Wednesday, December 23, 2009

401(k)s Suck

After complaining about health insurance being tied to one's job, I'd like to expand that complaint about it being tied to 401(k) plans.

Back in my Intel days, my health insurance and 401(k) accounts were basically selected by Intel. Neither of which really made me happy. Why can't *I* make such selections? Being as healthy as I am, I didn't make much use of my health insurance options. I remember Intel sending me a statement one year saying they spent something like $4,500 for my health insurance, and I laughed thinking, "Wow, they really got ripped off!" I'd have preferred them pay me that money and I'd have bought my own health insurance somewhere else.

When I first started working at Intel, I also opened up a 401(k) account because hey, that's what you do to save for retirement, right? After about a year of saving money in the account, I took a closer look at the advantages and disadvantages of them and decided to stop. Oh, I'd still save for retirement, but I decided I liked a boring old IRA better. The main reason--to disentangle myself from the mutual fund choices that Intel provided. I thought they sucked.

I had to open an account with some firm--I don't even remember what one it was anymore--and I got a sheet with a list of 20 or so mutual funds I could choose to invest in including stocks, bonds, money markets, and pure Intel stock. I think it might have been USB. I remember somehow ending up in a situation where I had a USB account with something like $10 in it. I don't even know how that happened, but I had that account for three or four years wondering why they kept wasting money telling me about ten bucks I had in my account. I finally got annoyed enough at the statements that I finally called them and got them close the account and send a check for me for ten bucks.

I put all my money in what I considered the lesser of 20 (or so) evils--an S&P 500 index fun. But why should I be limited to those options in the first place?

When I started working, I signed up to have my paycheck direct deposited in a bank account of my choosing. It's a great system! It works like this: I open a bank account wherever I want, then I tell Intel the account number so they can send my money into it. Why can't 401(k)s work like that? It's so simple. I can invest the money with any company I choose.

The one really nice thing about being laid off--besides having more time for other hobbies--is that they kick you out of the program. I was required to take my money and split, which I considered a blessing. =) I rolled it over into a traditional IRA with an institution of my choosing, and could then invest it in any choice of thousands of mutual funds and stocks.

But the system is screwed up, if you want my opinion. Intel should not be able to limit my investment options to the 20-or-so options they deemed acceptable--and if there's one investment in my book that's NOT acceptable, it's investing in your own company's stock. Just ask anyone that used to work at Enron or Lehman Brothers--but that was a prominent option. Obviously, Intel's investment choices did not have my best interests at heart. It had their own interests at heart, which is the very reason they should NOT be in control of those accounts in the first place.

Amanda has a 401(k) due to her working the corporate job and recently let me take a gander at the investment options they provide. I cringed. I did not like the options at all. Even the S&P 500 index fund had an expense ratio of 0.5%--which I consider absolutely insulting when I know there are such index funds with an expense ratio of just 0.1%. That index fund was charging five times more than it should! And it was the cheapest fund available in terms of expense ratio. Criminal!

But in her case, I suggested she should keep adding to it. Not because the funds choices are great, but because her airline has matching contributions. That's really the only thing that makes it worth while. If it weren't for the matching contributions, I'd tell her she was better off taking her retirement money elsewhere. Intel did not have matching contributions, so that issue wasn't a consideration for me.

Once Amanda retires (or is laid off--this is the airline business we're talking about here), she'll be free to roll over the 401(k) into an account of her own choosing--one with more and better options available. Until then, she's stuck with cruddy investment options.

But it ticks me off. Direct deposits into a bank account of my choice worked so well. Why is it so darned hard to do the same with 401(k) accounts? The company you work for should not be who gets to choose where to invest your money.

I had a second account I opened while working at Intel--this one in regards to the stock participation plan. Basically, it let me buy Intel stock at a discount. Normally, I'm not inclined to buy stock in the company I work for (and at the time, I felt Intel stock was wildly overpriced anyhow), but they'd let me buy the stock for a minimum of 15% below the current market price, and I could sell it immediately for a profit. It was free money! It would be stupid not to take it.

But it meant I had to open an account with E*Trade, a company I loath. I used to have a brokerage account with them. I used to have a bank account with them. And eventually I realized the errors of my ways and ditched them. Until Intel foisted them back onto me. Bastards! Can't they just deposit the stock in a brokerage account of MY choosing? Direct deposit the stock into a company I'd actually want to do business with?

