Would You Like $100 Today, or $110 Tomorrow?

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Dear Rich Lifer,

Imagine you’re offered two choices:

Get $100 today or $110 tomorrow.

Statistically speaking, most people would choose to take the $100 today.

But, if you reframe this scenario and offer someone $100 in one year and $110 in one year and one day from now, the majority of people will wait the extra day for the $10.

This makes absolutely no sense.

Why do most people choose a bigger reward when the wait is longer versus a smaller reward when the wait is shorter?

The answer has to do with a cognitive bias behavioral economists call hyperbolic discounting.

Hyperbolic What?

Hyperbolic discounting essentially states that people tend to choose smaller-sooner rewards over larger-later rewards as the delay occurs sooner rather than later in time.

Or, put another way, we prefer immediate rewards in the short term. But, we’re more patient and wait for better rewards in the long term.

Then why is saving for retirement so hard?

The reason people struggle with saving for the long term is because most day-to-day decisions are competing with immediate rewards in the short term.

Do you go out for dinner tonight, or save that $50 so it will grow to 4x that amount when you retire?

The reason I bring this up is to show you what your brain is doing when you start to think about taking money out of your 401(k) early.

According to Fidelity, 1 in 3 investors have cashed out of their 401(k) before reaching age 59 and a half, often when changing jobs.

Most people considering cashing out early are doing so because of short term needs.

Maybe your car breaks down and you need an extra $10,000. Maybe you lose your job and you need to pay your mortgage.

Whatever the situation may be, taking money out of your 401(k) probably seems like your only option.

What Happens When You Withdraw Early?

Three things happen when you take money out of your 401(k) before you turn 59 and a half:

1) The IRS Takes 20%

The IRS usually requires automatic withholding of 20% of a 401(k) early withdrawal for taxes. So if you withdraw $10,000 in your 401(k) at age 50, you may only get back $8,000.

2) The IRS Will Penalize You 10%

If you withdraw money from your 401(k) before age 59 and a half, the IRS will hit you with a 10% penalty when you file your tax return.

3) It Could Mean a LOT Less Money Later

If you’re pulling money out when the market is down, you’re killing your chances of a rebound. It’s also erasing all the hard work and saving you did up until this point.

That’s why withdrawing early from a 401(k) is not an option in my opinion.

There are other ways to meet your short term financial needs without sacrificing your retirement nest egg…or at least not giving so much of it away to the government.

401(k) Loans

Rather than lose a portion of your investment account forever, some 401(k) plans offer loans that allow you to replace the money through payments deducted from your paycheck.

You’ll have to check with your plan provider and see if you’re eligible but a 401(k) loan is better than taking a withdrawal and incurring those aforementioned penalties.

Exceptions to the 10% Penalty

If you’re really stuck and it seems like tapping your 401(k) is the only option, before you do make sure you check to see if you qualify for any exceptions to the 10% early distribution penalty.

If your situation falls under the following conditions you are exempt from the 10% penalty:

  • You leave your job and are at least 55 years old
  • You have to divide your 401(k) in a divorce
  • You withdraw an amount less than is allowable as a medical expense deduction
  • You rolled the account over to another retirement plan (within a certain time).
  • You begin substantially equal periodic payments
  • The money paid an IRS levy
  • You overcontributed or were auto-enrolled in a 401(k) and want out (time limits apply).
  • Your withdrawal is related to a qualified domestic relations order
  • You die, and the account is paid to your beneficiary
  • You become disabled

Other exceptions to the 10% penalty are hardship distributions. In order to qualify, the IRS needs to decide whether “an immediate and heavy financial need,” is merited. This includes:

  • Medical bills for you, your spouse or dependents
  • Money to buy a house (if you’re a first time home buyer)
  • College tuition, fees, and room and board for you, your spouse or your dependents
  • Money to avoid foreclosure or eviction
  • Funeral expenses
  • Certain costs to repair damage to your home

Your employer’s plan administrator should be able to determine whether you qualify for a hardship distribution or not, and you’ll definitely need to explain why you can’t get the money elsewhere.

