2024-05-04

Investing - Miscellaneous

Investing - Miscellaneous

All Investing Posts

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HSA

Do you have a high deductible health insurance policy and have not started Medicare? If so, do you have a Health Savings Account (HSA)? If not - GET ONE. It will let you pay for medical expenses (not insurance premiums) with untaxed money. It's like an IRA that you can use to pay for medical care, including eye care and dentistry. You can get one at fidelity.com (I haven't looked elsewhere). There are limits to yearly contributions.

The Widow(er) Tax Rate and its Impact on IRA to Roth Conversions

I added this to Investing - IRA to Roth Conversion. I am repeating it here because it wasn't in the original post and I don't want anyone to miss it.

If you are married, you are using the married tax table for ordinary income on IRA withdrawals. But what happens if a spouse dies? The living spouse is suddenly single and using that tax table - way higher tax bracket for a given income. Of course the living spouse may not need to withdraw as much from the IRA, but don't forget required distributions and expenses (mortgage, rent, taxes). This is a good reason to push IRA to Roth conversion.

Keeping Up With Inflation Via Bonds and CDs

I often say that you can't keep up with inflation with bonds or CDs - and get challenged that interest rates rise with inflation as the Fed adjusts its overnight interest rate. Interest rates do reflect the inflation rate, but it doesn't compound unless you reinvest it in more bonds/CDs. Inflation compounds and if you use the interest as income, the principal does not increase.

As a safe way to invest money that grows with inflation, bonds/CDs might work well. You must reinvest the interest for this to work.

But as an income source where the income grows with inflation - no chance. For that, look at dividend stocks, and be prepared for some risk.

(Does anyone have a good mnemonic to remember whether assets are principal or principle? I have to look it up every time I need the word.)

Gross Income, AGI, MAGI

You will likely come across these terms occasionally, so I investigated the definition. Complex, so this is a simplification. To get an accurate number, you need to fill out the tax forms.

Gross Income - all of the taxable income that you receive in a year, including wages, dividends, alimony, capital gains, interest income, royalties, rental income, IRA, 401k, 403b withdrawals, etc.

IRA, 401K, 403b withdrawals are included in gross income.

Gains within an IRA, 401K, 403B are not taxable. These are taxed upon withdrawal.

Roth gains and qualified withdrawals (59.5 years old, 5 year old account, etc.) are not taxed.

AGI - Adjusted Gross Income -

The sum of all of your taxable income, i.e. your gross income, minus IRA, 401k, 403b contributions, deductible HSA contributions, half of self employment taxes, student loan interest, and a few more.

Roth contributions are not deducted from AGI. Qualified Roth withdrawals (59.5 years old, 5 year old account, etc.) are not taxable so not included in AGI. IRA, 401K, 403b withdrawals are included in AGI.


MAGI - Modified Adjusted Gross Income - 

This is your AGI but adding back in tuition-related costs or deductions, losses from rental properties, half of the self-employment tax, student loan interest, and a few more.

Incidentally, if you are not familiar with self employment, you pay double Social Security and Medicare tax. That's your part and your employer's part. The employer's part is our government attempting to hide half of these taxes by making the employer pay it. But nowhere to hide with self employment.

Fee Based Advisers


I've said this before, but I heard an ad for a fee based adviser on the radio - "We only get a raise when your portfolio goes up." Well that sounds good, and it's true. BUT if your portfolio doesn't go up, they still get their 1%. You lose the fee, a percentage of your portfolio, not a percentage of the increase, every year.

So are fee based advisors worth 1% of your assets every year? Strictly as a stock picker, I would say probably not - not many mutual fund advisors are worth 1% when compared to index funds. But there is a lot more to getting through retirement than picking stocks, such as use of tax advantaged accounts, getting income from your assets, minimizing taxes and fees. If you don't spend the money on an advisor, you will need to learn a lot and prepare a strategy. A 1% fee on one million dollars in assets is $10,000 every year, so learning and doing it all yourself could save a lot of money.

2024-01-26

Melanie Safka

Melanie Safka

Melanie (Melanie Safka) died a few days ago. I have listened to her since about 1970. She wrote some great songs and she was wonderful covering others' songs. I thought I would gather a few of them that I still listen to. No particular order to these, just the order that I thought of them or found them.


