Roth 401(k) for Women

Walter Updegrave at CNN Money takes a question from reader Danny about whether a traditional, pre-tax 401(k) or a Roth 401(k) is better for him. Updegrave's answer points out that, assuming your tax rate is the same at the time of contribution as it is at the time of withdrawal, you will come out even at the time of withdrawal if you size your contribution to take the same bite out of your after-tax paycheck. For example, you could max out your pre-tax 401(k) with $15,500 this year, or contribute $11,625 to a Roth 401(k) after taxes (at a 25% rate), and you would still end up with the same takehome pay either way. However, Roth 401(k)'s have the same contribution limit as pre-tax 401(k)'s, so if you can afford to reduce your takehome pay by a little bit now, you could ramp up your contributions to your Roth 401(k) and effectively increase the amount you have in tax-advantaged accounts beyond what you could have if you'd stuck with the pre-tax 401(k).

There are other factors to consider, too. Aren't there always? The two biggies are: What is your current tax rate? And what does your crystal ball tell you your tax rate will be when you retire, based on projected job changes, nest egg savings, or changes in the tax law? (Aside to my fellow twenty-somethings: if you get a read on what tax code changes we might expect over the next 9+ presidential elections and 18+ congressional elections that stand between us and retirement, please do let me know. And let me know what numbers I should buy in Powerball. kthnxby). If your tax rate now is higher than it will be in retirement, a Roth 401(k) may well be a losing proposition. However, my money's on the Roth 401(k) even though I'm in a high tax bracket now because federal tax rates are at historic lows and I'm hoping that by the time I retire, I'll have saved up enough that I can replace most of my salary. Besides, I like the relative peace of mind that comes with knowing the money I have invested for retirement is mine, all mine, and isn't quite so subject to the vagaries of changing tax laws.

So what does this have to do with women in particular? As we all know by now--I hope--we need to be saving more money for retirement than men do, but by all appearances we are saving less. This is not good. This needs addressing. All other things being equal, maxing out a Roth 401(k) yields more usable retirement savings than maxing out a pre-tax 401(k) does. If you can't quite find the coin to max out a Roth 401(k), anything over the amount you get multiplying $15,500 by your current tax rate and you'll come out ahead (again, assuming your tax rate in retirement is the same as or higher than it is now, as I am betting on for myself). If you have a Roth 401(k) option through your employer, and can stomache a reduction in your takehome pay now--even just a small amount can make a huge difference in time!--switching from a pre-tax 401(k) to a Roth 401(k) is one way to help to make up some of the savings gap you'll need to fill. You long-lived, forward thinking lioness, you.

Wells Fargo, Take... Four? Five? Ten?

How many hours have I spent on the phone with Wells Fargo over the last couple of years? After over a decade of incident-free banking, in which I have never had any problems that required more to resolve than a quick driver-by conflict resolution with the local teller, I moved away from my hometown bank and I opened a new set of accounts with Wells Fargo. They were conveniently located, they held my mortgage, and their hold music is no more crazifying than anyone else out there. And you know what? To their credit, they've always been really nice when I've called and asked them to fix their mistakes. But I have spent literally hours with them over the past couple of years getting them to correct their mistakes.

The joint account sweetie and I use to pay our household bills is the latest Wells Fargo timesuck. For a while we were getting a $1 fee every month as a fee to view electronic images of checks we wrote from the account. The problem? We never had checks printed on that account, we use it exclusively for free online billpay. Every month we'd be charged for an add-on feature that we never requested, never used, and in fact had absolutely no way of using. And every month I'd call, they'd reverse the charge, say they didn't know why that fee kept appearing, and reassure me it would never happen again.

Last week I called and went through the rigamarole again, and Steve, the guy who reversed the bogus charge, said that if we would just let him change the designation on our account from "Advantage" to "PMA Advantage" we could keep using our account just as we were now, only without any monthly mystery fees. Done and done. Today sweetie sent me an email asking if I knew why our account was overdrawn by about $4 when we normally leave a cushion of at least $20 in there. Instead of our old friend the $1 charge, we had a $25 fee for the privilege of having this new account designation.

Luckily Steve had given me his direct number, and I got him on the phone quickly. He reversed the charge and said "some linkages" had gotten messed up when they'd reprocessed the account designation, whatever that means, and that it wouldn't happen again. Awesome. I'll let you know in February whether that's true.

Quick Hits Tuesdays

An Oregon law requiring health insurance prescription plans to cover birth control went into effect on Tuesday. About half the insurers in the state do not cover prescription birth control. More at the National Partnership for Women and Families: Great news for Oregon women with insurance! Not so useful for the masses of women without it.