Withdrawals in all of these scenarios would only be subject to ordinary income taxes and not the additional 10% penalty.

But you have to make the withdrawal according to your 401(k) plan rules and have appropriate documentation.

The reason why early withdrawals can be so devastating is because you lose the potential future investment growth of that retirement money. 401(k) plans have annual contribution limits, so you can’t make up for a previous withdrawal later.

“Catching up” is almost impossible.

This is why it’s so important to consider the implications of your decision fully. Remember that your brain is wired to choose short term gratification over long term gain.

Do your best to override this thinking and make sure you protect your future self.

To a richer life,

Nilus Mattive

Nilus Mattive

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The Cult of the Trump Tax Refund

This post The Cult of the Trump Tax Refund appeared first on Daily Reckoning.

Last week, I told you how I got a surprise correction from the IRS – one relating to Trump’s new tax laws and my Solo 401(k) retirement plan.

What I didn’t mention is the monetary impact of that note – essentially, I ended up owing a couple thousand more in taxes than I had previously figured.

Before you shed a tear, on balance, the new tax laws were a net positive for my specific situation last year.

Even though my Solo 401(k) contributions were slightly less valuable, the qualified business income deduction was a big win …

While the SALT cap is painful for someone like me living in California – with high state income taxes and high property taxes – at least my oversized mortgage is still fully deductible because I purchased my home before the new lower limits kicked in …

And with a young child in the home, the doubling of the child tax credit (plus higher phaseout thresholds), was an additional positive.

I could keep going.

The point is that many things changed and how the sum total affected you depends on the very specific details of your life.

How did Americans Fare Under Trump’s Tax Changes?

The IRS just released its first batch of official numbers, using tax returns filed by May 23rd.

Roughly 10% of filers are still using the benefit of extensions and haven’t turned in their returns yet. Moreover, that group of people tend to be higher-income filers – with more complicated returns – and they represent 20% of all the income reported to the IRS.

Still, we can get a good idea of where things stand.

Here are some general takeaways:

#1. Households making somewhere between $100,000 and $250,000 received fewer refunds and were more likely to owe money.

That comes from a Wall Street Journal analysis of the IRS’ data. But we’ll talk more about this idea in just a second. It isn’t really what it seems.

#2. Average refunds for households making $250,000 to $500,000 rose 11%.

I suspect this has a lot to do with the aforementioned QBI and other benefits for businesses and their owners.

If you’re starting to feel like only the wealthy made out …

#3. From a high-level view, about the same number of Americans got refunds this year (79% vs. 80%) and for roughly the same amount ($2,879 vs $2,908) as the 2017 tax year.

So if you’re now feeling like the ultra-wealthy made out and everyone else got shafted, you’re not alone.

Barron’s recently cited a Gallup poll conducted in April, which found only 14% of Americans thinking their taxes went down.

However, the reality is far different …

#4. The Tax Policy Center says roughly two-thirds of American households paid less in taxes overall year-over-year while 6% paid more.

How is this possible?

How can half of the population not realize their taxes actually went down under the new laws?

Beyond the fact that many people outsource their tax preparation and thus have no real connection to what’s happening in that part of their life, many Americans only look at their refunds.

If they get money back after they file, they’re happy.

If they get more than last year, they’re really happy.

Of course, none of that makes rational sense.

This year, for example, IRS withholding amounts were adjusted earlier in the year.

That means many workers had less money getting taken out of their regular paychecks. So what they ended up owing or getting back is not a good indication of how they fared overall.

So What’s with the Overreaction?

The entire “cult of the tax refund” is completely misguided and always has been.

Getting a large refund from Uncle Sam simply means you loaned him a good chunk of money at zero-percent interest over the course of the year.

That’s hardly something to celebrate!

Instead, your goal should be paying exactly what you owe and not a penny more.

Or, even better, paying less than you owe without incurring underpayment penalties and then writing a check for the difference come filing time.

And bonus points if you have the difference invested and earning some type of return during the interim … which is the polar opposite of what almost everyone else does.

