Friday Reading: Great Deal in 5/1 ARM
30-Year Fixed Mortgage Loan Or An Adjustable Rate Mortgage (ARM)? The Choice Is Obvious If You’re Logical by Sam at Financial Samurai
Sam also noticed the great deal presented in 5/1 ARMs. I was paid $900 after all said and done when I refi’d to a 5/1 ARM at 2.625% last year. The rate is somewhat lower again now. I’m holding out for 2.125% for a half-point reduction from my current rate and extending my fixed rate period by one more year.
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Best Broker For a Custodial IRA For Your Kids
The age of majority is 18 in most states in the U.S. Kids under 18 are allowed to work for pay but they aren’t allowed to open an account with a financial institution unless an adult over 18 is either a joint owner or a custodian. This is because kids under 18 can’t legally sign a contract and agree to the terms.
When a kid works for pay, a parent can open a Roth IRA for the kid and fund the Roth IRA with the parent’s money, up to the kid’s earned income. However, an IRA by definition has only one owner; there’s no joint IRA. Because the kid under 18 can’t open the account him- or herself, an adult has to do it as the custodian.
This type of account is called a custodial IRA. The kid is the owner. The adult is the custodian.
Diversify Stocks and Bonds Investments With Rental Property
A co-worker told me she bought a house as a rental property in Las Vegas (we are nowhere near Las Vegas). She said a few other co-workers thought it was a great idea and bought there too.
Clark Howard, a consumer advocate and personal finance guru on radio, also says now it’s a great time to buy a home, either to live in or as a rental property.
So far all my investments are in stocks and bonds. I’m not sure if the home I live in counts as an investment in real estate. Suppose it doesn’t, should I diversify my investments with a rental property?
Friday Reading: Give Up Those Tax Breaks
Life: How Much Will You Leave On the Table? by Scott Burns at AssetBuilder
“Excessive caution, he told me in a recent interview, means we buy long-term security at the expense of giving up many things we’d like to do today. We leave estates that are larger than planned and feel remorse for experiences we’ve missed.”
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2013 HSA Contribution Limits
The IRS announced contribution limits for Health Savings Account (HSA) for 2013.
HSA Contribution Limits
| 2012 | 2013 | Change | |
| Individual Coverage | $3,100 | $3,250 | +$150 |
| Family Coverage | $6,250 | $6,450 | +$200 |
You can only contribute to an HSA if you have a High Deductible Health Plan (HDHP).
401k vs Pension: How To Make Your 401k Pay As Much As a Pension
For the most part, 401k plans replaced pension as the prevailing vehicle for people’s retirement. Surveys and studies show very bleak numbers. The balances in 401k and IRAs aren’t nearly enough to pay for a comfortable retirement as the previous generation’s good ol’ pension once did.
Most public sector employees still get a pension. This often brings envy. People who don’t get a pension and don’t get enough from their 401k’s are increasingly unwilling to pay those who do.
It also leads to some people saying the 401k system is a failed experiment and that we are better off with a pension. A recent New York Times article by Joe Norcera quoted Teresa Ghilarducci [*], an economist at The New School as saying
Form 5500-EZ For Your Solo 401k
If you have a solo 401k, also known as a self-employed 401k or an individual 401k, and the plan’s assets as of December 31 last year exceeded $250k, you are required to file a Form 5500-EZ with the IRS before July 31 each year.
If you dread another tax form, relax. Form 5500-EZ is very easy to do. My plan is with Fidelity. I received my 2011 Retirement Plan Annual Valuation Statement from Fidelity last week. With the information from Fidelity, I completed Form 5500-EZ in less than 5 minutes.
Here’s a filled-out example (click on it if you want to see page 2):
Friday Reading: Paper I Bonds Arrived
I have some good news to report. Back in January I bought the maximum amount of I Bonds I’m allowed to buy at TreasuryDirect — $10,000 each for me and for my wife. Because I Bonds are paying more than other comparable safe investments, I want more. I used the backdoor to paper savings bonds and it worked!
I paid extra with a tax extension. Then I allocated $5,000 from my tax refund to savings bonds. I received $5,000 paper I Bonds about four weeks later. Sweet! Here’s the proof:
Restricted Stock Units (RSU) and TurboTax: Net Issuance
One of the most popular posts on my blog is one I wrote four years ago about reporting tax on RSU. Although I try to do the best I can in deconstructing it, I still get many questions about it every year at tax time.
It’s a difficult topic because there can be many variations. Employers issuing the RSUs don’t help because they are afraid of liabilities. They just say "consult your tax advisor" as if everyone has one. Tax software doesn’t make it easy either. Although there are many variations, the software tends to go by just one. If your situation fits it, you may be able to muddle through. If it doesn’t, the software confuses you more than it helps you because your situation doesn’t match what it thinks you have.
For the longest time I only addressed the issue generically. I refused to work as free tech support for the software companies. If you paid for the software, they should help you with how to use it. Now I give up. I realize people are looking for step-by-step help and the software companies aren’t providing it. Although this may be a little late for this year, there is always next year.
Clearing Firm: Your Broker’s Broker
You learn so many things if you pay close attention. On my recent brokerage account switch from Wells Fargo to TD Ameritrade, I noticed this in my transaction history:
Transfer of security from First Clearing
Who’s First Clearing? I thought I was transferring from Wells Fargo Advisors.
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