Who Is A Millionaire?
I hear people use the word millionaire, but I’m not sure what exactly it means. For example, President Obama said in his latest State of the Union address,
"Before we take money away from our schools or scholarships away from our students, we should ask millionaires to give up their tax break."
Overvalued? Saving Too Much? Others Richer Than You Think?
I’m still catching up with the blogs I subscribe to after I came back from my vacation. Here are some of the noteworthy articles:
5 Reasons the Stock Market is Over-valued at Irrational Investor by Allan Roth. I share Allan’s concern about the near universal rosy outlook for the stock market after two years of good returns. Where were the stock market fans in 2009 and 2010? I’m not reducing my stock allocation but because stocks have done well, my new cash has been going to muni bonds lately.
Are You Saving Too Much for Retirement? at Generation X Finance by Jeremy. The answer is no, unless you have a pension. In addition, what’s the downside of saving too much? If you find yourself awash with money, there are always ways to spend it. If you find yourself not having enough when you reach retirement age, what do you do? Classic Pascal’s Wager problem.
Social Security Family Benefits Mess
Most of people think of Social Security as a government managed savings program similar to a 401k plan: you pay into the system when you are working; you draw from the system when you retire.
More informed people will point out it isn’t so. It’s a pay-as-you-go inter-generation transfer program. The money you (and your employer) pay today supports today’s seniors. When you retire, the younger generation supports you. It’s a social contract. Because mom and dad supported grandma and grandpa, you will support mom and dad.
That sounds good to me. However, because it’s an inter-generation support system, there ought to be some fairness between generations. What should one generation ask the next generation to shoulder and what shouldn’t? I see a breakdown to this question in the area of Social Security spouse and family benefits.
Claiming Parent As Dependent On Tax Return
Reader Bill asked me if it’s possible to list his parents as dependents on his tax return. Bill’s parents are foreign citizens. They came to visit him and lived with him for eight months last year.
We are all familiar with children as dependents. Can parents also be dependents for tax purposes?
I consulted my favorite tax book. I see Bill and his parents will have to meet several requirements before Bill can claim his parents as dependents on his tax return. » Read more …
More From Argentina: Middleman and Consumption Smoothing
For those keeping track, I’m happy to report that I’m writing this from safety in Argentina. I, together with some other foreign tourists, got out of the literal tourist trap set by the Chilean protestors by walking 6 hours, refugee style, to the Argentina border. We successfully crossed two blockades before we reached the border. Never have I appreciated an international border this much.
For a brief coverage of the strike in southern Chile and its impact on tourists, please see this report from the BBC:
Tourists trapped in Chile due to fuel price strikes
Money Stories from Argentina and Chile
I planned to write this after I return from my vacation to Argentina and Chile, but since I’m currently held hostage in a hotel by an indefinite general strike in southern Chile, I might as well do it now when I have nothing else to do.
The general strike affects the entire Magallanes region in Chile. People went on strike because the President of Chile would cut gas subsidies to this region. The protestors set up blockades on all roads into and out of cities. I don’t quite understand what exact purpose blocking the road serves, but that’s the way they do it. As a result, no one can go out to anywhere. There are also twice-daily rallies in town with people driving around honking horns and waving black flags, which I take as the symbol for strike. There have been no violence or rioting except one broken window at a restaurant which served tourists lunch on the first day of the general strike.
Now, money stories.
Debit Card Fee Caps: Nothing to Fear
Back in December, the Federal Reserve proposed rules to cap debit card interchange fees at 12 cents per transaction. Currently banks charge the retailers (called "merchants" in the industry) on average 56 cents per transaction for a signature debit and 23 cents per transaction for a PIN debit. If the proposed rules become the final rules, obviously banks will earn much less from their debit cards.
From a consumer’s standpoint, I welcome this change if it comes to fruition.
Banks say they will have to get rid of the debit card rewards programs. OK. Most debit cards don’t have a reward program to begin with. Those that do have a reward program give very little in rewards. The going rate is 0.25% of each purchase. Spend $100 on a debit card, get 25 cents back. Big deal! Customers going after rewards use a credit card instead of a debit card anyway.
How To Call US Toll Free Numbers From Overseas
Jennifer Saranow Schultz at New York Times Bucks blog wrote an interesting story:
She lost her laptop when she was in China. She wanted to call her bank and credit card companies to check if there were unauthorized access to her accounts.
As you know, 800/888/877/866 toll free numbers typically don´t work outside the US (some work in Canada). Jennifer saw ¨call collect¨ on the back of her cards with a direct number. So she dialed that number from her hotel phone. She thought that would make it a collect call. She ended up with a big charge for the one-hour call. She had to plead with the hotel and the bank for a credit saying the bank wasn´t clear on telling its customers how to make a collect call.
Timing Mutual Fund Purchases Around Year-End Distributions Backfired Again
Financial advisor Allan Roth has a pet peeve against the Associated Press’s habit of reporting the raw S&P 500 index changes as if they are the U.S. stock market returns. He argues the true U.S. stock market returns should (a) include dividends; and (b) include small caps. I agree with him, but the media don’t listen. Every year Allan writes a new article pointing out the same thing.
I, on the other hand, have a pet peeve against the conventional wisdom of timing mutual fund purchases around year-end distributions. Every year in late November to early December, as predictable as clockwork, there will be articles telling people to hold off investing in mutual funds until after the year-end distributions. “Otherwise you will pay taxes on gains you didn’t have,” these articles warn the investors.
Here are some examples: » Read more …
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