Ask the grumpies: Which fictional figure would you meet?

Leah asks:

if you could meet any fictional figure, who and why?

#1:  I want to meet one of those brilliant super-heroes who always manages to do something brilliant to save the day.  Like Jeeves but on a bigger scale.  Like the top bureaucrat from Yes Minister.  Or Kyoya from Ouren High school Host Club.  Or the team from Leverage.  I want him or her or them to tell me how to fix the problem our country is currently in with a brilliant plan for which he or she has forseen all possible complications that I can implement.  So that the day can be saved.

#2:  I really want to meet scifi animals.  There’s a species of treecats in the Honor Harrington Universe, and a species called norbears in the Liaden books.  Both species are sentient but lack a shared language with humans…. both seem super cute

Ask the Grumpies: Roll over 403(b) to new employer or not?

Amanda asks:

We moved [to a new job in a new state].  Although I continue to have access to TIAA-CREF in my new job and matching contributions that are comparable, the fund selections aren’t identical.  For instance, I have access to a small cap index fund with a slightly (.06% vs .05%) lower fee structure at my prior job (and with similar 5-10 year returns). Obviously new contributions have to follow my new employers plan. But what about the previous contributions? Should I roll over and combine funds, even though the fund isn’t QUITE AS good as before (but very close)? Or not? Why or why not?

Standard disclaimer:  We are not financial advisors.  We do not have fiduciary responsibility.  Consult with a fee-only advisor or do your own research before making any major financial decisions.

You actually have three options, not two.

1. You can keep things as they are
2. You can rollover into your new employer’s 403(b)
3. You can rollover into an IRA

All of these have pros and cons (but probably not major pros and cons).

Keeping things as they are (option 1) means that you’ll have more accounts, more clutter, more chances of losing paperwork or having your loved ones deal with hassle later on in your life should you cede financial decision-making prior to emptying the account.  But the fees are lower, which makes it more attractive than your new employer.  And if you make the switch now, you’re the one who will have to deal with hassle.  Make sure that they don’t have additional fees for people who are no longer working at the company– if they do, then definitely don’t choose the first option.

Rolling over into the new employer’s 403(b) (option 2):  The sole benefit to doing this is that you would have less clutter.  Everything would be in one place.  If you die suddenly, nobody has to go looking for passwords to a second account.  If you hate having multiple accounts, then go ahead and consolidate.  You’ll be paying for the privilege, but not that much.  (Less, in fact, than I pay to use Target Date funds instead of rebalancing manually.)

Rolling over to an IRA (option 3) means you could just put everything in Vanguard along with any taxable funds and IRAs/IRA-Roths you already own.  Your fees would be low.  However, having a large traditional IRA could cause complications should you ever want to convert some of your traditional IRA to a ROTH or if you want to start making contributions to a backdoor Roth.

Grumpy Nation, what would you do in Amanda’s case?

Ask the grumpies: Should we rent out our house that hasn’t sold?

Amanda asks:

We moved (and we are renting in our new town halfway across the country).   Our house isn’t sold yet and the “summer season” in a university town is coming to an end.  We’d like to be buying a new house in our new town in the winter/spring.

In the meantime, we are pondering whether we should try to rent the old house or not.  The cost of the house (interest on the mortgage, taxes, insurance, utilities and lawn care) ~= $9000 to hold for a year.  We think we could rent for a little less than our total mortgage + escrow payment.  What other issues am I missing as I think about pros/cons?  How would you set up the “math problem” for this decision?

Ugh– not a fun situation to be in.  I hope someone sweeps in this August so you don’t have to make the rental decision.

The main thing to think about:

How much do you hate hassle?  vs. How much do you need/want the 9K/year?

All of my sub-thinkings are basically in the form of how to deal with the hassle should you decide to rent.

1. Are there any good managerial companies in the area that you trust to take care of things for you?
2. How would you react if the tenants trash the place or fail to pay?
3. What are the eviction laws in your old place?
4. Who can you rent to– anybody or just single families?
5. Are you thinking of doing a short-term or long-term rental?  (If it’s short-term, then, since you’re moving from a university town, you may be able to use sabbatical homes or your local university website to rent out to a temporary academic).

You may also want to think about how much you would be willing to lower your house price.  Staging it may also be worth some effort.

Here’s a Washington post article on the “math”— it goes into all the literal costs of renting.  Note especially what it says about capital gains taxes if you’ve lived in the place 2 out of 5 of the previous years.  Though this cbs news article talks about the tax advantages to rental depreciation.  This blogpost has a few more things to consider.

