Thursday, January 19, 2017

Unsolicited Phone Calls From Microsoft Security

When somene calls you saying you have a problem with your computer, hang up.

Lately, I have been getting dozens of phone calls from various area codes, where the caller hangs up as soon as I answer.   I answer the phone "Bob Bell" and not "Hello" so I think their phone system doesn't recognize "hello" and hangs up, or they think they reached a business and hang up.

When I google the phone numbers, I find other people have gotten these calls as well.  Some are hang ups, but others get an Indian-sounding guy on the line claiming to be from Microsoft and that they have "detected a problem with your computer".

These phone numbers, of course, are just entry points in the grid, from VoIP connections (Voice over Internet Protocol) from India.   They set up a line and start dialing - hundreds of people in a boiler room calling thousands of numbers.   Since long-distance is free, the cost of the phone calls is nil.

These are a scam of the worst sort.   They get ignorant people to download a virus to their computer which allows them to control the computer.   The "technician" then encrypts the hard drive and then tells you that you have to pay a ransom to have it unencrypted.

Or, they tell you your computer has a virus problem, but for a fee, they will fix it.   Of course, the problem with your computer is the program you unwittingly downloaded from their website.

In other cases, they simply say you have a problem - which you don't - and ask for money to fix the problem, which they don't do, because you never had such a problem to begin with.

Many of these latter folks may never even realize they have been scammed.   After all, they gave the nice man their credit card number and he fixed their computer!

Sadly, the folks who need to read this blog entry are the ones least likely to read it.   These are folks who actually believe that Microsoft is monitoring their computer and can fix it over the phone.   They have no understanding how computers or the Internet works - the are primitives in a cargo cult.   And they will get fleeced no matter what.

Ignorance is an expensive hobby!  Gullibility is even more expensive.

Knowledge and skepticism, on the other hand, are profit-making traits.  Sad that more people don't invest in those things.

So long as people keep falling for these scams, people will keep doing them.   In many parts of the world, making even a few dollars a day is considered a good income.  So if you have to call several hundred people to make even one score, it is worthwhile.   Maybe you'll make enough money to save up for a three-wheeled car!   And from their perspective, we are impossibly rich and spoiled (and they are arguably right about that) and certainly won't miss a few dollars here and there - or a few hundred.

We live in a smaller world today.  You can gird the planet in less than a day by airplane.   Long-distance is free, with VoIP lines.  People from far across the planet can interact with you in real-time.   This was not the case not long ago.

The interesting thing is, these folks are very smart.  They figure out early on, who is a "mark" and who to hang up on.   They want unsophisticated, older, dumber people.   So they hang up the moment you voice suspicion, or if it seems like they called a business phone number - hence why they hang up on me.

And in this modern world, they likely will never go away, until phone calls themselves die out.   Already today, most people text or message - even e-mails mark you as a geezer.   No one actually talks to anyone.   And certainly young people never take a call from someone they don't know already.

So ironically, just by answering the phone, you passed the first level of filtration - you are a geezer by definition, as only geezers actually answer their phones anymore.   If they can keep you on the line for more than 30 seconds, they know they have a sucker.  As soon as you say anything contrary, they hang up.

And no, we can't track down or prosecute these people.   Yes, a few of the IRS scammers were shut down in India a few months back.   When interviewed, some of these call-center people marveled at how paranoid Americans were about the IRS - their own government.  In India, tax evasion is a national sport, which is why they recently changed the currency there, to get people to declare their stashes of ill-gotten un-taxed cash.   If you called someone in India and said you were from the tax authorities, they would likely say, "fuck you, come and get me!" and slam down the phone.

Maybe the solution isn't to go after call centers in India, but to change attitudes here in America.   People need to shed this irrational fear of the IRS - and irrational fears of their own computers!

It is "Elitist" to Say People Make Bad Choices in Life?

Does poverty force you to make bad choices or do bad choices force you into poverty?

One argument I get a lot in this blog is that, "Well, it's all very well and fine for your to denigrate the poor, but they have no choices in their lives!   You are being an elitist!"

Elitist is the catch-all phrase du jour for people who don't really have an argument to make, so they attack their opponent.    And in debates, that is the oldest and cheapest game in the book.   I can't counter your logical argument, so instead I will imply that your Mother is a prostitute.  I win.

And in the crazy Post-Trump Twitter world, these sort of "arguments" are winning, sadly.   People can no longer hold coherent thoughts.  No one reads.  Everyone just reads a headline and then goes off. 

But I digress...

The reason I am not being elitist is that I am not sitting in some ivory tower or in some mini-mansion on a golf course, opining about what "the little people" are like, having never met any of them, other than my housekeeper and gardener.  Yes, if I did that, that might be elitist.   But even then, folks with money are entitled to their opinions, and if they can perceive that their gardener is making a shitty choice by paying $25 to cash his paycheck, then maybe they are right, even if elitist.

My perspective about all of this comes not from witnessing this behavior from some far-off platform, but from examining my own behaviors when I was on the ground living in poor neighborhoods as a poor person.

Once I flunked out of college and went to work at a minimum-wage job ($4.75 an hour back then) I was poor, by definition.   I came from an upper-middle-class family (which was one generation removed from poverty) and I witnessed there how the middle-class and upper-middle-class squander huge amounts of money chasing status.   And later in life, when I became wealthier, I would make those same mistakes.   The rich don't take our money away from us, we willingly give it to them.

But what about the poor?  Certainly they don't chase status, do they?  They can't afford it, right?  Well, here's where the irony sets in.   A lot of people who may accuse you for being Elitist for saying things that are common-sense, really have no idea what it is like to be poor.   Many are academics studying poverty through a microscope in the lab.  Others are the "Limousine Liberals" who have an idea of what poverty is like, but no real clue.

The latter are convinced that people are starving to death in America, and thus will do silly things like volunteer at food banks or homeless kitchens.   They think of poverty in terms of starvation, when in reality, in America, the number one health problem among the poor is obesity.   And friends of mine who volunteered at these organizations will tell you that while there are a few "needy" people, a lot of folks will drive to the food bank in a spanking new SUV, or that the neighbors of the soup kitchen will stop by for lunch, simply because it is free - not that they need a free meal.

And people who volunteer with the homeless will tell you they are not all sainted poor (with magical powers, of course!) but rather sad people who have mental health and drug addiction issues who should be helped in an institution or shelter that can help them manage their lives.  Giving them $20 on a street corner, on the other hand, is akin to giving them a loaded handgun to kill themselves with.   Again, the real elitists in the world - limousine liberals who think they know what poverty is - think otherwise.   I was stuck at a traffic light just yesterday while a man in a $100,000 Porsche gave a homeless man $10.   He would have been far kinder giving $10 to a homeless shelter (which would have been tax deductible) and four more cars would have gone through that light (and a homeless man would have one less reason to live on the street and one more reason to seek help from an agency).

What prevents us from having a rational discussion about this, is the charges of elitism and the associated shaming that many on the Left like to use.  "How dare you criticize the homeless!" they say, "Don't you know they have magical powers?  Didn't you read that quote by Gandhi about how a country should be judged by how it treats its homeless?   You heartless bastard!  You Elitist!  I simply refuse to talk with you!"

We don't get much done that way.

