Updated on 08.05.13

Reader Mailbag: More Fees

Trent Hamm

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Switching jobs and retirement plans
2. Family corporations
3. Student loan question
4. Savings targets for singles
5. Television
6. Job switch
7. Finding speaking gigs
8. Same card, different rates
9. Switching credit cards
10. Pieces of inspiration question

I’m not surprised at all to find that other banks are following Bank of America’s lead in adding fees to bank services that previously didn’t have fees associated with them.

It’s a simple matter of profit. If they think that only a few customers will jump ship because of these fees, then the fees will be a big net gain for them. They may even go back to the well for more fees.

Eventually, “fee free” will be a huge marketing point for checking account services.

Q1: Switching jobs and retirement plans
My company recently announced it will be divesting it’s self of my division. The work load and assets are being transferred to a new company. I am being offered a job at the same pay. I have a 401K which I am fully vested. I have options of either rolling it into the new company plan -XYZ company-, at any time or leaving it where it is -ABC company- at no cost. At this time my thoughts are to leave the plan where it is at no cost. Start investing in the new plan as soon as I’m able. But from there what factors should I use to determine weather or not I should roll my old plan into the new plan? Or is it a better option to keep not only my 401k diversified but the companies holding the plans diversified? And if I don’t trust trust my knowledge would it be beneficial to seek help from a professional financial adviser to create some sort of plan.

– Andy

I would study the two companies that offer the plans, as well as the investments offered within the plans.

If your old 401(k) offers drastically worse investment options from a company with a worse reputation than the company and offerings with your new employer, then you should roll it over.

All things being completely equal, I would probably leave the old one in place just for diversity’s sake, as you mention. Although there’s little risk of losing money in the failure of a reputable firm, there is a risk.

Q2: Family corporations
Can you provide any guidance in regard to purchasing property through a family corporation? We have heard of others getting great tax breaks if they set up a family corporation and use it to purchase property. What are your thoughts?

– Lisa

It depends on the tax breaks you’re looking for.

Essentially, a family corporation is no different than any other corporation. You set it up with a chairman and a board of directors (usually consisting of family members), then you sell shares in the corporation to raise money for the property purchase. The corporation then purchases the property. The corporation is then responsible for the property taxes on the property owned by that corporation.

What about getting the money out of the corporation? Any profit earned is a capital gains. Dividends are taxed as well.

To me, if you’re simply putting together a corporation to buy and sell real estate, you better be comfortable with the relationships you have with your family members because you’re entering into a fairly high-priced business arrangement with them. The board can decide to do things like allow some members to sell back their stock but not allow others and so on, and this can result in busted relationships.

To me, this isn’t worth it unless you’re talking about a lot of money. This is an option if you have several homes or some other significant amount of real estate you’re looking to transfer to the corporation. If this isn’t the case, it’s not really worth it.

Q3: Student loan question
I currently have $17,600 remaining in low interest student loan debt. I have been aggressively paying this down (from a total of nearly $50,000). But now I am worried. I’ve been hearing a lot lately in the media about politicians lobbying for student loan forgiveness as part of a stimulus package. I worry that as soon as I pay off my last loan, the government will decide to forgive it all, and if I had put the money in savings instead I would have had a significant amount of money in the bank rather than being screwed for doing the right thing. What do you think? Should I put all of my debt payment money into savings until this student loan thing plays out, then pay it off in one lump sum? Or keep tossing $500-$600 each paycheck into my loans, as I have been doing? All of my interest rates are in the 3s at this point.

– Alice

I’m not going to comment on the specifics of the potential policy in question (I’ll save that for another mailbag, perhaps the next one, because it’s a fairly long answer on its own and I received multiple questions about these political whisperings).

However, you should never base your financial plan on a “maybe,” particularly when that “maybe” is coming out of the mouth of a politician. If you put all of your money in savings instead of paying off debts because of that “maybe,” you have a very good chance of finding yourself paying a lot of extra interest on those student loans.

