Friday, May 26, 2017

Space Age Alchemy: Dust into Gold

The U.S. Marshals Service (USMS) is responsible for the sale of property confiscated as part of the law enforcement efforts of agencies such as the Federal Bureau of Investigation, the Drug Enforcement Administration, and the Bureau of Alcohol, Tobacco, Firearms, and Explosives.  They typically contract with private companies to facilitate the auction process. On its website the USMS publicizes a general list of merchandise forfeited in criminal proceedings that is up for auction: residential and commercial real estate, cars, boats, aircraft, jewelry, art, and antiques.  Oh, don’t forget moon dust.

Enter sharp-eyed Nancy Lee Carlson, a bit of an amateur geologist though by her own admission not much of a rock collector.  Two years ago she came across an auction run by one of those private companies, with a listing for a lot that included “One flown zippered lunar sample return bag with lunar dust (‘Lunar Bag’), 11.5 inches; tear at center.  Flown mission unknown”.  Myself, I would have been very skeptical.  But Ms. Carlson trusted that since this was an auction sanctioned by the USMS, the lunar dust bag must be genuine.  She bid $995—and won. 

Once in possession of the bag of dust, she found a serial number on the bag and researched National Aeronautics and Space Administration (NASA) records to determine that it had flown on the very first lunar landing mission, Apollo 11, in July, 1969.  Her next task was to verify that the dust inside was actually from the moon’s surface.  She ended up sending it to NASA for authentication.  They did verify it as genuine but then decided they should keep it because they felt they were the rightful owner, and it should be on public display.  NASA doesn’t allow individuals to own any bits of the moon.

To make a long story short, Ms. Carlson sued NASA, won her case, has possession again of the precious dust, and is auctioning it at Sotheby’s in New York on July 20, the 48th anniversary of the Apollo 11 moon landing.

You may read a bit more background to the story and the impending auction at

So what lessons are there here for personal finance?

Online auctions, properly vetted, can be a boon for someone in a situation that demands extreme budgeting (deep in debt, more expenses than income, jobless).  They may serve as a source for essential but less expensive goods or may provide an income through re-selling.  Or it could just make a great hobby, now or in retirement.  The USMC has a page on its website describing their process.

Keep good records and be careful how you clean house.  When the Apollo moon program was winding down and NASA was preparing for the space shuttle program, storage space at NASA was at a premium, and accounts from that time tell of NASA employees giving away or even throwing away items recklessly.  It is believed that is how Ms. Carlson’s lunar bag began its journey from NASA into private hands.  To my thinking, those NASA employees fall into the same category as the evil step-mother who throws away all the stepchildren’s belongings while they are away at college.  Hear me?

Know the value of what you own.  The auctioneer contracted by the USMS valued the lunar bag at $15 in its online listing.  What could they have garnered for the government (and for themselves in commissions) if they had done a little more homework?

But the best lesson comes from Ms. Carlson herself.  She plans to donate most of the several million dollars expected to be paid at July’s auction of the lunar dust to scientific and medical research.  So while NASA claimed to want the lunar bag for the sake of the public but treated it like dust, and finally lost it, Ms. Carlson saw its value, did what it took to obtain and keep it, and with it will generate a sizable charitable donation to the public good in the process.  Golden.

Until next time,


“The kingdom of heaven is like treasure hidden in a field.  When a man found it, he hid it again, and then in his joy went and sold all he had and bought that field.” Matthew 13:44 NIV®*

*Scripture quotations taken from the Holy Bible, New International Version® NIV®

Copyright © 1973, 1978, 1984, 2011 by Biblica, Inc.™

Used by permission.  All rights reserved worldwide.

Friday, May 19, 2017

Turning Down Free Money

For whatever reason—perhaps to get our mind off our own political turmoil—it seems we pay more attention now to elections in other Western nations.  Most recently our attention was riveted on France, where perceived moderate candidate Emmanuel Macron bested the more right-wing candidate of the National Front Party, Marine Le Pen.   But I thought the initial round of voting (France has a runoff if no candidate wins a majority of the votes in the first round) produced a more interesting and—for someone who takes a strong interest in personal financial affairs—more satisfactory and remarkable outcome.

Benoit Hamon, a presidential hopeful from the left-wing of the French Socialist Party, was eliminated in early voting.  Hamon had championed the idea of paying every adult French citizen, whether employed or not, and regardless of economic status, a monthly stipend equivalent to about $800, no strings attached.

He argued that this would give recipients the freedom to try new things, presumably new business ventures, without the fear of being unable to pay for their basic needs.  He cited the mass movement to automation that is leaving fewer jobs for people as the justification for his bold proposal.  At a price tag of nearly $320 billion, Hamon proposed paying for it by taxing robots and “other measures”.  But the creative energy and economic power unleashed by the project would supposedly outweigh the expense and boost the national economy.

 I found several aspects of Hamon’s plan troubling.

