Friday Reading: Financial Automation

By Harry Sit

Selling Investments to Pay Down a Mortgage by Mike Piper at Oblivious Investor

Mike addressed a question from a reader about paying down a mortgage by selling investments. I would say if the money is in a taxable account, and selling doesn’t trigger capital gains tax, go for it. See previous post Pay Down Mortgage vs Investing In Bonds.

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Financial Automation = Financial Freedom by Daniel Ostermayer, MD at The White Coat Investor

Although I don’t use mint.com, I’m a big fan of automation. All my bills are paid automatically with  auto-charge to a credit card, auto-pay from a checking account, or auto-debit to a checking account. I still review the bills but I don’t worry about paying them. I recently added auto-deposits to Citibank checking, BBVA savings, and Mango prepaid card. They all run automatically on a preset schedule.

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Should the US Reform the Student Loan System? by Matthew Amster-Burton at MintLife

Matthew tells us how student loans work in Australia. Loan payments vary by income and they are paid together with taxes by payroll deduction. I wonder how the government tells the employer when to stop.

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The 401(k) Is a $240 Billion Waste by Matthew O’Brien at The Atlantic

Surprise, surprise. When you offer a tax subsidy to save for retirement, people don’t save much more. They just shift their savings from one place to another. "Households save where the subsidy is, but don’t save more because of the subsidy." I agree.

Before the laws are changed though, take full advantage of all the subsidies. Forget about which accounts you should fund first. Just max out all of them. Then you don’t have to worry about the order.

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Should you sell stock before capital gains taxes rise? by Allan Roth at CBS MoneyWatch

You should sell if your capital gains will be taxed at 0%. You likely will get the 0% rate if your gross income is less than $50,000 single, $100,000 married. You should also sell if you are planning to sell in a few years anyway. I have a spreadsheet for it in the previous post Taxes Going Up, Reset Cost Basis? If you don’t qualify for the 0% and you are planning to hold the assets long term, don’t sell.

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Insights into Deposit Growth and Low Rates from Wells Fargo’s CEO by Ken Tumin at DepositAccounts.com

Who knew when Wells Fargo offers 0.10% on the savings account people still keep depositing more and more money? Break the inertia. I recently moved a chunk of my savings from my credit union to CIT Bank. I also bought a CD there. CIT Bank does not advertise as much as Ally Bank, American Express Bank, or ING DIRECT, but the higher rate is worth it.

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Pension In Asset Allocation Decisions by Michael at Long-Term Returns

This one is a little subtle. I reluctantly disagree with the author. A pension is like an annuity. If I buy an annuity, that’s fixed income money. More of the rest of my money will be in stocks. But I would only consider pension already earned/accrued, not the amount projected, because the unearned pension may not materialize.

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Posted on November 30, 2012 under News. Keywords: , , , , , .

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2 Comments on Friday Reading: Financial Automation

  1. dd on December 2, 2012
     

    The CIT rates on CDs look good, but…didn’t CIT Bank go bankrupt in 2009? Is CIT Bank an internet bank? I can’t seem to find any locations using search engines.

  2. Harry on December 2, 2012
     

    I would say to some extent CIT Bank is in a similar situation as Ally Bank. The parent company CIT Group ran into some financial trouble in 2009. It went through a prepackaged bankruptcy and quickly emerged from it (basically debt holders took over, wiping out the stockholders). The bank subsidiary CIT Bank is a FDIC insured online bank.

    Similarly Ally Bank’s parent company Ally Financial, formerly known as GMAC, got into trouble during the financial crisis, received bailout, and is still owned by the Federal government today by a large percentage. Its bank subsidiary Ally Bank is a FDIC insured online bank.

    As long as both banks are FDIC insured, I don’t worry.

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