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

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A New Tax Warning for Business Owners

This post A New Tax Warning for Business Owners appeared first on Daily Reckoning.

I’ve been self-employed for the last decade and I’ve been doing my own taxes for as long as I’ve had income so I’ve learned an awful lot about both things over the years.

Now, after recently getting a letter from the IRS regarding my 2018 return, I have some new insights to share with you about where the two areas intersect – specifically why the advantages of a special retirement plans for business owners have just gotten a bit less attractive under the new tax laws that went into effect for 2018.

Here’s the Background…

As a self-employed person, I’ve been using a special type of retirement plan for years now and it’s already helped me keep more than $500,000 in income away from Uncle Sam’s greedy hands (at least for the foreseeable future).

It’s called a Solo 401(k) or an Individual 401(k) and I’ve universally recommended them to anyone else with self-employment income… whether from a primary business or a side hustle.

To use one, you just have to own a business and you can’t have any employees other than your spouse.

You can be a sole proprietor… a partnership… a corporation… it doesn’t matter.

Solo 401(k) plans have many of the same features as their regular brethren.

One of the biggest? You can deduct your contributions come tax time.

The difference is that you can put away a lot more money every year.

Just to illustrate the point:

Like regular 401(k) plans, your employee “elective” contributions couldn’t exceed a maximum of $18,500 for the 2018 tax year ($24,500 if 50 or older).

But in addition to that amount, Solo 401(k) plans also allow your employer — i.e. YOU — to make additional profit-sharing contributions every year – up to a maximum of $36,500 last year.

All told, that means the total limit was $55,000 for 2018 (or $60,000 for folks 50+).

To take full advantage of the sky-high maxes, you have to earn a significant amount of money in any given year. All the details on the rules and calculations via the IRS here.

However, the point is that Solo 401(k) plans offer the most generous total contribution caps available just about anywhere.

One New Wrinkle with Trump’s Tax Changes…

The amount you deduct for contributing to a solo 401(k) – or another pre-tax retirement account like a SEP or SIMPLE IRA – reduces the amount of money that benefits from the new 20% deduction for qualified business income (QBI).

That came as a surprise to me.

After all, you don’t deduct your retirement contributions on Schedule C… which is the record of your net self-employment income. They’re a separate line item on the 1040 itself (more specifically, line 28 on Schedule 1 of the new 1040).

As a corollary, any deductions you have related to self-employment health insurance also reduce the amount of pass-through income that qualifies for the deduction (line 29 of Schedule 1). 

Same goes for the deductible tax on your self-employment income (line 27 of Schedule 1).

You can get the full set of regulations here.

Here’s the Upshot…

The new 20% QBI deduction somewhat reduces the value of contributing to a tax-deferred plan like a Solo 401(k).

Does that mean you should forgo contributing? No. Everyone’s situation and goals are different.

Just as an example: I live in the high-tax state of California. My Solo 401(k) contributions reduce my taxable income at the state level even as California ignores the new QBI deduction.

I’m simply pointing out that anyone with self-employment income has a new variable to consider when they pencil out their yearly tax planning.

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

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2 Reasons Why Your Refund Isn’t as Big as You Thought…

This post 2 Reasons Why Your Refund Isn’t as Big as You Thought… appeared first on Daily Reckoning.

Are you accustomed to receiving a fat tax refund from the IRS… money that you often use for a summer vacation or to save for a rainy day?

This year, though, you might’ve gotten a smaller one than expected. Or worse yet, you may have had to include a check when you submitted your 2018 return.

You’re not alone.

According to the IRS, the average 2018 refund check for early filers was $2,640… 16% less than in 2017.

So why were so many caught off guard when the tax overhaul had promised relief?

Two reasons…

First, the Tax Cuts and Jobs Act (TCJA), which became law last year, lowered the rates for five of seven tax brackets. And the IRS changed its withholding tables to more closely match the amount owed.

So rather than withholding the same amount of tax as they did from your paychecks in 2017, your employer took out less.

That means your refund may not be as big as you expected because less tax was taken out of your paychecks and you got more money throughout the year.