This is actually fresh in my mind, because that E*Trade account still haunts me today. I haven't worked at Intel since 2001, and somehow 63 shares of Intel stock got stuck in a twilight zone. I wasn't able to sell the stock, because they didn't have "paperwork" to authorize it. I couldn't transfer the stock out of the account, because it didn't match the name on my other brokerage account. And those stupid 63 shares have been collecting dust ever since, mostly because I was too lazy to fill out paperwork to "authorize" the company to sell them. Really my own fault, in that sense, but the stock is down about 50% from that original purchase price, so it's turned into a remarkable loss for a little "free money."

Anyhow, I'm tired of them sending statements to me for the past decade, and finally decided to do whatever it took to close the account. And if, God willing, I can actually get that stock sold (*fingers crossed*), I can actually claim a capital loss on it and save some money in taxes. It'll be the first good thing this stock has ever done for me.

So I called up E*Trade this afternoon, punching in account numbers, codes, and at one point yelling into the automated talking machine, "I want to talk to a real, live talking person!" And the machine sweetly responded that it "could not understand my request." I pounded the phone a few times, then pressed pound over and over and over again to see what happened, and the automated voice suggested that if I wanted to talk to a representative, I could press one. So I pressed one, and finally got to talk to a real-live, honest-to-goodness person. "And what's your account number?" he asked. ARGH! Why the heck does their stupid machine ask me to punch in my account number if apparently their service representatives can't even see that information?!

We chatted a bit, him trying to convince me to open an E*Trade bank account, and my telling him I wanted to cut every last thing tying me to their wreck of a financial institution, and he finally transferred me to a trading specialist who, somehow, remarkably, was able to put in a sell order for those 63 shares of Intel (requiring no paperwork on my part--why the hell couldn't they do that back in 2001?!), and I should be rid of those evil shares once the market opens later this morning. The trade will cost $14 and change, and they were "kind" enough to waive the $40 fee they normally charge for doing something I wanted them to do eight years ago for not selling it online through their website. (I wanted to! *rolling eyes*) Good riddens! The money should settle after a few business days, then they'll send me a check and close the account. Finally, a light at the end of the tunnel!

By comparison, my main brokerage account currently lies in the hands of Scottrade. I can't say enough kind things about these folks. I recently called them about a week ago. I owned a few shares of Terra Industries, and they paid out a special one-time dividend of $7.50 per share, which plopped about $2,000 cash into my account. Normally, I'd just reinvest the dividends in whatever stock looked particularly attractive at the time, but I'm looking to fund my IRA and HSA accounts come January. (I've already maxed out my contributions for this year.) I wasn't entirely happy about having $2,000 in dividend income showing up for the IRS (really, they couldn't wait an extra two weeks for the new tax year so I can delay paying taxes on it for 12 months?), but at least it gives me two grand in cash to put towards these other accounts. The only catch was--I needed to get the money out.

So I called up Scottrade about a week ago. And you know what happened? Someone answered the phone, saying something like, "You've reached Scottrade. How can we help you?" No buttons to press. I told him, "I need to get some money out of my account." I told him my account number, how much money I wanted to take out (two grand), and confirmed the address on the account that the check should be sent to, and we hung up. It was a wonderful experience, and that's exactly the reason I prefer doing business with Scottrade rather than E*Trade. Nothing I've ever tried to do with E*Trade has ever been easy.

And get this--I can buy or sell a stock at Scottrade for $7. E*Trade charges twice as much, and the service there sucks!

I'm getting a little track, but my point is this: I wouldn't have had to even deal with E*Trade if it wasn't for Intel's meddling to begin with. Just deposit the stock into an account of my choosing, just like you do with my paycheck. I could have gotten better service, at better prices, and been a heck of a lot happier with the end results.

To me, jobs are where I get paychecks. My employer really should not be involved in choosing my health care, retirement options, brokerage accounts, and so forth. But everyone always goes on like this is normal, or even good. If you're a corporate drone, it may be the best option available. But it shouldn't have to be that way, and I sure wish someone would fix it.

Why I Hate Politics

There are a few things in the news that have been bothering me, so I'm going to complain.

First up: Gitmo. There's talk about moving the inhabitants of Guantanamo Bay into the United States, such as to a prison in Illinois. I guess some are going to be tried in New York City, mere blocks away from where the Twin Towers once stood, and a lot of people are all up in arms about this.

And I wonder--WHY? Who the heck cares? They're in a prison in Illinois. What do people think will happen--they'll escape and go on a rampage killing everyone they can? I suppose technically it could happen, but that can happen to Gitmo too. At least if they escape from Gitmo, they can escape into Cuba and be beyond our reach. Much better. *rolling eyes*

I suppose the idea of exiling Bad People onto an island is appealing to a lot of people (Alcatraz, anyone?), but they're in prison, which in my book makes them no more dangerous in Illinois than they would be in Cuba. The idea of holding people prisoner indefinitely without a trial I find a little disturbing. If there's good evidence that these people are dangerous, why hide it? If there's not good evidence that these people are dangerous, why are they being held? I never liked the setup to begin with, and if they start putting some of these folks on trial--great!

