$10,000 Lesson On Variable Universal Life (VUL)
Variable Universal Life insurance or in short VUL is sold by insurance agents as a smart investment to unsuspecting people. The pitch usually goes like this:
You invest in VUL. The money in the policy grows tax deferred. You get to choose what you invest in, stocks, bonds, international, you name it. It’s like a super IRA, only way better. When you need money after you retire, you can first withdraw what you put in, then borrow from it, all tax free. When you die, your beneficiaries receive money tax free.
Disputed Credit Card Charge Against Priceline
When I go on vacation, I usually use Priceline’s Name Your Price™ service for a hotel room. You specify an area in the city, a quality level (3-star, 4-star, etc.), the dates, and the price you want to pay. Priceline tries to find a hotel for you at that price. If it accepts your bid, your reservation becomes final and non-refundable. You have to use the hotel Priceline picks for you. I usually bid for 3-star hotels and I get good deals at Marriott or Hilton. I don’t necessarily save absolute dollars because I otherwise would stay at a Comfort Inn or Best Western for the same amount of money. For the same price, I stay at a better quality hotel through Priceline. I just have to wait until the last minute making sure that my plans won’t change, and then enter my bid.
It has worked well, except this last trip. I bid for a 3-star hotel and paid more than what I usually pay. When I got to the hotel, the quality was not as I expected at all. Everything was at least 30 years old, from desk lamps to bathroom sink, from furniture to air conditioner, you name it. For a 3-star hotel, I got a 13-inch TV. The hallway smelled worse than a cheap motel. Because I already paid and it was not refundable (sunk cost), I had to stay there. Fortunately it was just one night.
Priceline let me down. It didn’t honor its end of the bargain. I bid for a 3-star but the hotel it gave me was clearly not a 3-star. I called them and asked for a refund but they didn’t listen. Now I will have to see if my credit card really protects me against a bad transaction. I filed a dispute with my credit card. Too bad I didn’t use an American Express card for my charge. I heard American Express is more friendly to their cardholders (not sure if it’s true). I will have to see how Visa and MBNA, now Bank of America, work for me. Maybe the so called consumer protection is just perception, something the credit card companies advertise but don’t really stand behind. I will see if it’s real. If I have to venture a guess now, I’d say I probably won’t win.
Carnival of Personal Finance #106
Carnival of Personal Finance #106 is up at The Digerati Life. My entry was a review of the new documentary about debt in America Maxed Out. My favorites in this carnival are:
- Japan Standard of Living – MoneyNing Style at MoneyNing — It’s great to see how things work in a different country.
- Rule #17: Numeracy at My Open Wallet — You need to know some math for finance and investment. I just wrote something today about how a math law taught in 2nd grade applies to evaluating Traditional and Roth 401k.
- What Would You Do With “Found” Money? at Grad Money Matters — “Found” money is every bit as valuable as earned money.
Commutative Law of Multiplication
Commutative Law of Multiplication is a fancy way of saying when you multiply two numbers, it doesn’t matter which number you put down first and which number you put down second.
a * b = b * a
Rebate Prepaid Debit Card Update
I received the mail-in rebate prepaid debit card last month as promised. I activated it, and then I immediately made a one-time payment to my phone bill for the full amount on the card. I received my phone bill today. The payment showed up correctly. Because the payment was more than my last month’s bill, the remainder is carried over as a credit to this month’s bill. I cut up the card and threw it away. Everything worked exactly as planned. Whew, I didn’t fall to any of the breakage traps. I still wonder how much the issuers earn by switching over from issuing rebate checks to issuing prepaid debit cards. It must be substantial.
Carnival of Personal Finance, 2nd Anniversary Edition
I haven’t submitted my posts to the Carnival of Personal Finance for a while because I have been very busy with work lately. But I had to participate in the 2nd Anniversary Edition because it’s so special. Bloggers were asked to submit their best articles in the last two years. As a result, this edition of the carnival is really the cream of the crop of personal finance blogging. The host JD at Get Rich Slowly did a fantastic job. It’s worth bookmarking.