Second is that many folks were affected by the biggest set of major changes in 30+ years, such as:

  • The end of personal exemptions
  • The elimination of the job-related expense deduction
  • Doubling of the standard deduction
  • Doubling the maximum Child Tax Credit for dependent children from $1,000 to $2,000 per qualifying child
  • The $10,000 cap on the deduction for state and local taxes

Retool Your Tax Withholding…

To prevent the same shock from happening this tax year, you may want to fine tune how much is withheld from your paycheck and how big of a refund you’d like. Factors include: marital status and how many dependents you have.

You don’t want a too big refund, because that’s like giving Washington an interest-free loan. Nor do you want to owe a big balance, since you could also get slapped with a penalty.

My advice: File a new Form W-4 so that your employer can withhold the correct amount of federal income tax from your pay.

The good news is that the IRS has a free withholding calculator that makes the job of completing a new Form W-4 a snap. You’ll need two documents: most recent pay stub and most recent tax return.

For an example how the calculator works, suppose you’re married, file jointly, and both of you are 60 years old.


Next, your salary is $75,000. Through mid-June of this year, $2,600 has been withheld with $200 coming out of each paycheck.

Let’s assume you’ll take the standard deduction…


As you can see, figuring what to put on Form W-4 is a piece of cake. The calculator provides specific recommendations on the number of allowances you should claim. It might also recommend an additional flat-dollar amount withheld from each paycheck… again so there’s no surprises when you file your return in 2020.

In our example, if you don’t make any changes, you’ll owe $287 come tax filing time. But if you follow the “Here’s how” instructions and file a new Form W-4, you’ll receive a refund of around $200.

As soon as you complete the Form W-4, give it to your employer so you can make up withholding shortages, or recover overages, by year end.

Also, check your withholding whenever there is a major change in your life, for instance, getting married, getting divorced, or starting a part-time business.

After you’ve finished with the Form W-4, you might want to checkout…

More Free Stuff from the IRS!

The IRS’ homepage has a boatload of free tools for you that can make the tax filing process a tad easier.

For instance, you can:

  • Get your refund status
  • Make payments
  • Get answers to tax questions
  • Find forms and instructions

And as long as your income is below $66,000, you can file your taxes for free with Free File’s easy to use software.

However, there’s a potential drawback if you use the program… one that Washington doesn’t talk about…

Some preparers have found that in reviewing clients’ Free Filer returns the IRS had made adjustments on those returns that were in the government’s favor and did not apply all rules to the taxpayer.

And those erroneous adjustments resulted in demands for payments, rather than refunds. 

Although up to 100 million taxpayers, or 70% of filers, are eligible to use the Free File program, whether it will continue is a coin toss.

On June 10, 2019, Congress passed the Taxpayer First Act of 2019. It’s meant to modernize the IRS and strengthen taxpayer protections.

The original version of the bill included a provision for Free File… the final approved version did not.

Understanding refunds can be tricky, but hopefully this issue was able to clear things up for you a bit.

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

The post 2 Reasons Why Your Refund Isn’t as Big as You Thought… appeared first on Daily Reckoning.

How the IRS Can Disrupt Your Travel Plans

This post How the IRS Can Disrupt Your Travel Plans appeared first on Daily Reckoning.

When you travel out of the U.S. you need a passport. And some countries won’t let you enter unless your passport is valid for at least six months beyond the dates of your trip. Moreover, the airline might not let you board if that requirement isn’t met.

Not to worry … renewing your passport by mail is an easy task.

You just need a new photo, $110, and Form DS-82. And in 4-6 weeks you’ll have your new passport. For an extra $76.48 you can get it even sooner.

However if you owe a significant amount of income taxes, you could have a problem because of the …


The Fixing America’s Surface Transportation (FAST) Act became law on Dec. 4, 2015, and was meant to provide long-term funding for transportation projects, such as highways. It also included a provision allowing the State Department to snatch passports from delinquent taxpayers.