Ignore vague statements and promises that come from anyone’s mouth, particularly a politician’s mouth. Yes, it might happen someday, but if we all start making all of our moves based on what politicians hint at in an effort to get votes, we’d be broke in a year. Just ignore it. Take advantage of it when it becomes a law and don’t worry about it until then. In all likelihood, it will never happen anyway.

Q4: Savings targets for singles
Do you have any guidelines for how much money a single person should be saving?

The background: I am a 26 year old female. I rent an apartment. I have no debt; I paid off my student loans ($30,000) in May 2011. Since May, I have been able to save $4K in an emergency fund. (I had to make $2K worth of car repairs in June 2011 and then I was hit with $1k worth of medical bills in July). I make $60,000/yr (gross). I contribute 5% to a retirement fund (TSP), and my employer matches my contribution by 5%. I have no other assets other than my TSP (which is worth around $15K currently, but I really don’t consider it an asset since it’s a retirement fund).

Right now, I am able to save about 50% of my take home pay, after taxes, retirement contribution, and medical insurance. This savings averages out to about $1750/month. Is this okay? My goals are to (A.) build my e-fund to $5K; (B.) save $7K for a “new” car (my car is 13 years old); (C.) open a ROTH IRA and contribute another 5% of my pay; and (D.) save for a down payment on a home.

Am I on the right track?
– Ellen

You are absolutely on the right track. You’re saving about 50% of your take-home pay, wich is very very good, and you’ve got goals established for yourself, which is also very good.

If I were you, I would settle on an order for those goals (you may have already) and just knock them down like bowling pins. I would absolutely put the emergency fund first, but I’d probably put the Roth IRA second, before the car replacement.

You are doing light years better than many people your age and are absolutely on the right path. Kudos.

Q5: Television
You’ve mentioned that you don’t watch much television, but you’ve mentioned that you do watch Fringe. What shows do you watch? How much television do you watch per month?

– Amy

The only currently-airing shows that my wife and I watch are Fringe and Community. That’s it.

We do watch some documentaries when they air, such as the most recent Ken Burns documentary on Prohibition. We also watch some programs on streaming services without commercial interruption.

I would estimate my weekly television watching to be between three and five hours, on average.

Q6: Job switch
I’m about to make a job change that will affect my lifestyle and my finances. I currently make $210,000/year and would receive about a $20,000 raise each year for the next 4 years. Annual bonus is $30,000+. Great pay, right? Well, work-life balance is difficult. I’m married and have several young children, and I feel like I’ve been missing out on their lives since I started working. My wife and I recently reevaulated our situation and decided to seek out a job with a better work/life balance. I’ve now accepted such a job, but the pay is $125,000/year with an expected bonus of 10-15%. So it’s a $100k+ salary cut for next year, plus a cut in bonus. To make this work, we are moving away from the metropolitan area we live in to a more rural part of the country. I feel good about this decision because of what it means for my family (we’ll get to see each other and enjoy each other much more). Also, we’re moving to a part of the country that we’ve always imagined moving to and, from a career standpoint, my new job will help me develop marketable skills that I wouldn’t otherwise develop. The only thing I’m struggling to find peace with is the financial side of things.

We have $225,000 in student loan and car loan debt, $125,000 in retirement savings, and $10,000 in an emergency fund. We also have a $510,000 mortgage on a house currently worth about $550,000. If I had stayed at my current job, we’d have our car loan paid off by February 2012, and we’d have the student loans paid off by August 2014 as well as have a $55,000 emergency fund. Plus, this was with maxing out our 401k and IRAs during this time. Furthermore, this would have put us in a position where, even if we then changed jobs and moved, we could have easily held on to our house indefinitely as an investment property. (This is all according to a financial plan we had created last year.) Now, instead, we’re not even going to have the car loan paid off by January 2013! I don’t even want to think about when the student loans will be fully paid off. And as for the house, I doubt we’d get approved for another mortgage until we get rid of the current one. (I’m looking ahead several years here… we’re planning on renting for at least the first few years.) In the long term, I have excellent job security and have substantial room for growth at my new job. In the short term, however, I feel that I’ve moved my family’s date of financial independence many years down the road (though, importantly, we will continue to live comfortably in the meantime). I feel like Dave Ramsey would slap me across the face right now. But I ask, what good is financial independence if you’ve sacrificed crucial years with your family? I’m interested in what you have to say.
– Ken

I know exactly how you feel with regard to missing out on the lives of your children because of your job. I felt so strongly that way that I was simply compelled to make a career change in 2008 and start writing for The Simple Dollar full time. I took a huge pay cut. I haven’t regretted it in the least, though I will say that I miss some of the challenges of my old job and many of my old co-workers.

