dave100: that's interesting and had to do some surfing. Cutting & pasting the whole article I found since this was quite readable and, Luddite that I am, my attemps at links go off into cyberspace. Don't throw away anything you've faithfully saved till now - quarterly statements, confirmations, etc. since the buy/sell, gain/loss tracking goes forward and it's still up to you to be able to track your dealings backward. Right? I have a couple of brokerage accounts as well as investments outside brokerages - no problem there as I can see. But I initially received, as a gift, a block of stock in our local power company back in the 70's. (I still have the initial cost basis, etc. paperwork). But I have always reinvested the dividends to purchase more shares and the new cost basis is, of course, reflected on the next statement. I've saved every one of these statements over the approx. 40 years in the event I'd ever sell some of it since any sale is going to involve a real mix of share price. I like hard copies of things; I don't do much online tracking. Consequently I have boxes of "important" investment papers all in good order. The beauty of it is my heirs will not be pulling their hair out trying to find things when THAT TIME comes. (We've done enough sifting in dealing with others' estates to have learned some valuable lessons.) The article: [Broker-dealers, mutual fund companies and fund custodians are updating systems to comply with the cost basis reporting requirements included in the Emergency Economic Stabilization Act of 2008. Brokers must begin reporting cost basis to the Internal Revenue Service and to taxpayers for trades beginning Jan.1, 2011; fund companies have until 2012 to comply. Custodians are not required to comply with the legislation, but they provide the technology as a service to their broker-dealer clients. For their part, wirehouses already track this data so the deadline is a non-issue for them. "The tech implications for cost basis are significant and if firms don't start now, they will never get it done in time," said Sean Cunniff, research director for brokerage and wealth management at Needham, Mass.-based TowerGroup. The aim is to guarantee full reporting of capital gains so the IRS receives its fair cut of investors' profits. Estimates from the Government Accountability Office and IRS put the amount of underreported capital gains at $7 billion to $11 billion per year. REDUCED TAX BILLS Ironically, because the technology allows for improvement of cost basis reporting, many advisers will be able to harvest losses more efficiently, reducing their clients' tax bills. Costs estimates for the enhancement range from $200,000 for a small, self-clearing broker-dealer to a multimillion-dollar expense for custodians, according to a participant who asked not to be identified. Systems within broker-dealers that require overhauls are the account transfer systems that interact with brokerage firms, as well as their order management systems. Historically, tracking cost basis has been a headache, a responsibility of investors who would have to dig through dusty old confirmations to determine the amount they paid for a stock or bond. For many firms, completing the fixes requires a multistep process that can frazzle the nerves of even the calmest, most experienced technologists. "This will take months just to scope out, and then you must build or buy a solution and integrate it with your current system," Mr. Cunniff said. "Then you test. Then you fix the bugs. Then you deliver." At Raymond James Financial Services of St. Petersburg, Fla., the battle to meet the deadline is under way. "We know it's a significant change and that's why we've started working on it already," said Josh Bohlander, senior manager in information technology. Hindering the project, however, are questions about how reporting should be done for wash sales, gifted securities, sales-load-basis deferral adjustments, and for fixed-income securities. "These are items not pinpointed in the current legislation," said Dale Skinner, a technology product manager with Raymond James. "We and the rest of the industry still need more clarification from the Internal Revenue Service on particular areas." Other firms are also waiting for the IRS to set a clear direction for the development effort. "We are still waiting for the IRS to make its final recommendations," said Teri Manton, a director in the product management and development group of Pershing LLC of Jersey City, N.J. Marjorie Qualey: Would like to see the IRS determine the format it wants the reports to use. "We still need to know exactly what format the IRS wants us to report it in," said Marjorie Qualey, vice president of product development and technology at Schwab Institutional in San Francisco. In response, a spokesman for the IRS said it was "continuing to work on the issue." Rather than build the upgrade themselves, some companies are retaining third parties to provide the software, an approach that OppenheimerFunds Inc. of New York pursued. "Due to the complexity of building this into our own systems, we decided that it made more sense to partner with [GainsKeeper]" to build this enhancement, said Christine Polak, vice president of operations at the mutual fund company, who declined to disclose the cost of the software. GainsKeeper, a