Nickels & Dimes with Nancy

My cat has no sympathy for this condition. He considers it a superior way of living, an acquired taste, an elegant life choice. He looks disdainfully at my melancholy. If I fill his food bowl, clean his litter and give him a treat, he will show me how to enjoy window views and play with the drapery cords. Life is what you make it. He’s getting along fine.

Normally I enjoy living alone. Control of the remote and a freezer full of nukeable foods are just part of the perks. Nobody cares if my dirty socks pile up. I run the dishwasher only when I’m out of clean forks. Paper plates come in seasonal designs. Amazon delivers. And when I change my sheets, I flip over the pillowcases and only wash them every other time. It’s not laziness, it’s efficiency. Turn up the heat, turn down the air, who is going to know? Nirvana is living alone.

Netflix and chill feels different when it is not a choice. I realize I am dependent upon the building cafeteria. I made a foray into a supermarket and bought peanut butter, crackers, parmesan cheese and a box of wine. I bought macaroni and cheese too, but didn’t realize that I need milk and butter for that. Neither do I have all the fixings for a sandwich. I miss the salad bar and my bottled ice tea. I miss piping hot french fries. I miss the news back when there was more than one topic coverage. I miss having a meal out with colleagues or friends or even a frenemy. I want sports scores. I want freedom. I want my life back.

A week into self-isolation and I have cabin fever. Life feels deserted. I am chaffing at the loss of control. I am exasperated at the uncertainty of how long this could last. I am terrified of all the people hoarding guns and ammunition. My mood can go careening out of control if I don’t rein it in. There must be something I can do. My four legged fur ball circles his water dish, dreaming of ice cubes. A simple thing makes him happy. I can be grateful.

I am grateful for leadership. Queen Elizabeth and Tom Hanks are my new heroes. I am in awe of the medical personnel and caregivers risking their health and their lives to fight the scourge, and grateful there are so many willing to do it. I am grateful for spring and for tulips and daffodils. I am grateful for puppy dog videos and the rhythmic sounds of rain against the windows. I am grateful for creativity. I can learn anything on YouTube. I love my kindle. I am able bodied and symptom free. And I live in America and we will come roaring back when this is over. I am grateful.

So I will enjoy the empty streets and the cavernous elevators. I will plan my next vacation. This will not last forever. And compared to the real hardships and loss in the world, I am outrageously lucky. I can survive Self-Isolation Cabin Fever.

Made in India, printed with the white postseason logo, the Indians handed out red rally towels for every game and every watch party. They’re great for cleaning up spilled beer, protecting heads from sleet and rain, and when vocal chords fail, they can be spun around in unison with the fan brethren who refuse to go home as the games march ever so slowly to conclusion. Today they’re another momento of an “almost” season. And as we wallow in overcast skies and a game seven loss, img_2605it’s easy to forget the joy we felt along the journey. Who predicted in April that we’d be awash in rally towels, in November?

As the post season began, the Indians had the lowest odds of all the playoff teams to win it all. We were the underdogs, the team plagued with injuries and quickly dismissed. Our catcher was injured, and the replacements couldn’t hit. Our reliable clutch hitter and best outfielder only played the first few games of the season. Pitching and base-running were our strengths, and with two starting pitchers lost late in the season and our ace questionable with a quad injury, well, pitching didn’t look like a bright spot. Our outfield was patched together with rookies and aging veterans, with another outfielder suspended from post season for steroid usage. The chances for victory looked non-existent. And yet there is a reason we play the games.

Remember the Boston series? On the last weekend of the regular season, we swept the reigning World Champion Royals in Kansas City to claim the second seed in the American League playoffs and home field advantage in the division series. We then proceeded to shut out the Red Sox. The media bemoaned the end of Big Papi’s career with a loss at Fenway Park. And they covered the Red Sox fans in distress, and their tearful goodbye to their vaunted designated hitter. And to be fair, the post-game crew did ask our manager if he had any latent sympathy for the Boston team. We rolled our collective eyes. Let them weep in Boston; we’re still playing.

