Planning for the inevitable

April 8, 2019

As a result of the problems I encountered administering the estates of my parents, I learned a few things that might be helpful in planning for the end of your life, especially if you have dependents.

Many people designate trusted relatives or friends as attorneys in fact (through a document called a power of attorney) to act in case they become disabled and cannot handle their own financial and business affairs.  The important thing to remember about such a designation is that it only exists during the lifetime of the grantor — as soon as the person designating another as attorney dies, the attorney’s authority to act on behalf of the grantor stops.

If you have a spouse, and you were the bigger earner, it is true that your surviving spouse will, in many cases, be able to receive your higher monthly social security payments after your death; however, your spouse’s own existing payments will cease, thus resulting in an immediate loss of income.  What’s worse, after Social Security finds out about your death (usually from your funeral provider), if you have received any excess payments via direct deposit, it will claw them back from the account in which they were deposited.

If you were lucky enough to have a pension, you more than likely opted for benefits to your spouse to continue after your death, but at a reduced rate.  The survivor in such situation may likely suffer a large, immediate loss in monthly income (from social security and the pension) that may not be offset by the reduced expenses of living alone.

The issue is not just whether there will be enough money for the survivor to live on long-term.  The issue also is providing for the immediate needs of the survivor when income may be reduced and accounts frozen. Life insurance pays quickly, and can be a lifesaver if the policy beneficiary is the surviving spouse. Don’t make the mistake of using a life insurance policy to provide for those who don’t need the proceeds immediately; provide for them elsewhere in your estate plan.

 

 

 

 

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The cost of playing “short pay” video poker

April 8, 2019

Traditional “full pay”  or “9/6” (based on their payouts for the full house and flush on a single-coin bet) video poker pays back 45 coins for a full house and 30 coins for a flush  including the return of an original five-coin wager (as explained in earlier posts, a wager of five coins is necessary to be eligible for the enhanced royal flush payout).  Combined with the returns for other winning combinations (which usually but not always remain the same on all machines), the overall average return for full pay jacks or better is 99.5% of all moneys wagered when played using optimum strategy at full coin.  This overall return takes a long time to achieve, since part of it is based on hitting a royal flush, which on average occurs only once in some 40,000 hands, but it’s a useful measure nonetheless.

While full pay jacks or better machines do still exist, they are becoming rare, especially outside competitive gaming markets such as Las Vegas.  Particularly at lower denominations, most jacks or better machines in our area pay 8 coins for a full house and 5 for a flush.  The overall return (again, based on optimum play at full coin, over a long period of time) is 97.3%, or some 2.2% less than full pay.

While 2.2% doesn’t sound like much, it can add up fast.  Let’s assume play on a dollar machine (a level at which full pay machines are available at Mohegan Sun and Foxwoods; the best dollar machines at Turning Stone are somewhere in the middle, some returning 9 for a full house and 5 for a flush and others 8 for a full house and 6 for a flush).  At max coin, that’s $5.00 a spin.  While experienced video poker players can achieve speeds of up to 1,000 hands per hour, and average 600-800 hands per hour, let’s assume a leisurely pace (which I recommend) of 400 hands per hour. That means the player is pushing $2,000 an hour through the machine, which amount is exposed to a house edge of 2.7%.  On average, the house therefore will retain $44 of that amount.  On a full pay machine, with a 0.5% house edge, the house will retain, on average only $10 — more than four times less.  The average hourly cost of playing a $1.00 short pay jacks or better video poker machine is $44 more than a full pay machine.  As we used to say in Brooklyn, “that ain’t nuttin'”.  And if you’re playing a $5.00 machine ($25.00 per spin), the extra cost per hour is quintupled, to $240 per hour.

Whether to accept the extra cost is, of course, up to you.  If you have a very limited budget, and must play at the $.25 level, you really have no choice —  8/5 machines likely are the best available to you in the northeast (and beware of those paying even less).  At the dollar level, if you live in Albany, the nearest full pay machines are two hours farther away than the nearest 8/5 machines.  At the $5.00 level and above, Turning Stone offers full pay jacks or better, as do the casinos in Connecticut.  Be aware that, regardless of short term results, the more you play, the more your results will skew toward the average return.

Ironically, one of the major responses of the gaming industry to increased competition has been to lower the return to players on its games.  The reasons for this are many, including increased taxation and other items of overhead (New York’s taxes on its non-native American casinos is, not surprisingly, among the nation’s highest, and that money has to come from somewhere).  However, a major reason for for the payout reduction is that it works.  Consumers who normally would boycott a store charging four times more than its competition for a given item accept the gouging, usually out of ignorance.  If you know the cost, you — and only you — can decide whether the convenience, amenities and other factors justify playing the short pay machine.

 

 


The business of death

March 18, 2019

My extended absence from this blog has been due primarily to the loss of both my parents last year. I was designated executor of their estates, which were somewhat complicated. It was my first time discharging this type of responsibility, and I had a lot to learn.

Fortunately, I had good professional help, which eased the burden a great deal.

That burden was made far more onerous than it had to be, however, by the abysmal customer service I received from almost every business I dealt with in administering the estates and related matters. I realize that customer service usually is not a revenue producing department for most businesses, and thus is a prime target for bean-counting cost cutters. However, those economies can backfire — I have vowed never to do business with several of the companies at whose hands I received unacceptable service.