I guess you could set up a math problem with expected probability and expected utility, but you don’t actually know what the probabilities are.  It would probably be some dynamic model where you have some probability of selling each month and that right-hand-side would have to collapse to being less than 9000 for you to not rent it out.  Probably too complicated to actually be practical.

Grumpy Nation– Can you be more help to Amanda?  How would you make this decision?  What would you consider?  Any stories about renting/selling/etc.?

Ask the grumpies: Private vs. Public school, why did #1 switch DC1?

The frugal ecologist asks:

Curious (read nosy) about your kiddo #1 switch to public school. Why did you decide to switch? What do you miss about private? What are you happy about with public (I remember you already mentioned aftercare / extracurriculars being much more extensive).

The main reason we switched DC1 when we did was because we were going to Paradise for a year and private school would be 40K instead of 8K PLUS the public schools are really good in Paradise.  But when we came back, we kept DC1 in public school instead of coming back to private.  The main reason for that is, like you say, our public schools have a lot more options starting in middle school.  (The after-care was more extensive in Paradise, but isn’t so much here unless you’re into sports, which DC1 is not.)

So, we mainly remained switched when we came back so DC1 could take an instrument and advanced-level math and because DC1 is a lot older now and can (mostly) handle the larger classes etc.  Zie has had a good year after some initial growing pains and has friends etc.

I do still miss the smaller class sizes and knowing everything that was going on at school.  DC1 probably wouldn’t have fallen quite as far behind in the second to last grading period before we noticed at private school (I can’t remember if I mentioned hir series of forgetting to bring homework home or to turn completed homework in), but I don’t know.  I also miss Spanish and French (and zie would be starting Latin if zie had remained).  And I miss a bit the college level science they were doing because the science teachers they hired had only taught university courses before.

With public we’re happy about… orchestra and math.  We’re unhappy with writing and science.  We’re meh on social studies, PE, and study hall.  Next year zie will have Spanish and fortunately the teacher that everybody said was terrible has moved on, so there will be a new person teaching that course.  Zie will also have Robotics, but the class is supposed to be pretty bad since the person teaching it doesn’t understand programming.  DH may step in there.  We also really like that there is a bus (DC1’s stop is literally on our house corner, DC2’s will be across the street).  In paradise we liked that DC1 could walk/bike to and from school.

DC2 is also starting in public next year instead of private because zie got into the Dual-Language program.  The reason we’re doing dual-language for DC2 but didn’t for DC1 is that, unlike DC1, DC2 didn’t need to start K early, partly because zie is 6 months offset from DC1 (hir birthday is right before the cutoff) and partly because hir Montessori has higher-level materials than DC1’s did at this age so zie hasn’t run out.  If zie hadn’t gotten into dual-language we would have gone straight to 1st with DC2 and skipped K entirely.  (That’s not an option in the dual-language program.  But zie will be able to test out of a grade in the future if need be.)  I’m concerned about class size, lack of attention from the teachers, lack of differentiation, bullying, etc. etc. etc.  But we take things one year at a time.

Moving forward, I will also be concerned about the required state legislature disinformation.   DC1 doesn’t bring textbooks home, but I know that the state uses TX-standard textbooks, which means they are full of information that is biased in ways that do not fit with our family values.  (Unlike the CA-standard textbooks we grew up with!  Those are biased in ways that do fit with our family values.)  So we’ll have to provide information on evolution and the Holocaust etc.  DC1’s social studies teacher this year was a bit of a hippie and probably skirted the line closer to love and understanding of different cultures and religions than what our state legislature wants and hopefully did not get in trouble for it.  Sadly, the class was mostly crafts and not a whole lot of actual academics.  The science teacher was not that great, but not biased about it.  So maybe this worry is overblown in our blue-dot college town.  It would be easier if the school’s indoctrination matched our values rather than being in opposition to them, but there may be benefits there to critical thinking and not kow-towing to authority, even though authority is so highly stressed in this hierarchical former plantation state.

I will give them a lot of books and force critical thinking skills at home!

Ask the grumpies: What were your childhood career aspirations?

Leah asks:

As kids, what were your career aspirations and why?

#1:  I wanted to be a biologist because I liked science and water and so on.  Then I saw a NOVA episode on Nancy Wexler and Huntington’s Chorea and wanted to be a genetic engineer.  Then I did an internship in genetics in high school and realized it was insanely boring.

#2:  I thought I might like chemistry, and I also thought that I’d like to be an astronaut and a rock star.  (I did not become those things.)

What about you, grumpy nation?

Ask the grumpies: Why is healthcare getting more expensive in the US?