Winning early when part of your team is injured can be a blessing. Time heals. The media circus moves on, and the Blue Jays wore themselves out defeating the Texas Rangers with offensive fireworks and cocky confidence. They showed up in Cleveland for a best of seven series wearing Canadian flag capes and the consensus conventional wisdom of two nations that they would win. But our ace was feeling better, we played error free baseball, and after our starting pitcher was booted from a game due to uncontrollable pinky bleeding, we wove together a victory one inning at a time from the bull pen. Records were set for number of pitchers in a post season win. The Blue Jays were toast, and again we were blessed with a few extra days to recover. We’re going to need more rally towels.

And on to the Cubbies we go, the winningest team in baseball, the National League juggernaut, the sentimental favorite, the beneficiaries of an over-the-top payroll, and the darlings of a large market audience. They filled Burke Lakefront airport with their private planes. They interrupted press conferences at the white house. And they bid ticket prices to all time astronomical highs. And so the team with the longest world series drought in baseball came to play the injured Indians, the small market team with second longest drought in baseball. Maybe we would just curl up and lose gracefully. After all, the weather was miserable. But we didn’t. Our ace set a record for strike outs in game one, and we hit the ground running. cleveland-indians-tribe-time-towelRemember when we were up three games to one, and the Cubs faced elimination? The heroes were unexpected. Everyone contributed. We hung in there. But there are risks of using the ace too many times on short rest, and rookies can eventually make errors, and games can slip through your fingers, until the series rests on a game 7.

Seventy degrees in November is Indian summer in Cleveland. The crowd was evenly split, both teams played hard, with the Cubbies taking the early lead and Cleveland catching up. The game was all but won, when Cleveland tied it up in the bottom of the eighth. But injuries were taking their toll. The Cleveland ace was in heavy rotation, pitching his third game, yet another short rest outing. We moved to the bull pen early – strikeouts were scarce. And still we came back, relentlessly refusing to give up. Rain delay, and extra innings, the Cubs scored two in the top of the tenth. Cleveland could only answer with one. And the series swung to the National League Champion Chicago Cubs. It was a roller coaster of emotions, an epic game, worthy of the world series and the historic breaking of the Chicago curse.

Cleveland is no stranger to heartbreak, in fact we name them. The fumble, the drive, the shot, the departure, all have meaning to Cleveland sports fans. And we were not all quick to forgive when the King returned. It took a heart-wrenchingloss against Golden State for some to embrace “the return.” The 2015 Cavaliers gave their all, every ounce of effort, amid injuries of their own. It wasn’t winning or losing that brought us around, it was the monumental exertion of will and emotion, the willingness to give all to the team that earned the hearts of Cleveland fans.

The 2016 Indians played the same way, they left nothing on the table. They played as hard as individuals can play, and not willing to let their teammates down, believing against all odds that anything was possible, and making personal sacrifices for the good of the team. It is not the outcome we hoped for, but no one can doubt the effort.

So I’m keeping my rally towels. They’re the evidence of an epic game, an historic series, and an extraordinary season. We are the American League Champions. And we got to play baseball in November, in Believeland.cropped-cleveland_bg24

It all started with those Cowboys in purchasing.  They had to figure out what and how much product to buy, and when to order it.  The tried and true method was just to keep a safe level on hand, and reorder more when the quantity dipped below it.  And that worked great as long as customers kept ordering what they always ordered.  Any change in the customer behavior and there was too much inventory on hand, or even worse, too little.  The corner office decided it would be great if purchasing could reduce inventories, because isn’t that just cash tied up in a warehouse?  Oh and while they were at it, the executives thought purchasing ought to be negotiating better pricing.  “A little less vendor lunching and a little more volume discounting,” the corner recommended.  So the PO guys got POed at the impossible sounding edicts and decided to go visit their brethren in the sales department. The sales guys at least understood the value of a relationship.

Wyatt ERP and his Department So purchasing and sales got together for a martini or two at the local saloon (and no one recalls who picked up the check) and hatched a plan.  Sales would give their monthly forecast of what and how much they were going to sell to purchasing, and the POs would be written based on these expectations.  Purchasing used the promise of future buys to wheedle better pricing out of vendors, and that shortage problem all but disappeared.  Purchasing was off the hot seat, and an acronym was coined: Material Resource Planning, or MRP.