Some of Melanie's songs -

Peace Will Come
on Ed Sullivan - https://www.youtube.com/watch?v=IDyni9AIp9E

Close to it All at Woodstock - https://www.youtube.com/watch?v=EL_frV5gXyg

Lay Down
on Woodsongs - https://www.youtube.com/watch?v=fzg_8gKp-rU

I went to Woodsongs Old-Time Radio Hour (a Lexington KY show, recorded live) to hear Melanie. Not being a member, I sat way in the back. When the two person chorus for Lay Down came on stage, it took a minute to recognize my friend Diane Timmons, a wonderful singer who, long ago, would sing Schubert songs for me, and once for my father's memorial service.

Lefover Wine - https://www.youtube.com/watch?v=y7rIVhyFhts

In the Hour - https://www.youtube.com/watch?v=ffAJ1viZUws

I had forgotten this beautiful song. I found it while searching YouTube. When I switched from vinyl to CD I lost a lot of music. I restored a lot of it as old music slowly reappeared on CD, then oldies collection CDs, then MP3s from Amazon, then YouTube.

Photograph - https://www.youtube.com/watch?v=x55sAAxZO2U


And some wonderful covers -

Long Long Time - https://www.youtube.com/watch?v=b7hrjATqSpA

Hard to beat Linda Ronstadt's version (or any other Linda Ronstadt cover), but this one is just as good.

Carolina in My Mind - https://www.youtube.com/watch?v=tz0hB9rrmQA

Chords of Fame - https://www.youtube.com/watch?v=lBXtTDCWUk8

My Father - https://www.youtube.com/watch?v=faUp8OJ-ZVk

Arrow - https://www.youtube.com/watch?v=E7fBuYayVzw

As Tears Go By - https://www.youtube.com/watch?v=kBF0hASQQBg

2024-01-16

Investing - IRA to Roth Conversion

Investing - IRA to Roth Conversion

This post is based on a few conceptual rules of IRAs and Roth IRAs. But don't forget the details that I have not mentioned - converting, eligibility, age, time limits, etc. And don't forget - THE RULES MAY CHANGE.

Also see  

Occasionally you may see an article questioning the use of Roth IRA, Roth 401K, etc. and suggesting that 90% of us should not be using the Roth versions of retirement accounts. I do not recommend or disparage using Roth accounts to build your retirement savings. I have suggested converting your IRA to a Roth IRA (in pieces, not all at once) when conditions make it advantageous.

Certainly Roth accounts are not the better place for some people. I have no idea what the percentage is. Roth is not generally used while working, in my experience, because people like the tax break of a pretax account. And for older people, Roth accounts were not available at work for most of their working life.

But the point of this post is to examine the value of converting IRA funds to Roth funds in preparation for or in retirement. I assume that you have converted your 401k to an IRA and that you have a Roth IRA started. I know nothing specific about converting 401K or 403B to Roth versions - this post applies to IRA to Roth IRA conversions.

For the rest of the post, IRA means traditional or rollover IRA, Roth means Roth IRA.

The Advantages and Disadvantages of Conversion

The choice of IRA vs converted Roth starts with how much tax you pay when withdrawing money. At first look, when withdrawing small amounts, and assuming that tax rates stay the same over time, and assuming that you pay the tax on the conversion from the IRA, it's a wash - no difference. You can pay the tax now and shrink your investment by the tax rate (Roth). Or you can wait until you need the money and pay the same tax rate on the, hopefully bigger, investment (IRA).

But the choice is not that straight forward.

RMDs

At 72 or 73 you must start taking required minimum distributions (RMDs) from the IRA. Not that you will be paying more tax than if you have converted the money, but you may not need the money. It is too late to convert to Roth, so now it leaves the tax advantaged realm.

Growth in an IRA vs Roth

A good stock investment will grow faster than inflation. Maybe you will pick an explosive growth stock and make a fortune. If this is in the Roth, you may use any amount of the money tax free. In an IRA, use too much in a year and you bump the tax bracket. Or the tax rates may go up. And the RMDs will go up because they are a percentage of the total in the IRA. This is why I have suggested to convert risky high growth investments to a Roth before the safe stuff (bonds, CDs).

