Comments on: Fifteen Dumbest Money Moves

By: Mike Hillyer

Mike Hillyer — Thu, 16 Jun 2005 05:52:24 +0000

Here’s one I would add: borrowing from your 401k/RRSP for a mortgage down payment. It is allowed by the feds in Canada and the US, as long as you pay it back with a set number of years (15 in Canada), but for that term the money you borrowed is not working for you, and the benefit of compound interest is lost when you get the money back in 15 years down the road (or over the 15 years, you know what I mean).

By: Cliff

Cliff — Thu, 16 Jun 2005 04:50:46 +0000

#8 is too general. Sometimes it is good to stretch out repayments. For example, student loans can now be consolidated at less than 3%. The first $1500 of interest is tax deductible, giving you an after tax cost of funds of about 2.25% if you are in the 25% bracket. You are better off stretching out the debt as long as you can, while investing your cash in higher yielding investments.

By: nickel

nickel — Thu, 16 Jun 2005 01:44:14 +0000

Right, but if you have the ability to both fund both regular old investments and tax-advantaged bonds and/or annuities, then it wouldn’t make sense to put the tax free stuff in an IRA. Might as well leave that out in the open and put your taxable investments in the IRA. The issue of whether or not annuities are a good investment is another argument entirely.

By: Stop Betting On the Cubs, Stupid.

Stop Betting On the Cubs, Stupid. — Wed, 15 Jun 2005 21:50:56 +0000

I strongly disagree with the second part of #7. I know that Suze Ormann has been beating this drum for a long time, and variable annuities ARE more expensive than most investments, however –
Why is it that nobody ever talks about the benefits to owning an annuity ASIDE from the tax deferral aspect of them. Most annuities now offer guarantees that your investment will never be underwater with all of the upside (minus the 2-3% fees) of the market returns for you to use as a living benefit in retirement, or for a death benefit for your heirs should you never use the money. If the market returns 20% next year, and I only see a 17% return after fees, will I be unhappy?? Probably not. And if the market returns -10% next year, I know that I will always get all of my money back. So my next question is, Why does it matter if it’s qualified or non-qualified money in my annuity?? I’m not doing it for the tax deferral, but rather for the protection in a turbulent market.

By: nickel

nickel — Wed, 08 Jun 2005 12:27:16 +0000

The biggest problem with #15 is that most people don’t return the car with a near-empty tank. Right now, a $0.20 discount is only around 10%. Unless you run the tank way down, you’ll come out well ahead if you just fill it back up yourself before returning it. If this was an overall win for the average consumer, as opposed to a cash cow for the rental agencies, they wouldn’t push it so hard.

By: Matt

Matt — Wed, 08 Jun 2005 09:56:43 +0000

Hmm…I’d have to dispute #15, too. Or am I missing something sinister about saving 20 cents per gallon off the prevailing rate for gasoline?