The question you have to ask yourself is what’s more important to you: quality time with your family or a shorter period to financial independence. There is no right or wrong answer here. It’s all about what really matters to you.

I don’t think Dave Ramsey would slap you across the face at all, and neither would I. You chose the thing that really matters to you. So what if it moves your debt payoff date down the road a bit?

Q7: Finding speaking gigs
I work for an association in California as trainer. I essentially write, facilitate and deliver in-person training programs for groups of various sizes. After reading your blog (found it last year after researching financial matters for a program I wrote) I’ve decided it’s time to pull the trigger on developing a side business. I have a passion for motivating and inspiring groups of people through public speaking. In addition, I am a decent trainer….I’ve found that you can be a great speaker, but deficient trainer, the 2 don’t always go hand-in-hand.

I was curious to hear from you some thoughts on how you think I could get started in this pursuit. To be upfront, I’m motivated by 1) increasing my revenue stream 2) I miss “taking the stage” and motivating people (I use to work in the church).
– Ed

The first thing I would do is seek out speaking groups in your local community. Is there a branch of Toastmasters International in your town? Many groups that are seeking local speakers will contact groups like these to find good speakers. It’s also a great way to practice your skills.

Another thing I’d point out is that you shouldn’t turn down chances to speak for free, especially at first. It gives you practice and it builds your reputation. Any time you have a chance to speak, take it. If you’re good, you’ll build a reputation. If you’re not, at least you got practice.

Another element is having something useful to say. What are you going to talk about? Have you written a book or done anything compelling that can be a calling card for you?

Q8: Same card, different rates
I was looking at a credit card comparison site and saw the Chase Freedom Card…with two different offers. I was originally looking for a gas card for limited purchases, but took a quick look at Chase since they were garanteeing the Gas Station card. The card requriing “excellent credit” has a higher cashback reward ($200 after $500/3months) and a higher interest rate, $15.99%. The other card required “good credit” and offered $100 cashback after $500/3months and a lower interest rate, 11.99%. Seems counter-intuitive, doesn’t it? I guess I should go for the higher cashback since I plan to use it only for gas purchases and pay it off every month. Your opinion?

– Carl

If you’re planning on paying it off every month, then the higher cashback offer is probably better for you.

As for the multiple offers for the same card, this is completely normal. Credit card companies often have many different offers for the same type of card. They’ll vary in the teaser offer, the interest rate, the maximum credit line, and countless other factors.

From my perspective, it’s good business for them. The more offers they have, the more likely they are to have one that will hook a new customer.

Q9: Switching credit cards
I feel like I am the opposite of many of the people that write in to you. I have hardly any savings, have never maxed out a 401K (although I always contribute at least something), and have a ton of credit card debt. I’m working on it, and am lucky to live in an affordable rent controlled apartment in Manhattan, where I don’t need to worry about paying for a car & insurance.

Right now I have an Amex Blue, Continental Airlines Visa from Chase and a no-frills Mastercard from CapitalOne. I have balances on all three, but have been paying at least double the minimum payment to try and get the balances down. Cumulative total around $13K.

After some fraud on my bank debit card, I am thinking about changing the Amex & the CapitalOne cards into Cash Back credit cards. But I am wary about doing both at the same time and what that will do to my credit score, which is currently around 730. Amex will let me transfer balances, CapitalOne will not, so I would have to close the no-frills account after I get the cash back account.

Do you think it is worth the cash back benefits? And as someone who is not going to buy a home or a car anytime soon, should I be overly concerned about the ding to my credit score and just work on getting some cash back?
– Melanie

The actual credit score impact of this shift will be pretty small and will disappear after several months, particularly if you get new cards with comparable credit limits.