The Widow(er) Tax (2024-05-04)

If you are married, you are using the married tax table for ordinary income on IRA withdrawals. But what happens if a spouse dies? The living spouse is suddenly single and using that tax table - way higher tax bracket for a given income. This is a good reason to push IRA to Roth conversion.

A Back Door

And a back door - if you have money in an ordinary (not tax advantaged) account and pay capital gains tax or qualified dividends tax to use the money, but can't put it in a Roth because you have no earned income, try this. Convert money from IRA to Roth but pay the taxes from the ordinary account. Now instead of having to pay income tax on the money that you convert and the money that you take out to pay the tax, you take the income tax money from the ordinary account plus enough to pay the capital gains rate on it. You end up keeping the full value of your tax advantaged accounts but some of it made tax free. And you pay for this with money from the ordinary account. So you have moved money from the ordinary account to the Roth through a back door. But how much did it cost to do that and where did the money come from and go to? An example is the only way that I can illuminate.

Let's move 10K from IRA to Roth. Let's say your tax rate is 22%, so you need to pay 2.2k in income tax. If you pay from your IRA, take out total 12.82K, now you owe 22% on 12.82k = 2.82k. Conversion complete, IRA down 12.82K, Roth up 10K, taxes paid.

Let's try it the other way. Convert 10k so 2.2k income tax. Your tax rate on the ordinary money is 15% (cap gains) so you need 2.59k and you pay .39k tax. Conversion complete, IRA down 10k, Roth up 10k, ordinary account down 2.59k, taxes paid. You have moved 2.59k of ordinary money into 2.82k IRA money. That's a 9% increase, but the IRA money costs you 7% more to withdraw. So just a 2% difference, but that 2.82k is eligible to move to your Roth.

Tax Rate on IRA Money

If IRA withdrawals are in addition to other taxable income (pension, taxable Social Security) they will be taxed at your marginal rate, not your average tax rate.

Tax Efficient Conversions

If you encounter a significant stock market dip, and you are confident that it will come back, then converting in the dip lets you convert with less tax. I am not suggesting timing the market for short term dips or looking for absolute bottom. But in a significant, long term downturn such as the tech crash, housing loan crash, or COVID crash, it is easy to choose a point to save some taxes.

Between the ages of 62 and 70, you might decide to live off of savings and avoid taking Social Security benefits. You can use this low income period to transfer IRA assets to Roth assets at a low tax rate. If you have assets in an ordinary account, you can set it up so that you collect only capital gains and qualified dividends. Then pay the income tax on the conversion from this ordinary account (the back door described above).

At age 72 or 73, you must start taking required minimum distributions (a percentage of the total assets) from your IRA. You can reduce these by moving the assets to a Roth before the RMDs start.

Medicare

But remember that income from a conversion may bump your Medicare premium, so look at the whole picture before deciding. See Investing - Fun Retirement Tables.

Charities

If you like to contribute to charities, before or after you die, IRAs are very efficient - give them pretax money. They won't owe tax on it.

If you leave money to charities after you die, it's a waste to have already paid taxes on it.

Heirs

Remember - THE RULES MAY CHANGE.

IRA, the heir pays income tax rate (because you didn't pay it).

Roth, the heir pays no tax (because you already paid it).

Ordinary account, the cost basis resets to the value at death - so the money is tax free at that point. Your heir gets a free, potentially huge, capital gain (that you did not pay). So ordinary accounts have some advantages over IRAs and Roths, but that is not the subject of this post.

Psychology

Not owing taxes, I expect, is somewhat like not having debt - one less headache to deal with. You will still have to file a return and pay taxes, but a lot less after converting to Roth.

2024-01-11

Two Steps Forward, Two Steps Back

Two Steps Forward, Two Steps Back

Caulipower Pizza Crust (that's a brand name, not a misspelling)

I have had very good cauliflower crust pizza at three restaurants. But I don't know how much cauliflower they contained or what other ingredients were included. I tried Green Giant frozen cauliflower crust that was not good.