provider of cost basis and tax software, is a division of Wolters Kluwer Financial Services in Minneapolis. Over the next two years, Ms. Polak will collaborate with the vendor to provide clients with cost basis data, in the form of their choice. Under the legislation, clients can select the way they want to report cost basis data to the IRS, such as the average cost basis or on a first-in-first-out basis. Although earlier attempts to pass the cost basis rules failed, Pershing assumed that passage was inevitable and began working on the project, Ms. Polak said. "The whole idea of these regulations isn't new to us; we are very well-positioned and have been working closely with [the Securities Industry and Financial Markets Association of New York and Washington] for several years now in planning for this legislation," said Ms. Manton. So far, the firm has developed a Form 1099 tax and year-end statement that breaks out gains and losses and addresses the bulk of the regulatory requirements, she said. Some broker-dealers, such as Cambridge Investment Research Inc. of Fairfield, Iowa, and Securities America Inc. of Omaha, Neb., receive cost basis information from their custodians, Pershing and National Financial Services LLC of Boston, respectively.] (Davis Jankowski, InvestmentNews, December 14, 2008)

With pension programs disappearing, it seems to me that some middle-aged people's idea of borrowing against the equity in their houses in order to consume is foolish, in most cases. It is easy, as our employment income doesn't increase as fast as the cost of living, to decide to continue living at our earlier level, withdrawing equity from our home to finance it. Far better, it seems to me, to decide that we are going to live within our current income. And not only that, but to take the long term view and see whether our asset base looks as though it will fund an extended retirement. On the other hand, with a lot of the baby boomers retiring in a few years, there'll be a shortage of staffing, and quite likely a number of people may well be offered incentives to continue employment rather than retiring. In contrast with the current situation, where a number of pre-retirement highly paid employees are being offered incentives to leave, so that companies can take on lower paid younger people to replace them. But would it be wise to count on that? I think not - unless one has some definite plans for a source of self-employed income following official employment, to subsidize that (inadequate, on its own) retirement income. Retirement planning is different than it was 30 years ago, for people on average are living longer, so need a larger fund on retirement in order to be able to eat and operate comfortably in their last year of life. As pensions die, our equity in our homes becomes more important as one of our sources of funding for our retirements, along with tax-deferred retirement programs and regular savings. As interest rates have dropped, with the requirement to pay part of the earnings in tax, and put part of current income with principal to maintain purchasing power of our shrinking-in-value dollars, there's little actual current gain ... in many years, none at all. If we have no net gain on investments in a given year, it becomes even more important, in fact crucial, that we make new savings in a year in order to add to that highly important retirement fund. The exact opposite of pulling equity from our house-asset now in order to live as high on the hog as we've been used to, in current years. Not only that, many unsophisticated investors are unwilling to get involved in even the equity-based mutual fund segment of the stock market, with the reduced net income that most face annually due to the substantial payments made to the managers, let along being willing to learn how to manage direct investment into the stock markets on their own, with a potentially higher rate of return (as the shrewder investor puts at least part of the money that the mutual fund manager was making into his/her own pocket). Some money management concepts to chew on - if you're interested. Good wishes for increasingly shrewd management of your own income and assets. ole joyful

Canadian banks, pretty solid, but recently having suffered share price reductions in sympathy with their U.S. counterparts, are paying 6 - 7% dividend rates. That have low probability of being reduced. But, in tandem with increases in share price, a greater possibility than their U.S.counterparts of being increased in the foreseeable future. For Canadians, those dividends come at a much lower tax rate than we pay on interest income ... and the tax rate on those dividends was cut even further, a couple of years ago. Another gift from Mr. Harper to his rich friends. At present the bank wants me to pay 5% interest (rate recently increased from 4.25%) on a fully secured loan and when I use the borrowed money to invest, the interest is deductible, meaning that the after-tax cost is about 3.75%. The 6% dividend is taxed at a low rate, leaving me with about 5% after-tax return ... so I have some money in pocket, on the current business. When I borrow $10,000. to invest, agreeing to pay interest only, and after a few years when I repay the loan ... I am required to repay exactly $10,000. Each of those dollars will