 First, $800 a month doesn’t buy a lot these days and is certainly not enough to, say, start a restaurant.  Yes, it may pay a few bills; but launching a business usually takes a lot more money than that and a good deal many other things that must come together to realize that dream.  I just don’t see that amount of money making a difference.

 If you think of this payment as “free money”, think again.  It is a zero sum game.  Let’s take the one specific idea floated for funding the scheme: taxing robots.  Robots don’t earn money; they make (or save) their owners money, but they don’t collect a paycheck.  What Hamon really meant—but probably realized was political suicide to actually say—was that he would tax the owners or their businesses.  That would erase or drastically reduce the savings produced by automation and end up raising the price of the goods produced, eroding the value of people’s monthly stipend as they pay higher prices.  I’m sure it feels good to say “tax the robot” who took a worker’s job, but it’s more than a little disingenuous.

 Finally, handouts do not generate creativity or spawn fresh ideas.  Think of the many sad stories of lottery winners.  We envy them their luck, until we learn how many go on spending sprees or don’t plan wisely and end up bankrupt.  How many start a new business, a new charity, invest in their communities?  I believe most people still want to work, to show what they’ve done with their time and talents.  So-called free money robs them of that dignity.

That is where I found the first-round French presidential election results gratifying.  Only 6% of voters cast their ballot for Hamon.  The French turned down “free money”.  They are richer for doing so.

 Until next time,


 “The Lord God took the man and put him in the Garden of Eden to work it and take care of it.” Genesis 2:15 NIV®*

*Scripture quotations taken from the Holy Bible, New International Version® NIV®
Copyright © 1973, 1978, 1984, 2011 by Biblica, Inc.™
Used by permission.  All rights reserved worldwide.

Friday, May 12, 2017

Women as Investors

I’ve been reading results of national surveys that indicate women tend to be the primary financial decision-maker in households where that power is not equally shared between husband and wife.  Still, I find it hard to believe that women, in general, take much interest in investing, retirement planning, and the stock market.  I see their involvement in household financial affairs as more geared to deciding what model of family car to buy, when to replace the refrigerator—mundane stuff the guys may be only too glad to hand off to them.
I say this not as an expression of gender stereotyping but as an observation from personal experience, and not just within my immediate family.  Yes, I take an interest in personal financial planning and all that comes with it, including investing in the stock market; and my wife does not.  But beyond the doors of my own home, I find one nearly invariable indicator that this is true for most other couples, too:  I just don’t hear women broach the subject or talk much about it at all.  And if they don’t want to talk about it, then they must not be interested in it, so their male partner must be taking the lead in that area of finance.
But it turns out that’s male-think; and the fact that women don’t talk about their investments may actually be one of the female strengths that often makes them—yes—better investors than men.
Several studies have shown that women tend to be more goal-oriented when it comes to investing.  While they definitely give heed to the performance of their portfolio, they do not focus on competing with anyone else or beating some benchmark.  So if you’re not competing, what’s the use of talking about how well your portfolio is performing?
These same studies also consistently demonstrate that men, as a group, trade investments 45% more than women.  Buying and selling stocks and other investments costs money and in the long run reduces the return on investments.  Women have been shown to earn nearly 1% more on their investments over the long term, and that is mostly attributable to their patience.  Once they make a decision to purchase a stock, mutual fund, bond, etc. they will stick with that investment through good times and bad and won’t cash it out to chase some tip or hunch on another investment. 
The ladies also seem less prone to panic.  I suspect this is at least in part due to their lower likelihood of getting their financial news from television.  Those finance gurus on the tube have a self-interest in taking extreme positions, whether to sell something or just boost their ratings by being out of step with everyone else, right or wrong.  And being less prone to panic during a downturn means that women not only hold on to their investments and reap the rewards of the rebound in prices later but will likely continue to buy when the market is down—meaning they can get some good bargains on quality investments that will appreciate in value over time.
Finally, women are more willing to ask for financial advice.  (Substitute the word “directions” for “advice” and you will see why I almost left this out because it’s so obvious.)  Professional financial advisors report that women ask more questions and generally talk through their decision-making before actually investing.
Patient, goal-oriented, less prone to panic, more willing to ask for advice…women are actually not bad at this investing thing.  Guys, maybe we should consult them more about our retirement accounts.  We have some strengths of our own, and together we can make an awesome investing duo.  Just don’t ask us what color car to buy, and we won’t ask you for directions when we drive it.
Happy Mother’s Day.
Until next time,
“A truly good wife is the most precious treasure a man can find!..She knows how to buy land and how to plant a vineyard, and she always works hard.  She knows when to buy or sell, and she stays busy until late at night.” Proverbs 31:10, 16-18 CEV

Friday, May 5, 2017

IRA, RMD, IRS, OMG (part two)

