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On Money

By HELEN HUNTLEY, Times Staff Writer

© St. Petersburg Times, published September 15, 2002

To earn most, leave money from seasonal job in 401(k)

To earn most, leave money from seasonal job in 401(k)

Q. I work for a company that offers a 401(k) plan, but the job is seasonal. Is there a benefit to taking the money when I leave and starting over again the next year?

A. No. Your best bet is to leave the money where it is, assuming the company allows this and you have at least halfway decent investment options. You definitely don't want to take the money outright because you will owe income taxes on it, plus a 10 percent penalty if you are younger than 59 1/2.

If you really want to get the money out, you should arrange for the trustee of your plan to transfer your money to an individual retirement account. That would allow your tax deferral to continue.

Before you do anything, get the details from your company about how your plan works. If you closed your account, would you face a delay in resuming contributions when you are re-employed? If your employer contributes to your account, would you lose your rights to contributions in which you are not yet fully vested? Be sure you have a good understanding of all the possible consequences of the action you are considering.

Q. In 1969, my son sold me 10 shares of stock, which he transferred into my name. In 1976 and again in 1992, I bought more shares, letting it remain in his name for the time being. In 1999, I had this stock transferred to my name. This year I sold it. I now want to pay estimated taxes on my gain. Can you tell me where I could find out what the stock sold for on those dates years ago? A friend told me that I should use the purchase price on the date of the 1999 transfer rather than the 1992 sale price. What do you think?

A. I think it's not entirely clear whether these transactions were gifts or purchases. Did your son report these sales on his income tax return and pay capital gains tax on them? If so, you should use the sale price he reported as your purchase price. If your son never reported the sales, it seems to me that the IRS could make a good argument that these transactions were gifts, should your return be audited.

If they are sales, your gain is figured from the price you actually paid. If they are gifts, your gain is figured from the price your son originally paid for the stocks.

Silicon Investor (www.siliconinvestor.com) is a good source for historical stock prices.

Q. In 1979, my husband and I bought an unimproved lot that we now want to sell. We want our asking price to be at least our cost adjusted for inflation. Can you direct us to a source for determining what the inflation factor would be and how to apply it to our purchase price?

A. Multiply your purchase price by 2.48. At least that's the result I got using the inflation calculator found on the Bureau of Labor Statistics Web site (stats.bls.gov/cpi.htm).

Now for the bad news: The price you paid, with or without inflation adjustment, has nothing to do with the price you should ask for your property. Prospective buyers do not care what you paid. If you want to price your lot correctly, you need to find out what the current market is for lots like yours. How much have lots similar to yours sold for recently and how many similar lots are on the market already? To get answers to those questions, your best bet is to contact a real estate agent in the area where your lot is located.

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Q. I must withdraw a minimum amount from my individual retirement account each year. What is the best way of choosing from the four mutual funds that I have?

A. Your goal should be to maintain your target asset allocation. Suppose, for example, that you own a large stock fund, a small stock fund, a bond fund and a money-market fund. Decide what percentage of your money you want in each category and compare that to what you actually have.

Take your withdrawal from the funds that represent a larger percentage than they should based on your target allocation. If you are happy with your current asset allocation, maintain it by withdrawing some money from each fund.

Online Money Map

Want to learn more about buying a car, managing taxes or putting together a financial plan? Check out the GE Center for Financial Learning (www.financiallearning.com).

-- Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.

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