Q: I just changed my job, left a big corporate job after 10 years with the company having 401(k) worth $100,000. I am heading to a new job at a new company that also offers 410(k) plan. What should I do with the money in my old plan?

Q: Should I borrow from my 401(k) Account?

Q: I have elderly relative who needs help, what kind of options available ?

Q: Can I sell my own house myself?

Q:I am thinking of buying a long term care policy, What should I look for in a Long Term Care Policy?

Q:I am in the market for a new car. Should I buy a car or lease one?

Q: I just changed my job, left a big corporate job after 10 years with the company having 401(k) worth $100,000. I am heading to a new job at a new company that also offers 410(k) plan. What should I do with the money in my old plan?

A: You have got four choices:

  1. Leave your 401(k) at the old company.
  2. Transfer your 401(k) to the new program.
  3. Have your old company cut you a check for $100,000.
  4. Roll over your 401(k) into a self directed Individual Retirement Account IRA Account.

Say you select "1" and would like to leave your money with the old company's 401(k) program. It is always easier to do nothing, specially when you are in a career transition. But that might not be an option.

For one thing, your old company might not want to manage your money after you no longer work there. Or you might not be able to get your money out in an emergency prior to retirement. You have find out exactly what your rights are if you leave the money there.

Bitter at your former employer? Afraid they will make your life miserable when you want to get access to it? That is unlikely, since the money is held in trust and is administered separately.

For personal reason, you may want to sever all ties with your former employer, or you could have a very good reason, namely that the 401(k) of your former employer did not offer the types of investment choices that you would like to have.

That's why you might want to choose "2" and do a direct transfer to your new employer's 410(k) plan-- that is if they let you.

A state-of-the-art 410(k) plan would offer several investment options with professional money management. Also, it would allow you to take hardship withdrawals and borrow money against your balance.

What is more, it might offer advantages when you make new contributions. Perhaps the employer matches employee contributions dollar for dollar up to a point.

A direct transfer from your old 401(k) to your new one is an example of a trustee-to-trustee transfer. There is no withholding and no risk of a penalty.

It may be better if you do not get your hands on the money, because the temptation is always there to spend it. If it passes through your hands, it may never make it to its final resting spot.

If you choose "3" and your old company cuts a check for $100,000, you have made the worst possible decision from the tax standpoint. Your old company is required to withhold 20% on all taxable distributions, or $20,000 and send it to the IRS. That leaves you with $80,000 in cash.

Say you do not re-invest the $100,000 in another retirement plan within60 days. Then you end up with $100,000 in ordinary taxable income. Worse, unless you are 59-1/2, you pay 105 tax penalty on what was not reinvested. That means you have 60 days to come with another $20,000. Even if you are not going to pay a penalty, It still is a good idea to leave it in a retirement account regardless of your age. It allows you to continue to invest tax-deferred the amount that you are not taking out to live on.

If you select "4" and set up a self directed IRA at your local bank or brokerage house. There are two types of self directed IRAs. One is known as a "co-mingled" IRA, in which you combine your former employer's 401(k) money with other IRA money you may have. The big problem here is that once you set up this type of IRA, you can never roll your $100,000 into a new 410(k).

Instead use a "conduit" IRA keeping the $100,000 separate. If you are ever going to move it into another 401(k) plan, then it can not be mixed up with other IRA money.

Most important thing in this situation, do not let anybody rush you. Leave the money in your old plan while you do your homework and talk to your financial advisor. Also make sure you know what your rights are under your old 401(k) plan and make sure you understand the rules of the new one.


Q: Should I borrow from my 401(k) Account?

A: Being able to borrow from your own account can be convenient, especially in an emergency. But it may not be financially shrewd. Here is why:


Q: I have elderly relative who needs help, what kind of options available ?

A: Assisted Living: Latest option for elderly Facilities Offer Some Health care, Meals and Housekeeping

Choosing where to live as we age is no easy task. The assisted-living industry, one of the latest option, would like to help.

But with more than 25,000 assisted living residences from coast to coast and the varying state laws governing them, it is important to get the right information before choosing one.

"You need to know everything about a facilities up front before moving in, so that you do not have any surprises later on." Says Karen Wayne, President and CEO of the Assisted Living Federation of America in Fairfax, VA ., a trade organization.

Assisted living facilities are residences for those typically 75 and older who are healthy enough to live on their own, but who need help with daily chores. Such residences provide meals and social activities in common areas.

Residents are assisted in their apartments or rooms with activities that can include housekeeping, dressing, bathing or taking medication. This differs from independent living facilities, which usually provide just meals and housekeeping services.

Prices can be high for assisted-living services, which are usually paid privately. The average daily rate for a room is around $70, according to Wayne.

"At this point, those who are poor really can not afford assisted living," says Elise Nakhnikian, editor in chief of Contemporary long term care, a monthly trade magazine based in New York.

In addition to housekeeping and meals, prices at some places include a variety of personal services, such as bathing. Others charge for these services on a per-item basis.

With fees for centers in some of the costlier areas of the country running as high as $4,000 a month, You should estimate how long you can afford as assisted-living residence before moving in.