It’s hard for me to say which company I dealt with gave me the worst service — was it the insurance agent who, after promising me for weeks that the homeowners policy on my parents’ house would timely be renewed, waited until several days after it expired to tell me he had failed to renew it, and would not be able to get me new coverage for a month?

Or was it the brokerage house, with whom my parents had several fairly large accounts, that lost paperwork I sent in, only finding it after I resubmitted it at their request.

Perhaps the worst service I received was from another firm, at which held a 401(k) account for my father by virtue of a contract with his former employer. I was asked to send three documents to begin the process of transferring the account to his heirs. Two, I had and sent, with an explanation as to why I was not sending the third and a request for further instructions. The third was a paper from the court administering the estate, but how the estate would be administered depended on the value of the account, which the firm would not disclose to me. After the receiving the third letter from the firm requesting the three items requested in the original letter, I called, not believing my two prior submissions of the two documents requested and letter explaining the absence of the third could have been lost in the mail. I was told that the company received my submissions, but could not proceed in the absence of the court paper. When I asked why I wasn’t told that, but was instead repeated sent letters suggesting I had never been heard from, I was told that was the only letter they had.

While not strictly a customer service issue, the worst problem I had was procuring a medallion signature guarantee, a sort of super-notary stamp (that not only vouches for the identity of the signer, but apparently also indicates the guarantor is assuming financial responsibility for the transaction), which some firms require for the transfer of stock, bonds and mutual fund shares. Although the firm holding the shares and requiring the medallion advised that it could be procured for free from many banks and brokerages, none of the four I asked for it (I was a customer of each) would give me one. The scam was exposed when the holding company offered a medallion “waiver” in exchange for a $50 payment, on top of its exorbitant commission and fees for selling the shares.

In my next post, I will offer some advice to spare your heirs some aggravation after your passing.


End of an era

July 11, 2018

USA Today reports that Southwest Airlines will soon stop serving its iconic peanuts, in deference to those with allergies. I only hope this heightened awareness of the needs of its customers with allergies will extend to those sensitive to the fur of so-called “support” animals, as well as those whose migraines can be triggered by screaming babies. I’m not holding my breath.


Auto repair

June 12, 2018

While there have been many advances in automotive technology over the years, and car prices have remained reasonable (especially when one considers the added convenience and safety features, now standard, that used to be optional or not available at all), I think both manufacturers and consumers have paid little attention to costs of ownership, particularly repairs and maintenance.

I recently noticed a small scratch and dent on one of my car’s doors.  The damage was not extensive, but was unsightly enough for me to want to have it repaired.

My collision deductible is $100, and I knew the repair cost would exceed that.  What shocked me was when I received an estimate for over $800.  The repair ended up costing over $1500, plus over $300 for a rental car that my insurance covered for the time it and the body shop dickered over the cost of the repair and the time it took to complete the repair.

I was only out $100, and I had the use of a car while mine was in the shop, so what’s the problem?  Like health care, another area where many have insurance, the problem falls disproportionately upon those who do not.  In addition, the cost of insurance for everyone must reflect the inflated prices of repairs and parts.

Also, as in health care, when one does not pay directly out of pocket, on is not likely to actively seek lower prices.

Decades ago, I recall that the insurance industry, through a lobbying and advertising campaign, sought common-sense changes in auto design that would help contain repair costs, such as standardizing bumper heights, requiring bumpers to meet crash resistance standards, and the like.  These efforts were fruitless, and now we all pay.


Repeal and replace

March 13, 2018

No, not Obamacare.  With all the focus on gun laws after the latest school massacre, it occurred to me that the problem could largely be solved if the Second Amendment were repealed, and that the chances of that happening — despite the fact that I’ve not heard it mentioned anywhere — have never been better.  The national sentiment appears to have shifted away from “protection” of unlimited rights to buy and own any type of gun toward support for sensible regulation.  A repeal of the Second Amendment would make that possible and undercut a lot of the NRA’s “moral” authority.

Of course, any move to repeal the Second Amendment could backfire.  I know many “gun nuts” who would fight it to the last.  But I don’t think the times have ever been more favorable to the success of such a move.

Whether a “replacement” to secure some gun rights would be necessary is hard to say.  The absence of any constitutional support for gun ownership would be new to this country, and many of those on the fence about repeal might insist on a replacement.  But any constitutional protection for gun ownership could hinder sensible regulation.

I say let’s run the idea up the flagpole and see if anyone salutes it.


What goes around comes around

September 13, 2017

This recent New York Times story about the rapid decline in the value of taxi medallions, due to competition from Uber, Lyft and the like, portrayed the purchasers of the medallions in a sympathetic light.  Many are immigrants struggling to enter the middle class, willing to work hard to achieve the American dream.

My reaction to the story was reflected in many of the readers’ comments (usually the best part of any Times story) who recounted taxi drivers refusing to pick them up because of their race, or refusing to take them to an outer borough.  I remember coming home more than once from an exhausting business trip, laden with luggage, and being refused a ride to where I lived at the time, in Brooklyn Heights.

While I do have sympathy for those rule-abiding driver-owners who lost their investments, I have no sympathy for the all-too-many drivers who viewed the oligopoly conferred by their medallions as a license to engage in predatory behavior.  Karma, as they say, can be a bitch.