It works like this:

The IRS doesn’t control passports. That’s the State Department’s job. And the State Department doesn’t have access to taxpayer information. That’s IRS territory.

The FAST Act bridged that gap by requiring the IRS to share names of seriously delinquent taxpayers with the State Department. The Secretary of State is then authorized to deny or revoke passports of those individuals.

To be on that list you need to have more than $52,000 of overdue tax debt, including interest and penalties.

That may seem like a lot, but according to the IRS at least 362,000 are affected by the law.

Is the FACT Act Working?

Apparently so…

One debtor paid $1 million to avoid passport denial. And as of mid-2018, over $11.5 million was collected from 220 individuals. Another 1,400 had signed installment agreements.


If you’re making timely payments under an installment agreement or under an Offer In Compromise, the law doesn’t apply.

The same for any debt in which you’ve requested a Collection Due Process hearing or a debt where collection has been suspended due to an innocent spouse claim.

Also exempt are those in bankruptcy, in a federally declared disaster area, or serving in a combat zone.

Furthermore, the State Department may still issue a passport for emergencies or humanitarian reasons.

They’ll also make sure a U.S. citizen can return from abroad.

How to Get Off the Delinquent Payer List…

The IRS must notify you in writing the same time it sends your name to the State Department. And the State Department will hold your passport application or renewal for 90 days for you to fix any errors, pay in full, or agree to a payment plan.

When those 90 days are up, the State Department revokes your passport request … no grace period whatsoever. Then you’ll have to reapply.

To get removed from the list, you must prove that the debt:

  1. Has been paid
  2. Is in the process of being paid
  3. Is legally unenforceable, or
  4. Does not meet the $52,000 threshold 

You might think that if you aren’t planning to travel out of the country, the FACT Act surely won’t affect you.

Before relaxing too much, think again …

Impact On Domestic Flights

As of Feb. 5, 2018, the Department of Homeland Security (DHS) began requiring that every air traveler have a REAL ID-compliant driver’s license or acceptable form of identification, such as a passport, for domestic flights.

So if your state is not compliant (or received an extension) with the REAL ID Act and your passport was not renewed or yanked because of a huge tax debt, you could be grounded.

Bottom Line

The IRS issued a news release advising that it’s stepping up efforts to collect large outstanding tax debts by using the FAST Act’s passport provision. And the State Department has confirmed that it has already denied applications for some debtors.

For now, new passports and renewals are only being denied, not revoked. But that could quickly change.

So don’t let the government derail your travel plans, get those tax obligations resolved beforehand.

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

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7 Income Streams You Could Be Tapping Into

This post 7 Income Streams You Could Be Tapping Into appeared first on Daily Reckoning.

According to the IRS, most millionaires have these seven income streams:

1. Dividend income from stocks.

2. Earned income from a paycheck.

3. Rental income from real estate.

4. Royalties from products or license agreements. 

5. Capital gains from the sale of investments.

6. Profits from business ventures. 

7. Interest from savings, CDs, bonds, or other lending activities.

I would argue that most people have only tapped into three of these seven: earned income, dividends, and interest. 

They spend their time earning a paycheck, saving what they can from that paycheck, and then investing the difference in hopes of making a return so they can reinvest and steadily grow their net worth. 

This system works for a lot of people but it takes a very long time to reach financial independence. 

The problem is your income from your paycheck is limited by the number of hours you’re willing to work. 

On top of that you incur the opportunity cost of the time lost at work. Time that could be spent building new income streams. 

So how do you escape this vicious cycle and tap into other streams of income to reach financial independence faster? 

Becoming fiscally independent boils down to a two-step process, says Tom Corley bestselling author of the book Rich Habits: The Daily Success Habits of Wealthy Individuals.

Step 1: Accumulate wealth.

Step 2: Keep the wealth you’ve accumulated.

These steps sound obvious but it amazes me how many people only figure out one side of the equation or fail to execute the other. 

Corley believes your ability to accumulate and keep wealth is directly tied to your daily habits.