A reader tells me of a recent article in The Atlantic that discusses check cashing stores and payday loans.  The fellow is trying to sell a book, and in that book, he makes the point that the poor are not stupid, but making the best choice in a bad situation by using payday loans and check cashing stores.   It is an interesting argument, but by and large, I don't buy it.

The argument the author makes is that it is "logical" for a poor person to use a check-cashing store to cash his paycheck, as he needs the cash right away to pay illegal laborers.   A bank would hold his check for several days before releasing the funds, and thus a check-cashing store is his only option.   There are, however, holes in this story:
"a construction worker who stopped by RightCheck frequently to have his checks cashed, handed over a check for $5,000 for cashing, which required a 1.95 percent fee—$97.50. Servon questions why Carlos would willingly pay such a large fee—plus the $10 tip he leaves Servon"
First, I might note they understate the check cashing charges.  My cleaning lady paid $15 to cash her paycheck, until I put a stop to it (and simply cashed the check for her myself).   That a $5000  check would incur only a $97.50 fee seems kind of low.   That someone would tip their banker is just ludicrous.   If you tried that at a regular bank, you would likely be shown the door.  Tipping a teller is probably illegal.

Second of all, if he is employing people and cashing $5000 checks, he certainly isn't "poor" by any means.   I think what he is doing here is trying not to leave a paper trail by depositing checks into a checking account.   He is living under-the-table and not reporting income, and of course, hiring illegal immigrants and not paying their withholding.   Pretty sweet deal, and the cost of doing business for him is the check cashing store.   And maybe the $10 tip is intended to keep the teller silent on the transaction, should the IRS come snooping.

So, yes, if you are running an illegal business than maybe a check-cashing store makes sense, and maybe that is why so many are in poor neighborhoods where people are operating off-the-books.   But others, like my cleaning lady are not necessarily doing anything illegal (although I strongly believe she under-reported income by not declaring cash payments) but simply do not have a bank account, either out of fear of banks or because they have horrific financial records.   In her case, it was unpaid credit card bills.

For me, as a young man, it was bounced checks, which I wrote to buy beer and get cash for pot, at the local convenience store.  I was making poor choices and a lot of these were due to ignorance, inability to control my own impulses, and of course drug and alcohol use.   The latter we don't talk about much when discussing the poor and homeless, but it factors in, big time.

There is also the matter of normative cues.   At the corner of "Community" and MLK boulevards in our town are a plethora of check-cashing stores, pawn shops, and title pawn loans.   People living in the area might be lead to believe that these are normal places to do banking, rather than the outrageously overpriced deals they are.

I wised up, at least a bit, when a friend suggested I use the local credit union instead.  I signed up, had automatic deposit for my paycheck, and could access my funds through an ATM or by writing a check - provided I did so responsibly.   It took a few years to figure this out - some never do.  

At the Patent Office Credit Union, you never wanted to go there on payday, as there would be a line out the door of people "cashing" their paychecks and then getting money orders.  A person working there explained to me that these GS-2 workers didn't trust automatic deposit, so they got their paychecks in paper form.   They were not allowed to have checking accounts, because in the past, they got them and just wrote checks until they ran out of checks.   So they had to stand in line and get money orders to pay the landlord, the utility bill, the phone bill, and so forth - paying a few dollars for each money order.

This is better than the check-cashing store, of course, but not by much.   What it comes down to is not that they have no other choices, but that they tried the other choices and screwed them up.   Banks want your business, if you have self-control.  They don't want the guy with $17 in his savings account who is overdrawing it all the time.

Yes, these institutions are their only choice only because they made poor choices in the past forcing them into these bad choices today.

The other argument made in the article, with regard to payday loans, was that these "borrowers" could use a lower-interest rate credit card they had (with 20% being lower than a payday loan!) but made the wise choice not to as they knew that a default on a payday loan would not be reported on their credit.

This is an odd and ridiculous argument on a number of levels.   First of all, borrowing money is never the answer to money problems - it just makes you poorer.  And the higher the interest rate you take out, the poorer you get.   And payday loans are a one-way trip to oblivion, or at least bankruptcy.

Second, intentionally taking out a loan knowing you will end up delinquent on it makes no sense at all.  This is simply a poor choice that makes you poor.

But getting back to elitism, the author really doesn't address why these poor people (cashing $5000 checks!) are so poor.  And again, it is not because they are starving to death.  They are not getting a payday loan to buy bread for starving babies.   They are borrowing money in many cases for status.

You see, on the same corner as the check cashing stores and whatnot, is the rent to own bling rim shop  and the rent to own furniture store and the buy-here-pay-here used car dealer.  Don't forget the tattoo parlor and piercing shop!  And no, they don't "need" a clapped-out monster SUV to "commute to work in" - they are merely making bad choices to obtain status among their peers.  They could choose to make different choices.  But they choose not to.

For me, after living a decade or so in marginal living quarters, just "getting by" on my income (but having a hobby car, nevertheless, and spending a lot on weed, beer, and junk!) I decided I wanted more.   I went back to school, sometimes working three jobs at the same time, and eventually moved away to a better place with better opportunities (not to mention lower taxes).   I made different choices and pulled myself out of poverty.   Others stay down.   But it is a choice, in most circumstances.

This does not mean it is an easy choice.   And as usual, there is a Science Fiction story which helps one to understand how people can get trapped in situations like this.

Robert A. Heinlein's Logic of Empire illustrates the problems facing the very poor.   In the story, two wealthy Earthmen argue as to whether laborers on Venus are indeed slave-laborers.  One argues that their condition is akin to slavery - they have no choice in the matter and cannot buy their way out of their onerous contracts.  The other argues that harsh contract terms are necessary to prevent them from quitting on a moment's notice.

They get drunk and place a bet, that they can go to Venus and find out for themselves what the deal is.  They sign on as contract laborers, and.... well, find out that in theory you can work your way out of poverty, but in reality, it is damn difficult to do.  The fact they all get addicted to narcotics within a week of landing there is part of the problem.

And that story reflects the reality of poverty in the United States.  Yes we all have choices in these matters, but actually making these choices is damn hard to do.   Having the wherewithal to give up on smoking pot and drinking beer - and walking away from friends and family members who did - was not an easy task.  For many, this emotional decision is hard to make.  When you are immersed in a culture where poverty is the norm, it is hard to visualize a situation so unlike your own.   So you assume that people who are rich are "nothing like you" and somehow lucked out by inheriting money or whatever.

Read that story (the link is to a free online copy of it).  It sort of illustrates the problems involved.

And the author of the Atlantic piece is partially right - we should offer better deals to the poor, so they are not exploited.   The problem with that argument is, who pays for these deals?  Banks did not walk away from serving the poor out of racism, spite, or fear.  They walked away because they lost money on poor customers - lots of money.

The upshot, however, is this - pining for a change in society's rules is fine and all, but not likely to happen overnight - if it happens at all.   If we paint ourselves as helpless victims, nothing ever changes.   If enough people stopped patronizing check cashing stores and payday loans, they would go away.

On an individual basis, you have to decide what your choices are in life.   It isn't easy, but walking that extra block to a real bank, and then managing your funds down to the penny will result in a far better outcome in your life.

It ain't easy, but rewards are there for people willing to do hard things.  And do we want to reward those who don't?


The Best Car?

What is the best car?  That is a nearly impossible question to answer!

