Dilemma: no tax instruments? Or tax instruments?

Rosedala · #1 (**permalink**) 10-19-2007, 10:41 PM

Hello, would someone be able to help me decide on a couple of dilemmas please?

I have around $150,000 in a triple tax-free loose money market while waiting to find some good tax-free zero coupon bonds, but these are for over 15 years at rates same as CDs for less time. They'll most probably outlive me...And/or CD-type fixed annuities. Actually I'll invest only $100,000 so I can have some liquid money for a possible contingency.

I have an IRA which I just put into a nice 6% APY CD. I live off my Social Security and a small yearly IRA distribution.

The reason I chose triple tax-free instruments (at lower rates) was that the brokers didn't have to report them with 1099s (being all tax free) and by not reporting them I could get a little cut in my apartment rent. Also I avoid paying taxes, a more complicated tax return, hiring a tax preparer (I'm bad with math), more and more papers, etc. But now they all report everything regardless of being all tax free which of course I must report on the tax return too, which makes me not eligible for a rent cut, so I wonder about the following in view of the above:

(1) Should I invest in taxable instruments at little higher rates, BUT: pay taxes, pay higher apt. rent, pay a tax preparer, be constanty buried in papers, etc.? OR:

(2) Continue looking for triple tax-free zero coupon bonds and/or CD-type fixed annuities (which are tax-deferred), and then since all of them will have to be reported anyway because of the 1099s, I'll still have to pay higher rent?

I don't like stocks and other kinds of bonds or any other investments that need staying constantly on top of them. Also, can't afford risking my principal or interest through variables or fluctuations since I'm a very old senior and could never replace the loss.

Thanks ever so much for any help in sorting out this tangle of mine. If it's too complicated, please just discard...I understand. :-) Rosedala

P.S. Please forgive the lengthy message...

Dru · #2 (**permalink**) 10-20-2007, 02:12 AM

Rosedala, you seem far too clever to be worried over some tax issues. I have found that hiring an accountant never cost me anything, it always saved me money.

Here is a little thought for such an active sounding and clever lady. It seems you have an interest in money and investing. Do you have other interests as well? Why not consider starting some sort of business? It would be entertaining and could be beneficial to many of your friends and neighbors. You could become a counselor to your peers about how they can find great returns or what to do with their money. Or maybe something else would be of interest for fun and satisfaction. Having a business could give you the opportunity to expense many things you may use for the business. This may reduce your income, allow you to have money in a business separate from your living money, or more. Find a good accountant or attorney who helps people set up a business and see what ideas they may have.

Good Luck.

GarySpicuzza · #3 (**permalink**) 10-29-2007, 07:55 AM

Rosedala, I may have missed something or didn't fully understand your post but you wrote:

Quote:

I live off my Social Security and a small yearly IRA distribution.

You didn't indicate that you needed or are using your earnings from your "other" $150,000.

If that's true then I agree with your idea of perhaps investing $100,000 into either a Traditional Fixed or a Fixed Indexed Annuity and leaving $50,000 as readily available cash on hand.

Your comments regarding 1099s on annuities isn't exactly correct.

You don't get a 1099 UNLESS and until you make a withdrawal. Otherwise all the cash grows tax deferred and the insurance company doesn't report your year to year interest earnings.

Easy To Get Credit Cards · #4 (**permalink**) 11-03-2007, 10:03 PM

Gary is correct. Get a non interest bearing business account and open it up in an LLC name.

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