Archive for February, 2010
Your Take: Boost Savings Rate by Cutting Taxes
Actions speak louder than words right? So why is the interest you earn from a savings account taxed at your marginal income tax rate while the dividend income you earn from investments is taxed at the long term capital gains rate? When we put our money in a high interest savings account, the interest we earn is taxed at 25%. When we get a dividend payment, it’s taxed at 15%.
So, if you want people to save more, why not do something simple like tax interest at the long term rate? Or, not tax the first $x,xxx.xx in interest earned each year? It won’t be a perfect answer to our aversion to saving, as interest rates will adjust to the change in tax treatment, but it will certainly change the mindset of your average citizen. Politicians love to talk about how we should be saving more but they don’t actually take any steps to make it a reality (unless you count ignoring the signs of an insanely “frothy” housing market, over-leveraged financial institutions, etc.).
Sadly, given the recession, this will never happen because while we all inherently know that saving for the future is more sustainable than spending it all today, there’s no way a politician can advocate this while we’re in a recession.
Despite that, I’m curious what you think? Crazy idea?
(Photo: gnerk)
Your Take: Boost Savings Rate by Cutting Taxes from personal finance blog Bargaineering.com.
Transferring Brokerage Assets from E*Trade to TradeKing
When I learned about E*Trade selling their banking business to Discover, I knew my days with them were numbered (I later learned that only bank accounts with no brokerage relationships were moving… but alas the ball was already rolling). Brokers are finding it increasingly difficult to differentiate themselves and when you can get good customer service at a cheaper cost elsewhere, even the pioneers are going to find their businesses suffering. Those who have been reading for a while may remember me mentioning my investments at E*Trade and how I’ve been doing any new investing with TradeKing. My original approach was to leave my assets at E*Trade until I sell them, but a recent offer changed my mind.
TradeKing has a promotion where they will reimburse new accounts, defined as opened in the last thirty days, up to $150 in transfer fees. My account is far older than that but I asked a CSR if they’d be willing to extend that offer to me and they agreed! (had they not agreed, I wouldn’t have transferred…) E*Trade has a $60 full account transfer fee, much less than the $150 reimbursement limit, that is paid using account assets. I’m not sure what would happen if I had $0 cash, but the simple solution was to transfer $60 into the account prior to initiating the transfer. If you plan on doing this, be sure you have the amount of the fee in cash or you might not like what the brokerage does on your behalf!
ACATS
The process, surprisingly, was painless. Anytime you want to transfer your assets, you need to fill out a form with the receiving brokerage because they are the ones that initiate the transfer. For a full account transfer, TradeKing has a short ACATS form you must send along with your most recent account statement. When you want to transfer assets from one brokerage to another, you need to keep one acronym in mind – ACATS. ACATS stands for Automated Customer Account Transfer Service and that’s a system setup by the National Securities Clearing Corporation (NSCC) to automatically transfer assets from one trading account to another.
Historical Transaction Data
The only tricky part of the transaction has to do with historical data. When I transfer my account assets from E*Trade to TradeKing, the historical data isn’t included. I will need to go into my TradeKing account and manually enter the historical transaction data for those shares. I’m not sure how this will play out whenever I do my taxes but I’ve kept electronic copies of trade confirmations so I can prove, if the IRS requests it, when the shares were acquired. Since I’ll be closing my E*Trade account, I suspect they won’t be retaining those records.
Why am I transferring my assets? Simplification. I have a few holdings in E*Trade (shares of Apple, Southwest, M&T Bank, and Costco) and when I closed my E*Trade bank account, I was considered closing my brokerage account so I would have one less account to deal with. Obviously that’s a terrible reason to sell stocks, so the alternative was to transfer it to my main brokerage, TradeKing (#1 reason for them being #1 is price, $4.95 per trade). There’s nothing wrong with E*Trade, I’ve always been satisfied with them, it’s just a matter of another broker being slightly better.
One more account scratched off the list! (it’s looking pretty slim now)
Transferring Brokerage Assets from E*Trade to TradeKing from personal finance blog Bargaineering.com.
List of Free Specialty Consumer Reports
After my post on requesting your CLUE reports, Reader Bob sent me an exceptionally long and comprehensive list of all the specialty consumer reports that you are entitled to every year. When I wrote my first request your specialty report post, I had about half a dozen… this expands the list by a lot.
I was amazed by the sheer number of companies that collect information about me. I was aware of the credit report companies, LexisNexis, and ChoicePoint, but there are a lot of smaller companies collecting data like rental history that I’ve never heard of. While I’ve never been too fearful of the idea of Big Brother, the number of companies collecting information about me, and you, is a little disconcerting!
Credit Reporting
- Equifax, Experian, TransUnion – All available via AnnualCreditReport.com.
- Innovis
- Payment Reporting Builds Credit (PRBC)
Employment History Reports
- The Work Number – Entitled to one copy of your Employment Data Report which includes employment and income information from your employers who send data to The Work Number, information about lenders, credit agencies, and other verifiers that have received your data, any messages, alerts, or statements you have requested be put in your data file.
