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Financial Planning / Tax Strategies
|Subject: Tales from the trenches||Date: 3/4/2009 7:48 PM|
|Author: ptheland||Number: 104954 of 125696|
It's high time to recount another tale. I haven't done one in a while.
Harold (not his real name) is a retired engineer. I have no idea how his bosses and co-workers put up with him, but his work was probably perfect. He is slow and methodical.
As an example, he writes up, line by line on a pad of notebook paper, everything that may need to go on his tax return. It's in no particular order. Then he fills out my organizer. If he's not sure about where to put something in the organizer, it will show up in multiple places. He separates the cost of eye glasses from the cost of the eye doctor's exam, because they are listed on separate lines in my organizer. Lots of details, it's all there, but only Harold knows how it's organized.
And Harold always comes in with his box. It's a small, portable file box. Nowadays, you see plastic ones in the office supply stores. His is steel. With a lock. That's always locked. Inside this box are Harold's records. He has an unusual filing system. For example, he has a savings account. And every year he gets a 1099 from the bank. So every year, he puts the current 1099 with all of the previous 1099s. The newest one is always at the back. So when I ask for his 1099, he has to dig though the box, find the envelope with the 1099s for that bank account (everything is kept in envelopes) then page through the folded stack to get to the last one, reminiscing about every page as we go. ("The interest was higher in 1992, we were saving up some money to help our son with a down payment.")
Did I mention Harold is slow and methodical?
So I was a little worried when he mentioned that he sold a portion of his mutual fund. He called me in December to ask about that. You see, he had never sold any of this fund. Ever. He first invested in the fund in ... wait for it ... 1957. So I told him that I'd need to know all of his purchases and dividend reinvestments since 1957. Of course, he said that he had all of those records. The funny thing is that I actually believed him.
But since he is thorough and methodical, he also called up the broker and the fund to try to get the back records. And they did a good job giving him something going back to 1971. They apologized that they didn't have records from the transfer agent they used before then. But they did give him the amount of his original 1957 purchase.
So I sat down with Harold to do his taxes today. And one of his first concerns was to take a look at the records for the mutual fund. So what does he pull out of his metal file box? Fifty years worth of individual purchase confirmations. One quarterly reinvestment at a time. In chronological order - oldest on top, of course. And then came 50 years worth of quarterly and annual statements. And finally, the package from the broker.
So I dutifully scanned it all up (thank God for a recently purchased and very fast scanner). And it didn't take too long to punch all of the data into a tool I have to calculate basis in mutual funds. I was able to account for every fractional share, down to the last .001 share!
Perhaps some statistics are in order. His original purchase was for $500. The last purchase was in 1966. He invested a total of just over $1100. That has compounded to be worth over $70k at the end of last year. And judging from the share prices I saw, it was probably close to $150k before the market crashed.
How's that for a testimony to the power of compounding?
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