The only thing I would watch out for is if you’re considering another major loan in the next several months. The short term dip in your credit could happen at a very inopportune time.

Aside from that, I’d make this change if it’s something you want to do.

Q10: Pieces of inspiration question
How do you use your “ten pieces of inspiration” to keep you moving throughout the week? Are there any that you keep going back to?

– Donna

Readers send me a lot of links along these lines, plus I’ll randomly stumble upon them throughout the week. If one resonates with me a bit, I store it in my “Inspiration” bookmarks folder and I share it the next week.

There are a lot of them that I see over and over again. I’m quite sure that at some point I’m going to repeat them (if I haven’t already).

There are a few that I look at time and time again. One that immediately comes to mind is Steve Jobs’s 2005 Stanford commencement speech.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

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  1. Jonathan says:

    In addition to Trent’s comment regarding Q3 I would also add that since you borrowed the money it is your responsibility to re-pay it. Without getting into a debate about if it is okay to default on a loan in some situations I would say that borrowing money, then choosing to build a savings account rather than pay back the money you owe seems dishonest to me. You can obviously afford the payments, so why would you not fulfill your obligation?

  2. Snowy Heron says:

    Re Q1 – Leaving your 401k money with a former employer, in my opinion, is not a good idea. My issue with 401ks is that there are two levels of fees – the fees to manage the 401k and the fees that each of the funds charge that the 401k money is invested in. It is impossible to know what those fees might be at the 401k level (no disclosure requirements), although you can often find some info about the individual mutual funds. And I can tell you that the fees charged by the 401k managers can be significant. If you have ever worked for a bank, they will always invest your 401k money through their trust departments, whose services do not come cheap. From bitter experience, I can tell you that 401ks at a bank may have a “company match”, but the company match goes back into their pockets through the management fees in the trust departments. And can I also mention that these trust departments do not hire the best fund managers?

    If you can read a few books on money management and investing, you can do better by rolling over the 401k money to an IRA account at one of the low cost brokerages. That will at least remove one level of fees which are a huge drag to your earnings. Trent has recommended a number of good ones, many of which can be found at the public library. Leave the money where it is until you have educated yourself on the subject, but not forever.

  3. Tom says:

    I think Trent posts these days in advance, so it’s kind of creepy that he referenced the Jobs comnmencement speech today.
    FWIW, I never found it that motivational.

  4. Finance Nerd says:

    @Q1 — a couple points:

    401(k) assets are held in a trust, not in the company’s name. There sometimes have been issues with companies not crediting withholdings, or not doing it quickly enough, but as a *former* employee, this is not a risk to you. Once the money is in the trust, which in your case it already is, the company does not have access to it. So, the risk of them blowing up and somehow taking your $ with them is very slight.

    That said, you ignored a third option which might be the best one. Roll your money to a third party IRA provider, such as Vanguard. This is very easy to do, and gives you access to a great variety of no-load funds. I have all of my 401(k) money from prior employers at Vanguard, and just have the new money with my current employer.

    Note — Although I have my money with Vanguard, there are plenty of other good companies out there, such as Fidelity or T. Rowe Price.

  5. Adam P says:

    Q4 “Right now, I am able to save about 50% of my take home pay, after taxes, retirement contribution, and medical insurance. Is this okay? ”

    WTF question is this? No..you should be able to save 90% of your take home pay!! Why did you even post this, Trent?

  6. Katie says:

    I find it odd that people seem to think there’s some kind of moral difference between watching TV on tv vs. some other way. It’s not like you can’t mute the commercials and read a magazine article or get up and do tasks around the house or whatever while they’re going on.

  7. Liz says:

    @2: Actually, starting with 2012, 401k fees will have to be disclosed to the account holders, so you will be able to see just how much you’re paying in fees. For those of us whose play years end in December, we won’t actually see the information until 2013, but if your plan is on a fiscal year plan, the end of the 2012 fiscal year is when you’ll start seeing a statement about your fees.
    A really interesting book to read about retirement fees and the huge drag they are on your retirement funds is Stop the Retirement Rip-off! by Loeper. I think there’s a new edition coming out (early next year, maybe?), but the current one is also pretty good.