- ChoicePoint – The ChoicePoint Workplace Solutions Inc. Employment History report contains information related to your employment history as well as other information regarding your background. Also available free once a year.
- Acxiom
Auto & Home Insurance Claim Reports
- ChoicePoint – CLUE Reports.
- Insurance Services Office (ISO) – A-PLUS will provide one free loss-history report in any 12-month period.
Tenant History Reports
- ChoicePoint – Tenant history report, the Resident Data Inc. Tenant History report contains information related to your tenant history as well as other information regarding your background.
- First Advantage SafeRent
- Tenant Data Services
- RentBureau
Full File Disclosure/Personal Information Reports
- ChoicePoint
- LexisNexis – Consumers can request their own reports for free.
Check Writing Reports
- ChexSystems – Under the Fair and Accurate Credit Transaction Act (FACTA) amendments to the federal Fair Credit Reporting Act (FCRA), you are entitled to a free copy of your consumer report, at your request, once every 12 months.
- TeleCheck – Available once every 12 months for free via psotal mail request.
Health History Reports
- Medical Information Bureau (MIB)
- Prescription Drug Purchase History Reports – Ingenix MedPoint
- Prescription Drug Purchase History Reports – Milliman IntelliScript
Miscellaneous
- Social Security Statement – Social Security Administration
- Purchase Returns History Reports – Retail Equation
- Gaming Patron’s Credit History and Transaction Data – Central Credit
- TeleTrack
- Utilities & Telecommunications Reports – National Consumer Telecom and Utilities Exchange, Inc (NCTUE) – Call 1-888-201-5643 for reports
According to Bob, he compiled this list of consumer reports by using information extracted from the following sources: ConsumerReports.org, PrivacyRights.org, Bankrate, ListSergeant.com, MyFico.com, and CreditBoards.com.
If you know of any specialty consumer reports that aren’t on this list, let me know and I’ll include it.
List of Free Specialty Consumer Reports from personal finance blog Bargaineering.com.
Closing E*Trade Bank Savings Account
You may have read on the interwebs that E*Trade is shutting down bank operations to focus more on the brokerage. As part of that process, all accounts are being sold to Discover Bank in what seems like the first bank sale that didn’t involve the FDIC. 
Unfortunately for E*Trade and the hilarious E*Trade baby, taking away the bank account takes away their last differentiator. The savings account, despite it’s abysmal rates, acted as a higher than average interest rate sweep account for brokerage funds. It was an FDIC insured place you could keep your money between investments. The interest rate wasn’t that great, probably foreshadowing this sale, but it was better than getting nothing.
Update: It turns out that not all savings accounts will be transfered, just those without an ongoing brokerage relationship. Thanks to all the readers who shared that in the comments below, you can get more detailed coverage here.
So today I started the process of closing my E*Trade Complete Savings account. Fortunately, it was pretty easy and you can do it online:
- Log in and look for Contact Us at the very bottom (or try clicking this link, not sure if it’ll work if you’re not logged in).
- From the account drop down, select your bank account.
- From the Subject drop down, select Account Services.
- From the Topic drop down, select Close Account.
- Type in a message, this is the message I sent:
I would like to close my Complete Savings account and have its assets transfered into my brokerage account.
About 24 hours later I received the following response (there was more text around the message but I trimmed all but the salient part):
Thank you for your message requesting to close your Complete Savings Account and moving it to your brokerage account XXXX-XXXX. I have submitted the request to have the account closed and the funds moved. The transfer of the money should occur tomorrow.
Then, after another 24 hours, I received a simple Account Closure Request Status message indicating the closure was complete. Easy as pie!
(Photo: thomashawk)
Closing E*Trade Bank Savings Account from personal finance blog Bargaineering.com.
Roth and Traditional IRA Contribution Limits
I, like many other personal finance bloggers, am a huge fan of IRAs because they give you a tax-advantaged opportunity to save for your retirement. Both types, the Roth and the Traditional, offer tax benefits that are hard to find anywhere else. The Roth IRA offers you to reap the growth of your retirement assets tax free while the Traditional IRA gives you an immediate tax benefit for contributing to your own future.
There’s a reason why the IRS puts contribution limits on IRA accounts. As many of you know, you have until April 15th to make a contribution to your Traditional or Roth IRA for the 2009 tax year. What you may not know is how much you’re able to contribute.
IRA Contribution Limits
In addition to the current year’s contribution limit, I’ve also included some historical limits to put the current IRA contribution limit into a bit of perspective:
| Tax Year | Contribution Limit | Catch-Up (50+) |
| 2006-7 | $4,000 | $1,000 |
| 2008 | $5,000 | $1,000 |
| 2009 | $5,000 | $1,000 |
| 2010 | $5,000 | $1,000 |
Roth IRA Phaseout
With the Roth IRA, your contribution is limited by your modified adjusted gross income. Rather than explain all the math, I created a calculator that does the math for you. May I present this very simple Roth IRA phaseout calculator. If you provide your modified adjusted gross income and your filing status, it will tell you how much you can contribute.
(Photo: dawnzy)
Roth and Traditional IRA Contribution Limits from personal finance blog Bargaineering.com.