlace2]

On Mar 1, 4:00 am, Ted Hart > wrote:
> Hi, So I'm about to run into about $65k dollars because of some stock
> that was given to me, and I will be forced to sell for one reason or
> another. I will have to pay taxes on that of course so it will amount
> to something less.
>
> I want to invest it into some type of interest bearing account but I
> know very little about what exists. I have heard about high interest
> savings accounts, Money Markets and CDs. My question is, what is the
> best way to go? I know that is pretty general but like I said, this is
> just a first step. Some general information would be appreciated.
>
> Thanks. Ted

I agree with John but also get a book about money. Pick one of the
top selling ones on Amazon. You have to learn to take care of your
money.

Frank

[Elle]

Re a windfall in the neighborhood of $65k:
I agree with the comments about double checking how to
minimize taxes on this windfall.

What, if any, are your debts? E.g. student loans, car loans,
home mortgage? Please give interest rates and time on each.

Where do you currently have financial accounts? E.g. a
certain brokerage? A bank? Who holds your IRA? Your 401(k)?
Answering these might help quickly narrow your choices for
the lowest risk, highest yield place to park your money.

[darkness39@yahoo.com]

On Mar 1, 2:44 pm, "FranksPlace2" > wrote:

> I agree with John but also get a book about money. Pick one of the
> top selling ones on Amazon. You have to learn to take care of your
> money.

One shouldn't be worried about the 'for Dummies' titles. The books in
these series are typically full of helpful advice.

http://www.dummies.com/WileyCDA/DummiesTitle/productCd-0470038322,subcat-PERSONAL.html

http://www.dummies.com/WileyCDA/DummiesTitle/productCd-0764571915,subcat-PERSONAL.html

[jIM]

>
> I want to invest it into some type of interest bearing account but I
> know very little about what exists. I have heard about high interest
> savings accounts, Money Markets and CDs. My question is, what is the
> best way to go? I know that is pretty general but like I said, this is
> just a first step. Some general information would be appreciated.
>


CD- Certificate of deposit. Available at local banks. Pays you
interest, their is a penalty if you pull money out before CD matures.
CD could be 3 months, 6 months, 1 year 3 year...

Money Markets. Available at local banks and brokerages. If the
stocks are held at a brokerage, you could sell the stocks and possibly
hold proceeds in a money market at the brokerage.

Savings accounts. Available online and at a local bank. Pays low
amount of interest.

I would be looking for a 4-6% interest rate. Most Money markets I see
are for 5% right now. 5% is adequate while you park the money and
wait (John Weeks gave good advice).

If the stocks were "given" to you. How they were "given" would affect
how they are taxed.

[Ted Hart]

John A. Weeks III wrote:

> In article >,
> Ted Hart > wrote:
>
>
>>Hi, So I'm about to run into about $65k dollars because of some stock
>>that was given to me, and I will be forced to sell for one reason or
>>another. I will have to pay taxes on that of course so it will amount
>>to something less.
>>
>>I want to invest it into some type of interest bearing account but I
>>know very little about what exists. I have heard about high interest
>>savings accounts, Money Markets and CDs. My question is, what is the
>>best way to go? I know that is pretty general but like I said, this is
>>just a first step. Some general information would be appreciated.
>
>
> It sounds to me like you have some life events that are happening.
> My suggestion is to park the money for a while, and let you get
> these life events sorted out. Put the money into a money market
> account, perhaps at your local bank or credit union. Don't let
> anyone try to talk you into something else, don't buy insurance
> with it, and don't take any fliers.
>
> After 4 or 6 months, when life gets sorted back out, then you
> have time to figure out something better. You might have time
> to do some reading in the mean time. At that time, you will
> want to figure out your retirement options, and how to best
> invest the rest.
>
> The only exception to this advice would be to take the money
> you need to max out your IRA or ROTH for 2006. If you have
> someone do your taxes, they can tell you how much you need.
> Again, go to your bank, and open the right kind of account,
> and put the funds into a money market to buy some time.
>
> The benefit of the money market is that it has a pretty good
> return for a safe investment, and it is safe. It also has
> no restrictions, so you can get at it any time. You are
> not locked in.
>
> -john-
>

I don't think I'm having any life events except I'm getting a huge sum
of money I don't know what to do with. I like the money market/ reading
up idea. And I didn't know there were no restrictions. This is forcing
me to look into investing. Thx - Ted


======================================= MODERATOR'S COMMENT:
Please trim the post to which you are responding. "Trim" means that except for a FEW lines to add context, the previous post is deleted.