  8. Liz says:

    @7: play means plan

  9. Finance Nerd says:

    @#7 — I second the recommendation. I actually read the version called “Stop the *401(k)* Ripoff” but I’m sure most of the material is similar. My guess is he just broadened it to include all types of retirement accounts.

  10. Johanna says:

    Q3: I don’t know enough to comment on the loan-forgiveness proposal you mention (how likely it is to happen, or how it would affect you), but I see very little downside in what you plan to do. If you cut back your loan payments to the minimum and put the rest of the money in savings, you can always take the money back out of savings and use it to pay down your loans. And your interest rates are so low that you’d pay very little extra interest. Even if you put your extra money in savings for a whole year, the amount of extra interest you’d pay would be about $100. That is not the biggest deal in the world.

  11. Dee says:

    Q4: Ellen, savings for singles

    You seem to be doing well. I’d say, however, that $5K is a low target for your emergency fund. I’d aim a little bit higher—$7,500 maybe?—to cover more monthly expenses and possible car repairs.

  12. Gretchen says:

    If I was saving 50 percent (!!!!!) of my income at 26, I’d be putting more into retirement.

  13. Johanna says:

    Q4: Is it possible that you’re saving too much? The fact that you’re saving so much, and you seem to be worried that you’re not saving enough, makes it seem like you might have a fear of spending money. That can be just as unhealthy as spending too much (and I speak as someone who’s been there).

    Are there things you’d like to spend your money on now, but you don’t, because you feel you shouldn’t? Maybe there aren’t – maybe $1750/month buys you everything your heart desires. But if there are, try giving yourself permission to spend a little more.

    Elizabeth Warren recommends a 50/30/20 (needs/wants/savings) balance for a sustainable budget. “Sustainable” means that you’re not stealing from tomorrow to pay for too much stuff today, but you’re also not stealing from what you want today to save too much for tomorrow. It’s not exactly the right plan for everyone, because everyone’s different, but if you’re really far off from it (and you are), maybe give some thought to whether you can bring your spending more into balance.

  14. Brianne says:

    Q3 – The student loan forgiveness idea feels more like the wishful thinking of my Facebook friends. Sure, I’d love to have my loans forgiven but I highly doubt that would ever happen. I just keep plugging along and hope to have them paid off sooner rather than later. Don’t forget about the federal student loan interest income tax deduction. At 3% interest, it’s probably a better idea to put the extra money in your retirement funds while the stock market is so low.

  15. Des says:

    Q3: Regardless of the policy debate, I don’t see anything wrong with shoring up cash, since your rate is so low.

    My concern is with the attitude presented in the question: that somehow someone else receiving a benefit that you don’t get is “screwing” you. You wouldn’t be “screwed” if the stimulus were passed (at least, not anymore than all taxpayers), others would simply get something you don’t. I got the $7,500 first time home buyers tax credit in 2008(the one that has to be repaid) and the next year the credit was $8k and is a gift. Was I “screwed” for buying my home one year earlier – or was I blessed for getting the credit in the first place? When you signed up for the loans there wasn’t talk of forgiving them, and you were happy with the lending arrangement. Now that you know someone else has a better deal, you’re suddenly unhappy? I would contend that is a character flaw that you should nip in the bud asap, lest it suck your happiness for the rest of your life to know that someone else might have it better. “The only time you look in your neighbor’s bowl is to make sure that they have enough. You do not look into your neighbor’s bowl to see if you have the same or more than they do.”

  16. kristine says:

    I would argue that throwing that money at the student loan, when the majority is interest, and applying the extra money to the principal (which you have the option to do), will in the long run be better than the 3% interest. Or at least even.

    On the loan forgiveness front…in WSJ I occasionally read that the next big crisis will be student loan defaults, in about 4 years. This does not surprise me.

  17. Sonja says:

    Q3 – Student loan repayment. So the question is pay it down in an accelerated manor, or put more in savings while making the scheduled payment only and do an early payoff down the road if her loan is not forgiven by the government.

