Escheatment

Escheatment is another fun (not really) term that I learned this tax season.  #2 didn’t even know this term!

Did you know that if you have a stock that is on a dividend reinvestment program and you don’t login to the webpage or call them or write to them (because it’s changed companies so you need to re-register and they send you a nice quarterly report and tax forms so there’s no reason to login), that after “some amount of time” the company has to, by law (depending on your state), declare your account dormant (even if you have ANOTHER stock from the exact same company with the exact same contact info that isn’t dormant because its dividends are going to your bank account, even if the reinvested dividends from the dormant account are buying shares in the non-dormant account).  Then they have to notify you 3 times to contact them.  The third time requires signatures from everyone on the account and you can no longer just login or call them to stop the dormancy.  The first two times can apparently be a one line suggestion that you login to their webpage to avoid dormancy hidden in the middle of a statement full of words and numbers.  So the third time with the signatures comes as a surprise.

What happens if you don’t get the signatures to the PO box across the country in time?  (Supposedly 30 days, but for some reason it takes a lot longer for the letter to get to you and then you don’t really pay attention to it until you start doing your taxes and go what is this OMG, I have 2 days.)  According to the internet, your entire dormant account is given to the state.  Then the state sells it (and you can’t sell it before that happens because your account is dormant so you can look but you can’t touch online).  If you want the money back, you have to go through the state’s lost money thing.

Of course, it isn’t clear from that third notice which state is going to get your money.  So good luck with that.

Update:  Escheatement averted.  And a reminder that I have to contact them at least once every 3 years in order to avoid escheatment, which can include logging into the account.  Maybe something to do at tax time.

So more fun with investing.  Seriously guys, Vanguard index funds.  Or target-date funds.  Maybe TIAA-Cref if that’s what your employer uses.

Link Love

We think W dodged a bullet by getting this job reneged when she tried to negotiate.  Getting that kind of a TT job might be worse than not getting it.  We agree with this comment and also this one.  Plus the number of people referring to W’s requests as “demands” is sickening.  That’s what happens when women ask, and it shouldn’t.  And here’s one from another woman in philosophy.

So how are you supposed to negotiate if you’re stuck being female?

God Damn it Texas.  WTF is wrong with you?

Stacking pennies notes that women’s week in finance shouldn’t be all about the babeez.

I like this way of understanding how interest works.  It really illustrates how debt can drag you down and keep you from spending to your potential.

I kinda want to read this book

we can’t use happiness surveys to make across group comparisons, only within group

I think my brain just exploded.   It’s apparently “News of the academic Weird” week on the internets

“The failure mode of clever is asshole” –Scalzi

Donna Freedman asks about your minor celebrity moment.

Some of our readers are interested in self-employment and aging

Am I the only one totally squee-ing about Clarice and Joshua?  #2 doesn’t read it so she has no idea what I’m talking about.  I sure hope it works out.  I think it will.  They’ll figure it out.  That’s what falling in love really is, at least the way I see it (YMMV).

Ask the grumpies: Next stage financial advice

Good saver asks:

My husband and I have done a recent financial checkup and in the process realized it’s time to do more interesting things with our money than build up savings in a savings account. The question is what.

We are both gainfully employed and spend an obscene amount on childcare for our toddler. We hope there might be a second little one running around wrecking havoc in the next year…. (Well maybe not running yet… but you know…). My husband is in his early 40’s. I’m in my mid 30’s. We both have highly stable jobs.

We own a house in a good neighborhood. The loan was taken out at a good interest rate (4.5%) with a good solid downpayment (25%). It’s a 30 year mortgage and we plan to be here for the next 5-15 years. We have 6 mos emergency fund.  We contribute to our employer’s 403(b) programs and take the match. With this combo we contribute about 15% of our salaries to retirement automatically. We can’t drop below that contribution rate and redistribute the money elsewhere.  This acct currently totals around $160,000. We also have been contributing to my husband’s Roth for the last 4 years at the max allowable contribution.  We’ve been aggressively saving and have had a couple relatives die and now have significant cash sitting around ($120,000).

Now that we’ve met the obvious goals, we’re not sure what to do next — How do we find people to help us think about this in a smart way? Who (broker, financial planner, bank trust dept.?) do we interview? And what are the right questions to be asking at the interviews?Do we pay off the house first and foremost (a friend strongly advocates this)? Others argue that between the mortgage deduction and the low interest rate it’s not the best way to spend our next dollar.  Do we put more into retirement savings specifically for the tax break or do we just invest and not set the money aside so particularly?  Do we try to rebalance the retirement portfolios into different investment devices (and if so, how much into what devices?) Do we seek to do different things with the different pots of money we have? College savings or retirement?

