July 31, 2013

FREE - Ream of 8x11 paper and 50 sheets photo paper from Stapes (expires 8/3)

I noticed a coupon on the Staples website offering a free ream of 8 x 11.5 paper (sku 513099) after rebate and coupon.    The deal is good till 8/3.    With the Staples rewards program you get free shipping for online purchase.  

Go to Staples.com then click on the 'deals' button and select 'coupons' and you'll see the coupon.   Heres a direct link.  You can look up the rebates here.

The ream of paper is $6.99 and after a $1 coupon (#48724) and $5.99 rebate (offer #13-73933) its free shipped to your home.   You'll have to wait for the rebate to process but you can do an online easy rebate and then have it paid to Paypal or a check mailed to your home.

1. put the paper in your cart
2. apply the coupon code 48724 during checkout
3. submit the purchase
4. fill out the easy rebate request for offer #13-73933

If you want to go to the physical Staples store you can also get a free packet of 8 x 11.5 photo paper sku 564121 after rebate as well.   $14.99 minus $3 coupon 13646 and a $11.99 rebate offer 13-73932.


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July 30, 2013

Cosmo, Popular Science and many other for $3 after discounts via Magazines.com and Ebates

Magazines.com is having a Christmas in July sale with several magazine titles on sale for $5.   They have several titles like Cosmopolitan Popular Science, Marie Claire, Seventeen, Field & Stream and others.   The sale ends tomorrow (7/31).

In addition you can get 40% cashback by using Ebates on the purchase.    So $5 cost with 40% cashback would give you a net cost of $3 after the rebate.

To get the cash back you need to be signed up with Ebates.  Then simply go to Ebates to get the referral to the the store before you do your shopping.  I also get a referral bonus if you use my links to sign up with Ebates.
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July 29, 2013

My Student Loans

I was sorting through some old papers and I found the statements from my college loans.   I had a few subsidized Stafford loans and a Perkins loan.

Three individual Stafford loans serviced by Sallie Mae:
$1,081 @ 8%
$1,712 @ 8%
$1,191 @ 8.25%
One Perkins loan :
$1,871.4 @ 5%

The total debt was : $5,855.40

That was all back about 20 years ago.  If I adjust to inflation it would be like having about $9,461 in loans in today's dollars.   It wasn't a burden for me.  When I started working full time the total debt load amounted about 15% of my annual salary.  I think I could have handled  as much as 6 times as much.  

Note the interest rates on my Stafford loans were 8% and 8.25% while the Perkins was just 5%.   The Perkins  loans were subsidized more substantially.   Of course this was many years ago when interest rates are higher than today's very low rates.

Looks like it took me a few years before I paid off all my loans.   I have a final statement that is about 4 years after I started working full time.   I don't recall for sure but I think I made minimum payments most of the time and then finally just paid them off in full at some point before the end of the loan term.

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July 11, 2013

Taking Some Time Off

I will be taking some time off.  

It may be 2-3 weeks till I'll have articles up again.


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July 9, 2013

6 Common Myths About Pensions

Once in a while you'll see people perpetuating myths about pensions.    I don't' know where some of this stuff comes from but I see some of the same myths over and over.   


Myth #1 : Nobody has a pension any more.
Fact : About 20% of the working population is covered by a defined benefit pension.
Its true that pensions are not as common now as they were in previous decades.   However they aren't extinct.   There are still many government and union workers who have pension plans.

Myth #2 :  If a company goes bankrupt then you'll lose your pension.
Fact : Bankruptcy does not wipe out pension obligations and pensions are guaranteed by the PBGC.
I write about this one in What Happens to Your Pension if Your Employer Goes Bankrupt?
The PBGC is an independent agency of the federal government.   It guarantees pensions in the case when companies go bankrupt.   The system works pretty much like how FDIC covers bank accounts.  There is a limit to PBGC coverage and high value pensions may be cut under PBGC coverage.  However the limit is $57,000 at age 67 so few people would be hit but the cut off.

Myth #3 : Companies can raid your pension and cut your benefits.
Fact : Companies are not fee to 'take' pension funds out of a pension system and are not legally allowed to reduce already earned and vested benefits.
Private pensions are heavily regulated by the federal government.   The ERISA law regulates pensions and defines vesting periods.   Once you are vested in a pension you've earned the benefits.  Under the federal law the employers have fiduciary requirements to employees for their pension funds.

Myth #4:  You're better off with a 401k.
Fact :   Usually not. -- But it depends.
Without knowing the details of the 401k or the pension or a persons circumstances this is not something people can say with certainty.   Comparing a 401k and a pension is kind of an apples to oranges comparison.   Pensions are low risk and guarantee a lifelong benefit but you retain no assets, 401ks have a lot more flexibility with assets directly handled by the retiree but no guarantees.  Yet in my opinion at least I would say that usually pensions are better.   Generally speaking most pensions offer higher dollar value benefits to retirees than most 401ks.   Thats a major reason why pensions were replaced by 401ks and pensions mostly phased out -- to save companies money.   Many people prefer to manage their retirement funds themselves, but the majority of people do not do a better job investing their funds than the market average or professional money managers.  In fact most individual 401k owners do a pretty poor job.