I tried another frozen crust recently - Caulipower. The first three ingredients are cauliflower, brown rice flour, and rice flour. So maximum 33% white (rice) flour. It's easy to work with - I bake (425) for 5 minutes, then add sauce, cheese, toppings, and bake for ten minutes. The prebake is my change to the instructions because thick toppings can insulate the crust.

This is my new crust for homemade pizza. It tastes good and should be healthier than the white bread refrigerated dough that I had been using. I am not under the illusion that this counts as a vegetable serving, but it does reduce my intake of white flour.

I make mushroom pizza - prebake the mushrooms or the water content will make the crust mushy. And salmon/artichoke heart pizza - no sauce, bake with just cheese, saute the salmon, add it with the artichoke hearts and bake for a couple more minutes. I need to try adding some pesto. I don't know if these instructions are optimal, but they work well.

Buckwheat Husk Neck Pillow

At the suggestion from a massage therapist, I purchased a buckwheat husk six inch tube pillow - Waterglider brand but there are many choices on Amazon. I added a form fitting pillow case.

The casing (not the pillow case) feels thick and not stretchy. The zipper that lets you remove stuffing seals well - I haven't had any buckwheat husk leaks.

The pillow conforms to your head/neck and then provides firm support. I find this much superior to elastic or viscoelastic pillows that change thickness as you move - these never let my neck muscles completely relax.

I have also used plastic bead pillows. These are great for a time, but as the casing stretches, the firm support disappears. The thick cloth and tube shaped casing of the Waterglider pillow and the additional friction between the buckwheat husks should solve this issue.

This pillow is wonderful.

Apple TV Streaming

I signed up for Apple TV + to watch Lessons in Chemistry. Not bad, not as good as the book. All worked well on my Roku stick.

Then I made it through half of the first episode of Foundation - BORING. I read all of the Foundation and related books, many years ago. I don't remember them being boring.

Ted Lasso was very good.

On to For All Mankind. Pretty good. Kind of sci-fi on the moon and soap opera on the earth. I am almost done with the fourth season.

On oddity - early in the show they explain that communication with people on the moon will have a two second delay. But when earth to moon conversations become part of the show, I don't hear any delay, or explanation of the discrepancy.

About halfway through the end of the second season, the resume function quit working. If I stop the show and return to it the next day, it starts at the beginning of the episode that I had been watching. VERY annoying. And if I pause and wait too long to start watching again - about 15 minutes I think, it goes back the the start of the episode. EXTREMELY annoying.

I tried backing out in different ways - back out from watching, back out from pause, pause then start watching then back out. Resume did not work. I checked the web. Many people have this problem, dating back at least a year. The "solutions" are things like reboot the Roku, sign out of the app and sign in again, turn on "use play history". I also cleared my play history. After doing all of this, the problem was fixed. Until midway through season four. I'm not doing all of that again.

This is not a slightly annoying bug. It is a major problem. And Apple apparently doesn't care to fix it.

Fortunately I am in the initial three month free trial period. And one episode to go. Then I'm done with Apple TV.

Softsoap Soothing Aloe Vera

I have been using this liquid soap for over twenty years. It has now become Softsoap Soothing Clean Aloe Vera Fresh Scent. It stinks - literally. Many reviews also says it dries your skin. I won't be using it long enough to find out.

2024-01-28 - After testing four hand soaps that appeared to meet my requirements, the winner is Molly's Suds Foaming Hand Soap unscented (from Amazon). I like the foaming - makes it easier and quicker to use. I'm not sure yet how the dispenser will handle being in a shower - some pumps let water into the bottle. Beside a sink, very nice.

2023-10-27

Missing Features

Missing Features

Many systems are very handy, but could be a much handier if the implementers had given some thought to extending them a little. I have complained about a number of these issues in the past, but the goal here is to highlight them as unfinished implementations of good ideas.

When I started working at IBM, long ago, the second-system effect had recently been described by Fred Brooks in The Mythical Man-Month. This is the tendency to take small, useful systems and add features that sound good but add so much complexity that the system become worse, not better. 

But some new features are very useful and worth some complexity. It's a line to cross carefully.