"People can spend every penny they have in assisted living, and then could run the risk of being asked to leave with nowhere to go once they have no money left," Says Terri Lynch, vice president of the Consumer Consortium on Assisted Living in Washington, D.C.

Residents typically pay for assisted living through a combination of saving, social Security and some help from children or other family members.

"There is often an emotional as well financial element, from children," says Jeffrey Levine a Douglaston, N.Y. based developer who is building assisted-living centers in New York and Arizona. "Children are worried about their parents being alone and isolated, and may help encourage a parent to move into an assisted-living facility.' He says.

It is a good idea to ask for references from other residents or their families, as well as local hospitals, when selecting an assisted-living facility. Recommendation from local chambers of commerce and civic organizations also are good.

When you visit a place, ask how often residents' needs are assessed, looked for a contractual agreement that provides for increased services as these needs changes, and find out how costs vary for different levels of care, says the Assisted Living Federation (703-691-8100).

A facility should have guidelines for assisting with medication, coordinating regular checkups and helping residents who experience memory or judgement loss. In addition, staff members should have some knowledge and training in nutrition and side effects of medication.

" A resident in an assisted-living facility can have a major change in a medical condition overnight," says Paul Klaassen, Chairman, president and CEO of sunrise Assisted Living Inc., a Fairfax, VA,. Provider of assisted-living care with 69 centers in 15 states.

You want to make sure that a facility can take care of and be responsive to someone's increasing healthcare needs. For instance, some providers will not offer care to those who become incontinent or develop cognitive problems. You do not want some one to have to go through a trauma of having to move out of an assisted-living facility to into a nursing home.

Examine the physical features and conditions of the assisted-living residence, for example, check the elevators, doorways and rooms that can accommodate wheelchairs; hand rails to aid in walking; and cupboards and shelves that care easy to reach.


Q: Can I sell my own house myself?

A: Selling a house yourself is definitely not for everyone, and only a handful of sellers try it. But many more could do it alone. In deciding whether to handle a sale yourself, the most important issue is your time horizon. If you are in a hurry to take a new job out f town, go with a Pro.

Regrettably the real estate industry operates as a kind of cartel, preventing outsiders from putting houses on the multiple listing service, the system most buyers use to find homes. Without an MLS listing, your property is exposed to fewer buyers, reducing the prospect of a quick sale.

There are, however, some discount brokers scattered around the country who put homes on the MLS for a few hundred dollars. They do not help sell the homes and do not charge a commission, typically six percent or so of the sales price. To find a discounter, try the yellow pages or search the internet with the terms "for sale by owner" and "multiple listing service"

If you are not in a hurry, it makes sense to try selling on your own, at least for a while. You need time to show the house, and a thick skin. People will criticize the property to your face, and some buyers do not show up for appointments.

The first service performed by the broker is pricing the property. To do this yourself, use an online data service such as Realist at http://www.realist.com, being careful to select nearby recent sale, as prices can change fast in a hot or cold market. Or just cruise the neighborhood for For Sales signs. Call to find prices and square footages, then apply the result to your own property. Obviously, the data are more valid if the home is similar to yours.

The most effective way to research asking prices is with the MLS listing, which is available free on line at http://www.realtor.com/ You can search for listing within a given radius of your address. A good broker, of course, might be able to refine the asking price better than you can, accounting for the home's condition, appearance and special features such as a pool, fire place or upgraded kitchen. But since you have time, you can price the house on the high side and come down if you do not get much response.

Also remember that a broker may recommend a price lower than you could get, because a low price can speed the sales. Knocking $10,000 off the asking price means a lot to you, but it is just a chicken feed to the broker. Remember you are not selling Big Macs to millions of customers; you just need one buyer, you may just get lucky. Aggressive advertising does bring buyers.

Negotiating with a buyer is the trickiest part for a do-it-yourselfer. Buyers often make very low offers, and you have to keep your emotions under control and have a clear idea of your minimum price. To weed out tire-kickers, it is always a good idea to mention during showings that you had to get a certain price to justify selling, since property is profitable rental. Never reveal that you are desperate.

It helps to marshal good reasons for your price, especially if it is on the high side, for instance corner property, fire place, deck, finished basement, new appliances, school system etc. It also helps to have a few items to throw in the end to sweeten the deal. If buyers think they are getting a good deal, all the better. Many deals fall apart because one party wants to feel it conquered the other. This is a business, be nice, that always helps.

With price settled, the rest is pretty easy. You can get a standard sales agreement from an office supply store. Just add a clause saying the terms are binding even if the title company or lender require a different form. Require that the buyer furnish a pre-qualification from a mortgage lender stating that he or she can obtain the necessary loan. Get $1,000 up front in "earnest money" toward the down payment, and specify that the rest of the down payment is due in 10 days.

When do you close?
The options are limited by the lender's lock-in period, the time it will guarantee loan terms. The contract also specifies contingencies, such as the maximum interest rate and points on the buyer's mortgage. Make sure those are high enough to leave a binding contract even if rates go up a touch before buyer applies for a loan. The contract should require that application be made within 10 days.