[PeterL]

On Mar 1, 2:00 am, Ted Hart > wrote:
> Hi, So I'm about to run into about $65k dollars because of some stock
> that was given to me, and I will be forced to sell for one reason or
> another. I will have to pay taxes on that of course so it will amount
> to something less.
>
> I want to invest it into some type of interest bearing account but I
> know very little about what exists. I have heard about high interest
> savings accounts, Money Markets and CDs. My question is, what is the
> best way to go? I know that is pretty general but like I said, this is
> just a first step. Some general information would be appreciated.
>
> Thanks. Ted


Check out bankrate.com for current CD rates.

[Ted Hart]

Elle wrote:

> Re a windfall in the neighborhood of $65k:
> I agree with the comments about double checking how to
> minimize taxes on this windfall.
>
> What, if any, are your debts? E.g. student loans, car loans,
> home mortgage? Please give interest rates and time on each.
>
> Where do you currently have financial accounts? E.g. a
> certain brokerage? A bank? Who holds your IRA? Your 401(k)?
> Answering these might help quickly narrow your choices for
> the lowest risk, highest yield place to park your money.
>

I don't understand why all that would matter but here's my situation.

I'm debt free, I've been careful. Have a small 401k (fidelity) started
through my company, no matching. I just guessed at where to distribute
the money. It doesn't seem to grow very fast. I have a mortgage on a
townhouse (around 6%) I've been paying on it for 3 years. With that I
just make ends meet but at least I'm not paying rent.

I consider myself in good shape, I just have no reserve and a very small
retirement fund. So this will be a big leap ahead for me.

Besides that I plan to make a few small purchases. I need some
furniture and the rest is getting stashed away.

[Ted Hart]

kastnna wrote:

> On Mar 1, 4:00 am, Ted Hart > wrote:
>
>>Hi, So I'm about to run into about $65k dollars because of some stock
>>that was given to me, and I will be forced to sell for one reason or
>>another. I will have to pay taxes on that of course so it will amount
>>to something less.
>
>
> What is the source of the funds? Managing the tax consequences of the
> scenario might be the best first move you could make.
>
> After that, I'd listen to Mr. Weeks
>

I was gifted some stock by an individual, and the company is being sold.
Apparently there will be a payout to the shareholders. I was
wondering if I had to pay the taxes right away or could invest the lump
sum and pay the taxes next year?

[Ted Hart]

wrote:

> On Mar 1, 2:44 pm, "FranksPlace2" > wrote:
>
>
>>I agree with John but also get a book about money. Pick one of the
>>top selling ones on Amazon. You have to learn to take care of your
>>money.
>
>
> One shouldn't be worried about the 'for Dummies' titles. The books in
> these series are typically full of helpful advice.
>
> http://www.dummies.com/WileyCDA/DummiesTitle/productCd-0470038322,subcat-PERSONAL.html
>
> http://www.dummies.com/WileyCDA/DummiesTitle/productCd-0764571915,subcat-PERSONAL.html
>

looks good, thx

[Elle]

"Ted Hart" > wrote
> I have a mortgage on a townhouse (around 6%) I've been
> paying on it for 3 years.

The mortgage is something to consider paying down (in part
or full) with your windfall, depending on the mortgage's
terms, your tax bracket, etc.

For someone with, say, a car loan at 10%, it's pretty
obvious that paying off the loan is the best place to put
some of one's windfall. This is why I asked about debts. But
with a home mortgage at around 6%, it's less clear.

[PeterL]

On Mar 1, 11:58 am, Ted Hart > wrote:
> kastnna wrote:
> > On Mar 1, 4:00 am, Ted Hart > wrote:
>
> >>Hi, So I'm about to run into about $65k dollars because of some stock
> >>that was given to me, and I will be forced to sell for one reason or
> >>another. I will have to pay taxes on that of course so it will amount
> >>to something less.
>
> > What is the source of the funds? Managing the tax consequences of the
> > scenario might be the best first move you could make.
>
> > After that, I'd listen to Mr. Weeks
>
> I was gifted some stock by an individual, and the company is being sold.
> Apparently there will be a payout to the shareholders. I was
> wondering if I had to pay the taxes right away or could invest the lump
> sum and pay the taxes next year?


