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Splitting the Restaurant Bill

Years ago, I was on a business trip. The people I was meeting with were coming to town well after dinner, so I was on my own. The hotel had a nice little happy hour, and I was making small talk with a number of people that I learned were there for the same reason, a real estate conference. They worked for the same company, but hadn’t known each other as they were from different parts of the US. The happy hour came to an end, and I was thinking of where I’d be eating when the group said I was welcome to join, they knew me as well as anyone else there.restaurant

I was at dinner with 11 Realtors, long before I had my license, but I had always found the industry interesting. We were ordering drinks when I heard someone tell the waitress, “We’d like separate checks.” I knew this would pretty awful for the waitress, and tried to talk the group out of it. The first objection was easy to address, what if someone had an extra drink? I said I only planned to have one, but even if two people decided to get two drinks each, my share would be less than $2 extra. Then, how, exactly, do we split the check? I thought realtors knew a bit of math, at least the easy stuff. With 12 people, I said it would be easy, we each pay 10% of the check, resulting in 120% of the money including a decent tip. As a group, they weren’t having it. Funny thing, in the end the range from low to high was about $2, not as if a dieter ordered a $12 salad, and someone else, a $40 steak.

When you go out with friends, how do you split the bill? Separate checks, 50/50, or do you do the math to nearest penny?

A Tough Endgame

As I was doing my mother in law’s taxes, over three years ago, I wrote, Mom – You don’t itemize, describing her tax return a bit and the fact that her medical deductions weren’t enough to flow to her itemized deductions, and so she remained a Standard Deduction filer. Since her taxable income put her below the threshold to hit the 25% bracket, I took advantage of the Roth IRA conversion to “top off” that 15% bracket.

It was all going well. Then her situation deteriorated to the point that independent living no longer worked for her. At more than $70,000 per year, the cost qualifies as a medical deduction. It’s a memory care facility, and passes the IRS test for what help the resident needs. The result is that from not coming close to itemizing, mom will now blow through the medical deduction exclusion (7.5% of AGI) as well as the standard deduction.

It’s all about the endgame. To handle our finances in the most tax efficient way possible require a knowledge of not just today’s tax code, and a guess as to tomorrow’s, but also an estimate of how long we’ll be on earth. Recently, a friend was asked what he did for a living before he retired. He responded that he worked as an actuary for an insurance company. The follow on question was simple, “So you could tell me when I’ll die?” I jumped in, and answered, “No, but if there were 1000 of you, he’d tell you, with scary accuracy, how many will be alive after 10 years.” Yes, I’m great at cocktail parties. But that’s the punchline. Man plans, God laughs.

Rethinking the myRA

I originally wrote about the myRA in February of 2014. It had just been introduced by the government, and my knee-jerk reaction was to dismiss it as an unnecessary redundant new savings account. myra I’ve had time to reconsider and the rare opportunity to spend some time with representatives from the US Treasury whose job is it to promote this account.

I left our discussion with a better understanding of how our retirement system continues to fail the small investor. Not all businesses, especially the smaller ones, offer a 401(k) or other retirement plan. This leaves too many people on a path to having little to no savings, and sometimes, all it takes is that first jump-start. Seeing the balance increase over time can itself be a motivator to save more. Even with rates near zero, the myRA returned 2.04% in 2015, as interest is at the same variable rate as investments in the Government Securities Investment Fund in the Thrift Savings Plan for federal employees. So far, over 15,000 people have opened their accounts, and are starting to save. You can think “only 15,000?” or realize that these are 15,000 people who had fallen through the cracks, unable to find a system can could easily accomodate their introduction to long term savings.

The Treasury myRA website is well designed and can answer any question you may have about how you can sign up, deposit to the account, and save your way to the $15,000 it will take to force you to transfer the account to a Roth at a bank or broker.

Swim With the Sharks: Never Miss A Great New Investment Opportunity !

A Guest Post today –

The financial business today offers numerous opportunities to people who are willing to work with devotion. If dealing with financial affairs fascinates you and managing other people’s money is a matter of your interest, then stock broking is a flourishing career for you.
The business of buying and selling shares, bonds for other people and organizations is termed as stockbroking. Stock broking involves professional individual termed as broker who executes, buy and sell orders for stocks and other securities through a stock market, or over the counter, for a fee or commission.

Selecting a broker is going to be the main decision when you decide to invest, as they are going to be taking a lump of your hard earned money every time you place a trade. So knowing the different services that stockbroking firm’s offer is equally important as placing the investments with them.
We can appreciate Hollywood movies like Wall Street for displaying the job of a stockbroker very glamorous. But the reality is that stockbroking is a very intense and sensitive business operation.

Stockbroking is a challenging field that needs to have the essential ability to sell, communicate effectively and to persuade others the concepts that are at times hard to grasp. New stock brokers have to be ready to work for long hours to find customers and to establish themselves.