Phones - clocks

The time on a phone clock is generally given in the local time zone. If you don't know what time zone you are in, that is not enough information. The phone knows what time zone it's using, but this information is generally not displayed.

And a phone clock should include the next alarm time. I need to know at a glance when the alarm will sound.

Phones - always on lock screens

My comments on clocks apply to always on lock screen clocks too.

And the always on lock screen should be visible in any light. But with my Samsung phones, the display text is often too dark read. I guess they are trying to increase battery life. But what is the point of the always on screen if I can't read it?

My Google phones (from years ago) handled these issues. Why not Samsung?

And Apple still hasn't figured out that an always on lock screen is an important feature.

Cars - sticky switches for driving modes

Car manufacturers have apparently forgotten the value of sticky switches - switches that keep their contents when the car is turned off. Most notably on my Subaru Crosstrek, auto stop/start and sport/"intelligent" driving mode. Why can't it leave my settings alone instead of going back to default every time I start the car?

Cars - wake up - the line is moving

The Crosstrek has a neat feature that beeps for you when you are stopped and the car in front of you moves forward. That's in case you fall asleep in line at a stoplight. But it is not helpful if you are at the front of the line. With all the image processing in the automatic cruise control system (Subaru uses a pair of cameras, not radar), you would think that the car could tell you if the stoplight turns green. Or maybe this is crosses into the second-system effect.

Cars - backup cameras

Backup cameras in cars are great. I often would like to see the backup camera display when not in reverse. For example when going forward while parallel parking. That should be trivial, just a screen button.

Cars - daytime running lights


Daytime running lights seem like a good idea. But why only on the front of the car. Especially in fog, I want all four corners lit.

(My solution - I leave the headlights on all the time. This includes the corner lights. I have LED lights that don't use much power and last a long time.)

Cars - automatic headlights

Automatic headlights - another great idea except - they need to turn on at dusk, not when it is dark. And they need to turn on in the rain and fog. The light sensor could be adjustable so that it catches dim/cloudy/rainy conditions. And the car could turn on the lights whenever the windshield wipers are on.

Also, if you need to turn on the headlights when in automatic mode (because the car doesn't) - how about a separate button for that instead of having to change the mode? That way it could change back to automatic automatically.

As noted above, I just leave the headlights on all the time.

Cars - turn signals

Turn signals - how do you signal a U turn? A simple addition would be another blinking sequence - short, off, long, off, ... could signal a U turn. A bit more difficult would be the driver's switch for this.

Computer Mice

Mice would be much better if they could be put in horizontal or vertical only mode. On Amazon, I see a lot of mice with variable resolution. This sounds very useful. I will have to try one.

Stereos - tone controls


I guess my usage of stereo dates me. But I have found no point in having more channels for my sound system. And as my hearing deteriorates, high fidelity seems pointless. But as my hearing deteriorates, I need better tone controls. Specifically, more important than bass and treble is upper midrange, also known as presence. It adds clarity to speech (consonants) and timbre (the sound of an instrument that makes it unique). But this is seldom found on home stereos. I could add an external equalizer, but just a presence knob would handle most issues.

Incidentally, you could probably get rid of the treble control. Adding or subtracting with a 10 KHz shelf filter is completely pointless to me, and probably the vast majority of people that spend their life in the noise pollution of America. (This morning I did a one mile walk underneath a circling helicopter. It's hard to express the anxiety and frustration this causes.)

2023-10-25

More On Sports

More On Sports

The Chess Clock


The chess clock was a brilliant invention. This is two stopwatches, each with a flag that falls after a set interval. Only one clock runs at a time. To start the game, the clocks are zeroed and the first clock is started. The first player makes a move and hits a button that stops the first clock and starts the second. The second player makes a move and hits a button that stops the second clock and starts the first. And so on until either the game is won or a flag falls. If your flag falls, you have exceeded your allotted time - you lose.

It should be used for more than just chess. Scrabble and similar games would be improved. You might need more than two timers, but that's easy with a phone app.

How about using it in debates to ensure equal talk time? Your microphone would be turned on only while your clock is running. Perhaps after your flag falls, the interval would be set for just 10 seconds to allow for short responses.