A reader writes, asking what I think is the "best car" to buy.   This is almost an impossible question to answer, on a number of grounds:

1.  What is the "best car" for your situation may depend on your situation.  If you need a truck for business, a small sedan won't work.   If you have a family of six, a small sedan or coupe is the wrong choice.  Bear in mind though, what you think are your needs are often your wants.   A lot of people today buy pickup trucks and rarely, if ever, haul anything with them.   Monster trucks and SUVs are bought as penis enlargers to sooth the psychological needs of their owners, not real needs.

2.  We don't know until a car goes to the junkyard whether it was any good or not.   Consumer Reports likes to do their "Best" list every year - including ridiculous things like 'Best luxury car" which is an oxymoron - again, wants over needs.   But their list is flawed as what is "best" this year (the Tesla, for example) is panned as "unacceptable" the next (again, the Tesla).   But Consumer Reports aside (as it is worthless), you really can't tell much about the long-term reliability of a car until you junk it.   Sitting on the showroom floor, you can't tell much about it.

3.  What does "best" mean anyway?   Again, from my perspective, it is the longevity and reliability of a car - the car as appliance that provides long service and low cost.   Many others have different opinions - they want "best" in terms of acceleration, handling, appearance, or convenience of cupholders.  We choose cars on criteria that we would never apply (or rarely apply) to other appliances in our lives.  Well, maybe that isn't entirely true, as the refrigerator and washing machine people have found it possible to double and even triple the prices of these appliances by offering "status" models.   And some folks will spend four or fives times as much for a heating plant as necessary, just to have bragging rights.
From the first perspective,  I think that from the title of this blog, we can just eliminate, entirely, every luxury or sports car ever made.   A "luxury" car these days is often just a regular car gussied up with different trim and interiors to make it look different.  This is particularly true for American and Japanese luxury cars, which fill out their lineups with clones of their lessor brands.

Not only that, "Luxury" cars are sold on one thing and one thing only - status.   People buy them to show off their apparent wealth and sophistication.  Status-seeking is the antithesis of wealth, as money spend on appearances serves no purpose other than to stroke the ego.  Every dollar spent on status is a dollar less you have to invest in real things.

In addition, luxury and sports car brands can be fantastically expensive to service.   Often they require esoteric repairs and maintenance, and parts are not cheap and few are qualified to do the labor.   Even things like an oil change can be pricey.   On my BMWs, a simple eight-quart oil change required oddball Castrol (5w-30 or 10w-60 - good luck finding that at Wal-Mart!) plus an imported filter.   The cost of materials alone could exceed $100.   My Nissan truck requires only a $39 oil change at the quicky-lube place, $59 if I want to go with synthetic.

Similarly, the Nissan is shod with tires that cost $149 to replace, while the BMW required $350 tires.   The added delta in costs doesn't really equate to increased longevity of the tires or better performance, other than in extreme cornering.   As an added bonus, taking exotic cars outside the confines of big-cities (where there are dealerships and repair depots) becomes a nerve-wracking experience.   So luxury cars and sports cars and exotics are just out of the running from the get-go.  And this includes all German cars.  Sadly.  And of course, no high-test burning cars!

Another part of this first consideration is trucks, SUVs, and all-wheel drive.  Again, people posit that they "need" a huge SUV to haul the kids around or that Dad "needs" a truck for work, even though all he does is drive to work and then use a company truck.  The cleanliness of most pickup truck beds attests to the actual use by their owners - as oversized sedans or wagons.

Even for people who are self-employed carpenters, plumbers, or other tradesmen, the pickup is often a style choice, not a practical choice.   For many workmen, the van is a better choice as it can hold all of your tools, materials, and supplies, in a secure manner.   A pickup truck, oddly enough, holds very little cargo.    We bought a mini-pickup to tow our camper, and found that while it hauled more stuff than the SUV it replaced, it needed a bed cap and a cargo tray to really be able to fit anything in a useful manner.

Pickup trucks excel in towing and hauling heavy loads.   If you have a trailer to tow, they might be the ticket.   But most folks don't have trailers, and buy them as "luxury trucks" with leather interiors and sunroofs and use them as cars.   It is very odd.

SUVs I have addressed before.  They have little room inside and suck gas.  And no, you don't "need" all wheel drive unless you live in the outback.   Even in snow country, a decent set of snow tires will pull a front-wheel drive car to places an SUV with all-season radials won't go.  Jeeps bear special mention in that they are staggeringly expensive, crudely appointed, have no cargo space, and are noisy as all hell.   Few ever go off road - you are just punishing yourself buying a Jeep, and doing it for appearances, not for practical reasons.

Again, we are talking about saving money here, not how to have bling on a budget.

For the purposes of our evaluation, we will assume the "needs" of the consumer are that of a family of four, who uses the car to commute to work, go to the grocery store, take the kids to after-school activities, and occasionally drive on a family vacation.   In other words, what 99% of Americans actually do with their cars.   No, not many are racing on the weekends, attending black-tie receptions at the country club, or going on rugged off-road 4x4 adventures - but to read the ad copy the manufacturers put out, you would think otherwise.   And they do this, because they make a ton of money selling sports cars, status cars, and rugged SUVs and trucks.

In fact, they often lose money on ordinary sedans, which sell for cheap because they are unwanted and un-loved.   This is where the real bargains are.   So this narrows our "best" down to the ubiquitous four-door sedan, what used to be the staple of every automobile manufacturer (well, that and the station wagon, but those are dead today).

The second and third criteria are related.   Again, the real costs involved in owning and operating a car are tied to its longevity, depreciation, and repair costs.   Other variable costs depend on things like gas mileage and maintenance.   Again, our four-door target sedan is going to beat every other category in terms of fuel costs (miles per gallon, 87 octane fuel), regular maintenance (oil changes, tires), and even categories like insurance premiums - cheaper cars are cheaper to insure.

Again, trying to determine the value of a car by looking at a new one is kind of pointless.  You can watch old episodes of Motorweek on Youtube these days.  I remember watching it in Virginia back in the 1980's and 1990's and thinking it was a good program.  Today, I watch it and laugh.

"Testing" cars back in the day apparently comprised running your hands over the headlights and yanking on the windshield wipers.

When I watch the show today, I am embarrassed to think I thought it was anything worthwhile.   The "testers" are shown in the background of this shot "evaluating" minivans by touching the surfaces, yanking on the windshield wipers and aggressively adjusting the seats - as if these things can tell you how long the transmission will last.

Even the "scientific" testing (using stopwatches no less!) is pretty lame.  Stopping distances and turning circles are sort of useful information, but again, not much in telling you the long-term-value of the vehicle in question.

Now lest you think I am taking a piss on Motorweek, the problem they have as "testers" is that they really can't tell you much more than how the car operates and whether they thought the ashtray was in a good position.   Most cars operate in a satisfactory manner and location of the ashtray is a subjective opinion of the user.

What really counts is whether you can go 100,000 miles without some expensive out-of-warranty repair.   And for many cars, this is a real concern.    Weird esoteric engine problems and failing transmissions are two things that can take even a high-end luxury car and send it to the wreckers long before its time.   And often, this is reflected in low-resale values on some cars.

As I noted in another posting, figuring this stuff out is hard to do.   One fellow bravely tried to index auto auction records with "fatal" auction codes ("needs major engine or transmission work") and came up with a list - a list with a lot of Fords on it, sadly.