    This makes no sense. You have a job, you have already accelerated your payment schedule. You pay income tax. WHY would you think your loan would be forgiven? Any loan-forgiveness program will have qualification parameters – it will not be a blanket deal for everyone who ever borrowed. I am pretty confident that people with jobs who can afford to pay their loans off ahead of schedule will not have their debt forgiven. More likely it will be for people who have been chronically unemployed,have someother hardship scenario, or commit to military service.

    You got your education. Pay back what you owe.

  18. jim says:

    Q1 : I disagree with Trent about risk of losing money in a 401k. I don’t know where Trent thinks the money will disapper to or how that will happen. But it sounds like paranoia really.
    Like Finance Nerd pointed out in #4 comment, the 401k is in trust at a broker and not in the hands of the company in question. Theres really NO risk that the money would just disappear in a puff of smoke or something. Now if the money is in company stock and the company goes bankrupt thats another matter, but thats just another way of saying stock in bankrupt companies becomes worthless. If you’re a current employee then theres a minor risk of losing a months current contribution if a company abruptly goes under and is insolvent, but that risk is very low too. And I think employees have a high priority claim to assets of the bankrupt company for their outstanding pay/compensation. Of course the company in question could have been defrauding the employees the entire time and putting the cash into moorage fees for the CEO’s yacht but in that case the money is already gone and it really has nothing to do with 401ks.

    Q3 Alice : They are not going to wipe away everyones student loans. So you can stop worrying about that.

    Q4 Ellen: Are you actually worried that saving 50% of your income is not enough? Or are you worried that you are saving too much? The way you write it seems like you think saving 50% may not be sufficient. THe real worry is that you may be saving TOO much.

    +1 for Katie’s point in #6 comment.

  19. Jonathan says:

    “I find it odd that people seem to think there’s some kind of moral difference between watching TV on tv vs. some other way”

    Katie, I agree that this seems like an odd way of thinking. Did Trent or one of the commenters imply this is the case and I just missed it? Or was this just an unrelated comment?

  20. jim says:

    #16 Kristine said : “WSJ I occasionally read that the next big crisis will be student loan defaults, in about 4 years.”

    THeres often talk about student loans being the next ‘bubble’ or crisis.

    Student loans can be a signficant burden to some individuals and no doubt the default rates will go up some in the near term. But to call it a “big crisis” looming on the horizon is I think very very exaggerated if not fear mongering.

    First of all student loan debt is nowhere near as large as the mortgage debt or anything like that. And student loans are not really ballooning out of control at all. In fact in inflation adjusted terms the average student loan debt at graduation has been essentially flat for over a decade. Only about 15% of the population has any student loans at all. The average debt is around $25k and only 10% of students owe more than $40k. THe total outstanding debt is about half what our nation owes on car loans. Plus you also have to look at who owes that debt. Most of the people with student loans are college educated people employed with higher than average wages.

    The student loan ‘problem’ is not growing, its only impacting a minority of the population and the size of the debt is smaller than other forms of debt carried by households. None of this really adds up to ‘major crisis’.

  21. Johanna says:

    “In fact in inflation adjusted terms the average student loan debt at graduation has been essentially flat for over a decade.”

    Do you have a reference for this? It’s not what I’ve heard.

  22. jackowick says:

    Q4: You can’t save too much as long as you are HAPPY. I would think your savings plan is great because it will also give you opportunities and habits for down the road. If you do find yourself in a situation where you are taking care of someone (whether it’s a child, parent or friend) you will be in a much better situation.

    People spend too much time using “splurges” and “rewards” to derail themselves, and we still associate “buying” with a positive feeling in society. If you find yourself happy, don’t let anyone change your mind. If you are living comfortably and safely, then you don’t need to upgrade (the trap of too many people).

    I also found that the less I spent, the happier I became with EXPERIENCES.

  23. jim says:


    I should correct myself. I was only looking at debt for students at PUBLIC 4 year universities. That has been flat. Borrowing for private university students has gone up some.

    I’d post links of course but that would just go to moderation.

    You can find the data on the college board website under trends in student financial aid.

