Oh no, that's not a European male carry-on at all. Very masculine.
Where do you suggest buying hard assets like gold or silver?
John, Las Vegas
Let’s start with someone who clearly read one of our previous posts.
Two ways to go here – ingots or coins. You’d think ingots would be the more liquid, easily transferable form. They aren’t always, and here’s why.
National governments issue coins, which means they come with some implicit guarantee. Should the gold market bottom out, your $10 American Eagle gold coin will still be legal tender. A bar is easier to fake. Even if you know a bar is real, a seller won’t and will insist that you pay to have a dealer examine and verify it if it doesn’t come with an assay certificate. That’s less likely with a coin, which is harder to counterfeit.
The U.S. Mint sells coins at huge markups – like, 20% (or 36% if you buy in tenths of ounces.) Better to go through a private dealer like Goldline or Monex, which sells at a smaller markup (around 4%).
The latter will also sell bars, which are forged privately. They’ll carry the logo of the manufacturer, stamped right on the bar. Johnson Matthey, a UK company, is a big one. So is Credit Suisse.
Your local bank might sell you gold over-the-counter, too. Not surprisingly, your chances are better with a big national or multinational bank than with a community bank.
My company takes $x per pay period and puts it in a 401(k). They match up to $x that I contribute. What is my company doing with my money?
Donnie, Austin
They’re doing exactly what you told them to, whatever that is.
Your company almost certainly uses just one provider to handle its employees’ 401(k)s. If your company’s big enough, once a year someone from that provider shows up and tells everyone where they can invest their 401(k) money. The provider will probably let you choose from a bunch of mutual funds – some that focus on growth, others that focus on dividend income, etc. You selected one and with your next paycheck, the money started going to whichever 401(k) instrument you chose. The money your employer matched your contributions with went to the same place. So ultimately, that money probably ended up with Hewlett-Packard or American Learning Corporation or Overland Storage or Burlington Northern Santa Fe or whatever. Or all of the above. But again, it’s only going there because you specifically asked for it to.
I love being grandfathered into the SARSEP plan I set up for my company before Billy Bob Clinton abolished them. No reason to look to get out of that, correct?
Andy, Indianapolis
No.
A SARSEP is, was, a Salary Reduction Simplified Employee Pension Plan. As you can tell, the IRS took acronymic license with that one.
As Andy mentioned, SARSEPs went the way of the passenger pigeon 14 years ago. Under a SARSEP, if your business had under 25 employees, and most of them agreed, you could direct part of their pay to an Individual Retirement Account. SARSEPs were a special class of the SEP-IRA, which is a little more relevant to our discussion.
A SEP-IRA is a way for small businesses to circumvent the rule that an employee can only contribute $15,000 annually to an IRA. (You want to be able to contribute a lot, as that’ll lower your tax liability today.) The maximum an employee can contribute under a SEP-IRA depends on how much the company earned. A SEP-IRA is essentially a profit-sharing plan. The most you can contribute on an employee’s behalf is either
a) ¼ of his salary, or
b) $49,000, whichever’s less.
That latter number rises annually. If you work for yourself, substitute 1/5 for ¼ and factor in the self-employed tax deduction. Isn’t accounting at the government’s behest fun?
One more thing: if you work for yourself, you know what the maximum you can contribute is? It’s a percentage of net profit.
20%?
Lower.
19%?
Lower.
18%?
Higher.
18.587045%?
Yes! And you read that correctly; the functionaries at the IRS actually drew the percentage out to 6 decimal places. Because if they let you contribute 18.587046%, which is an extra 1¢ on every $1 million, it would be unfair to some interest group.
How many examples have we given of the tax code needing to be imploded and started again from the ground up?
An aside: what’s the breaking point? At the rate we’re going, the IRS code will exceed a billion pages in the lifetime of some of us. Would a code that size be long enough to make taxpayers agree that the process under which their money’s confiscated is too confusing? Would the politicians of that era care enough to do anything about it? Is this as futile as trying to stamp out corruption or get everyone on the planet to quit smoking?
We do a mailbag whenever we get enough good, legitimate questions. Send yours to info@ControlYourCash.com.