So how do we determine long-term reliability when we can't determine long-term reliability?   I think there are two indicia we can use, although both are problematic.   First, choose a conventional design that has a lot of miles under its belt.   A car that had been made for a number of years (not the first year of its generation) and has no esoteric features.   Second, you have to go on the reputation of the marque, which can get tricky.

Thus, for example, our target four-door sedan is a pretty widely made car, hardly experimental in nature or features.   Find one with as few esoteric things as possible - no turbochargers or Continuously Variable Transmissions .   No, you don't "need" a V-6 engine to power a family sedan - a normally aspirated four-banger will do the job just fine, be easier to service, and cost less to run.   And a conventional automatic is probably the best bet - no CVTs or dry-clutch transmissions are needed.   A manual transmission is an interesting option, but today they don't get better mileage than an automatic, and in terms of reliability, it is a wash.   Automatics tend to be easier on the drivetrain and engine, and thus have an edge in longevity.  And while clutches last a long longer today than in the past, replacing a clutch has become an expensive nightmare in recent years - running into the thousands of dollars (I replaced the clutch in my '65 Mustang for $35 back in the day...).

With regard to reputation, you basically have to go Japanese.   The Koreans are the ones to watch, though, and are the "next" Japanese, in my opinion.   I have a Korean car and it is exceptionally well-screwed together.   But of all the marques in the world, the two with the best reputation for quality are likely Toyota and Honda.   And there is really no discussion about it.   These cars will go further and require less work than American or German makes, hands down.

Again, in the hierarchy of Japanese makes, there is Toyota, Honda, and then everyone else.   Honda is a little more sporty and as one Japanese friend told me, "The Engineer's Car" in Japan.   Nissan is a distant third, sold on price alone, and their use of CVTs in their sedans takes it out of the running.   Mazda, Suzuki, and Mitsubishi are struggling to stay in the market at this point, and have serious quality issues and poor reputations.  Subarus are all-wheel-drive, so that takes them out of the running as well.

The Koreans are worth a look, but in the past, their reputation was less than steller, so looking at used Hyundais and Kias (the same company basically) may be problematic.  The KIA Soul (which I own) is a very nice car, and the first generation models can be had used, for cheap.   The gas mileage is not as good as a sedan, due to the brick-like shape, and luggage room with the seats folded up is tight - too tight for our hypothetical family of four on vacation.

And looking at these two marques, the cars that come to mind are the Camry and Corolla, or the Accord and the Civic, their "full-sized" and "mid-sized" models, which not long ago were considered mid-sized and compact, and not long before that, compact and sub-compact.

But what about their smaller cars, like the Yaris and the Fit?   These penalty-box cars do not have the best reputation for quality, and can be cramped to boot.   And for the price of a new Yaris or Fit, you can be far more comfortable in a used Camry or Accord - for about the same overall cost of ownership.   Micro-cars are generally not a good bargain, even if they have incrementally greater gas mileage. 

Which brings us to the next question, new or used?  Again, from a cost perspective, you can save a ton of money buying a used car.  A new car depreciates like mad the first few years, and all you get in return is the bragging rights you bought a new car.   It becomes a used car the day you take delivery, so get over that.

So looking at all of our criteria, which car do we pick?   Of the four finalists, I will go with the most boring of the lot, a car that is an appliance in every sense of the word - as realiable as an old refrigerator and about as exiting - the previous generation Toyota Corolla:

For about ten grand you can find a used 2013 Toyota Corolla in reasonable shape.   You might fall asleep at the wheel, though!

Edmunds True Market Value®

  • Dealer Trade-in:
  • Private Party:
  • Dealer Retail:

They made a LOT of these cars so they are a known quantity and parts can be cheap.   The drivetrain is pretty basic - four cylinder naturally aspirated with an automatic transmission.   No turbos or CVTs or other things that can go expensively wrong.
This is pretty basic and useful transportation, and as the last year of a previous generation car, should have few production "bugs" in it.   If you can find one with low miles (off-lease) it could be a real bargain.
And since most Americans are obsessed with SUVs and pickup trucks, no one wants any cars anymore, which means off-lease cars languish on dealer lots.   The best bargain, as you can see from the pricing above, would be from a private party - maybe someone who wants to "upgrade" to an SUV.

So there you have it, in my opinion, the "best" car for a family of four, in this day and age, based on reliability and cost.   A Honda might also be a good choice, although slightly more expensive.  And if you feel you need more room, the larger Camry or Accord are nice cars as well.

If someone came to me asking for a recommendation for a reliable car, I would not hesitate to recommend these four cars.   Anything else?   Well, what worked for me as a shade-tree mechanic likely won't work for other folks.   Esoteric cars were fun to have, but they can be a nightmare for someone who doesn't understand cars or knows how to fix them.    An old Fiat was a fun hobby for me, but a series of unexplained and expensive repair bills for its previous owner.  BMWs are great if your idea of a fun weekend is spent under a car.

The rest of the world wants a car to work like an appliance.   And these boring sedans are the best appliances around.

Wednesday, January 18, 2017

Cardboard Sign on a Telephone Pole

There is something creepy and appealing about signs on telephone poles.

Stephen King is very good at finding the creepiness in everyday life.   He creates great horror fiction not by relying on the usual assortment of monsters and ghosts, but by finding the demonic in everyday objects.

For example, in the novel and movie Christine, King brings out the creepy factor in old cars - particularly older cars from the 1950's with their baroque juke-box styling.   Let's face it, there is something very, very creepy about the 1958 Plymouth Fury - made even creepier by a few dents and rust.   King can see this and bring it out.  You can smell that old car smell, just from reading the book.

In another book (and movie) Hearts in Atlantis, he find creepiness in "Lost Pet" notices tacked to telephone poles (note: my friends who work for the power company remind me that they are utility poles - the telcos merely piggy-back off them).  Tattered abandoned signs tacked to a pole become the object of horror.  That is the genius of King.   We all knew in retrospect these things were creepy, but it took King to bring it to the forefront.

In one of my earliest postings, I mentioned offhand how I was amused by a cardboard sign tacked to a pole by the side of the road:
While driving home the other day, I saw a sign on a lamp post that read, "Make executive salary from home! $10,000 per month! Call XXX-XXXX. Don't call if you don't believe!"

I almost laughed out loud at the last line, as it illustrated how these con artists work - they prey upon the BELIEF of the victim. As we know from religion, belief is something that is based on faith, and you can't argue faith logically. Thus, if you can get someone to BELIEVE something, there is no way of talking them out of it.

Here is a list of 50-some-odd things that, in my opinion, are scams....

1. ANYTHING ADVERTISED ON A LAMP POST: And this goes for road sign posts and utility poles as well. They can be neatly printed signs or pieces of cardboard scrawled on with crayon. It makes no difference. A sign taped-up to a utility pole that says "Lose weight now! Call XXX-XXXX" is a scam, as are any job offers, work from home scams or anything else. Other than garage sales and lost dog notices, anything advertised on a sign taped to a lamp post is a scam, PERIOD.

It seems pretty obvious, but then again, I still see these weird signs all over the place.  Mr. King was on to something.  There must be a cult or group of aliens or something that is putting them up - right?

