Lesson Well Learned
Brian White | Aug 21, 2020
WHEN I BEGAN investing in 1987 at age 33, I knew very little about the financial markets. As a new University of North Carolina employee, I just started having money taken from my paycheck each month and put in North Carolina’s 457 plan for state employees. A 457 plan is a deferred compensation plan, similar to a 401(k) plan, but the plans are offered by state and local governments, and they're subject to somewhat different rules. I have no idea how I chose the mutual fund in which I initially invested. Fortunately, since I didn’t have much invested then, it didn’t make a whole lot of difference. Sometime in the mid-1990s, I started reading the “work and money” section every Sunday in Raleigh’s The News & Observer. The section included a couple of pages on personal finance from The Wall Street Journal. Besides the usual articles on recent market performance and where the market was sure to go in the near future, there was solid personal finance advice: establish goals, allocate assets based on risk tolerance, diversify, rebalance, save regularly, use low-cost index funds, “ignore the noise” from all the market prognosticators and invest for the long term. These sounded like good ideas to me, as they were based on research and mathematics, both of which are dear to my heart. But I wasn’t yet at a point where I could implement all these ideas in a simple way, because the funds available to me through my 457 plan were limited to actively managed mutual funds, along with a “stable value” fund that paid a relatively low interest rate. Nevertheless, I was able to invest in a bond fund, a couple of stock funds, a balanced fund and an international fund. I set up a spreadsheet to determine what my combined…
Read more » That Final Payment
Brian White | Oct 30, 2024
IT'S IMPORTANT TO BE familiar with what happens with Social Security benefits when someone dies. Otherwise, you may find yourself in a long, painstaking battle to get the payment to which your loved one was entitled. I found this out the hard way. My father-in-law Bernard died in September 2015. My wife was his executor and the agent under his power of attorney (POA). But I’d earlier served as POA and executor for my mother, so I handled Bernard’s estate as well, except for signing documents. The Social Security rules relevant to this situation are as follows. First, the check you receive in any given month represents the benefit for the previous month. Second, you don’t receive a benefit for the month in which you die. You will, however, receive a payment in the month you die, since that payment is for the previous month. Your estate can keep that payment. I wasn’t clear on these rules, which led to much frustration and gnashing of teeth. Bernard died in September, and he received a payment that month—which was the payment for August. On Oct. 2, when Bernard would normally have received a direct-deposited Social Security payment for September, he didn’t get a payment, as Social Security had been notified of his death, presumably by the funeral home. On Oct. 9, we received a letter saying Bernard “is not entitled to monthly benefits beginning September 2015." It also said, "Since we did not stop [Bernard]'s payments until October 2015, he was paid $2,041.20 too much in benefits." The letter concluded: "You should refund this overpayment within 30 days." This was incorrect. The payment for September would have been received in early October, and Social Security didn’t send an October payment. I didn’t catch that error at the time. Instead, I did…
Read more » Talk While You Can
Brian White | Dec 21, 2022
THIS PAST SPRING, my brother Phil made the six-hour trip from our hometown in North Carolina to northern Virginia to visit our 95-year-old aunt, whom we know as Aunt Ina Lou. We hadn’t heard from her in a while, which was unusual. Since we were children, she’d always sent us Christmas and birthday cards, and she’d missed some recently. Phil tried calling several times, but she hadn’t been answering her phone. This wasn’t particularly surprising since our aunt is almost deaf. Though he wasn’t overly concerned, Phil decided to go see her. When he arrived, he learned that Aunt Ina Lou was no longer leaving her house or paying her bills. He spoke to some of her neighbors. He found out that one of her much younger neighbors had been writing checks for her to sign, and also buying and delivering her groceries. Other neighbors had been doing her laundry and helping out as much as they could. Fortunately, they’re honest. Our aunt had practically all her substantial savings in her checking account, so they could have cleaned her out. Her young neighbors were concerned because she clearly needed more help than they could provide. They hadn’t known how to contact any relatives, and Aunt Ina Lou was unable to tell them because of her declining mental faculties. Phil set about trying to organize our aunt’s bills, which were stashed in a variety of places throughout her house. She had saved years of bills, and organizing them was a monumental task. I’m a Volunteer Income Tax Assistance (VITA) tax preparer, so I offered to do her taxes. On a later visit, Phil brought back what records he could find, and I prepared her 2021 taxes. Most of her tax records were kept in the same place, but the last tax…
Read more » Limited Selection
Brian White | Sep 22, 2020