I can’t tell whether or not 160K is enough saved for retirement at your ages.  Play with online retirement calculators to see if you’ve saved “enough” or need to up that savings amount.  15% a year is the recommended amount, but it also assumes that you’ve been saving 15% a year the entire time.  If you did graduate school of any kind, or didn’t max out, or started making much less money than you are now, or had really lousy investment timing, you might be behind.  That would be the first thing to check, because it’s an easy answer.  If you don’t have enough saved for retirement, put more in your tax-advantaged savings vehicles.  You don’t need a financial planner to help you with that, just some internet calculators.  (Though, of course, you shouldn’t just take advice from strangers on the internet– our standard disclaimer applies.)

4.5% isn’t low enough to make it obvious that you shouldn’t pre-pay the mortgage, but it’s not high enough to make it obvious that you should.  So there’s no clear answer there either.  One thing to note is that, unlike most other forms of debt, a dollar spent early in your mortgage is worth more than one later.  You can play around with the GRS mortgage amortization spreadsheet to see how much different principal payments save you– that will put a dollar value on the benefit of mortgage pre-payment.  Remember also that you can unlock some of that prepayment in the case of an emergency by re-amortizing your mortgage and lowering your required monthly payment.  You can do this even in situations in which the stock market has crashed (so selling stocks is a bad idea) or the housing market has crashed (so refinancing or selling the house is out of the question).

We’ve never actually dealt with financial planners.  #2’s significant other recently had a windfall and will be getting a recommendation for a financial planner from a trusted wealthy friend.  Most of us don’t have trusted wealthy friends, however.  I point people to Walter Updgrave’s advice whenever I’m asked this question.   However, I add my own caution.  Many financial planners are terrible people who just want to separate you from your money by recommending high cost mutual funds and other terrible investment vehicles.  DO NOT stop by your local Edward Jones office to get advice.  You really do want a fee-only certified financial planner who does not get any kick-backs from recommending you high-cost funds.  Personally, I’d rather figure things out myself, possibly with the help of the Bogleheads forum (or their book), but I also have a PhD in economics and like dealing with money.

In general, we can’t tell you which saving/investment things to do first or in what order.  That is going to depend a lot on your own goals and your own situation.  How much of your children’s education do you plan on funding?  How much financial aid are you thinking you’re going to get?  How much do you like your jobs?  Do you want to retire earlier or later?  Do you want an upper-middle-class retirement or do you want to live a simpler life?  Will you have a short-term need for funds outside of your emergency fund (ex. IVF, new cars, private school, sabbatical etc.)?  Do you want to leave your own (monetary) legacy?

I can tell you what we’re doing.  We’re prepaying the mortgage, but not just prepaying the mortgage (and we stopped doing this so much when DH was unemployed).  We’re maxing out our tax-advantaged savings (we dropped this down to the required 12% when DH was unemployed), but I’m not sure we’re going to put money in the IRAs this year.  We’re hoping that we’ll be in the income bracket that keeps us paying full-tuition at private colleges or universities for our kids, and we’re planning on covering the entire bill, so we’re putting $500/month away for each kid in their respective 529 plans.  As I’ll talk about next month, we still have trouble figuring out what to do with extra money… it’s a nice problem to have, but not one with an obvious answer.

In terms of where to put your retirement savings– if you have access to Vanguard, then you have one stop shopping with their Target-Date funds.  Pick a date, set, and forget.  If you don’t have access to Vanguard, then the Boglehead forums are a good place to look for asset balance heuristics for your particular situation.  You should be looking for a combination of low fees and the right diversification of risk for your planned retirement date and risk tolerance.

Don’t worry so much about the “best place” for the next dollar.  The best place in hindsight is not going to necessarily be the place you think it is because none of us can predict the future.  The best you can do is to make a lot of good choices.  For us those good choices are never going to be best or worst because we’re doing a number of different things with our money.  That’s the essence of diversification.  We’re not going to win as big on the stock market as we could because we are pre-paying the mortgage.  But we’re also not going to lose as much as we could for precisely the same reason.  Are we getting the percentages “right”?  Well, there’s really no wrong answers.  We have enough places to tap short-term that we’ll be ok in a number of scenarios, but we’re also taking advantage of many of the tax-advantages to saving for retirement.