    For PUBLIC 4 year universities: If you adjust for inflation then student loan debt per borrower was $19,500 in 2000 and $19,800 in 2009. 54% of students had loans in 2000 versus 55% in 2009. Its ticking up marginally but the figure in 2009 is actually down from the $20,500 average in ’06.
    So its basically flat over the decade.

    For private schools the figures went from $22,300 to $26,100, so borrowing is up at private schools. If you combine all borrowing then the private school borrowing causes total borrowing to have gone up as well.

  24. deRuiter says:

    Q1, Quick, roll that old 401 into a self directed IRA with one of the discount brokerage houses like T D Ameritrade or Schwab, Vanguard. You will have more diversity of investments available, and it you do your own stock investment, dirt cheap expenses, there is no charge for just having the IRA with the discount houses, only modest charges if you buy or sell assets. 401 K accounts have fewer choices for investment, and often bad and / or expensive to the account holder choices. They are not set up to give the best choices to the investors, they are chosen as the company which gives the best deal to your employer.

  25. Tom says:

    Jim you beat me to the punch. I always hear student loan bubble too, and think to myself, who’s investing in this? What are we talking about? Where is the crisis? Are there student-loan backed securities? Are we talking about a run-up in for-profit education company stocks?
    I don’t think student loans function similarly enough to home loans in order to be a bubble. How does one speculatively invest in a student loan? Home ownership rates are something on the order of 4 times higher than people that hold student loan debt. And the raw amount of debt is much greater.
    I’ll grant that some people get degrees on credit and then can’t find jobs. (side: I hate when people assume the degree was useless, btw, it’s a tough market for the last 3 years) That’s not a student loan crisis, that’s a sluggish economy.
    If you’ve seen that gigantic infographic that roams around the internet (I saw it on Man v Debt), and believe it, defaults are a profitable scenario for the US Govt and private lenders. They are extremely difficult to discharge and have few consumer protections.

  26. Daria says:


    My husband did the same thing back in 2000. He took a 50% pay cut to change jobs in order to have more time with family. The only difference is that our children were a little older so I worked part time. Believe it or not, it has all worked out financially. We put our kids through college debt free (one child went to school overseas), and my husband got his master’s at the same time so that he could teach as an adjunct professor on the side (which is something he really loves and doesn’t see as work). We have taken advantage of the recession and bought two foreclosures (for cash)for rental properties. How have we done it? Well, two children earned full academic scholarships while the one overseas had her tuition cut in half because of good grades. A good friend, before he died. liked to buy and sell used cars and we gave him some money to work with that he used to earn us a $15K profit over a year and a half. This money went into the 4th child’s college fund. We work on a cash basis and we also attribute a lot to God because he made the numbers work out when there has been no other explanation. I love that for the last 10 years my husband and I can have friends over, go to bible study together and we so enjoy each others company bike riding and hiking. We didn’t have that for the 10 years prior to his job change. Good luck with your job change and I pray that God will honor your choice.

  27. jim says:

    Tom, Yeah I don’t even know what people think that a ‘student loan bubble’ means. What do people think will happen? People aren’t going to stop going to college in mass. People aren’t going to stop borrowing. People aren’t all going to simultaneously default on student loans. And even if one of those things ever did happen… then what? Whats the resultant crisis? I don’t get it.

    Honestly I think people just like putting the word ‘bubble’ after stuff.

  28. AnnJo says:

    OF COURSE banks are going to raise direct fees for debit card use. Last year, Congress prohibited them from using indirect (merchant) fees, which have been in existence for years.

    Politicians can talk about how banks should “accept lower profits” as President Obama put it, but Bank of America, which hasn’t shown its common stockholders a profit in three years, is simply trying to stem its growing losses. The 30,000 people who are going to be laid off from Bank of America in the next year would be joined by thousands more if B of A doesn’t somehow make up for the lost income Congress took away last year.

  29. Sonja says:

    AnnJo: Oh please. BofA’s CEO makes $9.5 million salary and got a $9 million bonus last year. As far as congress “taking away their income”, I seem to remember that congress gave them $1 billion in bailout money. Paying your CEO a huge bonus when your company is not turning a profit seems like a boneheaded move.

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