Bill at Queercents is getting married (congratulations, Bill!) and having just come through the experience himself, has some thoughts about the economics of same sex marriage proposals, where the traditional tropes don't really apply. It's difficult, for example, to conform to the schematic where the man asks woman's father permission to purchase his chattel marry his daughter, the man buys woman ring with two months salary, the man proposes to the woman, etc., when there's not actually a woman involved in any way. I enjoyed reading this since we're not big gender role/tradition people either, sweetie and me. All things considered, Bill's very sweet story is probably more traditional than ours!

Finally, Freakonomics blogger Steven D. Levitt and co-author Sudhir Alladi Venkatesh have a working paper out taking a look at the economics of street-level prostitution in three neighborhoods in Chicago. Interesting in many respects, but this stuck out to me: "Approximately one in twenty tricks performed by prostitutes are 'freebies,' either to police officers or gang members, to avoid arrest or in return for protection from the gang." When the authors presented their findings at a recent acadmic conference, Levitt apparently reported that the prostitutes they surveyed were more likely to have sex with a cop than be arrested by one. Via Freakonomics.

Stop the tyrrany of your shrewish wife by purchasing lady-appeasing gadgetry

A dopily titled blub ("The Wife Factor"?) in the New York Times Bits blog about the Consumer Electronics Show notes that TV manufacturers are trying to pretty up their wares so the ladies of the world do not exercise a spousal veto over their menfolks' purchase:

With TVs getting as large as some SUVs and no longer hidden in armoires, wives are putting their foot down when it comes to placing these in their living rooms.

Which is why this year's crop of flat panels features rounded edges, clear plastic frames, and, in the case of LG and Samsung, dark red accents burned into the bezel.

Riiight. Because if you slap a little embellishment on it, women won't notice that there's a fifty-inch slab of exhorbitantly priced electronic equipment staring at them when they walk in the front door. This is the problem with so-called woman-focused marketing and design, most of which assumes we're all awfully shallow and girly. If your product is ugly, has poor functionality, or costs more than I expect to spend this year on all utilities combined, the fact that it features "dark red accents burned into the bezel" (ooooh!) will not entice me to buy it. Or, excuse me, to "allow" my partner to buy it.

The Outsourced Uterus

I've continued to think about this piece by Judith Warner at the NYT about outsourcing surrogacy to India since I first read it a couple of days ago. Couples in the US who want to have a baby via a surrogate mother are looking at a steep price tag--the article says in the US it may cost couples as much as $80k. Faced with that cost, US couples are increasingly turning to India for women who will gestate and bear children for them for far less--$6k-10k. That is no small amount of money, particularly to these women, for whom that might be equivalent to ten to fifteen years worth of income. Consequently, the women featured in the article seem to enter into surrogacy willingly, even enthusiastically, because it provides them with a way to get a whole lot of much-needed income.

I admit to feeling quite muddy and conflicted about the situation. On the one hand, it seems so wrong to me, not because I think think there's anything inherently bad about assistive reproductive technologies, but because I think there is a point at which relying on another person's extreme poverty to make them willing to do hard, dangerous work for you is fundamentally disturbing. And also because in reading Warner's description makes me think of A Handmaid's Tale multiplied by Battlestar Galactica's The Farm:

Images of pregnant women lying in rows, or sitting lined up, belly after belly, for medical exams look like industrial outsourcing pushed to a nightmarish extreme.

And yet I feel like that's the wrong reaction to have, that as Jill at Feministe points out, this is just another example of the sort of economic exchange that greases the wheels of the global economy:

If we're going to do the surrogacy thing — and we already are doing it — then let's call it what it is: An exchange of money for services. And let's not pussyfoot around the fact that in a whole lot of service industries, the people providing services are poor, female and brown. Think of housekeepers, fieldworkers, childcare providers, elder-care workers — all of these women use their bodies in the service of others. Many of them are exploited, some are abused, and most are under-paid. But we only go into panic mode when the services provided are sexual.

Stick around for some interesting discussion in Feministe's comments.

And then there's the fact that if my pro-choice politics mean anything, they mean that a woman has the right to decide what to do with her body, and whether and when to have children, not just those children that are biologically or legally hers. If an Indian woman thinks she can best provide for her economic wellbeing, and perhaps that of her family, by acting as a surrogate mother for relatively wealthy, privileged folks from developed countries, shouldn't she have the right to make that choice? And the economics of it certainly make sense from the surrogate's end. There are repeated mentions of being able to buy a house with the proceeds of a stint as a surrogate, from women for whom that purchase would unlikely ever be possible without that money.