From 2004 – 2009, Corley interviewed hundreds of people, both wealthy and non-wealthy. He asked each person 144 questions.  It took sixteen months to turn that information into a usable spreadsheet. Then he wrote and self-published Rich Habits.

The rich were defined as individuals with an annual gross income north of $160,000 and net liquid assets of $3.2 million or more. The lesser-offs were those with a gross income of $35,000 or less and no more than $5,000 in liquid assets.

The most important Rich Habits discovered were the following 16. 

Live within your means 

Wealthy people avoid overspending by paying their future selves first, says Corley. 

They save 20 % of their net income and live on the remaining 80%.

Don’t gamble 

Every week, 77% of those who struggle financially play the lottery. 

Hardly anyone who is wealthy plays the numbers, says Corley. Wealthy people do not rely on random good luck for their wealth. 

They create their own good luck.

Read every day 

Among wealthy people, 88% read 30 minutes or more every day. Just as important, they make good use of their reading time:

63% listen to audiobooks during their commute.

79% read educational career-related material.

55% read for personal development.

58% read biographies of successful people.

94% read current events.

51% read about history.

11% – only 11% – read purely for entertainment purposes.

Don’t Watch TV or Mindlessly Surf the Internet  

Two-thirds of wealthy people watch less than an hour of TV a day and almost that many – 63% – spend less than an hour a day on the internet unless it is job-related.

Control Your Emotions  

Loose lips are a habit for 69% of those who struggle financially. 

Conversely, 94% of wealthy people filter their emotions, says Corley. They understand that letting emotions control them can destroy relationships at work and at home.

Network and Volunteer Regularly 

Almost three-quarters of wealthy people network and volunteer a minimum of five hours a month. Among those struggling financially, only one in 10 does this.

Go Above and Beyond in Work and Business 

Unsuccessful people have “it’s not in my job description” syndrome. 

Consequently, they are never given more responsibility, and their wages grow very little from year to year, says Corley. 

Wealthy individuals, on the other hand, make themselves invaluable to their employers or customers.  

Set goals, not wishes 

Every year, 70% of the wealthy pursue at least one major goal. Only 3% of those struggling to make ends meet do this.

Avoid procrastination 

Successful people understand that procrastination impairs quality; creates dissatisfied employers, customers or clients; and damages other nonbusiness relationships. 

Wealthy people try to knock off at least 70% of their daily to-dos, says Corley. 

Talk less and listen more 

A 5-to-1 ratio is about right: You should listen to others five minutes for every one minute that you speak. 

Wealthy people are good communicators because they are good listeners.

Avoid toxic people 

Of wealthy, successful people, 86% associate with other successful people. 

But 96% of those struggling financially stick with others struggling financially, says Corley.

Don’t give up 


Get a mentor 

Among the wealthy, 93% who had a mentor attributed their success to that person. 

Mentors regularly and actively participate in your growth by teaching you what to do and what not to do. Finding such a teacher is one of the best and least painful ways to become rich.

Eliminate “bad luck” from your vocabulary 

Poor people believe luck has everything to do with their current situation. 

Wealthy people try to make their own luck and eschew a helpless attitude. 

Find your purpose in life 

It’s the last Rich Habit, but it might be the most important. 

People who pursue a dream or a main purpose in life are by far the wealthiest and happiest among us. 

Because they love what they do for a living, they are happy to devote more hours each day driving toward their purpose.

Odds are, if you are not making sufficient income, it is because you are doing something you do not particularly like. 

When you can earn a sufficient income doing something you enjoy, you have found your main purpose.

Believe it or not, finding this purpose is easy, says Corley. Here’s the process:

  1. Make a list of everything you can remember that made you happy.
  2. Highlight those items on your list that involve a skill, and identify that skill.
  3. Rank the top 10 highlighted items in the order of joy they bring to you. Whatever makes you happiest of all gets 10 big points.
  4. Now rank the top 10 highlighted items in terms of their income potential. The most lucrative skill of all is worth 10 points.
  5. Total the two ranked columns. The highest score represents a potential main purpose in your life. Presto!