You won't have to pay taxes until after your shares are sold. If the
payout to shareholders occurs within one year of your acquiring the
stock, you'll have a short term capital gain event. Otherwise a long
term gain event. You'll need to find out from the individual who gave
you the stock what the cost basis of the stocks is, because that is
the cost basis you'll be using to calculate your gains.

[PeterL]

On Mar 1, 11:58 am, Ted Hart > wrote:
> Elle wrote:
> > Re a windfall in the neighborhood of $65k:
> > I agree with the comments about double checking how to
> > minimize taxes on this windfall.
>
> > What, if any, are your debts? E.g. student loans, car loans,
> > home mortgage? Please give interest rates and time on each.
>
> > Where do you currently have financial accounts? E.g. a
> > certain brokerage? A bank? Who holds your IRA? Your 401(k)?
> > Answering these might help quickly narrow your choices for
> > the lowest risk, highest yield place to park your money.
>
> I don't understand why all that would matter but here's my situation.

Because you can't give advice to someone without knowing the overall
financial circumstance of that person. If that person has a lot of
debt then maybe the advice would be to pay down that debt. If that
person is 60 yrs old then maybe the advice would be to be more
conservative.



>
> I'm debt free, I've been careful. Have a small 401k (fidelity) started
> through my company, no matching. I just guessed at where to distribute
> the money. It doesn't seem to grow very fast. I have a mortgage on a
> townhouse (around 6%) I've been paying on it for 3 years. With that I
> just make ends meet but at least I'm not paying rent.
>
> I consider myself in good shape, I just have no reserve and a very small
> retirement fund. So this will be a big leap ahead for me.
>
> Besides that I plan to make a few small purchases. I need some
> furniture and the rest is getting stashed away.

[Tad Borek]

Ted Hart wrote:
> I was gifted some stock by an individual, and the company is being sold.
> Apparently there will be a payout to the shareholders. I was
> wondering if I had to pay the taxes right away or could invest the lump
> sum and pay the taxes next year?

Ted, this is actually a complicated question. The way to phrase it is,
"will you be required to make estimated tax payments for 2007?" Maybe,
maybe not. See the instructions for Form 1040ES...here's a link to the
PDF from the IRS website - the packet explains estimated taxes in detail
and has vouchers for sending in payments:
http://www.irs.gov/pub/irs-pdf/f1040es.pdf

Your state should have a similar form/worksheet, the rules are different
in each state.

On that worksheet you'll need to enter your expected gain from this sale
of stock. Find out from the person who gave you the gift what their cost
basis and purchase date were -- both transfer over to you (with some
rare exceptions). The difference between that cost basis and the buy-out
price is your capital gain, and that's taxed at one of several rates
depending on your income level and how long the stock has been held.
Here's the IRS explanation of the taxes on that:
http://www.irs.gov/taxtopics/tc409.html

If you are required to make estimated payments, some money will be due
each quarter, beginning with the quarter after the date of the buy-out.
The due dates for quarterly estimated taxes each year are April 15, June
15, Sept 15, Jan 15 (shifted a day or two if it falls on a holiday).

If they aren't required, you can pay any balance due when you file your
taxes. But if you don't make required estimated payments, you're charged
interest for paying late, even if you pay in time come April.

-Tad

[Rich Carreiro]

"PeterL" > writes:

> You won't have to pay taxes until after your shares are sold. If the
> payout to shareholders occurs within one year of your acquiring the
> stock, you'll have a short term capital gain event. Otherwise a long
> term gain event.

That's not true. Assuming the giver held the stock at a paper
gain when they were gifted, the recipient picks up the giver's
basis AND holding period. So what matters re: long-term/short-term
is when the giver acquired the stock, not when the gift was made.

--
Rich Carreiro

[joetaxpayer]

PeterL wrote:
>>
>>>>Hi, So I'm about to run into about $65k dollars because of some stock
>>>>that was given to me, and I will be forced to sell for one reason or
>>>>another.
>
> You won't have to pay taxes until after your shares are sold. If the
> payout to shareholders occurs within one year of your acquiring the
> stock, you'll have a short term capital gain event. Otherwise a long
> term gain event. You'll need to find out from the individual who gave
> you the stock what the cost basis of the stocks is, because that is
> the cost basis you'll be using to calculate your gains.