BY EARLY 2009, I HAD been investing for 22 years. My wife had invested for a bit longer, and our savings were starting to seem like a significant chunk of money. I was reasonably happy with our investments. Still, I knew that—for those 22 years—we had been paying too much in investment expenses, thanks to the high-fee funds in our employer-sponsored retirement accounts. Another source of frustration was that our money was spread over seven financial accounts and 14 mutual funds. First, there was my 457 account through the University of North Carolina (UNC), where I did my initial investing. The funds there didn’t perform particularly well, so I was no longer contributing money. Second, there was my 403(b), also through UNC. The best options there—or, at least, what the salesman persuaded me to buy—were several American Funds mutual funds with 5% front-end loads. Third, my wife had a 403(b) through Nationwide from when she worked for the state as a clinical social worker. She had three actively managed funds in that account. Fourth, in 1998, my wife quit her job with the state to build up her private practice as a clinical social worker. I set up a SIMPLE IRA with Vanguard Group, so she could save part of the money she earned. We also each had Roth IRAs to which we were contributing regularly. Those were accounts Nos. 5 and 6. Finally, because we have no children and we kept our expenses relatively low, and because I’d received several promotions, we had additional money every month to invest, so we put those dollars in a Vanguard taxable account. All those different accounts made for some complex accounting, but I had them all in a spreadsheet that allowed me to track what percentages we had in U.S. large-cap stocks,…
Read more » Rookie Mistakes
Brian White | May 15, 2020
I LIKE TO THINK of myself today as a pretty savvy investor. But I wasn’t savvy when I started out. Despite attending business school and earning a master’s degree in computer science, I knew nothing about managing money or saving for retirement, so I initially made a number of blunders—but also one particularly lucky choice. My first real job after college was in 1987, as a systems programmer for the University of North Carolina in Chapel Hill. In my first year, I figured I should put away some money for retirement. I started investing through the 457 plan offered by the North Carolina retirement system. That turned out to be a fortuitous choice because, for years, North Carolina had promised its employees that the state wouldn’t tax their retirement savings. Then, in 1989, the state reversed its position, and decided to start taxing state employee pensions and retirement savings. A 1995 court decision, however, ruled that North Carolina couldn’t tax either the pensions of employees who were already vested—or the retirement accounts of employees who had retirement accounts as of 1989, which included me. While my initial investment in the 457 wasn't a great moneymaker, it meant I had my foot in the door. Since then, the plan’s fund choices have improved and, as an added bonus, I can now roll money into this account and thereby avoid paying North Carolina state income tax on it. This has worked out great for me, but I can’t take credit for it. It was sheer luck. Of course, I made many mistakes along the way, too. In addition to the 457 plan, I put money into a 403(b) plan offered through the university. The plan included a variety of mutual funds. My first big mistake was looking at various investing magazines for…
Read more » Late to the Rescue
Brian White | Nov 25, 2020
MY FATHER-IN-LAW William retired from Duke University after teaching there for more than 30 years. He had a good pension, which—along with Social Security—covered all his expenses at the continuing care retirement community (CCRC) where he spent most of his retirement. Almost to the end, he was mentally sharp. I saw no need to inquire about his finances. I was mistaken. In summer 2014, my wife noticed that William, then age 96, had left a large check for a matured life insurance policy on his desk for a couple of months. On investigating further, she saw that there were some bills—things not covered by the CCRC—that he had left unpaid. She spoke with her father, who agreed to grant her power of attorney. Since I’m more interested in financial matters than my wife, she enlisted my help. First, I organized his records. This took some time, because William saved everything he received from his bank, broker, pension fund and more. Next, I moved most of the money he had at the Duke credit union to the State Employees’ Credit Union, which was then paying about eight times more interest on money market accounts. That made him a couple thousand bucks in a year for very little effort. Then I started looking through his statements from a large national brokerage firm. There were 32-page monthly reports and eight-page quarterly reports, neither of which provided much useful information. Instead, they appeared to be written to impress the reader with the fine management the company provided, making it seem like the folks there were doing a lot of work for their fees. I found that 92% of William’s portfolio was invested in 14 North Carolina municipal bonds with an average 5% coupon rate. [xyz-ihs snippet="Mobile-Subscribe"] The bonds had a market value of $621,027…
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