Most trials are held near where the crime took place. If I rob a bank here in San Luis and get caught, you'll probably see me showing up in court here in San Luis--not Seattle. So holding a trial for someone related to the 9/11 attacks--it makes sense to have it in New York City.

A change of venue makes a lot of sense in this case--granted, it would probably be tough to find anyone in the world who was an unbiased opinion of the matter, but some folks will likely be more prejudice than others regarding the manner, and the citizens of New York City are probably among them. No discredit to the citizens of NYC--that's perfectly understandable. But the victims of a crime are not exactly the best people to choose to decide their fate either. So it starts in NYC--I don't really have a problem with that. If both the defense and prosecutor don't mind holding it in NYC, by all means, let them. If they want a change of venue, though, I'd give them that too. But my point--for all the drama that shows up in the news, I think it's much ado about nothing.

Then there's the health-care debate. Politics of the worst kind. The "public option" is one of those things that seems to get people riled up. Supporters seem to suggest that it could single-handedly save the world, while those against seem to suggest that it'll be the end of the world if it's allowed. I'm in neither camp--my thought is that it's much ado about nothing. I don't think it'll help reduce health-care costs in the long run (the for-profit companies don't have particularly high margins to begin with), but it's not going to be financial ruin either. So I don't really care if there is a public option or not--just so long as it's not subsidized by the taxpayers. Whatever it takes in in premiums must cover all expenses. I don't expect it to be for profit, but it should not be allowed to run at a loss either.

Republicans are whining about all the things wrong with the plan. Perhaps there's some element of truth to their statements, but they're in the minority and therefore it is their duty and cry and throw tantrums every chance they can get. Some of you might think I'm bashing the Republicans, but the Democrats would do the same thing if the rolls were reversed, and did so after Republicans took control of both sides of Congress during the Clinton administration.

Here's the problem with Republicans: They have practically no power. They don't control the Senate, the House, or the Presidency. It is in their best interests to see Democrats fail. It is in their best interests to see the economy tank, health-care costs spiral out of control, inflation to shoot through the roof, and lose the wars in Afghanistan and Iraq. If those things happen, the Republicans will sit back and say, "Ah, see, I told you that would happen. It's all those Democrats fault, but we didn't have enough people on our side."

Heaven forbid, if a solid, really good piece of health-care legislation did come out of Congress and it turns into a stunning success, Democrats will happily take all of the credit (and given the Republicans staunch opposition, deservedly so). So it's in the best interests of Republicans everywhere to see that the Democrats fail. Absolutely and completely fail. With health-care being such a hot-button topic, it makes sense that Republicans want to torpedo any legislation regarding it. They need it to fail. Doesn't matter if the legislation is good or not--it just needs to be stopped.

I personally don't have a strong opinion about the current health-care bill being kicked around in Congress one way or another. My biggest complaint regarding health-care isn't being addressed at all--which is why health-care is tied to the company one works for. That's just f****d up.

Imagine that everyone always got car insurance through your job. If you lost your job or changed jobs, you'd also lose your car insurance or be required to change insurance carriers. It's stupid--why should my employer decide where I can get my car insurance?

That's the thing that ticks me off the most--that insurance is most often tied to one's employer. I think it's stupid. There are historical reasons for why that developed, but it's a terrible setup.

It also hides the real costs of health insurance from the people who have it. If you have to fill a prescription but it costs you only $10 no matter where you get it, what are the chances you will comparison shop? Not very high. Maybe the drug normally costs $30 at Costco but $90 at Walgreens. That's a HUGE difference, but it doesn't matter to you--you pay $10 at either place.

Ultimately, the people paying premiums ARE paying that added cost, but one's employer is often the person footing the bill, so it still doesn't "hurt" like it would money out of your own pocket. Companies that are footing the bill don't like it, though, and are pushing more and more of the costs back to the employees that are ringing up the bills. Fair is fair. *shrug* There's a lot of talk about 'socialized medicine' and how terrible that would be, but that's practically what we have already. We have a socialized health-care system wearing a capitalism costume, creating this strange creature that combines the worst of both approaches. Getting away from that would be a good thing.

Back to the auto insurance comparison--what if you're driving around without auto insurance, then wreck your vehicle. If you tried to get insurance a week later, your wreck isn't going to be covered because it's a "pre-existing condition." So yeah, a health-insurance policy that doesn't allow for pre-existing conditions makes sense. Insurance is supposed to protect you against unknown events in the future. It's not really "insurance" if it's protecting you against known events.