Sandy L asks:

What has changed with healthcare that has made costs spiral out of control in the US? Why was healthcare more affordable just a decade ago? Two decades ago it was even cheaper. I am just glad I had my kids then.

Two things are the primary drivers of healthcare cost increases in the US:  1.  more expensive technology and 2.  as people become richer, they demand more/better healthcare.

An unsolved mystery (though top health economists are working on it) is why health technology, unlike other technologies, only seems to be in the “more expensive” direction and not in the “cost-saving” direction.  There are a lot of theories out there but we haven’t really nailed it down, nor do we really know how to change incentives so that healthcare innovations include price-drops instead of just price increases.

There are a lot of other reasons healthcare costs more in the US than in other countries, but you asked about growth, not the level differences.  Still, the fact that our insurance systems are so messed up (leading to lots of red tape, repeated tests, etc.) and the fact that the US is subsidizing innovation for the rest of the world because other countries have price controls on drugs and the US doesn’t are also main contributors to the fact that healthcare costs a lot more in the US than other countries.  We could solve the former with a single-payer system, and the latter would have to be solved either by directly investing in innovation or bargaining with other countries to loosen their price controls on new drugs.  These two items aren’t really getting worse over time though– they just contribute to the overall level differences.  (Malpractice is often brought up by conservatives, and it is a small contributor, but completely getting rid of the problems that malpractice litigation induces if we knew how to do that which we don’t just wouldn’t shave that much cost off.  That’s why policy makers haven’t been focusing on it even though politically there would theoretically be bipartisan support for reform.  There are bigger gains to problems that are easier to solve from an economic standpoint, if only the Republicans cared about you know, economics and efficiency and so on.)

Ask the grumpies: How to save for multiple kids’ 529s?

First Gen American asks:

Once our mortgage is done again, we’ll swap that out with a 529 auto deposit option that comes out of both paychecks….which brings me to another question…Should we funnel a ton now into older kid and worry about younger kid later (he’s 4 years younger) or should we fund both at the same time now? I’m assuming we can roll over older kid’s excess into younger kid if we over deposit but then if we die before kids do, an uneven distribution would screw things up for kid 2. Not sure what to do yet.

I have also spent some time thinking about this.  I am not sure it actually matters that much.

Yes, if you have too much money for kid #1, you can easily transfer the leftover amount to the second child.  (An added wrinkle–if you undersave for DC1, will you take from DC2’s account?  You can, but would you be willing to?)

A quick check on the internet suggests that the 529 does not automatically go to the child who is named on its behalf– you can name a beneficiary.  It is also something that you can talk about with an attorney for a trust if you do not have a successor that you trust not to just liquidate it at a loss.

We have target-date accounts for our children in their 529s, so it makes sense in terms of risk to fund them separately.  That means DC1’s account has less risk in it right now (a larger bond to stock ratio) than DC2’s does because DC1 is closer to college.  But I’m thinking of them as separate buckets and we’re aiming to fully fund 4 years at a private school given that we’re not expecting much financial aid.

If you’re not thinking of them as separate buckets, then you might want to think of it as if you are going to “retire” and you know you’re going to be alive for 8 years after “retirement” and then suddenly “die” (if you’re planning on funding post-college education, or your DCs might take more than 4 years to graduate, then you might want to add some years to that).  What kind of investment portfolio would be optimal in that scenario?  It’s going to depend on your risk aversion, but you probably could pick a single fund that would fit your risk preferences given that scenario.

In terms of how we’re funding, I don’t actually think that our method of putting in $X/month to each child’s fund is necessarily optimal.  It would make better sense while we have excess cash to put in lump sums right now and stop contributing later (allowing for more tax preferred earnings).  But $X/month/kid is predictable and is easy to fiddle with should our situation change.

The important thing that gets brought up in the comments when we talk about this kind of situation is the perceived fairness of the situation by the kids.  Pick some rule that seems fair for both kids and stick to it.  If you have to make adjustments, make sure that you adjust for the other kid as well.  For us, we’ve decided that fully funding tuition without loans is what we consider fair, so we will be ignoring the actual costs and financial aid for the schools.  Our kids will get college paid for by us no matter what college they choose.  Other people choose a specific dollar amount (though I hope they adjust it for inflation!), or may have a rule like, “we will pay up to the cost of state school X”.  What you don’t want to do is pay full freight for one kid and force the other to take out loans for the full amount because that can lead to them writing about how you don’t love them on money forums, and nobody wants that.

Grumpeteers– How do you think First Gen should save for two kids’ college?