The bottom line though, is that an extra 120K in cash on top of your 6 month emergency fund is way too much.  Put that somewhere soon!  Each month you delay making a decision, you’re potentially losing more money than you would if you just randomly chose any one of your good suggestions for potential vehicles*.  If it were me, I’d max out the retirement for this year (there’s still time to fund your 2013 Roth!), put some in a 529, maybe put some in taxable (Vanguard Index fund) stocks (because it sounds like you don’t have any, and taxable stocks are a nice secondary emergency fund), then put the remainder into the mortgage. If you don’t need a secondary emergency fund, then skip the taxable stocks in favor of the other options. Remember that the Roth can function as a secondary emergency fund just like taxable stocks can because you can withdraw the principal.  That gives it a slight advantage over just taxable funds.  But anything you choose from that list you gave is going to be better than sitting in savings.

*exception:  120K is probably too much to put into one kid’s 529 plan, depending on where you think they’ll go and if they’ll be eligible for financial aid.

Grumpy Readers, What advice do you have for Good Saver?

Are PhDs entitled to tenured jobs? A deliberately controversial post.

We have argued before that academia is just a job.

We have marveled at how willingness to do math opens up a world of opportunities.  (Though not necessarily with a math PhD… but if you’re willing to do the same math as say, an engineer, you’re in better shape.  And hey, you can always take actuarial exams or maybe work for the NSA with that math degree.)

So… does the fact that you’ve suffered for 5-7 (or more!) years in a PhD program and gotten your hood and your diploma mean that you are entitled a tenure-track job?  What about your debt?  Your lost opportunity costs?  Are you entitled to compensation for that?

The fact is, there’s an excess supply of PhDs compared to the demand for tenure-track professors in most fields.  In fields where industry can absorb those extra PhDs at salaries higher than their t-t counterparts, that’s not so bad.  You can cry about your industry job all the way to the bank, so to speak.  In fields where the PhD doesn’t provide many additional earnings opportunities, that leads to a lot of unemployed and underemployed people with doctorates.  We end up with a lot of people being exploited as adjuncts in the hope that if they put their time in they can get one of those elusive tenure-track jobs.  People are willing through their actions to accept very little pay and bad working conditions simply because they hope it will lead to better employment later, and there’s enough of these people that it drives the cost of adjuncts down.

Sometimes you work hard and you take risks and those risks don’t pan out.  It would be nice if there were exactly the number of jobs available for the people qualified for them who wanted them and they matched up perfectly and paid well.   But not only are there differing demands for different skill sets, but some sets at the same skill level seem to be more likable than others.  People like studying the humanities.  There’s not enough demand for PhD level humanities skills to ensure all humanities PhDs a living wage using those skills.

So… are PhDs entitled to tenured jobs?  Is anyone entitled to anything besides life, liberty, and the pursuit of happiness?

Fractions and bases

So, we’ve been enjoying Hard Math for Elementary School (for somewhat complex definitions of “enjoying” that involve both frustration and eventual pride).

Today DC1 said, “Different bases is just like fractions.”  Explaining a little more, ze noted that when you’re doing fractions with a denominator of 8, the numerator works just like when you’re counting in base 8.

By golly, I thought, ze’s right!

In base 8 you count, 1, 2, 3, 4, 5, 6, 7, 10, 11..

When you’re counting eighths, it’s 1/8, 2/8…7/8, 1, 1 and 1/8.

Adding works the same way too… 2 + 7 in base 8 is 11.  2/8 + 7/8 is 1 and 1/8.

Multiplying won’t be the same because we tend to cancel things out on the bottom, but in a world where we didn’t do that and we didn’t allow improper fractions, I think it would be the same.  So it could be the same.

Anyhow, that’s super cool.  Yay DC1!  And yay math!

Mutual fund taxes: Lessons learned

Every year I learn a little bit more about investing that I often wish I didn’t know.

Why?  Well, back in the day, my father took care of my investments and he’s really into complicated stuff.  Each year I can generally only handle untangling one crazy thing.  (I think I’m going to have one share of AOL for ETERNITY.  How?  I had AOL, then it became TWC, then it split off again, so now I have a bunch of TWC, some other Turner/Time Warner company, and one lonely AOL share.  Figuring out the cost-basis on that share is a really low priority.  Update:  And now Comcast is buying TWC… that’ll be fun.)

