A safe deposit box, like a storage locker, is just an additional expense you likely don't need.
When I was younger, we had a safe deposit box. Why? Well, my parents always had one, and it seemed the responsible and adult thing to do. What do you keep in it? Well, your valuable papers! Your expensive jewelry! Your gold coin collection! Your stock certificates!
Or maybe not.
Very few papers are all that valuable. If the deed to your house is recorded at the County Clerk's Office, having the recording copy is not such a big deal. Even if you lose it, no one is going to say you don't own your own home. And no one wants to steal such papers, either. A small house safe (with a good fire rating) is probably a better bet - it pays for itself within a year (compared to safe deposit box rental fees) and can hold any papers you think are that important, such as your birth certificate and passport. But in reality, even these can be obtained if the originals are lost. Being paranoid about documents is really kind of silly.
Things like Wills, Medical Powers of Attorney, Durable Powers of Attorney, and the like are important documents. But a home safe is more than adequate in most cases. If you had an attorney draft your will, they might keep a copy in their files. Or you can make multiple copies (with original signatures) and keep them in different locations, if you are that paranoid. For most middle-class people, however, a Will is really unnecessary, as most properties can pass by right of survivorship. Even if all copies of my Will were lost, much of my Estate would transfer as I have indicated anyway, as my retirement accounts, bank accounts, cars, houses, etc. are all in joint tenancy with right of survivorship.
If you have made your estate more complicated that this, ask yourself why, and why you are relying on a Will (which can be challenged) to transfer assets, when there are other ways.
Our local hospital keeps a medical power of attorney on file. Some financial advisers recommend keeping original signed copies in your car. If you are traveling and your partner is injured, you need access to these documents right away (if you are married, this point is moot).
What about your expensive jewelry? That diamond necklace that you don't dare keep around the house, lest the crack addicts steal it? Well, if you own something that you think is always on the verge of being stolen, I suggest you sell it, or move to a better neighborhood. Fancy jewelry is nice and all, but if you are too scared to keep it and wear it and have to keep it locked up all the time, what is the point? And as an investment, you are probably better off selling it and buying some equity or bond that generates income.
As a rule of thumb, I think it is a good idea to never own anything that, for your income level, you could not afford to lose. Particularly tiny things like watches, jewelry, electronics and the like. A $5000 Swiss Watch is a nice toy - for someone making a Million dollars a year. But it is just unnecessary stress for someone making $100,000 a year. Simply stated, you can't really afford it, if you can't afford to lose it. You're just playing at being rich, which is short-sighted.
Gold coins and collectibles are usually bad "investments" as historically, they under-perform the stock market. Even gold, with its meteoric rise from 2005-2010 (but relatively flat since then) is not big money maker. A 200-300% gain is nothing spectacular, over time, particularly when it can go down just as quickly. And if you have to pay rent on a place to keep it? That sort of adds a carrying cost. Physically owning minerals can be the most expensive way to invest in them, anyway, as you have to pay a premium to buy them and sell for below market when you sell. Dealers want a taste at either end of the transaction.
Physically holding stock certificates, other than as wall decorations (and some are rather attractive) is nonsense today. You can keep your stocks in an online trading account, or on the "book" of most companies. Not only is it safer, it is easier to buy and sell when the time comes. Physical stock certificates, when lost, can be a pain to replace - and your ownership even then is determined by the book entry of the company, not your physical ownership of a piece of paper.
Safe deposit boxes end up like storage lockers. People put things in them and then forget what they put there. And then when they finally go to look at them, they realize what a load of junk they have in there.
I gave up on the safe deposit box about 15 years ago. It just seemed so unnecessary for someone in my income and wealth range (average schmuck). I will leave them to the folks with stolen Nazi gold bars and the proceeds of that bank robbery or diamond heist. Because frankly, I can't think of any real need to pay $100 a year or so to store a lot of junk.
6 comments:
House burglary might not be much of an issue on an island. Do you need a ferry to get to your island? If you do I would bet that the local police case out every arriving ferry for trouble. I noticed this on Martha's Vineyard and Fire Island. A house burglar (or car thief) will not try to ply his trade there. The story is different in the upper middle class suburbs of NYC which are a relative easy drive from a million ghetto dwellers.
House burglary happens here and I think a safe deposit box is way cheaper than insuring jewelry. For many people their jewelry is their most valuable asset, not their house. And many 100K per year people have jewelry worth total 500K or more because of inheritances. That jewelry did appreciate quite a bit over the years but nowhere close to any other investment. Sell it? That's tough to do because of sentimentality. So that is why I have that safe deposit box. I am never scared to wear it but I do want to protect against losing it to a fire or crime.