What goes in must come out. 
That’s probably the shortest summary I can give of last week’s post about required minimum distributions (RMD’s) from retirement accounts.  To address what I consider the two main dilemmas posed by RMD’s—potentially pushing the recipient into a higher tax bracket and/or making up to 85% of his Social Security benefits federally taxable—I’ll offer some ideas here.  These are very general in nature, and I do not note all the exceptions to the rules nor explain all the pros and cons of each option.  I urge you to consult a tax professional to chart your own financial strategy to and through retirement.
1. Put your retirement money into Roth accounts.  Money invested through a Roth retirement account is taxed before it goes in, but that money PLUS all the money earned in the account from investing may be withdrawn tax-free after age 59 ½.  Moreover, Roth IRA’s do not have RMD’s; the money may stay in the account throughout the owner’s lifetime.  Roth 401k accounts do have RMD’s.  Regardless, the money withdrawn from a Roth account is not taxable, so the two major drawbacks to taking an RMD are resolved.  Most people can convert the money in a regular IRA to a Roth IRA, but there are some limitations, and you want to be aware of the various pitfalls, including the upfront tax obligation you incur.  Consult a professional.

2. Put a portion of your money into a Qualified Longevity Annuity Contract (QLAC).  I can’t say I’m a fan of annuities, but this could be one way to reduce your RMD.  You may put the lesser of 25% of your IRA balance or $125,000 into an annuity that will start paying an annual income starting later in retirement.  One day I’ll write more about annuities, but I’d consider this one of the least attractive means of tax planning.  Buyer beware.

3. Marry a younger man or woman.  If your spouse is at least 10 years your junior, you are allowed to use a different IRS table, with smaller percentages, to calculate your RMD.  But your younger spouse is likely still earning an income, and that will still put your Social Security benefits in the tax man’s sights.  There are better reasons for marrying.

4. Roll all your savings into your workplace 401k and keep working.  Unless you own 5% or more of the business, you do not have to take RMD’s from your employer’s regular 401k account as long as you continue working for that employer.  If the plan accepts rollovers from IRA’s or other 401k’s, consider parking your nest egg there.

5. Make a charitable donation.  You may have a payment made directly from an IRA to a qualified charity—up to $100,000 per year—and it will count toward the RMD.  This is an especially attractive option for those who do not itemize deductions because the donation does not count as income, and the full standard deduction may still be taken.

6.  Draw down your account balance before RMD’s are required.  Starting at age 59 ½, when savers can start withdrawing from most retirement accounts without incurring a 10% early withdrawal penalty, begin drawing money from those tax-deferred funds a little each year and put it into taxable vehicles like CD’s or non-retirement brokerage accounts.  It still generates taxable income, but presumably smaller amounts of it and maybe taxable at lower rates.  Eleven years later your IRA balance might be low enough that the RMD’s will not push you into another tax bracket nor trigger taxation of Social Security benefits.  It requires careful planning, though, since you have to include that taxable income from your non-retirement accounts in your calculations.

One variation of this plan is to delay taking Social Security benefits until age 70 and just live on the money in your IRA or 401k until then.  Unless you have been a diligent saver for many years, this plan will likely deplete your account or take your balance down to a point where the RMD may not be enough to impact your tax bracket.  Moreover, this strategy allows your eventual Social Security benefit to grow 8% per year.  Your benefit will max out if you delay claiming until age 70, at which time it will be nearly 76% higher than if you had begun drawing at age 62.  That higher amount alone might be enough to sustain a retirement lifestyle.  The obvious downside to that is you have no nest egg and are wholly dependent on that check from the government.  How comfortable are you with that?

All of this said, for most people the RMD dilemma may be a moot issue.  Consider Joe and Bridget, the hypothetical couple in last week’s post and whose case study I’ve reproduced below: 

2016 Tax Year calculation to determine if Social Security benefits are taxable:

$9000.00         (50% of Joe’s Social Security benefit of $1500/month x 12 months)
$8700.00         (50% of Bridget Social Security benefit of $1450/month x 12 months)
$5500.00         (Bridget’s income from a part-time teaching job)
$ 250.00          (Interest income)
$6073.00         (Joe’s RMD based on the IRS table and his IRA account balance of $150,000 on December 31, 2016)
$6445.00         (Bridget’s RMD based on the IRS table and her IRA account balance of $165,000 on December 31, 2016)

Their situation is actually fairly typical.  Their Social Security benefits are near the national average, maybe slightly above.  The combined $315,000 in their IRA’s is a bit above the national average 401k balance of a worker with 30 years’ tenure at the job.  Yet, even with the RMD’s they only exceeded the income limit at which Social Security benefits become taxable by $3968.00.  If Bridget had just not worked that part-time job, they would have come in under the limit.  Their total income would still be $48,168, of which only $12,768 would be potentially taxable.  If they use their personal exemptions, the standard deduction….hmmm…..are they even going to pay any taxes this year?

 So maybe it’s all a big fuss over nothing for most of us.  But the lesson is clear: PLAN, PLAN, PLAN.  And start now.

 Until next time,


 “It’s much better to be wise and sensible than to be rich.” Proverbs 16:16 CEV