For this special edition, I submitted Employee Stock Purchase Plan (ESPP) Is A Fantastic Deal. I wrote it when I first started blogging last year. If the employees in my company are representative of the population, only 50% of employees who are eligible actually participate in the ESPP. It follows that even fewer employees maximize their contributions to the ESPP. I showed in my post that the return on ESPP purchase approaches 90% annualized even if the stock went down. Every employee should take full advantage of it if they are able to sell the shares right away.
Every post in this “greatest hits” carnival is a gem, except I’m not a fan of lists like “10 ways”, “7 mistakes” etc. I’d rather read an article about one subject and dive really deep into that one subject. That’s just me though. I particularly liked these posts: » Read more …
Chase Ending 5% Grocery and Gas Rewards Cards
Someone reported on Fatwallet Finance that Chase will end the 5% rebates for gas and grocery purchases on its Cash Plus rewards credit card. I have the Rewards Plus and Cash Plus cards from Chase. They stopped issuing the Rewards Plus and Cash Plus cards shortly after I got in. However they have continued the 5% rewards program for existing cardholders until now. I have been getting 5% rebate on gas and grocery purchases, and I only charge gas and grocery purchases on the Chase card. The Fatwallet report didn’t say anything about the Rewards Plus card, but it’s very likely that the same will happen to that card as well.
Although I didn’t expect to be grandfathered in forever, this change is still a negative because it marks the end of the ongoing 5% gas and grocery rebate cards. The reported replacement offer is 3% rebate for the first $600 in top 3 “everyday” categories in each month. Everything else is 1%. If you can wait until you accumulate $200 in rebates, you then get a 25% bonus for converting it into a $250 gift card. It’s a complex offer. To maximize the rewards, you have to charge only 3 “everyday” categories and also make sure the total charges don’t exceed $600 every month. Otherwise the charge will fall into the 1% bucket.
Offers from other credit card companies are not any better. There are some cards that offer 5% or more rebates only for the first 12 months. I don’t count those because they are a limited time offer and I have no interest in applying for new cards every year. Other ongoing offers are equally gimmcky. American Express Blue Cash promises 5% rebate on gas and grocery purchases but the first $6,500 of the charges only earn 0.5% rebate. Pass. Citi Driver’s Edge card requires that you mail in your car service receipts or call them in order to convert your rebates to Thank You points which you then redeem for gift cards. Pass.
Individual TIPS Or TIPS Mutual Fund
[An updated version of this article appears in my new web site Explore Bonds, together with many other articles on investing in bonds.]
A reader asked about TIPS mutual funds in the comments to my action plan for TIPS. Just like there are mutual funds which invest in stocks, there are mutual funds that invest in TIPS. The Vanguard Inflation-Protected Securities Fund (VIPSX) is a popular choice because of its low 0.20% expense ratio. Similar funds from Fidelity or T. Rowe Price charge double what Vanguard charges. There is also an ETF iShares Lehman U.S. Treasury Inflation Protected Securities Bond Fund (TIP), whose expense ratio is also 0.20%, but it only makes sense if you have a no-commission brokerage account like WellsTrade or Zecco because otherwise you would have to pay brokerage commission for each trade. There’s another newer ETF SPDR Barclays Capital TIPS ETF (IPE) with 0.1845% expense ratio. Vanguard also filed an application with the SEC for an ETF based on its fund. It’s not on the market yet.
Buying TIPS through a mutual fund (or ETF) is a good idea, because it gives you a lot of convenience for a small price. Pros for investing in a fund include:
TIPS Action Plan
Since I wrote about TIPS yield on the rise, TIPS yield continued to climb.
If you are not familiar with Treasury Inflation Protected Securities or TIPS, which are inflation indexed treasury bonds, please read my previous post TIPS: Inflation Linked Bonds.
I’m amazed by how much the real yield rose in a very short time. 3.0% isn’t too far out of reach. Here’s a chart showing the yield changes since May 1, 2007, a mere a month and half ago.
Maxed Out: Documentary About Debt in America
I watched a documentary Maxed Out on DVD over the weekend. It’s about debt in America, especially credit card debt. It featured people who are in debt, people who lost their loved ones to debt, a Harvard Law School professor, Dave Ramsey, debt collectors, a pawn shop owner, and many other people involved in debt in one way or another. It presented a multifaceted picture of the debt problem in the United States. Here’s the trailer on YouTube.
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