Wyatt ERP, accounting marshal, shook the dust off his black hat and the smudges off his spectacles.  The corner office now wanted to know how much money purchasing was saving the company from this new strategy.  So Wyatt decided each item that purchasing bought should have a regular price, and they would call that regular price the “standard.”  They would track the difference between what items really cost against the standard, and a new acronym was born, price variance or PV.  It’s pretty simple, if we buy an item for 95 cents and the standard is a dollar, we have a five cent variance. So the standard inventory cost is a dollar, the variance is an expense reduction of five cents, and that nets to the 95 cents the company owes the vendor. Tracking this variance was very motivating to our purchasing.  At last their contributions were measured!

But the corner office is never happy for very long.Wyatt ERP and the Accounting Department at the Corral   “Wouldn’t it be great if we could track how much raw material was used against how much was supposed to be used?” they asked.  Wyatt was dragged into the meeting, thinking, “Now that we’ve complicated purchasing, why not manufacturing?”  But if inventory was always kept at the standard cost, then any difference between materials charged to a job and the planned materials had to be a usage variance.  The Manufacturing department either used less or more than they should have, and this difference could be tracked (or fracked depending on the mood of auto correct.)

Now we’re getting somewhere the corner office decided.  We know price variance, and usage variance for materials, let’s add labor!  Same concept, labor can cost more or less than expected based on overtime and shift differential, and production could be more or less efficient than planned depending on how they used it.  Wyatt ERP upgraded his ten key and got to work.  To track all these differences, a standard for the finished items would have to be created.  But this had another advantage.  If goods sold were always at standard, then differences in margin generated has to be from too many sales discounts to customers, or the mix of products sold.  More new general ledger accounts and more new variances.  And now we weren’t just planning materials, we were planning the whole enterprise.

Wyatt ERP in the Gunfight at the Accounting Corral

And so it was then ERP was called into the corner office to explain the Ripple order sold to Acme Widgets in Cripple Creek.  All these variances flow downhill to the ledger.  Someone has to corral these accounts and make some sense out of this.  “ERP, crack the whip and explain this” the sheriff roared as he multi tasked and checked his tee time on his Apple Watch.  Sales and Purchasing were not the only departments that know how to build relationships.  “I thought we got a great deal on the material, and Manufacturing was extremely efficient in making the ripple but this report says profit was exactly what we expected.  “ERP, explain this.  Where did the extra profit go?”

ERP thought about the glazed eyes that faced him routinely at the monthly meetings.  This system wasn’t built Overnight, and the more differences we track the more complex it gets.  But basically it worked like the this:

We got a great price on the Ripple bottles and the malt at the after Christmas sale in January.  Those differences were recorded in January when we bought them.  Manufacturing was very efficient in February.  No one was on vacation and they made Ripple in record time.  All those differences were recorded in February when the Ripple was made.  But the order for Cripple Creek didn’t ship until April.  Seems Acme is implementing a new MRP system and they figured out they didn’t need the Ripple until April Fools’ day.  So since the variances had already been recorded when the materials were purchased and the goods were made, the sale itself is therefore at planned margin.

The corner office scratched, blinked, turned three shades of red.  “What I want is everything at actual cost.”

ERP, tipped his black hat and smiled.  “Standard plus variance equals actual,” he said.  We can do that.  ERP circled the wagons and formatted new reports.  They were now officially back to the beginning.  But it was all in a day’s work at the accounting corral.

To Roth or Not to Roth, that is the question.

There are some inherent assumptions in the question itself – primarily that the questioner has already decided to kick some hard earned Washingtons into a retirement account.  Rainy days are inevitable, and even squirrels are wise enough to stash acorns away for later.  And while bank haters exist (and the millennial version perhaps hoards gift cards instead of stashing paper bills in coffee cans), the vast majority of us have enough faith in financial institutions to place a long term bet on a retirement account.  So given that Keurigs seem to be replacing coffee cans, and gift cards have expiration dates, a long term account in a financial institution is not a bad way to go.  But To Roth or Not to Roth, what should a saver do?

The term “roth”

William V. Roth, Jr. was actually a person, a senator from Delaware that suggested that perhaps some people would prefer to pay tax on their retirement account contributions instead of deferring the tax until later.  Americans traditionally have an abysmally low savings rate.  Deferring tax on contributions made to retirement accounts was a kicker initially intended to incentivize taxpayers to save.  The deal was that a taxpayer could deduct the contribution to the retirement account and thus pay less federal tax when the contribution was made.  But the tax would be assessed later when the money is distributed from the account.  The contribution would grow tax free until distributed, and both the contribution and the earnings would be taxed later.