You are your habits. The more Rich Habits you can build the more you’ll earn and the more you’ll be able to invest in passive income streams to free yourself from trading time for money.

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

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There are Billions to Be Claimed… Is Any of It Yours?

This post There are Billions to Be Claimed… Is Any of It Yours? appeared first on Daily Reckoning.

State governments are sitting on boatloads of unclaimed dollars. 

Right now Florida alone is holding $1 billion, Washington … $1.3 billion, Illinois … $2.9 billion, California … a whopping $9.3 billion, New York … a jaw dropping $14 billion.  

And the billions keep pouring in. 

According to the National Association of Unclaimed Property Administrators (NAUPA), in FY 2015, $7.763 BILLION was collected.

Where the Money’s Coming From 

When a rightful owner cannot be located after a year or longer, funds are turned over to the government. 

For instance, suppose you had a small savings account and moved to another state. But you forgot to give the bank your new address? Since the bank doesn’t know where to send statements or tax information, it turns the money over to the state. 

The same often happens with life insurance death benefits. The insurance company can’t locate the beneficiaries, so the money eventually goes to the state. 

Other cases when the owner cannot be found include:

  • Trust distributions
  • Tax refunds
  • Contents in safe deposit boxes
  • Tenant security deposits 
  • Annuities
  • Old stocks
  • Uncashed payroll checks  

How to Find Your Share

Of the $7.763 billion cited above, $3.235 billion was returned to the rightful owners. That’s because every U.S. state, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands have unclaimed property programs meant to find owners of lost and forgotten assets. 

The unclaimed property law is sometimes referred to as the W.C. Fields Law, named after the legendary comic and actor who died in 1946. Afraid of being robbed while he worked in the vaudeville circuit, Fields opened bank accounts in around 700 places. After his death, his heirs spent years contacting banks around the country to track down his assets.

Most states hold unclaimed financial assets until you are found. Tangibles, such as from a safe deposit box, might eventually be sold at auction and the proceeds held until you claim them. 

The amounts are usually small, $100 or so. However, last year in Arizona someone claimed $2 million. 

You may have received a notice from a company offering to recover money that you didn’t know was yours. 

Many are legitimate businesses that charge a percentage of the amount recovered. Although some are scams expecting you to pay upfront and then don’t deliver on promises. So be cautious before signing a contract. 

But if you’re willing to do some legwork, you can search for unclaimed assets on your own. And in most cases, the state will return them to you at little or no cost. 

Where to Start

The government doesn’t have one central source to look for money that might be owed to you. 

So a good place to begin is with the NAUPA. You can search every state where you have lived on their free search engine.  

Go to the IRS, too. They may be sitting on a refund you didn’t even know about because they have an old address. 

Have you ever had a credit union account? The National Credit Union Administration (NCUA) could be holding funds for you. 

Or are you about to retire and think you might be entitled to a small pension from a company you worked for decades ago? The problem is … you can’t locate them.  

The Pension Benefit Guaranty Corporation has over $300 million for more than 38,000 people who haven’t claimed their pensions. The individual benefits range from 12 cents to almost $1 million. 

Speaking of retirement money …

The Department of Labor (DOL) allows companies who are terminating defined contributions plans, like 401(k)s, to transfer accounts of $1,000 or less to state unclaimed property funds when they can’t locate the owners.

So if you think you may have had small qualified retirement plan that has been terminated, the DOL will help you locate your money.  

To Prevent Losing Your Property…

Property is generally lost because the company or financial institution can’t find you.  

To prevent that: 

  1. Let banks, brokerage firms, insurance companies, and other financial institutions know when you move or have a change in marital status.
  2. Maintain accurate records that include account numbers, institutions’ names and addresses.
  3. Have a qualified attorney prepare a estate plan that has the contact information for all beneficiaries. And review it annually and make changes as needed.  

I hope this helps you find out if any of the unclaimed assets are actually yours.

To a richer life,

Nilus Mattive

Nilus Mattive
Editor, The Rich Life Roadmap

The post There are Billions to Be Claimed… Is Any of It Yours? appeared first on Daily Reckoning.