This past weekend the Wall Street Journal managed to concoct a little excitement around something only a nerd like me could find exciting, the rolling over of 401k accounts. The article, variously titled “The Grudge Match Over Your 401(k): Employers and financial firms vie for control of your savings.” or “The 401(k) Wars: Fighting for Investors Cash” uses photos of an NFL player for illustration. (He is quoted at the end.)
The gist of the piece is that after years of acting with relative indifference to ex-employees taking money out of their 401k plans, companies are suddenly trying to discourage this behavior.
A company might want you to keep your assets in the 401k it sponsors because it wanted its plan to be a large as possible, which might lower average costs. This is a fairly modest incentive, however, as evidenced by how long it has taken for most companies to get around to doing anything about it. And for some employers, the cost of keeping an ex-employee in the system might actually be greater than the savings from having a bigger plan.
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As a cap to Complain About Taxes Week, I thought it would be amusing to peruse somebody else’s tax return. There are not very many publicly available ones to choose from, but there is this one from a famous multi-millionaire author.
11 Slightly Interesting Things From the Obamas’ 2009 Tax Return
1. The social security numbers are redacted. The White House provided most of the 1040 and schedules that were filed, but the SSN boxes are blank. I guess there is the potential for political pranks, but seriously, what are the chances of somebody trying to use Barak Obama’s identity to open a new credit card?
2. Both Obamas sent $3 to the presidential election campaign fund. A classy thing to do given that Obama is the only major party candidate in history to turn down money from the fund. Presumably, he won’t use it in 2012 either, so this just helps the other guy.
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As readers of this blog know, I consider the smoke-to-fire ratio on ID theft to be heavily skewed to smoke. ID theft does occasionally cost consumers real money and cause real headaches, but those occasions are orders of magnitude rarer than popular wisdom would lead you to believe.
The basic truth about ID theft is that it is a form of fraud in which the consumer almost always plays the role innocent bystander rather than victim. Sure, sometimes innocent bystanders get hurt, but the basic idea of ID theft is to trick a financial institution into handing over some cash. Why steal from a consumer when you can steal from a bank? As a great philosopher once said “that’s where the money is.”
One of the reasons that this basic truth is routinely obscured is that perpetuating the Great ID Theft Scare is just so convenient for so many people. The snake oil salesmen at LifeLock and it’s competitors are leading examples, but there are others. Journalists in search of an easy story to write are another.
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As April 15 approaches, some of us experience a short-lived obsession with, and resentment of, taxes. For fairly obvious reasons, those of us who put off sending in the old 1040 until the last minute tend to be those who need to accompany our returns with checks made out to the Treasury. Folks entitled to checks going the other way tended to file weeks ago.
Having to fill out lengthy government forms is bad enough. Capping off the process with a savingsectomy is enough to turn anybody into a grumpy Republican. For me, this is like being an Irishman on St. Patrick’s Day. I enjoy the company of my temporary compatriots, even though I know it won’t last long.
Pandering to this grumbling constituency this week was The Big Money, which shared a list of the five worst parts of the tax code. The fact that they could come up with only five tells me they are only seasonally grumpy. A year-round resident would have come up with at least ten.
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This past weekend the Wall Street Journal carried a somewhat confused article on what we hip investor types call cash. Just to be clear, what we refer to is not literally cash, not slips of paper with pictures of dead politicians, but rather highly liquid assets we can use to buy stuff. Like a checking account.
I say the article is confused (and confusing, for that matter) because although it starts with important reminders about how chasing slightly higher yields on cash caused many investors great pain in the fall of ‘08, and then repeats the equally important principle that “the only way to boost yield is to take more risk” it promptly explains how to boost yield by taking more risk with your cash.
Generally speaking, the interest rate you get paid on cash deposits, in money market funds, short term Treasuries, and the like, is very low. It usually approximates the inflation rate, meaning that with a little luck the real value of your cash treads water.
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