The Three-Account Strategy; Funds-of-Funds; Tivo

MORE ON SHARING

Chip E.: ‘You are right when you say there are many ways to share expenses when a couple has unequal incomes. My partner and I have found it useful to have three bank accounts (his, mine and ours). This has several benefits. First, the wealthier partner protects his assets – often not just a real need but also a psychological need. Second, each partner has his own money to use as he/she wishes without the other knowing and therefore having to ‘approve’ (whether explicitly or tacitly). This is a relationship between two adults. Neither should feel the need to be the parent or be treated as a child.

‘That said, we have split the amount we contribute to the joint account in different ways over the years. At first, the joint account was used just for true household expenses (not including the mortgage and real estate taxes on the house which is in my name). My lower-earning partner in the early years insisted on putting the same amount in the account each month as I did. As the relationship matured (we are now together over 11 years), the amount going in and the use of the joint account expanded. We now each put in 33% of our take-home pay. This allows us to use the account not only for household expenses but also for vacations, our restaurant meals, furniture purchases and other miscellaneous expenses. We each feel that we are contributing according to our ability (sounds socialist coming from a Republican). As my remaining 67% is significantly higher than his, I use it not only for my personal expenses, but also to make my automatic monthly Vanguard index fund contribution and to annually fund his Roth IRA. Between his 403(b) maximum contribution and his Roth IRA, he is putting away significantly more than he would have on his own and will have a substantial sum after we retire many years from now. The important thing is that this is his money and that he won’t be totally dependent on me at that stage in our lives. This is what we do. As I said before, there is no one right answer.’

FOREIGN FUNDS FINE POINT

Robert: ‘Re your March 5 column, one point on the foreign stock funds that needs mentioning. Funds-of-funds (like Vanguard’s Total International Index, which is a fund made up of three other mutual funds) do not pass foreign tax credits through to the shareholder. Just wanted to point this out. I learned the hard way.’

☞ You’re right! With respect to Vanguard, that disadvantage applies only to Vanguard’s Total International Index fund. It can be avoided by purchasing the Vanguard Pacific, Vanguard European, and Vanguard Emerging Market Index Funds in roughly the proportions they are held by Vanguard’s Total International Index Fund (currently around 24%, 68%, and 8%, respectively). Thanks for pointing this out.

TIVO – CAREFUL WHAT I WISH FOR

Chris Hubbard: ‘If your vision of the television future comes true, and people can skip commercials at will, won’t that mean that we will see Tom Brokaw talking about how poor Timmy fell down the well and needed Band-Aid brand bandages for all the cuts and scrapes? I.e., even more product placement in the TV shows?’

☞ Very possibly. And, in the same vein . . .

Bill Walker: ‘I see a major problem with EVERY television coming equipped with the built in capability of allowing viewers to skip the commercials. Commercials are the reason for the existence of all those show we want to watch. The commercials pay for the shows. If no one is watching the commercials, then businesses won’t pay to advertise and the viewers will end up footing the entire bill to produce the shows. I can’t even imagine what the cost per household would be, but I do know that the cast of ER will not be able to count on me to pay their exorbitant salaries.’

☞ It is a thorny but, I think, surmountable problem. If each episode of ER costs $2 million to produce and is watched by 20 million, that’s just a dime each. I think we’ll find a way to let viewers pay more to watch without commercials, if they choose to.

Tomorrow: Another Plus for the Roth IRA, and an Open Letter (Not Mine) to Crown Prince Abdullah