Myth #5 : Pensions are all underfunded and they are going to run out of money.
Fact :  Most pensions are under funded but that doesn't mean they'll run out of money.
As of 2010, about 80% of pensions covered by the PBGC were underfunded by about 20%.   That seems bad.  However we should keep in mind that the funding of a pension looks at all the future liabilities and assets for all retirees projected into the future.  If a pension is 80% funded that doesn't mean they're short 20% today, it means that the actuaries calculate that the assets held today are only sufficient to pay 80% of all the liabilities.  Its just a snapshot in time.   The calculations are based on interest rates and market conditions.   Back in 2007 the average funding rate for private pensions was 111% but just two years later in 2009 it had dropped to 80%.   Thats mainly due to market conditions. And as of 2012 a recent law may have drastically changed the funding outlook for many pensions by allowing them to use higher historical interest rate averages.

Myth #6 :   Everyone used to have a pension.
Fact :  Most private sector employees were never covered by pensions.
According to the ERBI the peak of private workers covered by pensions was 46% which we hit in 1980.  After that it declined.    While pensions were a lot more common in the past than today, most people didn't have pensions in their jobs.

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July 7, 2013

Are People Shockingly Bad at Finance Math or is The Economist Wrong?

I while back I reported that People Are Shockingly Bad at Simple Finance Math   That was based on an article in The Economist titled  Teacher, leave them kids alone

I quoted that article saying how 'only half of Americans aged over 50 gave the correct answer' to a simple multiple choice question about how much your savings account balance would grow / drop after 5 years if it paid 2% a year.

The question in question:
Suppose you had $100 in a savings account that paid an interest rate of 2% a year. If you leave the money in the account, how much would you have accumulated after five years: more than $102, exactly $102, or less than $102? And would an investor who received 1% interest when inflation was 2% see his spending power rise, fall or stay the same?

Easy right?   (if you got it wrong you probably over thought or misinterpreted the question)

I was shocked that only 50% of people would get that simple question wrong.

Then recently I saw Bargaineering asking How Financially Literate are You? and they gave a quiz from the  FINRA Investor Education Foundation National Financial Capability Study
I recognized that the #1 question on that quiz is the same simple question about how savings grows over 5 years at 2% a year.

I found the full report :  Financial Capability in the United States Report of Findings from the 2012 National Financial Capability Study

If you go to page 29 of the report they give the % of people who got each question right.   In 2012 a full 75% of people got the question correct.  Thats a whole lot better than 50%.    Of course only 75% is not great cause that still means that 25% of people got it wrong. 

Now I notice that the article in The Economist says that only half of people "aged over 50"  got it right.   So maybe older people do poorer than the rest of the nation on that question?    Well if you flip back to page 28 on the report they break down how well people do on the test by age group.   They only have 3 age groups :  age 18-34, age 35-54 and 55 or over.    The groups got scores of 2.3, 2.9 and 3.3 respectively.   The 55 and older group did the best on the quiz.

I think The Economist was wrong in its report.    The actual FINRA survey report shows 75% of people got that question right.

I noticed that The Economist article actually said : "a survey found that only half of Americans aged over 50 gave the correct answers."     They used 'answers' plural.   Made me wonder if they were thinking of all 4 questions.   But people over 55 didn't get all 4 questions right.  

I  later checked out the comments in The Economist article and found someone already pointed out the error there.    They cited this different survey How Ordinary Consumers Make Complex Economic Decisions: Financial Literacy and Retirement Readiness  available at NBER which says in its summary : "only half of Americans age 50+ can correctly answer two simple questions about compound interest and inflation".   So in actuality its 50% of people who get TWO questions right.  Not just the interest rate question.    If you browse forward in that report down to Table 1 on page 26 they give results for every question.    The group age 50 and over got the 'numeracy' question right 92.9% of the time.   The under age 50 group got it right 91.3% of the time.    That same article points out that this set of financial literacy questions have become  standard questions used in multiple such surveys.

I'm puzzled why the FINRA survey shows only 75% o people got the question right while the other study at NBER showed 91+ getting it right.   Thats a pretty huge difference in results between two studies. 

In any case The Economist article misstated things and people aren't so shockingly bad at finance math after all.

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July 5, 2013

Best of Blogs for Week of July 5th

Every Friday afternoon I share some of the more interesting or notable posts that I have seen in the personal finance blogs and other sources for the past week

Bargaineering asks How Financially Literate are You? they share a quiz from FINRA.    Can you get all 5 questions right?  Only 14% of Americans in the survey did

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July 3, 2013

Should You Buy an Annuity Now or Wait?