The strategy worked.  Taxpayers began kicking money into Individual Retirement Accounts, and IRA became an everyday term for long term money.  The smart thinking was deferring tax was a good idea, especially if you’re in a higher tax bracket now than you will be when you retire and start reaping the rewards doled out by your IRA.  Throwing money annually into an IRA was a great rule of thumb for every taxpayer.  And then along came radical Roth.

Roth said, pay the tax now, not later, and the kicker is that both the contribution and the earnings will be tax free later.  As plot complications go, this one is a zinger.  First, most people don’t know what their marginal tax rate is now, let alone what it will be later.  And estimating what earnings will be when you take the money in the future is another fun calculation due to the compounding nature of interest.  Then there is the whole government trust issue, what if the government reneges on their promise that the contribution and the earnings will be tax free in the future (and that’s not too far fetched – the tax law is constantly changing, and taxing at least the earnings as a preference or for alternative minimum tax purposes is an idea that some would generate a lot of revenue for uncle Sam).

Pay now or pay later

Conspiracy theories aside, and assuming the government keeps their Roth promise, is it better to pay tax now on the contributions, or pay tax later on both the earnings and the contribution?  So there are few general guidelines.  The longer you’re stashing the money, the higher the earnings.  Under Roth rules, the earnings are not taxed.  So if you have a long savings horizon (eons before you get to stay home and eat chocolates in retirement bliss), paying now and avoiding the tax on the earnings is a good plan.  This is especially true if your tax bracket now is approximately the same as what you expect it to be when you retire.  But what if you’re not a spring chicken, you’re already hoarding chocolates in the freezer, and your big screen TV is already set to increased font size?  Your tax rate now may be much higher than it will be a few years down the road when you’re taking money out.

A good accountant could further complicate this by adding in time value of money (a greenback now is worth more than later) and considering the decision as a stream of annual contributions. And will this contribution be the first money you take out of your IRA or the last?   And I’m all for keeping accountants employed, but for simplicity sake, ignore that for now.  Make your decision on this year’s contribution only.

The Numbers

To do the basic calculation, you need to know four things:

  1. What is your tax rate now?
  2. How long before you retire?
  3. What will your tax rate be when you retire?
  4. How much will the contribution earn between now and when you retire?

Step 1: Take the contribution plus the earnings, and multiply by the retirement tax rate to determine the traditional IRA tax.  Subtract the traditional tax from the contribution plus the earnings.  This is your traditional IRA result.

Step 2: Then take the contribution multiply that by your current tax rate.  That is your Roth tax.  Tally your contribution, less the Roth tax, plus the earnings.  Compare that result to your traditional IRA result.

Step 3: Go with the higher result.

Here’s an example – 35% tax rate now, retiring in ten years, 20% tax rate upon retirement, 6% earnings over ten years, (6% * ten years = 60%, or 69% if you insist upon compounding).

For a one thousand dollar contribution:

Traditional – (1,000 + 600)* .2 = $320 tax – traditional result of $1,280.

(1,000 contribution plus earnings of 600 less tax of 320).

Roth – 1,000*.35 = $350 Roth tax, Roth result of $1,250.

($1,000 contribution- $350 tax + $600 earnings)

So, for all you taxpayers that still have 20/20 vision, go Roth!  Beyond a time horizon of ten years, the elimination of tax on the earnings beats the initial tax paid now on the contribution.  And if you already have a pair of drug store readers, and you can take a Roth contribution later than when the year you retire – then consider it.  But if you’re like most of us, and you need a little reduction in your annual tax bill to afford the contribution, then go traditional.  But whatever you do, the first decision, the one to save money, is a good one.  When was the last time you heard someone say they wish they had saved less?  Roth or not, we all need a few acorns.

About Nancy

Nancy Keene is the Chief Financial Officer at Dan T. Moore Company. She plays a major role in DTMCo.’s success and Investment Philosophy. Her blog series, Nickels and Dimes with Nancy, will periodically share her insights and wisdom on a plethora of financial topics. Visit Our Team page to learn more about Nancy.