The modern stockbroker has several major arenas in which to build a business, but those without prior training or censure might be wise to start at a full-service firm that will provide this at no cost.

Stockbroking is a regulated profession in the UK and brokers must achieve a recognized qualification from the Financial Conduct Authority (FCA)’s Appropriate Qualifications list. Whereas In the United States, a stockbroker must pass both the Series 7 and either the Series 63 or the Series 66 exams in order to be properly licensed.

Stockbroking on one hand offers potentially good pay, job security and career advancement opportunities but it can also cause high stress, dealing with annoyed people and risk of market affecting your finances.

Stock broking offer retail and institutional investors the opportunity to trade shares. Trading platforms can be envisioned as the electronic “facilitator” to future success Stockbrokers trade shares both on exchange and over-the-counter, dependent on where they can find the best price and liquidity.

In view of the fact that there’s a lot to consider when you’re selecting the right trading market these days. The big five stock brokerage firms in the US namely, Scottrade, Charles Schwab, Fidelity Investments, E-Trade and TD Ameritrade, comprise the top five in terms of customers and assets.

Online financial institutions specialized in stockbroking services provide extensive and insightful market observations. One such exceptional example is the CMC markets, the global CFD (contracts for difference), Forex trading and stockbroking providers.

Changes in business practices have resulted from the widespread adoption and diffusion of information and communication technology. As a result, Stockbroking firms have now openly adopted information and communication technology to improve their competitiveness and responsiveness in market conditions.

Investing in the stock markets can be very complex job and often requires the help of a professional. Besides the level of service that brokerage firm’s offer, the type of investing style that you as an investor follow will also affect your unique financial situation.

The bottom line to becoming a stockbroker is that, it’s not an easy job. If you are motivated enough to posses the necessary aptitude, adapt to fast changing situations, setting the right expectations and priorities then stockbroking can certainly be a handsomely rewarding job in the end.

The Cost of Bad Advice

When Shakespeare said (spoken by a character in Henry VI) “The first thing we do, let’s kill all the lawyers,” it was actually a complement to the profession. It was suggested as a way to undermine the government, and lawyers were viewed in high regard, as keepers of the law. I was going to offer “Let’s kill all the lawyers” as a headline, but that would be awful. I don’t want to kill anyone, but I do want to offer a warning about the bad ones.


Bad doesn’t always mean malicious, it can just come from ignorance. And now, let me offer another post-mortem, how a series of lawyers messed up my sister’s finances. It took a few to mess up this badly. It started in the early 80s, when my grandmother passed away. She owned the family house, a small apartment building, 4 apartments, all occupied by relatives. After she died, I found out tat she had transferred ownership before her death, half of the building going to my father. Nearly two decades later, another lawyer helped transfer his share to my mother. No tax forms filed, no paperwork beyond the quit-claim deed filed at the registry of deeds. Since my mother and sister still lived there, no disaster just yet. I knew at that point that since the house was never inherited, the basis ($4000, bought in the 1930s) never got stepped up. I advised mom to set up an irrevocable trust, so her share could pass to my sister and get stepped up on her death. Between then and the time mom died, another lawyer took care of the transfer. Via a trust? No. Just a transfer. In my opinion, malpractice. With my mother gone, and my sister likely to sell the house, she never got a stepped-up basis. With her share worth $600K or more (this is NY, where home prices are insane) and basis so low, even at the long term gain rate, she’s looking at $110,000 in federal taxes and $63,000 in NY tax.

Please, take a moment to let that settle in. Inherit the property on death, sell it, pay $0. Get it as a gift, basis follows, pay a tax totaling $173,000. That difference would allow a withdrawal of just under $7000 per year (Using the 4% withdrawal rule).

Now, there were 2 options that were proposed to her. One, since she’s lived in the house most of her life and certainly the past 2 years, claim the $250,000 exclusion. That drops her total tax bill to $90,000. Better than $173,000, but not the zero my advice would have achieved.

The other advice? To fill out the tax return as if the house was inherited. Not my advice. And this option has the potential to really blow up. Presumably, my sister would use the proceeds to buy a condo in the area, and this would take most, if not all of the money from the house sale. Imagine, she’s all moved in, and somehow, a random audit shows she owes the full amount, but has already spent it. Not a good situation to be in.

Whether it’s a reader or a family member, there’s no joy in saying “I told you so.” What remain is my private thoughts and my own feelings that people shouldn’t offer advice when they are not knowledgable. In my world, there’s a lawyer who should be writing a large check to my sister for his bad advice.

(Disclosure – the numbers above are all accurate, I expect the house to sell for $1.2M and my sister is in for half. I am not in for any of it. I have no issue with that. I only want the best for my family including my sister and my cousins, each with their own tax issue when the house sells.)

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