What sort of signs am I talking about?  Well, not "lost pet" or "garage sale" signs - those are usually legit (except in Mr. King's novels!).  These signs seem to fall into one of three categories:
1.  Weight Loss

2.   Make Money At Home!

3.   House for Sale - Investment!
The first two are pretty self-explanatory and I have touched on them before.   The Weight Loss ones are likely a pitch for an MLM scheme - to buy "supplements" to lose weight and of course, become a "distributor" of your own and con other people into buying into the scheme.  MLM (Multi-Level-Marketing) schemes are all just plain rip-offs, period, paragraph, end-of-story.  If you can't figure this out on your own, I can't help you.

The Make Money At Home people are the same way - selling you something, particularly the something-for-nothing mentality.  The sort of folks who fall for this nonsense don't bother to think about why, if something really was an opportunity, why is it being advertised on a piece of cardboard tacked to a stick on the side of the road?    They likely are not reading this blog, either.

The last is a new trend, and like in a King novel, kind of creepy.  I've seen these signs mostly in Florida, but they appear here in Georgia and in other parts of the country as well.   The sign is a broken piece of brown cardboard nailed to a stick or a utility pole and in Sharpie(tm) writing says, "3BR 2BA House - Great Investment! Call XXX-XXX-XXXX!!"

Really?  Selling Real Estate using cardboard signs?  Sometimes a ridiculously low price ($30,000) is mentioned on the sign.  I think the gag is that the person seeing the sign might think the seller is unsophisticated and thus is giving away their house for less than market value.   But of course, the seller - if he is indeed even a seller - is far more astute than you think.  Odds are, one of two things is happening here:
1.  The seller does not own the house - but is merely renting or just standing in front of a random house on the street.   He offers a house (maybe already rented) for an obscenely low price, but only if you act now and provide "good faith" money in advance.  Of course, he takes off with your money and you never see it again, as he did not own the house in the first place.
2.  The seller does not own any house, but wants you to sign up for a "buy ugly homes" gig which you have likely seen advertised.   You sign up and pay for training materials on how to buy and flip houses (everyone is making money doing this, right?   After all, you've seen it on television!) and of course, end up with nothing.  But you can make money if you put up your own cardboard sign and sign up more suckers like yourself.
Both are scams, of course.  There is no "money system" or "kit" you can buy to learn how to make money from Real Estate.  The thousands you spend on seminars or kits could be better spent actually buying such houses.   But if you don't have the cash and credit rating to get loans, it ain't gonna happen, so forget dreams of avarice and just put the dough in your 401(k) as boring as that seems - or pay down your damn debts!

But again, this is something that people should be able to figure out just by the context of it.   There are no opportunities to be had by responding to cardboard signs.  No one is giving away houses for nothing - at best you can hope to find something for slightly less than market value.  Why is this?  Well, there are plenty of people out there who will bid against you if someone is selling a house for an alarmingly low price.  This in turn tends to bid the price up to near market value, adjusted for any defects in the property, of course.

Since the great fool shortage of 2008, we've run short of chumps and idiots.  And usually people astute enough to own a home are astute enough not to merely give it away or to advertise using a cardboard sign.

But with the election of Donald Trump, it finally appears the fool drought is letting up.   A whole new generation of suckers and chumps is on the scene, completely ignorant about the real estate meltdowns of 1989 and 2009, timeshare seminars, MLM schemes, Nigerian Scammers, car leases, payday loans and a whole host of shitty deals.

It seems that the economy will turn around, balanced on the back of a new generation of fools!

NEVER Subcribe to the New York Times!

Any company that uses "negative option" to snare customers is a company to be avoided.

The New York Times is crowing that their subscription rates are up as a result of the Trump election victory.  I think another factor is at stake here - they basically gave away subscriptions for very little (about $18 a month for Friday to Sunday delivery).   Mark needs newspaper for the pottery studio, so we thought, "why not?"

Negative option is why not.   Negative option is not necessarily bad in and of itself, but how it is played out makes all the difference in the world.   When AOL was failing, they used trickery to prevent people from cancelling their accounts.  People would call up to cancel and the operator would send them to a "cancellation specialist" to cancel the account.  After haranguing them on the phone to keep the account, they would finally reluctantly agree to cancel the account.   Or so they said.

The next month, the monthly service charge would appear on their account and when called, the agent would say there was no record of cancellation!   People would wait hours on hold, call over and over again, and even write certified letters.   The only solution was to cancel their credit card.

Negative option is a "from hell's heart I stab at thee!" kind of deal - kicking your customers in the ass on the way out the door.   Most companies who do this figure they've lost that customer for life, so why not utterly fuck them?   And to some extent, they have a point.

Problem is, the Internet.   If you hope to attract new customers, it doesn't help if your reputation gets around that you screw the old ones.  And that reputation can get around quickly, on the Internet.

Before taking on any negative option kind of deal, scout out in advance, if you can, how you can cancel said deal.   If they make it difficult to cancel, then odds are, you are better off just walking away from the "bargain" as you will end up stressing yourself and going through a lot of hassle.

The New York Times, like so many papers, is trying to re-invent itself as an online publication.  So if you subscribe to the paper, you can also read it online.   The problem is, the articles that appear in the weekend papers may appear online almost a week in advance.  So when the Sunday Paper arrives, we end up not reading it, as we've already read it.   It goes directly to the pot shop to help dry a clay birdhouse.

After the promotional period ended, I decided to cancel the subscription, as I was not going to pay the "regular" price of over $50 a month for newspapers which were already stacking up around the house - papers that I already read on my phone or computer.

So I go online to cancel.   They are very high-tech, and have a website where you can log in, check your subscription, and so forth.   You can do everything you want to online - suspend service for a holiday, change your subscription level, change your credit card and billing address.

Everything, that is, except cancel your subscription.   You see where this is going?  Not well, let me tell you.

So you call the 1-800 number and wait on musical hold.  Eventually someone answers.  You tell them your life story.  They can't help you, but have to forward you to an "account specialist" in another department.   The "account specialist" might pick up on the first ring - or you may be on musical hold a long, long time.

This is a lot of hassle for something that should be done with the click of a mouse.   So, you talk to the account specialist, who tries to get you to stay a subscriber.   Finally, they agree to close your account and credit your credit card for any surplus.   You ask for a confirmation - they promise you an e-mail.

Nothing happens.  No credit, no e-mail, and the papers are still piling up.   So you send them an e-mail.   Maybe two e-mails.   No response.

So you call again.  Again on hold, again transferred, again on hold, and finally after 20 minutes, you hang up. 

Call again.  The person answering says they can't help you, but when pressed, they admit they can check to see if the account has been cancelled.   They claim it is.  We'll see.

I ask them for a physical address to mail a certified letter to cancel my subscription, but they refuse to provide one.   How can you cancel, then?

What annoys me is that the New York Times is insulting our intelligence here.   They are playing negative option games, hoping we will just not bother to cancel because it is a "hassle".   This is really, really sick of them to do - to make it even moderately difficult to cancel is cruel.  To not follow through and make it very difficult is even worse.

So, what do I do now?  Cancel my credit card?  Dispute the charges?   Send them a certified letter?

I'll wait and see if this next promise is fulfilled.   But frankly, they have lost a reader for life.   It is not as if a lot of their content wasn't sort of monotone to begin with, but to treat customers this way?

Sorry, no sale!

Maybe like AOL was, they are struggling to get by. 