I have the box also to keep stuff that is a pain to replace. Two car titles, two passports, and two sets of school transcripts from schools that no longer exist are among what I have in my box.
Sentimental value? What is the point of that? Your kids will sell it before you are cold in the grave. It is just junk. People and memories are more important than things and money. Sell it and invest the money. You can live off money, you can't live off of jewels.
If you have $500,000 in jewelry in a box in a bank, sell it an invest it in something. It is just sitting there and not appreciating much. And that is a LOT of money to have tied up in one thing, for most middle-class people.
It is like folks who own $50,000 cars and then worry about getting them scratched.
The Material is Mortal Error.
If you are worried about "things" in your life, chances are, you own too many things. Get rid of them.
A lady in my home town owned Porsche. I was appalled when she put snow tires on it and drove it through the Salty Central New York winters. It rusted.
I mentioned this to my Dad, and he said, "Well, there's people who think they can afford a Porsche, and people who really can afford a Porsche. She can really afford a Porsche."
When it got rusty, she bought a new one. If this seems like sacrilege, then you probably REALLY can't afford a Porsche (but can afford to buy one).
Similarly, I see guys on the golf course with Breitling watches. $5000. And then they lose it in the water trap and freak out. They got no business owning $5000 watches. The guy who can lose such a watch and say "Oh, gee, that was a nice watch, pity" can afford it. The rest are wanna-bes.
Bottom line: If you are worried about stuff getting stolen, the best, easiest, and least costly thing to do is to own less stuff. End of story.
"Things" are a trap. If you find yourself installing an alarm system to protect your "things" then maybe it is time to (a) move or (b) own less things.
As for the "difficult to replace" documents, a car title is ridiculously easy to replace, a passport only slightly harder. School transcripts? You won't need those more than five years after graduation. Scan them and upload them to Google docs or e-mail them to yourself, if you want to create an "immortal" copy of a document.
My Grandfather was Mayor of Larchmont, so I am familiar with the area. And I lived in Old Greenwich as well. Suburbs, in a way, are worse than the city. All the crime plus a big hassle of a commute.
The kids growing up there often end up "troubled". Those areas are kind of icky, frankly.
I own nothing that I cannot afford to lose. Two older cars that are worth maybe $10,000. Some furniture and computers. Not a lot of fancy jewelry or electronics.
And it is simpler this way. When you have less worries, you have less stress.
Stressing yourself to have "things" is a false value. And it kills people, over time. And no matter how many things they have, they are never happy.
In fact, I think their happiness is inversely proportional to the amount of things they have.
Think about it - as a kid or teenager, it was a lot easier to be unstressed and happy. It is only when we have cars, houses, mortgages, and "stuff" that the world seems a burden.
Anyone can be a kid again - by unplugging from the material.
It is hard to let go. In the last year, I let go of a house, four cars, two boats, and a tractor - plus boxes and boxes of "family heirlooms" (mostly junk) and other crap that was clogging up my life (tax returns from 1999? Get real!).
It was a swell bonfire, and liberating.
Don't let the chains drag you down.
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Sentimentality is expensive. In a lot of ways.
Another fantastic post - this and the "House" one.
Your point about stock certificates actually brings up an interesting question I have that I can't seem to find an answer for. Since you are a legal professional, perhaps you might know?
Is it true that when you buy stock through an online broker, the broker is the one who actually owns the stock and you are only designated as a "beneficial owner"? And if this is true, and let's say the broker goes belly up and declares bankruptcy, is it possible that the "beneficial owner" might lose their stock?
And if this is the case, would it be helpful to keep stock certificates at home so that you can prove you own it?
Good Question.
See:
http://money.cnn.com/2008/09/15/pf/broker_leak.moneymag/index.htm
The short answer is that the securities should be in your name, not as a beneficial owner.
If the brokerage is SIPC insured, you should be covered up to $500,000.
Lehman Brothers went belly up. I do not recall any customers losing their stocks.
Physical certificates are a false sense of security, I think.
The other aspect of this is not to be paranoid about things.
We worry about losing the title to our car, which is not really likely to happen, and not the end of the world. Why do we worry?
Or the house burning down. Likely to happen? Not really - which is why homeowner's insurance is so cheap - compared to the cost of a home.
Worrying about possible outcomes can prevent you from enjoying the probable ones. People insure themselves up-the-ass for stuff like broken windows and dented fenders, and then don't have enough money to put gas in the car.
I think it is OK to take risks on small things like that, and then use the savings to insure the larger things - your liability, your retirement.
But we are trained to do the opposite - sweat the little things and ignore the huge and predictable things that can be readily avoided.
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