As I right this interest rates are still generally very low.   Mortgage rates have gone up about 1% in the past month or two.   However Treasuries, munis and corporate bonds are still pretty low.   It is almost inevitable that sometime in the next couple years that interest rates will go up.   Annuity rates are based on interest rates at least in part.  The insurance companies that sell annuities base the payout rates on how much money they expect to get from their investments which is tied to interest rates.    When interest rates go up you'll see annuity payout rates go up as well.    Given that we're at very low interest environment right now it would follow that right now is not a great time to buy an annuity. 

I went looking for historical data on annuity payout rates.   I couldn't find much.   The Immediate Annuities site has data going back 10 years to 2003.    I think thats a good enough time period to see a good trend.   If you look at that site and find Chart 7 you can see the trend for a fixed immediate guaranteed life annuity for someone aged 65.   From 2003 to 2009 the monthly payment was around $600 give or take.   As of 2013 their data shows payouts around $500 range.   You can see in that chart how the corporate bond yields and the annuity payout rates move in the same direction.    I think its a safe conclusion that if corporate bond rates go up a couple % points then we'll see annuity payout rates go back to the rates we saw 5-10 years ago.  Just a few years ago annuities were paying out about 20% more than they are now.   It would follow that if you wait a few years and interest rates recover that annuity rates will also rebound.

Lets look at an example of how this might work.   Say you're 65 year old male and you've got $100,000 that you want to use to buy a fixed life annuity.

Option 1: Buy today. 
If you buy right now you'll get $545 a month for life.

Option 2:  Wait.
Lets say you decide to instead wait two  years before you by and hope that interest rates go up.  You could keep your money in safe bank CDs.   You could spend $545 a month in the meantime.  Thats $6,540 a year or $13,080 total.   After two years you'd be left with only $86,920 left.  If you bought an annuity with $86,920 at age 67 then todays rates would give you $492 a month.  However if interest rates go up 2% in the next couple years and annuities end up paying 20% more then you'd get $590.


If you want to take a little risk then waiting till rates recover may very well be worth it.   Of course it might backfire and maybe two or three years from now we could still be seeing relatively low interest rates.   However that doesn't seem very likely to me.

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July 2, 2013

Limits on Small Estate Sizes to Avoid Probate Rules For Each State

When someone passes away their estate will usually have to go through probate.   Probate is a legal process where the courts officially handle the assets in a legal manner.   Probate can be costly with legal fees and/or a % of the estate gross being charged.   However if an estate is small enough then probate can be avoided.   The threshold on how small an estate has to be to avoid probate varies state to state based on each states law.

The Nolo site has links to each state in their article Small Estate Probate Shortcuts: Why Even Large Estates May Qualify  I went to each individual state page and got the numbers there.    Some of the numbers below are for a 'simple affidavit' and some are for the 'small estate' form of probate.   These are two different ways of either avoiding probate or doing a shortened probate.   They are different but for my purposes here good enough to show the maximum estate value below which you can avoid probate.    A list of state laws is at the Findlaw page State Laws: Estates & Probate

To be clear, this is not even close to legal advice.   If you're going through probate you ought to review your states current laws.   This list is bound to get out of date fast since 50 states tend to change laws once in a while so a couple years form now I bet 1-2 states will have changed it.

If you want the detail for your state then I encourage you to check the Nolo site : Small Estate Probate Shortcuts: Why Even Large Estates May Qualify 

Here is the list by state for assets below which you may be able to avoid probate :


Alabama $3,000
Alaska $15,000
Arizona $75,000
Arkansas $50,000
California $150,000
Colorado $60,000
Connecticut $40,000
Delaware $20,000
D.C. $40,000
Florida $75,000
Georgia no debts*
Hawaii $100,000
Idaho $100,000
Illinois $100,000
Indiana $50,000
Iowa $100,000
Kansas $20,000
Kentucky $15,000
Louisiana ?*
Maine $20,000
Maryland $50,000
Massachusetts $25,000
Michigan $15,000
Minnesota $20,000
Mississippi $12,500
Missouri $40,000
Montana $50,000
Nebraska $30,000*
Nevada $100,000*
New Hampshire spouse/child*
New Jersey $10,000
New Mexico $50,000*
New York $20,000
North Carolina $20,000
North Dakota $50,000
Ohio $35,000
Oklahoma $20,000
Oregon $275,000*
Pennsylvania $25,000
Rhode Island $15,000
South Carolina $10,000
South Dakota $50,000
Tennessee $25,000
Texas $50,000
Utah $100,000
Vermont $10,000
Virginia $50,000
Washington $100,000
West Virginia $100,000
Wisconsin $50,000
Wyoming $200,000

* Theres some details to add per states: Nebraska allows $30k of real property / $50k of personal property, Nevada allows up to $200k if theres no debts, New Mexico allows up to $500k for spouses only, Oregons total is $75k personal and $200k real.   Georgia seems to avoid probate if theres no debts, Nolo didn't have a page for Louisiana and New Hampshire seems to avoid probate entirely for spouses and children.

Some states may allow larger amounts than the figures given above based on circumstances.  The laws can get more convoluted based on various situations.   

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