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I've had pretty good success investing in foreign stocks, and I think I would do well running a mutual fund. Where can I go to find information on how to start an overseas stock fund? -- Phil C., via e-mail
Uh oh! We get a little nervous when every Tom, Dick or Phil thinks he can pick stocks well enough to run a successful mutual fund. It could be a sign of irrational exuberance. On the other hand, we don't want to discourage anyone who's potentially the next Warren Buffett.
The cost of starting a fund is high. Prepare to spend at least $100,000 to get your fund approved, says Steve Rogé, who launched Rogé Partners fund in 2004. Rogé advises hiring a lawyer versed in mutual fund law, as well as a seasoned third-party administrator, such as Gemini Fund Services, to draw up a detailed preliminary prospectus and to hold your hand during the application process with the Securities and Exchange Commission. It took more than four months to get SEC approval for Rogé's fund (contact the Investment Company Institute for basic information).
After you get approval, you'll need legal counsel for your new fund; a board of directors; an auditor; a transfer agent for back-office services, such as settling trades; a third-party custodian to hold money; a distributor to keep track of shareholder accounts; and an administrator for SEC paperwork.
And did we mention investors? Just to break even, the fund will probably need to have more than $20 million in assets. It helps if you have rich relatives.
Too good to be true?
The new rules about rolling over IRA money to a health savings account seem almost too good to be true. We're ages 63 and 64 and, as I understand it, we can each withdraw money from a traditional IRA and put it into a health savings account without paying taxes on the money. If we use the HSA money to pay for approved medical expenses or long-term-care insurance, we don't have to pay tax on that, either. Is this for real? -- G.R.V., Whitwell, Tenn.
It's for real, although there are limits to Uncle Sam's generosity. Under the new rules, you can roll over money from an IRA to a health savings account tax-free and avoid the tax bill altogether if you then use the money for medical expenses. But you can make such a rollover only once during your lifetime (at any age until the time you enroll in Medicare) and only up to the maximum HSA contribution for that year. In 2007 that's $2,850 for individuals or $5,650 for family coverage (plus an extra $800 if you're age 55 or older), minus any HSA contributions you've already made for the year.
And, of course, you must also have a health savings account. That means you must be covered by a health-insurance policy with a high deductible -- at least $1,100 for individual coverage or $2,200 for family coverage in 2007.
As long as you meet those criteria, you can get a few thousand dollars out of your IRA to help reduce a big tax bill on an IRA withdrawal, jump-start an HSA if you're young or pay for medical expenses at any age. In addition to covering your deductible and co-payments, you can use the money to pay premiums for qualified long-term-care policies, as well as for Medicare Part B, a Medicare Advantage plan or Part D prescription-drug coverage (see IRS Publication 502, Medical and Dental Expenses).
To avoid paying taxes or penalties, let the administrators of your IRA and HSA handle the transfer. Don't touch the money yourself.
Spousal benefits after a divorce
My husband and I are getting a divorce after 37 years of marriage. Will I be able to qualify for half of his Social Security benefits? I was a housewife for ten years and have started looking for a job. But I am worried about my future. -- Name withheld
One thing you don't need to worry about is Social Security benefits. Even after you're divorced, you can still qualify for spousal benefits because you were married for at least ten years. To begin taking these benefits, you must be at least 62 years old, unmarried and not eligible for a higher benefit based on your own Social Security record or someone else's.
Like any spouse, you can receive up to 50% of your husband's full Social Security benefit at your full retirement age (which in your case is 66) or a reduced amount if you take benefits earlier. To see how much lower your benefits would be if you take them early, see the age-reduction chart at www.socialsecurity.gov.
