Friday, February 24, 2012

Do You Need A Safe Deposit Box? No.

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 (or $50,000) 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.