buy less than when I borrowed it, so I gained from inflation. The guy/gal who put that dollar into the bank (or bought a CD, GIC or bond) lost money due to inflation (as the number of invested dollars doesn't grow, apart from the rent on the money). While quite a few U.S. banks are rather iffy, these days, Canadian banks are going to be around for a while. And I fully expect them to regain a substantial part of their recent losses, and that before long. Which I fully expect will give me some capital gain. That'll be taxed at one-half regular rate - and not payable till I choose to sell them. But if I'd sold the equity assets and bought GICs, money market funds, etc. a while ago ... they'd pay interest ... that'll be taxed as current income ... and taxed at top rate. I'd rather earn a higher rate of dividend, taxed at a lower rate than interest. And expecting to grow some capital gain, quite likely before too long ...that won't be taxed until I choose to sell them (or die) ... ...and then be taxed at half regular rate. Actually ... I just signed up for a "credit" card ... that'll charge me 1.97% for nine months on transferred debt. So I plan to use my original card to buy some stocks, then transfer the debt ... and make sure to pay the 1.97% annual rate of interest, monthly ... and be sure to pay the loan off in full just prior to nine months after the transfer. Plus - be sure not to charge anything on that card in the meantime (as not a cent can be paid on that later bill till the full amount of the transfer is paid off). A second agency are making a similar offer - and I get reduced cost on gas and groceries, with them. But - be careful not to buy any of that stuff on that card till the full amount of the transfer gets paid off, as well. My auto club is making a similar offer - so that's three such offers. And I've received an offer from the bank in which I've owned shares for 42 years ... at 2.9%. But that came in November ... and it's only good till July. In the meantime, I'm adding more collateral to my L o C, to add more security and be sure to pay off those credit card loans, if the stocks haven't gained enough that I'm willing to sell them for a profit when the low interest rate dies. There's a big difference between the possible credit card loans at low interest cost and the L o C loan, though - for there's a heavy deadline on the credit card debt, and if the new stocks bought haven't increased nicely within a few months ... ... or I can't access the L o C ... ... I'd be in a real bind! I don't like being beholden to outside agencies, subject to variations in their rules ... especially in volatile financial times as we are experiencing these days. I have a back-up - I can ask my broker for cheque, as long as it doesn't exceed the margin limits on my assets with them, at any time, and get it, immediately. So far, that is. Who knows about the future? I've played this game for years (though mostly for cash - not much borrowing) - and, even given the volatility of the markets and the uncertainty in the banking business these days, I think that I'm willing to put some chips on the line. And, if the markets are recovering half decently, I'll most likely try to avoid selling any of the newly acquired stocks. Some Canadian pipelines are solid and paying well, and some Canadian oil and gas stocks, whose prices have slid due to recent reduction in crude prices, have been paying over 10% ... some up to 15% and even 20% (but likely liable to reduction in future), and some are subject to change in corporate rules soon. Have a great weekend, everyone. ole joyful

Ok, so here is a bit of reality for those of you who responded about using my Social Security for the "extra" income I need. I "qualify" for full SS since I am 65, but they have denied my benefits because of ----my income. That's right. You see, if you work all your life, put yourself through undergrad all on your own for 15 years, then go to grad school for 6 years while adopting a baby at age 37, followed by working for a few incompetent and/or unethical bosses, move on to starting your own agency, and eventually becoming a little bit successful at what you do -- you are PENALIZED for it when you NEED some of that money back you've paid to SS all those years. Yes, I "make" a good income, but what I actually take home to pay my bills is not always enough, despite living a pretty frugal life. Therefore, like I said when I posted this question, I will always have to work, and am simply looking for the simplest/best/easiest way to stay in my own home by turning some of the space into income. I feel like I deserve this. I am leaning toward buying a free standing kitchenette (by Acme or Summit, which are very popular in NYC/Hong Kong where space is a real premium). This would require simply putting a lock on a common door, adding some minor electrical and plumbing, and living in half of my home while renting the other half to a medical/grad student. Are there foreseeable problems? Perhaps! But moving out of my home is not an option. And this could pay for half of my mortgage, making that payment below what I would have to pay for a smaller rental house in an undesirable neighborhood if I did move. Not exactly feeling the love from some of you posters, but to those of you who offered encouragement, I thank you.