This year I learned that mutual funds can generate capital gains without your knowledge, and they don’t give you the money but instead they reinvest it, buying more shares of the fund.  This particular capital gain hasn’t done any such thing since like 1994 (before I was paying attention), so the $4K capital gain was a surprise.  I immediately groaned and wished I’d given these funds to the school instead of cash back when my dad was donating money to the school, but I was worried about dealing with that paperwork then too.  Or that I’d taken leave from the school when DH was unemployed so that I could claim a 15% marginal tax rate and sell every single one of those tangled up funds.  (Or better yet, taken a capital loss on all of them when the markets were down during the recession!)  If only I were more organized and not still learning in the past.

But, it turns out that paying capital gains taxes now on mutual funds isn’t such a horrible thing.  The tax I pay now will reduce my tax bill in the future when I actually sell the whole thing.  So it may be best not to donate these shares to charity.  (I probably have some QQQQ with a higher capital gain anyway.  QQQQ has been good to me.)

Still, this mutual fund has a 1% expense ratio, and I think it’s just a large cap fund, so I should get rid of it one of these days anyway since I can get large cap from Vanguard much less expensively.

So anyway.  None of our readers probably cares about this, but hey.  Stick with Vanguard index funds or Target date funds and you’ll be fine.  Stay away from needless and expensive complications!

And so say I.

Link love

Are there no workhouses? Ironically, plagiarized…  If he’s going to steal from something with the opposite meaning, he should go back to Dickens.

Stay in school, kids.  From Femme Frugality.

Adjunctorium explains how adjuncting isn’t a job, it’s community service!

Surviving Academia explains the importance of bathroom placement

Author entropy explained.

Why faculty members work so much.

Feral homemaking with your Sunday evening laugh.

In the category of Onion stories that are actually true

Julia explains true horror and snow.

How model view culture was driven out of science.

Ashe Dryden talks about who bears the responsibility of diversity.  (Hint:  the answer should be white men.)

PZ Meyers talks about Marthe Gautier, yet another woman whose work was stolen and credited to a man.

This week is full of mommy wars in the various blogs. I wonder what it is about spring.

This time when I did the dialect quiz it gave me my high school town.

Ask the grumpies: Basic mortgage advice

Green hills asks:

I am wondering if you can give your opinion on the best loan types for first time home buyers. Is an adjustable rate better over time than a fixed rate? And what is the difference between the loan interest rate and the APR? We’ve done a bunch of reading and really, have just confused ourselves more.

There are very few instances in which you would want an adjustable rate rather than a fixed rate.  (Leightpf is one of the rare exceptions.)  The very fact you are asking this question means that the best loan for you is a 20% down fixed interest rate, either for 15 years or for 30 years.  Whether you choose 15 vs. 30 will depend on the difference in the interest rates and what you would do if one of you had a job-loss or other emergency.  (30 year loans are safer– you can pre-pay them as if they were 15 year loans and then when an emergency hits, lower your payments, but a 15 year loan can save a lot of money.  You have to look at the numbers to see which is best for your situation.)

In general for loans, the APR includes compounding.  Different loans compound at different times.  APY doesn’t take into account compounding.  For mortgages, APR also includes a bunch of junk that mortgages try to confuse you with like “points” and “rolling fees into the principal” (a quick google search says it doesn’t include the paperwork fees, so you will compare those separately).  The APY is jiggered so that they can make it seem like they’re offering you a low rate but then they hit you with a bunch of upfront fees. You should be comparing APR and ignoring APY when you’re trying to decide between mortgage lenders.  Get the APR in writing.

So:  quick bottom line:  Use APR.  Save at least 20% for a downpayment.  Get a fixed rate mortgage for either 15 or 30 years.  Don’t buy more house than you can afford!

Ok, now for unusual situations that do not apply to you.  If you have a lot of cash and are in no danger of ever defaulting on your mortgage or being unable to make your monthly payments, then you may be interested in an ARM if 1.  The difference in interest rates between the ARM and the fixed rate is high and 2.  There’s no way that you’re going to end up with the rate being reset at the end of the ARM into something that you can’t pay back.  So, if you’re flush enough that you can definitely pay back the mortgage before the rate resets, or the limitations on how high the rate resets that make it so it can’t reset to something you can’t afford, then you may want to consider an ARM.  The argument that people usually make when choosing an ARM is that they’re going to resell the house before the end of the term anyway so it doesn’t matter what the rate resets to– but you have to be sure that you won’t need to short-sell that house or keep it on the market longer than expected (another reason to have cash on  hand to make up the difference if the market drops) and that your plans aren’t going to change.  So be careful.