UPDATE:  I tried using the "Chat" feature on their website.  The person "Kara" tells me the account is cancelled but that I owe them another $55!  When I ask why, she "disconnects" from Chat.

I do not trust these people!

UPDATE:  They responded to my third e-mail, finally and promise the account is cancelled - next week!

The C5 Corvette - No one Buys, Sells, or Drives

Prince doesn't like to license his music to YouTube.  Too bad, too, this was a killer video until they pulled the sound track.

A recent article in Road and Track explained to me why my friend had such a hard time trying to sell his Corvette.   It was a 2003 50th anniversary edition and not a bad car.  It was not a great car, either.   All the bits and pieces were there - sexy looks, a big pushrod V-8 with a throaty exhaust, and big tires.   But it was not a fun car to drive, for some reason.  Hard to get in and out of, hard to see out of, and handling that could bite you on the ass if you let up on the throttle too fast.   I never felt in control while driving it, and it didn't seem that "quick" or handle very nimbly.

Back when this generation of Corvette - the C5- came out, it was no doubt revolutionary.  And a lot of folks went out and bought them and put them in their garages and never drove them.  And is not hard to figure out why.   They were just not fun cars to drive.  With high window sills, you tended to feel like a child in a bathtub while driving it, and with a dashboard three feet away, it was hard to even read the instruments.   They became "garage queens" for the most part.

My friend's had 80,000 miles on it - which was a lot -  and he decided to sell it as it wasn't very practical or fun to drive.  Long trips were cramped, with no space for luggage.   And it always attracted the attention of the Police.   The same reasons, in fact, why I sold the M Roadster.   Fun cars can be un-fun in a real hurry.

We went online and got the KBB, NADAguides and Edmunds blue book values for it.  It was astoundingly low - in the teens, particularly since it had been driven.   On Autotrader, there were dozens just like it and most had far fewer miles.  Several had less than 1000 miles on them after 15 years - and the owners were asking twice the original sticker price for them!   Why buy a car and not drive it?  And no, they are not collector's items just yet - and may never be, as they made so many of them.

My friend, seeing the unrealistically high prices on Autotrader, decided to list it for $24,000 - almost $10,000 over book.   He failed to realize that asking prices are not sales prices.  After six months, not a single phone call.   People list them for sale, but never sell them.  And the reason given is, "I'm not going to just give it away!  It's worth a lot of money!"

But as the article in Road and Track illustrates, there are a lot of them on the market, many in "like new" condition, and remaining unsold.   Since they are "hobby cars" owned by older men who don't want to sell them anyway (the wife no doubt made them put the ad in Autotrader) and since they have the garage space, they remain unsold at fantastic asking prices for years.  Their widows will sell them eventually, and maybe a new generation can buy them - if they can afford the insurance.

And I think I know where they will end up.   Here in rural Georgia, you see ads on Craigslist for completely clapped out Corvettes from the 1970's through the 1990's.   Rednecks buy these and actually drive them - drive the wheels off them, often making questionable modifications to them.   Once they are a couple of decades old, they are worth hardly anything, so they are a cheap ride - to be ridden into the ground.

Why do they decrease in value and not go up?   Well, because they keep making better Corvettes.  The seventh generation Corvette - the C7 - is far more car than the C5 and can be had with engines nearly   over twice the power.   A 15-year-old car, no matter how "cherry" isn't going to be worth more than that.

People rushed out to buy the new C7 when it came out - it was startlingly different than its predecessors.   And it was a far better car, too.   But those folks will be chagrined to find out that in a year or so, the C8 will be introduced, and it may take things to a whole new level - overhead cams, mid-engine layout - supercar stuff for real.

You can't buy something "brand new" as a collector's item.   Whether it is an Elvis commemorative plate, Franklin Mint coins, or an "anniversary edition" Corvette.   What makes a collector car collectible is the subject for another posting - there are a number of factors, including outright hysteria.

Oddly enough, in the same Road and Track article, the author claims that his friend is making a mint buying and re-selling old BMW M Roadsters.   But of course, they only made a few thousand of those, and the really collectible ones (2001 coupe) they made only hundreds if not only dozens of.   Holding on to a car thinking it will become "collectible" and worth more over time is, in 99% of cases, flawed thinking.  I am glad I sold my M Roadster.  And no, it won't be worth a mint anytime soon, only because there are better BMWs being made today.

My friend eventually sold the Corvette - or more precisely traded it in.   The dealer was able to allow him to save face by getting "his price" for the car, by using the old inflated trade gag.

It is funny, how such a high-performance car with many good miles of service left can sell for so cheap.   But they do, all the time, as the secondary market for exotic and quasi-exotic cars is somewhat limited.

I saw a nice Porsche Carerra for sale on St. Simons for $18,000.   You want to buy it?  It's only 20 years old, what could possibly go wrong?  Nothing cheap, that's for sure!


The media's portrayal of "cyber-warfare" is somewhat overstated.

A fellow has set up a website called to point out how idiotic the media is in reporting "cyber-warfare".   As he points out, to date, worldwide, there have been two attempts at "hacking" the power grid, once in the Ukraine by Russia, and our attempt to use Stuxnet to destroy centrifuges in Iran.  In the meantime, squirrels and other animals have brought down power plants and actually have killed people and these incidents go on daily and number in the thousands per year.

We are entering an odd age of high technology where most of the public has no clue how the technology works.  As a result, superstition, rumors, and wishful thinking are replacing real technical education.  We are becoming a Cargo-Cult - primitive natives worshiping the relics of some bygone civilization.  Relics that might as well have fallen from the sky.

Whenever technology gets ahead of the populace, ignorance and superstition takes over.   After World War II and the detonation of the A-Bomb, people started to seriously believe in UFOs.   To many, this was a comforting belief - one that is still practiced today - in that the mad complexity of the world can be explained in one sentence - it was all made by aliens.   Of course, simple answers to complex problems are usually always the wrong answers.  But to the simple-minded, it was easier than trying to learn the basics of nuclear physics.

(And that is an odd thing - a nuclear weapon in theory is a very complex thing to understand.  From a technician's point of view, very simple.  Slam two pieces of radioactive material together to form a critical mass and ka-blooie!   Granted, the hardware is more complicated than that, but that pretty much sums it up).

The complexity of the moon landing is too difficult to comprehend.   It had to be faked, right?   Simple minds want to believe simple things - and that others are not very much smarter than they are.   It is a lot easier to deal with the fact that you are no rocket scientist if you believe that rocket scientists don't exist.

We saw this again during the "gas crunch" of 1973 and it goes on today.   People believe in the "miracle carburetor" that gets 200 miles per gallon, that the "oil companies are suppressing".  This is a lot more comforting to believe than the reality - that we were driving gas-hog cars that were destroying our own environment.

And so on and so forth.   In response to periodic horrific mass-shootings, some choose to believe that these shootings never happened as it is too horrific to contemplate.   No, it all has to be paid actors and a hoax.

The "Cyber" thing I have talked about before - the media loves to append that prefix to anything - why not squirrels?

But the reality is far different.   Yes, there was ways to "hack" servers and computers.  Often these involve just trying different things until a computer or program crashes or locks up - and then defaults to full-access mode.  I "hacked" my first computer at age 16 when me and a friend discovered by accident that if you tried to boot a dual-floppy Digital PDP-11 with the discs removed, it would sit there for several minutes trying to read the non-existent discs before giving up and booting in administrator mode, allowing full access to all files, once the discs were re-inserted.   Much "hacking" today falls along the same lines.