I don't really have a good solution to this pre-existing condition problem. I haven't heard of a good solution to it either. If you wreck a car then want the pre-existing condition covered, I'm sure the insurance company would be happy to accommodate you--but they're going to add the cost of that known expense to their premiums. They have to to stay in business. Same goes for health insurance companies. If they know you're going to cost a lot of money to treat, they're going to charge a lot more to cover the cost. Maybe basic health insurance should be a fundamental right for every American. It'll cost more, but treating poor, uninsured folks in emergency rooms isn't cheap either.

We don't want our employers telling us what company to use for auto insurance, so why the heck do we let them tell us where to get our health insurance from? That's screwed up.

Whatever happens with the current health-care proposals, it won't be the end of the world as we know it (like the Republicans suggest), but I don't see it helping much either (like the Democrats suggest). It's politics as usual--much ado about nothing. *sigh*

Tuesday, December 15, 2009

Maybe I'll Just Watch....

Tomorrow (or rather, later this morning, since midnight has come and gone), weather permitting, Boeing's newest airplane, the 787, is supposed to take to the sky. I've been fascinated by this plane ever since I first heard about it. I remember way back when Boeing was trying to decide between building a bigger plane than ever to compete against Airbus's A380, developing the fastest passenger jet in service (at least since the Concorde was retired), or a fuel-sipping machine that would dramatically cut fuel costs.

I'm not sure why Boeing spent so much time, money, or effort considering building a bigger plane or a faster plane--when it comes to flying, what's the most important consideration most people have when deciding what flight to take? The price, of course. Back in the days before I had Amanda to get me around the country cheap, that was always the very first thing I looked at. "Which flight is the cheapest? I'll take it." Didn't matter the time of day or what airline it was. Oh, I had my preferred times, and preferred airlines. But cost was always more important. And most people I knew felt the same way.

The only people who didn't seem to care about what a flight cost were those who didn't have to pay for it. If your company picks up the dime, who cares, right? =) When I flew from Portland to Phoenix on Intel's dime, I didn't worry much about how much the flight cost. At that point, I worried more about the time of day and choice of airlines. (My favorite time of day was about noon or so, and my favorite airline to fly was Alaska.) But even if I didn't care about how much the flight cost, it certainly mattered to Intel.

So to me, it seemed like a no brainer--the cheaper cost to fly the plane, the more popular it would be. Boeing spent years and who knows how much money before coming to the same conclusion, but that's probably not surprising. "Gut instinct" isn't always a good way to run a business. Strangely, Airbus went with the "bigger is better" theory and spent their time and effort building the biggest plane in the world. Good for them. Me? I believed that a fuel-sipping plane was the way to go--and this was back when fuel was relatively cheap.

Not long after the 9/11 attacks, I first invested in Boeing. It seemed like a no brainer to me. Given the crashing of the dot-com boom and fear of flying after 9/11, airlines were in the tailspin. Boeing was suffering from scandals. Those were dark days at Boeing. The sky was falling, and so was the stock price for Boeing.

So I bought some stock. =) Scandals come and go, and I was sure it was only a matter of time before the top management were swept out with the garbage. The airline industry was suffering, but it's always been a cyclical industry. Eventually it would turn around again. And I felt very strongly that the 787 would be a huge, smashing success. It seemed like the company had hit a point of maximum pessimism and things could only start looking up from there, so I bought.

And I've been following Boeing, and particular the progress of the 787 in the news ever since. It only took a few years for a complete reversal of fortunes. The economy started pulling up again, and the fear of flying was abating. Management was swept out, then swept out again when the replacement was caught having an affair with another employee. Orders for the 787 were rolling in in unprecedented numbers, and Airbus fell flat on its face when their jumbo A380 arrived two years late. To say Boeing was doing well was an understatement. It was doing fantastic!

So I sold half of my stock.

I was tempted to sell all of it, but I had kind of grown attached to the company, so I figured I'd at least take out my initial investment and let the "house money" do whatever. =)

Glad I did--it topped out shortly thereafter and sank into oblivion. The 787 was plagued with multiple delays. Airbus started gaining momentum again now that they sorted through the A380 troubles and started development on a plane to compete directly against the 787. And the economy tanked again, airline traffic tanked, and so did Boeing's stock.