Aquisition date follows as well as cost basis, the clock for Long Term
Cap Gain doesn't start on the gift date.

JOE

[joetaxpayer]

Ted Hart wrote:

> Elle wrote:
>
>> Re a windfall in the neighborhood of $65k:
>> I agree with the comments about double checking how to minimize taxes
>> on this windfall.
>>
>> What, if any, are your debts? E.g. student loans, car loans, home
>> mortgage? Please give interest rates and time on each.
>>
>> Where do you currently have financial accounts? E.g. a certain
>> brokerage? A bank? Who holds your IRA? Your 401(k)? Answering these
>> might help quickly narrow your choices for the lowest risk, highest
>> yield place to park your money.
>>
>
> I don't understand why all that would matter but here's my situation.
>
> I'm debt free, I've been careful. Have a small 401k (fidelity) started
> through my company, no matching. I just guessed at where to distribute
> the money. It doesn't seem to grow very fast. I have a mortgage on a
> townhouse (around 6%) I've been paying on it for 3 years. With that I
> just make ends meet but at least I'm not paying rent.
>
> I consider myself in good shape, I just have no reserve and a very small
> retirement fund. So this will be a big leap ahead for me.
>
> Besides that I plan to make a few small purchases. I need some
> furniture and the rest is getting stashed away.

Elle's questions are all aimed at providing a well-reasoned answer. The
more details, the better the advice. For example, I'd suggest you
consider a Roth IRA. You put in post tax money, and it's never taxed
again. In an emergency, it may function as a source of funds, so it's
less 'tied up' than the 401(k). Debt free is good. Since it sounds like
you don't itemize deductions, the mortgage is costing you the full 6%,
and paying it down isn't a bad idea. (I know, there are some pretty high
end Town Houses so the real estate tax and mort interest may be over the
standard deduction). These are the things that can change a reply.
JOE

[PeterL]

On Mar 1, 3:44 pm, Rich Carreiro >
wrote:
> "PeterL" > writes:
> > You won't have to pay taxes until after your shares are sold. If the
> > payout to shareholders occurs within one year of your acquiring the
> > stock, you'll have a short term capital gain event. Otherwise a long
> > term gain event.
>
> That's not true. Assuming the giver held the stock at a paper
> gain when they were gifted, the recipient picks up the giver's
> basis AND holding period. So what matters re: long-term/short-term
> is when the giver acquired the stock, not when the gift was made.
>
> --
> Rich Carreiro

Stand corrected.

[FranksPlace2]

On Mar 1, 1:58 pm, Ted Hart > wrote:
> Elle wrote:
> > Re a windfall in the neighborhood of $65k:
> > I agree with the comments about double checking how to
> > minimize taxes on this windfall.
>
> > What, if any, are your debts? E.g. student loans, car loans,
> > home mortgage? Please give interest rates and time on each.
>
> > Where do you currently have financial accounts? E.g. a
> > certain brokerage? A bank? Who holds your IRA? Your 401(k)?
> > Answering these might help quickly narrow your choices for
> > the lowest risk, highest yield place to park your money.
>
> I don't understand why all that would matter but here's my situation.
>
> I'm debt free, I've been careful. Have a small 401k (fidelity) started
> through my company, no matching. I just guessed at where to distribute
> the money. It doesn't seem to grow very fast. I have a mortgage on a
> townhouse (around 6%) I've been paying on it for 3 years. With that I
> just make ends meet but at least I'm not paying rent.
>
> I consider myself in good shape, I just have no reserve and a very small
> retirement fund. So this will be a big leap ahead for me.
>
> Besides that I plan to make a few small purchases. I need some
> furniture and the rest is getting stashed away.

My guess is you want to accumulate some after tax funds (i.e. not in a
retirement account) as a reserve and for future expenses. I suggest
you put about 2/3 of your windfall into index funds at Fidelity (where
you already have a retirement account). Call them up and they will
answer all your questions.

This is a reasonable way to learn about managing your money.

Frank

[Ted Hart]

Just wanted to thank everybody for all of the responses. It's been a
great help I now have some things to look into and start thinking about.
- Ted