But much more of it is far more primitive.   The easiest way to "hack" a system is to get someone on the inside to give you the passwords or to get them to load a program onto the system for you.   And this is not hard to do, using social engineering techniques.   And every day, I get attempts to "hack" my accounts.   E-mails, particularly on Yahoo! claim to be from the "administrator" and claim there are problems with my account.   Won't I please type my user name and password in this e-mail reply? 

Or you get an important message from "FedEx" about a missing package, or Google about a missing e-mail - just click on this attachment, please!   Of course, the attachment is a virus program that you just willingly loaded into your computer - bypassing every safety precaution Microsoft has tried to install.

We can make cars safer and safer with more airbags and rollover protection and anti-lock brakes.  If people still believe driving off a cliff is a shortcut to the bottom of the mountain, there ain't much all those safety features are going to do for you.  Computers are the same way.  The biggest vulnerability in the system is people and the fact they are unsophisticated.

The media is making a big deal about how Russia "hacked" our election.  But the reality is, foreign countries have been trying to influence politics of other countries for ages.   America has done this for ages - using the CIA to influence locals in small countries and try to swing elections one way or another.

But the reality is less glamorous than high-tech computer hackers, but rather small armies of drones in cubicles behind computer screens, typing witty comments on Reddit and other social media sites - trying to get stories and images up-voted and moving up the ranks of Google.  It is not so much "hacking" as "spoofing" a system that in reality, is quite primitive.   Google keeps its algorithms secret not because they are so high-tech, but the opposite.  If you knew that Google just barfs up what is on the front page of Reddit, you might not use it as a search engine.

Yes, the Russians tried to influence public opinion, in part by releasing "embarrassing" e-mails that really weren't that embarrassing, but the Democrats reacted like they were naked pictures of Hillary.   And yes, they tried to "upvote" messages about Trump and succeeded in skewing reality on the Internet.

But they were not the only ones.  Many in "silicon valley" (which is more of software valley these days) are very right-wing and supported Trump.   One fellow makes no bones about the fact he paid trolls to troll for Trump.  The stereotype of "high tech" companies being left-wing is clearly over-stated.

The problem is, again, that we have this "technology" which really isn't that complex, but that people think is.   Media types have little technical education - even those who report on technology.   Most reporters are so stupid that they think a company that delivers pizzas is a "tech company" or one that rents cars is somehow "cyber".   The opinion of the media is that taking something you did before on paper and then putting it online makes it tech-y.

And sadly, this seems to be a trend -we are getting dumber and dumber all the time.  The genes for education and study are dissolving in our gene pool.   The dumbest among us reproduce at a prolific rate, while the educated barely have enough children to replace themselves.  No wonder wealth disparity is getting wider and wider - intellectual disparity is widening at the same time.

And even those of us who have half a brain are "dumbed down" by the media, particularly television, which operates at a sixth-grade level.   We are pummeled by media messages until we can't think straight, and end up acting against our own economic best interests.

What is scary about the last election is not that Russia tried to influence it, but that smart people failed to connect the dots and see trolls for what they were.   That people in high offices are susceptible to e-mail phishing or even Nigerian scams.

The sad thing is, we live in a technological society, but our technology is still relatively primitive that anyone can understand it enough to operate it and understand the basic concepts of how it works.  However, few people choose to want to learn anything about the smart phone they hold in their hand.  To them, it is merely a means of spreading online rumors and lies, as well as superstitions.

We are living in a Cargo Cult.   A Cyber-Cargo-Cult - if that makes the media happy.

Tuesday, January 17, 2017

Pay Down Your Mortgage?

Should you pay down your mortgage?   

I hear from a lot of people who want to be aggressively frugal, and one thing they mention is getting debt-free by making advance payments on their mortgage, or by going to a shorter-term 15-year mortgage.  I have had friends try this, with mixed results.   Of course, you can make additional payments on your 30-year mortgage and effectively turn it into a 15-year mortgage, but of course, the interest rates would be higher.  Not only that, relying on "self-control" to accelerate payments.... well, we know how that works out.  At least I know how it works out for me.   A 15-year mortgage is a forced savings program, provided you plan on living in a house for 15 years.

If you move within five years or so, well, it probably will save very little if not in fact be more expensive.  Since the monthly payments are higher, you are effectively cash-poor in the interim, and you pay down little of the balance to justify the added expense.   And like the "over-saver" who decides to put 15% of their income into their 401(k) without making a corresponding 15% cut in their expenses, you can end up behind the eight-ball, running up credit card debt as you live beyond your means.   If you decide to go this route, make sure you can make that payment.   Cut something from the budget first - a new car, or cable TV, for example.

It doesn't take a mathematician to figure out the savings in mortgage interest in going to a 15-year loan.  There are plenty of calculators out there to figure out that for you.   You will pay far less interest, but of course, your tax deduction for the interest will be less.   You cannot deduct your way to wealth, however, and even if your deductions are less, you will likely come out ahead by paying less interest than more.   Think about it for a second - would you willingly sign up for a 15% interest mortgage loan just because you'd get a bigger deduction?  Of course not.  Deductions are fine and all, but they merely ameliorate a loss - they do not turn it into profit.

In an earlier posting, we compared paying cash for a car to taking out a car loan.   And a number of things came to light.   If we assume the interest rate on savings is the same as the loan rate then there is a slight advantage to paying cash.    If we assume the interest rate on savings is comparable to a government bond (which is a more apt comparison), then the savings in paying cash (or paying off a loan early) are even better.   The car salesman, of course, would compare your loan rate to the returns available on risky stocks - which shows an advantage to borrowing, of course, but places your investments at risk, and thus is not an "apples to apples" comparison.

Mortgages get a little trickier because Congress decided to make mortgage interest tax-deductible, in an effort to spur home sales.   And like any government subsidy, be it soybean price supports or tax credits for electric cars, these sort of things end up doing little more than distorting the market.   Moreover, they are like a very addictive drug - people become dependent on tax subsidies and structure their lives around them, and as a result, the subsidies cannot be repealed without hurting a lot of people.   At the very least, we can't go "cold turkey" by suddenly withdrawing subsidies, as it would cause a lot of people and businesses to go bankrupt.

The weird thing about tax deductions (as opposed to credits) is that they tend to favor the upper-middle-class and rich, who are in the higher tax brackets.   If I am in the 25% bracket, a tax deduction is worth 10% more to me than some schmuck in the 15% bracket.   Thus, mortgage interest deductions and 401(k) and IRA deductions tend to favor wealthier people.   For the latter reason, there is an "investment tax credit" given to the lower classes, if they contribute to their IRAs, to try to sort of balance out the inequality.

Another "unintended consequence" of tax laws is that having debt in retirement, if you are living off your 401(k) or IRA, can be problematic.   If you have a mortgage totaling $24,000 a year in payments, that is $24,000 a year more you have to withdraw from your IRA.  This, in turn, forces you into a higher tax bracket, so you end up paying a higher tax rate - negating the stated benefit of the IRA, which was to allow you to be taxed at a lower rate in retirement.   In other words, the goal in retirement is to stick to that 15% bracket, if you can, and avoid paying higher taxes.   Having debt in retirement forces you to withdraw more, pushing you into a higher bracket.