I visited the assembly line where the 787 is being put together. Twice, in fact. The first time I took my mom on the Boeing factory tour. (It is totally worth it if you find yourself in the Seattle area looking for something to do.) We got to watch the first few 787s coming together. The #1 plane was still painted in flashy colors for when they rolled out the plane for the world to see for the first time. The other 787s were a pasty khaki color, not yet painted. Which was even more strange to see if you realized that all of the other planes Boeing built always started off green. They put on a green coat to protect the aluminum skin of the plane during construction and don't peel it all off until the plane is done and ready for painting. Occasionally I'll see one of those shiny green planes flying around and I know--it's being tested. Fresh off the factory floor, not even painted yet. So it's kind of weird to see an unpainted plane that's not actually green.

Then last month, when Silent Doug was in the area, I pushed him into going on the factory tour. The first few 787s were parked outside, painted and sitting. Waiting for their time in the air. If I remember correctly, I think they were working on plane #11, but don't quote me on that. Each plane being constructed was actually labeled with the plane number, but photos weren't allowed so I don't have pictures to verify my memory. =)

We also saw that first 747-8 that had just come out a couple of days before. Those things are big.

But anyhow.... I'm rather excited to read about this first flight of the 787. The plane is revolutionary from nose to tail. And, if all goes well, the first flight is just mere hours away.

Three of the 787s they're building are being built with the intention of destroying. One of the factory tours described a wing test they do where they pull both wings up until they snap. The carbon fiber wings of the 787 are so flexible, the guy told us that the wing tips can nearby touch without breaking. (!!!) The incredible flexibility of the wings is supposed to help reduce the effects of turbulence, but it also means the wings might look like a bird flapping in severe weather. I think it would make me a bit nervous looking out the windows and seeing the wings flapping like a bird, so I hope those engineers really know what they're doing!

The plane will have to undergo months of in flight testing before it will be certified as safe for the flying public. Imagine the thrill those test pilots must get being able to fly one of these things for the first time. I always imagined that would have to be one of the most awesome jobs EVER!

Then, today, I read Tough testing awaits the Boeing 787 Dreamliner once it takes to the air. Holy smokes! The hair on my arms stood straight up reading about some of the tests they're going to do to that plane! And now I'm thinking, "Yeah, I think I'd rather watch someone else test pilot those planes." Even if I knew how to fly, some of those tests look absolutely, utterly insane. Who are these maniacs who've volunteered for such a suicidal mission?!

First, there are the "flutter tests." Here's a quote from the article describing those:

Flutter, which occurs when natural vibration is amplified to violent levels by wind or airflow, is what caused the original Tacoma Narrows Bridge to flail to destruction in 1940.

Flutter, which occurs when natural vibration is amplified to violent levels by wind or airflow, is what caused the original Tacoma Narrows Bridge to flail to destruction in 1940.

Seeking to detect any such flutter that could rattle a plane out of the sky, electronic devices pulse the flight controls at varying frequencies to generate shaking. The pilot also slaps the steering column rhythmically with his palm and rapidly vibrates his foot on the rudder control to shake the movable control surfaces as the jet dives from about 40,000 feet.

And, if you read the small print in the caption of a diagram illustrating this test, it reads:

Only after these tests are successfully completed during the first couple of weeks is the plane deemed safe enough to allow FAA inspectors on board to observe the remaining tests.


But that almost seems boring compared to the "Maximum Energy Refused Takoff" test. This test, I'm convinced, would make Chuck Noris cry and wet his pants:

Before the test, the brake pads are intentionally ground down to the minimum allowed before they'd have to be replaced in regular service. Then, loaded to its maximum weight and full of fuel, the jet races down the runway up to a pre-calculated top speed before the pilot slams on the brakes.

When a pilot "dynamites the brakes" in this way, in the words of Joe MacDonald, former chief 747 test pilot, it generates so much heat that on earlier planes typically the steel brakes melted and the wheels caught fire, popping fuse plugs that deflated the tires. Fire personnel standing by were required to hold off dousing the flames for five full minutes in a successful test, to show that no wider fire would ensue.

This particular test they will do at Edwards Air Force Base on the world's longest runway (15,000 feet) with a dry lake bed beyond. Just in case things go wrong, it won't kill anyone except the test pilots.

Another test that made me sick just reading about it is the "tail-strike takeoff."

As the jet accelerates down the runway, the pilot points the plane's nose so steeply upward that as the nose wheels leave the ground the tail of the airplane scrapes along the runway, sending sparks flying out behind. The nose cannot physically go higher until the tail leaves the ground. When it does, the test has determined the Dreamliner's absolute minimum takeoff speed.

The article describes additional tests that the plane will be put through, but I'll tell you one thing--I'm darned glad I'm not a test pilot. Those people are freakin' CRAZY!

And if you live in the Seattle area and see a plane that appears to be plummeting out of the sky--don't worry. They're just testing planes. *rolling eyes* =)