Advanced Personal Finance

A couple of weeks ago, I wrote about my decision to just donate carloads of stuff we don’t want any more to Goodwill instead of trying to sell it on Ebay. At the end of that post, I suggested maybe there was a business in selling other peoples’ stuff on Ebay for a percentage.

Well, my streak of non-original business ideas remains unbroken. Today my wife and I were walking out of the restaurant where we ate for our anniversary (It was an all-you-can-eat. I swear I’m not making that up, but I also swear the fact that we went to a buffet for our anniversary was unintentional. But that’s another post.). As we left the restaurant, what should I see across the street but the storefront of a business that does just that. They sell your stuff on Ebay and take a piece of the action (I forget the name or else I’d tell you).

So, once again, I haven’t found my get-rich-quick scheme.

But the house de-junking is coming along nicely.

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This might be only tangentially related to personal finance, so please bear with me for a second.

I was watching just a bit of the Republican presidential debate when they were discussing a current hot button issue - immigration.  I wasn’t surprised that every one of the candidates who spoke on this were pandering to voters without much information about the actual situation.

The simple fact is, to maintain anything like our current economy in the future, the U.S. needs immigrants.  Lots of them.

Math explains why.  Women need to have 2.1 live births each to sustain a population.   Currently, native-born U.S. women have about 2.0.  Without immigration, our population would be shrinking or, at best, constant.

Big deal, you say.  So the population stays the same.  More for the rest of us, right?  Wrong.

The big word in economics is growth. Without it, your economy is dead.  You get growth by selling more stuff.  You need more people to buy more stuff.  Manpower is one of the factors of production we all learned about in macroeconomics class.

But wait!  There’s more.

It gets worse.  Much worse.

Without a growing population, your current one ages.  Rapidly.

That’s bad because you have fewer and fewer workers supporting more and more retirees.  Right now, there are 3.5 workers per retiree, more or less.  By 2040, that number drops to 2 to 1.  You think your payroll taxes are high now?  You ain’t seen nothin’ yet.

In short, I think many people have the immigration issue all wrong.  We need to be encouraging immigration, not trying to inhibit it.

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Kids listen to everything.  And just so you don’t think this post is about kids, I’m referring to how my daughter picked up on something regarding saving.

Just recently, we decided to open a savings account for my four-year old.  A few days after I did, a packet with kid-friendly marketing material came that we shared with her.  We didn’t really get into it, but we just explained that we’d opened an account for her and why.  As these things tend to go, she seemed at best marginally interested.

That’s why it brought a smile to my face a couple of days ago when I picked her up from daycare.  She showed me a dime she’d found.

Daughter: “Daddy, look what I found.  A quarter!” [She’s too little to know which coin is which.]

Me: “That’s great!”

Daughter: “Can I put it in my savings account?”

Can you believe it?

We’d mentioned the account maybe twice. I fully realize that, for those without little kids, this story will likely lose some of its impact, but I thought this was a tremendous breakthrough.  She’d gotten the idea about saving just through our family’s everyday discussions.  I was so proud.  Not because she understood saving so much as because she learned something important on her own without being formally ‘taught.’

It was a small encouragement.

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Tired of the same old 401(k)?  How about a Super 401(k)?

Some companies have started offering a new defined contribution retirement plan to employees.  Here’s how it works.  In return to ceding control over how your contributions get invested, you gain a turbocharged contribution from your employer.  As this article from Business Week points out, these plans are hybrid of a traditional 401(k) and a pension.

And the increased employer contributions can be substantial - think 15% to 20% of your yearly salary.  That’s in addition to the more standard 6% match on your contributions.

So what’s not to love?  Well, like the man says, there’s no such thing as a free lunch.  In return for the increased match, you turn over control of how the plan (and your money) is invested.  Typically, the employer will select a so-called lifestyle or target date fund.  Such a fund matches your projected retirement date to an appropriate asset allocation.  I personally like target date funds and recommend them to people without much interest in investing.  In this case, you’d be turning over control of the investment, but it would like be invested how you would have done it anyway.

That isn’t so bad until you consider the down side of the equation.  If how the employer invests the money isn’t so smart and you don’t have enough to retire at your projected retirement age, tough luck.  You keep working.

I’m not so sure you’ll see a lot of this in the future.  I don’t think turning over control of their money would appeal to a great many people.  Besides that, there’s the legal risk.  You can sign all the papers you want, but if your company takes your retirement money and invests it inappropriately, I tend to think you’d have legal recourse.

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A couple of weeks ago, I wrote about how if Congress doesn’t act soon to fix the ever-engulfing AMT, it could delay tax refunds for everyone due one. Well, the Senate passed, by a wide margin, a temporary fix to the AMT. There are still a couple of roadblocks in the way, though.

First, the House hasn’t taken up its version of the bill. Second, the two versions are not exactly alike and must be reconciled.  Third, the House version is significantly different and hasn’t even been taken up by the full House yet.  Democrats, now the party of fiscal responsibility apparently, are pushing for offsetting revenue (i.e. additional taxes somewhere else).  And we all no how much Republicans hate taxes on anyone for anything.

So it seems that there’s a very excellent chance you won’t be getting your tax refund right away.  Which would be OK, except that also means neither will I.

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