How about group discussions? An enhancement might be a "waiting" button to get in line to talk. And a "go to the front of the waiting line" button to get priority to talk - but this should probably cost you by reducing your time allotment.

Frisbee Golf


Frisbee golf looks fun. I've never tried it. But I wonder, why just Frisbees? What other object would be fun? Baseball, golf ball, dart? Corn hole bag, horseshoe, nunchucks? Paper airplane? Maybe punted football golf would be interesting.

How about any object golf? I wonder what would dominate - Frisbee, baseball, golf ball, dart? Certainly not a basketball, football, or shot (as in shot put).

Volleyball

Volleyball - why six players on a side? Beach volleyball games get by with two players on a side. Maybe part of the game is coordinating traffic.

I was going to ask why only the serving team get points for winning a rally. I investigated and found that there are now two types of scoring in use. In "side out" scoring only the serving side gets a point for winning a rally. In "rally" scoring, introduced around 2000, either side wins a point for winning the rally. Rally scoring makes a lot more sense to me.

Auto Racing

My favorite automobile racing was the Can-Am series from 1966 to 1974. Almost anything goes cars. Two seats, wheels enclosed by the body. This made it a technology race and the cars were very interesting. Unfortunately, each year, usually, one team had a technology advantage that led to domination. Can-Am saw wings (driver adjustable, attached directly to the suspension until they realized how dangerous that was), active ground effects aerodynamics, turbocharging, titanium. Now we have NASCAR with fake family cars, Indy cars are all the same car with a couple of engine choices. Formula 1 allows a lot of innovation, but tends to outlaw things that are too good. One change that I would like to see for all open wheel race cars is to reduce the allowed width significantly to make passing easier.

A New Class of Auto Racing

How about a new sport? Auto racing with self driving cars. The cars should be standardized to emphasize the driving. And probably be restricted to low enough power that aerodynamics is not a major issue. Maybe with standardized sensors - cameras, maybe radar. And maybe a standardized computer. Download each team's software into random, nominally identical cars right before the race.

This would be a great way to speed development of self driving cars. The goal of the cars would not be quite the same as an on the road self driving car, but pretty close. Drive a number of laps on a road course. Do not crash.

An interesting possibility would be alternate routes. The cars could track the current traffic conditions on the different routes and choose the best. Roundabouts would be another interesting addition.

I wonder if you could get a human driver to compete with the self driving cars?

2023-10-15

The End of Streaming TV

The End of Streaming TV

For many years, I have used TV streaming services (Netflix, Hulu, Prime, Peacock, HBO) on a rotating basis. (Actually Prime is part of Amazon Prime so I always have it). I like finding a long series and watching it start to finish. I have seen some great shows that captured my interest quickly (some slow starts) and kept it for the entire series. In alphabetical order -

  1883
  1923
  After Life
  As We See It
  Atypical
  Better Call Saul
  Bosch
  Breaking Bad
  Dead to Me
  Deadwood
  Enlightened
  Firefly (old antenna TV)
  Game of Thrones
  Hell on Wheels
  Justified (Lexington KY connection!)
  Longmire
  Mad Men (slow start)
  Nurse Jackie
  Orange is the New Black (slow start)
  Ozark
  Peaky Blinders
  The Queen's Gambit (Lexington KY connection!)
  The Sopranos
  Unbreakable Kimmy Schmidt
  Yellowstone (slow start)

Some other shows have kept me going - let's say good, not great -

  Disenchanted
  The Good Fight
  The Good Place (old antenna TV)
  The Handmaid's Tale (great book, The Testaments too, okay TV)
  House (old antenna TV)
  Monk (old antenna TV)

But now, there is nothing. I've tried an uncounted number of Star Trek series, Wheel of Time, The Man in the High Castle, Russian Doll, Stranger Things, Bridgerton, The Witcher, The Mandalorian, Carnival Row, The Rings of Power, The Boys, The Marvelous Mrs Maisel, The Expanse, Sneaky Pete, Mozart in the Jungle, The Flight Attendant. Highly rated shows - blech, boring or stupid.

Ten to fifteen dollars each month was good value for relaxing entertainment. No more.