So, for the 401(k) generation, paying off your mortgage before you retire is probably a smart move.  You won't have to worry about making mortgage payments, and you can leave money in your IRA and avoid paying more taxes than you have to.

Let's assume you own a house with a $250,000 mortgage, because like me, you refinanced it a number of times and took out cash to pay for a car or your credit cards.   Or like a lot of other people.   So here you are, facing retirement with debt.

But you have over a million dollars in your 401(k) and IRA plans, so it is no big deal, right?  (NOTE:  It may be tempting to take out $250,000 from your IRA and pay off the mortgage, but that just makes the tax consequences horrific!).

Well, yes and no.   That amount of money will generate $50,000 a year in retirement using the 5% rule, and you might expect another $3000 a month or so in Social Security (Trump willing) to supplement that income.  Gee, that's 86 grand a year in retirement income!  Sweet!

Or is it?   You'd be looking at about $1250 a month in mortgage payments or $15,000 a year.  Since, as a 401(k)/IRA retiree, your income is flexible - based on how much you decide to withdraw every year, you can make a conscious choice which tax bracket you want to be in.   For 2017, the brackets are as follows:

Table 2. Married Filing Joint Taxable Income Brackets and Rates, 2017

Rate Taxable Income Bracket Tax Owed
$0 to $18,650 10% of taxable income
$18,650 to $75,900 $1,865 plus 15% of the excess over $18,650
$75,900 to $153,100 $10,452.50 plus 25% of the excess over $75,900
$153,100 to $233,350 $29,752.50 plus 28% of the excess over $153,100
$233,350 to $416,700 $52,222.50 plus 33% of the excess over $233,350
$416,700 to $470,700 $112,728 plus 35% of the excess over $416,700
$470,700+ $131,628 plus 39.6% of the excess over $470,700

You can ignore the higher brackets - we are all middle-class people here.  The big break is right smack dab in the middle of the middle-class - the 15% to 25% jump that occurs at the $75,900 limit for married couples.  As you can see, when you go over that limit, your taxable rate jumps from 15% to 25%.

And at this point in your life, after paying a mortgage for many years, you are paying mostly principal and little interest, so the mortgage interest deduction is pretty small, if not in fact, non-existent.   You may be better off with the standard deduction at this point.

If your house was "paid for" you could withdraw less money from your IRA and bring your taxable income down by $15,000 - to the $75,900 limit, which means you pay 15% tax basically, on the excess over $18,650.

That extra $15,000 in mortgage payments would require you to pay 25% in taxes on that money, or $3750 more a year, which means you'd have to withdraw $3750 more a year to pay those taxes.   And there would be tax on that money as well - so you'd better make it an even $5000 more in taxes - just to pay a $15,000 mortgage payment.

Crazy as it sounds, refinancing at this point makes perverse sense, as the mortgage payment becomes all-interest and is tax deductible.  Of course, you pay thousands in refinancing fees, and you end up paying off the balance years later when you finally are forced to sell the home, or your widow does, or your children do.

The other alternative is to pay down the mortgage before retirement and live debt-free.   With this scenario, you can structure your finances such that you stay in that 15% bracket and give Uncle Sam the middle finger.   But wait, it gets better.

Since you are taking $20,000 less per year from your retirement account, your retirement monies will last longer and you have less to worry about.  It is a more comfortable and stress-free way to live in your "golden years" to be sure.

But, the opportunity cost people will chime in here.   First, they will argue, "Well, that's all very well and fine, but to pay down that mortgage may mean missed opportunities to invest, such as in the 401(k)!"   And this is an argument worth addressing.  To begin with, you could pay down your mortgage before retirement simply by spending less and living within your means.   I can say firsthand that I ended up owing $300,000 on a $189,000 house by refinancing to pay off other debts and to live large.   We could have chosen differently.

Second, as the example illustrates, you need less money to live when you have a paid-for house.  So if you did in fact fund your 401(k) less, it may be somewhat of a wash, as you will need less income in retirement as a result.

Again, using the 5% rule, which is generous, the $20K less you need in your retirement income cash-flow equates to a staggering $400,000 in your IRA or 401(k).   In other words, you can save up 400 grand in retirement savings in order to service a $250,000 debt or just pay off the damn debt in the first place.

The second argument that the "opportunity cost" types will make is that "you could have invested that money and kept the house mortgaged and made more in the long run!"   That is a slick argument, but flawed on a number of levels.

First, it assumes you are keeping the house mortgaged on purpose so you can "invest" the income stream, and are not in fact merely living beyond your means like about half of America is.   Yes, it is a nice fantasy to say we will "invest" the difference, but we all know we are going to spend it on stupid stuff instead.

Second, as I noted time and again, it is a classic apples-and-oranges comparison.   Assuming you have the willpower to invest the money you are "saving" (and these savings are dubious at best), in order to achieve a rate or return higher than your mortgage interest rate you would have to invest in risky securities which may drop in value on occasion, which if that occasion is your retirement, really, really sucks.

As you approach retirement, you should put more and more of your investments into safe harbors - low-yield risk-free investments that may not grow much, but will not go away either.   The two safest investments we have in the USA are government guaranteed bonds and bank accounts, and debt that is paid off.   Of the two, the latter is more secure.   The government could theoretically default on its debts.   Your debt paid off is paid off for good, never to come back - even if the government goes South.

So yes, you could "invest" in your 401(k) and come up with more than the $400,000 needed to service your $250,000 mortgage in retirement, but it would require you invest in high-yield risky investments.

Or, you could pay off the $250,000 debt and be 100% assured you would need $20,000 less in retirement income - meaning $400,000 less you have to save.

Working people simply don't get this math!   I was talking to a bank manager the other day, and she could not understand how the widows on the island here live on so little money every month.  After all, she has a six-figure income and that seems to barely pay for her $3000 a month mortgage payment, her car payments, the cable bill, and the other costs of living. How can someone live in a more expensive home that she has - for such a pittance a month?

And the answer is, simply, the home is paid-for.   It costs about $850 a month to live here on retirement island, provided your home is paid-for.   That is what a small apartment rents for in a not-so-desirable  neighborhood in our nearby town.   Since you don't commute in retirement, your variable car costs drop, and of course, you spend a lot less on things like lunch at work, dry cleaning bills on your suits, and so forth.  Also, you are not setting aside 10-15% of your pre-tax income into a 401(k) but are spending it instead.  It is a different way of life.

Other retirees take a different approach.  Heavily in debt, they spend a lot of money - and pay a lot of taxes - to service this debt.  If they have a pension plan (husband and wife) and social security, maybe this makes a perverse form of  "sense".  But in terms of security, they are reliant on these companies they worked for not going bust during their golden years.

Retirement calculators often state that in retirement, your income requirements are only 60-80% less than those when working.   But in reality, living expenses can be far, far less, if you retire with no debt.

The advantages go far beyond that, of course.  You have more flexibility in retirement, more security, and of course, a "nest egg" you can cash in when you decide to downsize.   It really works out better from every angle.

The secret is, of course, to figure out how to retire with no debt.   For me it was deciding to have less "things" and more security.  Vacation homes and fancy cars are fine and all, but not at the expense of perpetual debt.