Of course that begs the question: am I content to live in a world in which the best path to economic independence for a woman--in India or anywhere else--is renting out her body for nine months to be treated in a manner similar to breeding stock? Not especially, no. But until global poverty and racism get dismantled (no short order!), I certainly can't fault Indian women who use the assets other people, rightly or wrongly, seem to value most: their ability to grow babies.

What do you think about this development?

The State Of Our Union

Sundays are State of the Union days in our house, when sweetie and I sit down to talk about how we're doing relationship-wise. Sometimes they're quick check-ins, sometimes we get into a little more depth, depending on what we've got going on. In this year leading up to our wedding, we've decided to make finances a central part of our State of the Union talks. Over the next couple of months, sweetie and I will be reading Smart Couples Finish Rich by David Bach and discussing the latest chapter at SOTU.

Sweetie and I have different approaches to money. Obviously, right? We're different people with different histories and different priorities. We have different incomes, different amounts and types of debt, different spending and tracking habits. We are still in the process of combining our finances, and we don't know yet what level of integration we expect to have after we get married, but even if we keep separate accounts and separate liabilities, we're hitched. For real, y'all! If his boat sinks, so does mine, and vice versa. It's kind of scary, actually, and would be more so if I didn't trust him so much!

Anyway, because money is so darn personal, we've never spent a lot of time thinking about how we might function together as a unit. I pay my bills, he pays his bills, we have a joint checking account out of which we pay utilities (split down the middle evenly), and each month he gives me a fixed contribution to put toward the mortgage, which is in my name. That contribution is a lot like rent, except we don't call it that since neither of us likes the implication that he's nothing but a boardinghouse tenant. It's been a good system for us.

But until we decided to get married, I didn't consider it my business how much money he was saving for retirement or how he was going about paying off his credit cards. That was his money, and therefore was his business. By the same token if he had ever suggested I might be better served putting the money I'd just spent on plane tickets toward paying down my home equity loan he may well have gotten an earful. It's my money. I earned it, I decide what to do with it. It's not that we never talked about retirement or debt or budgeting, just that we approached the topic like National Geographic narrators, neutrally gathering information, impartially observing, moving slowly so as not to scare off the one we were observing. That was a good process. It served its purpose. We were comfortable enough with one another's priorities and practices to decide that becoming permanently legally entangled (as opposed to permanently emotionally entangled, I suppose) makes sense to each of us.

Which is not to say that either of us actually likes the other's priorities and practices enough to adopt them ourselves, wholesale. Here's where the fun part begins.

On the agenda for this week's SOTU is Chapter 1 of Smart Couples Finish Rich, which addresses facts and myths about couples and money. Honestly, there's not a lot of content here, certainly nothing new or revolutionary to me--especially considering that I read Smart Women Finish Rich a couple of years ago, before I meet sweetie, and this is largely the same stuff. Compounding interest rivals the law of gravity in its power to control the universe, invest steadily if modestly over time and you'll come out ahead, maximize your tax advantaged vehicles, fiddle dee dee, fiddle dee da. You've heard it before, I hope.

The main takeaway from Chapter 1 is that couples who aren't on the same page about their finances are in for a rough ride, and couples who plan together and work as a team come out far ahead in the longterm. Point taken, David, that's why we're reading your book, and why I'm sitting through it for what feels like the second time. In fact, the true/false checklist exercise is nearly identical. However, where the Smart Women checklist left me feeling very self-satisfied indeed for knowing what my life insurance benefits were, and knowing precisely what my fixed monthly expenses are and how much the variable expenses vary, the Smart Couples checklist left me feeling like an underacheiver. I may know a lot about my financial state, but neither of us, as it turns out, knows very much about our financial state. OK, David, you've convinced me, maybe it's worth proceeding to Chapter 2 after all.

The Myth of the MRS

Hardhitting reportage from CNN.com on undergraduate women prioritizing "acheivement goals" over "relationship goals." Do I smell a smackdown with Lisa Belkin?

Changes in family economics likely play a role, too. Now that most families have dual incomes, Klosson says, "men may feel more freed up to prioritize as they did in this study [to prioritize relationships over career]. There is less pressure, because of a shift in their role definition, to put their careers first."

Note that this was a survey of undergraduates. I wonder what would happen to these men's priorities as they enter the workforce. I'm not willing to pin my hopes and dreams on this, but I do believe that work-life balance, family/parental leave, and related issues will not improve so long as they are seen as "women's issues," so seeing more and more young men valuing this sort of flexibility is heartening to me.

More on this article at Young and Broke.