Our child, the biter

If you recall, DC2’s wonderful daycare went out of business because they mismanaged a theft and couldn’t meet operating expenses.  As a stop-gap measure, we enrolled DC2 at DC1’s private school’s associated daycare until ze hit 18 months and could enroll at the next youngest Montessori preschool in town.  Doing this was nice because it was one stop shopping for both kids at drop-off and pick-up.

However, although the private school daycare was not a bad daycare, it was also not a great daycare.  The kids weren’t mistreated, rules were followed etc., but it didn’t follow the guidelines for high quality daycare.  It didn’t follow the minimum guidelines either, but instead of a 4/1 teacher ratio for kids DC2’s age, there was a 6/1 teacher ratio.  And instead of involving the kids in setting up and cleaning up like Montessori schools do, generally there was one teacher cleaning up or setting up and the other teacher interacting with 12 kids all at the same time (or with just 1 kid at a time while the remaining 11 were on their own).

On top of that, DC2 went from 4 teeth to 12 teeth during hir duration at that daycare.

The lack of supervision plus the teething plus DC2’s personality… not a good combination.  The main teacher often said it wasn’t a big deal and sometimes the other kid deserved it, which, of course, didn’t make us feel any better about the situation.  They introduced DC2 to pacifiers (ironically at an age that most parents try to remove the pacifier).  Eventually we got enough bite slips that we got called in for a parent-teacher conference with the preschool director and the school director.  Ze wasn’t malevolent, they said, ze just bit when ze was protecting hir stuff or someone crowded hir too much.

The solution we came up with was to offer to pay for a third teacher in the room for a month during DC2’s prime biting hours.  (DH graphed out the bites and discovered a pattern to the timing– mainly when the kids were least supervised.)  $581.31 brought the student-teacher ratio down to 4/1.  The head teacher for the room was ecstatic.  DC2 only bit twice during that time period, once when the third teacher was sick and didn’t show up, and once at a non-standard time when there was a fight over a toy.  DC2 was caught almost biting a few times in addition to that.

Having the third teacher there also made the room much more like a high quality daycare.  The kids became more animated and less likely to stare and crowd any parent who came in.  (Seriously creepy the way they did that, poor neglected kids.)  DC2 also stopped screaming bloody murder when dropped off. It was tempting to continue paying for the third teacher after the time was over (and DC2 did bite a couple more times after that), but at that point we’d already put in our month notice for the change in daycare.

There hasn’t been a single bite at the new daycare.  It is very much like the old daycare.  There’s two main teachers and plenty of floaters.  There are 10 kids and 2 teachers in the room and a third teacher (a floater) is usually there during the main hours.  Kids don’t fight.  When they disagree about toys, the person who has the toy has property rights and the other kid is reminded of that and redirected before a fight can occur.  It isn’t accepted as something that kids will do (and that sometimes results in biting) like at the private school’s daycare.  DC2 happily waves bye-bye when DH drops hir off in the morning, and for a week or so was having such fits when I picked hir up that I wouldn’t be surprised if the teachers thought I beat hir.  (Though part of that was that ze wanted mommy milk right away, but their parking lot isn’t really big enough for me to feel right taking a space during busy pick-up times so we can nurse, especially given that home is less than 5 min away.  DC2, if you weren’t fussing, we’d already be at home and you could be having as much mommy milk as you wanted!  We solved this problem by having me pick up DC1 instead.)

My thought, though this is certainly no randomized controlled experiment, is that good quality daycares have only limited biting because the kids are busy and conflicts are managed before they really become conflicts.  Some kids have greater propensity to bite than others, but it’s still really the daycare’s responsibility to take care of that.  But who knows!

12 Reasons Why You Will Click Through To This Blog Post And Enhance Our Revenue Stream

1. We don’t have a revenue stream and you’re wondering about that.
2. You want to know how you too can get in on this lucrative idea
3. You want to know how to give us fat sacks of cash money.
4. You think this post will be funny.
5. You’re desperate for details: is it really true that Lindsey Lohan was seen exiting a motel in company with 2 chickens and a lawnmower?
6. Or was that Miley Cyrus?
7. You’re looking for something to be outraged about.
8. You think someone might be wrong on the internet and it’s your job to correct them.
9. You’re procrastinating on grading.
10. You’re looking for personal finance advice.  (in all the wrong places)
11.  You enjoy trolling?
12. There is no # 12.
THIS LIST GOES TO… ELEVEN