Most other details, such as inspection, are pretty standard. If you have not done this before, it is probably worth spending a few hundred dollars on a lawyer. Many people do that even if they have a broker.

What happens after the contract is signed? That is one of the beautiful thing about selling yourself-- you turn everything over to the title company. Title companies do all the hard work, such as making sure the owner is not encumbered by court judgements or liens, figuring what tax refund the buyer must rebate to the seller, arranging to pay off the seller's mortgage with sales proceeds. They sometimes even supply the blank sales contract and other documents you need. Best of all, the title company's biggest fee, for title insurance, is paid by the buyer. Title companies are listed in the yellow pages, and there is little variation in fees. Usually, the buyers chooses the title company.

On closing day, buyer and seller meet for the last time around the title company's table. When it is over, the buyer has the keys, and seller has a check. And if you go it alone, there is no broker there siphoning off an enormous chunk of your proceeds.



Q:I am thinking of buying a long term care policy, What should I look for in a Long Term Care Policy?

A:A good long term care policies should cover you in all situations outside a hospital, such as your own home, assisted living facilities, adult care or nursing homes. Increasingly more and more want to be cared in their own homes.

Before buying a policy, please make sure the policy:

  1. Covers skilled nursing care, custodial care, all nursing-home services and home base care.
  2. Will pay benefits on at least $110 per day.
  3. Contains an automatic cost of living increase clause pegged to inflation.
  4. Has the shortest possible waiting period before benefits begin.
  5. Provides at least three years' coverage, and four years are preferred.
  6. Covers comprehensive list of "triggering events" Triggering events are conditions, such as Alzheimer's disease, that cause that start of benefit payments.
  7. Offers a waiver of premium should you be confined to nursing home.
  8. Would not be canceled as you age or if you become ill or injured.
  9. Would not increase your premiums as you age.


Q:I am in the market for a new car. Should I buy a car or lease one?

A:With a lease, You can have a new vehicle every two or three years, and you are always on warranty. The monthly payments can be much lower than those of a loan, since you are not paying off the full value of the car, just the depreciation-- the decline in value--over the term of the lease. With a lease could have paid monthly half the cost of the three-years loan.

Leased vehicles should be free of major repair bills, but you will always pay top dollars for insurance.

How do you figure, whether buying or leasing is best?

The First and most important question is how long you plan to keep the vehicle. If you are willing to drive the same vehicle for five or more years, buying is more economical than leasing.

The monthly payments will higher than with a lease, but they will end and you will enjoy many payment free years. A repetitive leaser is never free of monthly payments.

If you buy a new vehicle these days, you should not face big repairs for at least 100,000 miles and vehicle you own gets cheaper to insure.

If you must have a new vehicle every two or three years. You do not drive more than the maximum annual mileage allowed on a lease.
Want to have a car that is more expensive than you can afford to buy. Pay little down payment money and would prefer to invest that money elsewhere for better returns. Then you are a best candidate for the lease.

Leases are full of odd jargon makes them seem more mystifying then they need to be.

The vehicle's price is often called the "Capitalized Cost" The interest payment may be called the "Money Factor" The assumed value of the vehicle at the end of the lease is called " Residual value"
Depreciation is the key to figuring the monthly payment and is the difference between the capitalized cost and residual value. Your monthly payment is interest on the capitalized cost plus a monthly portion of the depreciation calculated over the term of the loan. If the vehicle will lose $10,000 in value over three years, the monthly depreciation cost will be $10,000 divided by 36 months., or $278 (Money factors can be converted to annual interests by multiplying by 24 (# of months) A money factor of .00333 equals 8 percent.) (8/24*100) .

Purchase and lease deals can be compared, first by adding up all the costs, including down payments, monthly payments, and any other fees described openly or buried in the print. If the down payments are different-- a high one on a purchase and none at all on the lease, for instance-- you should also factor in the potential earnings that money could bring if it were invested instead of used for a down payment. Also figure the potential investment return on the money you would save each month by leasing. You also must consider the vehicles likely resale value if you buy it, too. This is an uncertain figure in a purchase. In a lease, the residual value used to calculate depreciation is specified up front. Be wary of residual values that look lower than they ought to be, because a low increases depreciation, which pushes up the monthly payment. ( To get handle on resale values, get the Kelley blue Book at a bookstore or library or use Kelley's internet site http://www.kbb.com/)

So, does leasing makes sense? From a financial perspective, I do not think so. The comparison described above assumes you would replace a purchased vehicle as quickly as you would replace a leased one. That is the problem-- it does not make financial sense to replace a vehicle every two, three or even four years. Vehicles depreciate the most in the first year, generally losing 25% of their value. By leasing, you take this big hit over and over. Owning allows you to enjoy the lower depreciation of the later years.

Leasing only makes sense for people who must drive an almost-new vehicle all the time. That is not really a financial decision. It is a matter of fashion, lifestyle or keeping up with the friends.

Should you have any question or need more information, please feel free to email @ hansr@sharmah.com or call Hans Sharma at 610-828-8253

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Should you have any questions or need additional information, please call or email:
Hans R. Sharma, MBA, CFP
Phone: 610-828-8253
hans@sharmah.com

This page was last modified on August 25, 2009.