Hidden Assets
Everyone has one: the folder where you stash old savings bonds, unused gift cards, crinkled IRA statements and dusty insurance policies. Comb through it and you might uncover some real treasure.
By Carla Fried

(MONEY Magazine) – Whether it is stored in your head, lost in the back of a filing cabinet or buried deep in a computer beyond the reach of the advanced search feature, you no doubt have The Folder: the list of financial tasks great and small that you've been meaning to get to forever but have put off.

Until now. If cleaning your closet is the path to domestic zen (who are we to argue with just about every home and decorating magazine?), just imagine the bliss that is in store for you once you rid yourself of the financial dust bunnies that have accumulated in your life. Roll your old 401(k) over into better-performing mutual funds. Purge your portfolio of once-hot funds and stocks that are now a line of defense against global warming. Get cash for the $300 in Home Depot gift cards left over from last year's renovation. And there's a kicker: Crossing items like these off your financial to-do list doesn't just induce a higher emotional state. It also fattens your wallet.

The first step in tackling your Folder is to stop making excuses. No matter how elegantly you gussy up your inaction with well-constructed rationalizations ("I can't do a thing until I've fully researched this matter"), procrastination is often an exercise in pain avoidance. "What's typically going on is that you have some fear, anxiety or regret that keeps you from doing what you know deep down is correct," says Dr. Richard Peterson, a psychiatrist and managing partner at Market Psychology Consulting, which coaches individuals and professional investors to rein in the emotions that cloud smart financial decision-making. "You find it easier to defer making a financial decision in the short term if it plays into your anxieties and fears, even though you know in the long term it will be worse not to act." Can't see where the fear comes into play for you? Fine, but that leaves you with laziness as the only explanation. It's your call.

Regardless of why you procrastinate, you need to break free. Peterson offers a straightforward solution: Don't try to tackle everything at once. Take on one task at a time, break that job down into small achievable steps, and create a schedule for finishing it.

Sounds like a plan. Start with these seven oft-put-off tasks. Some will save you money; others will set you up to earn better returns. Sure, cleaning up can be messy: You need to watch for unexpected fees and unintended tax bills. But that's no reason to delay, right? Right.

Cash in Old Savings Bonds

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WHY BOTHER? The U.S. government is making a mint off of birthdays, bar mitzvahs and graduations: About $13 billion in savings bonds have matured but not yet been redeemed. If you own one of them, you aren't earning a penny in interest on your money.

HOW TO DO IT At treasurydirect.gov, you can search for missing bonds or calculate the value of your bond and find out if it's paying interest; typically, if your bond was issued before December 1965, the interest meter ran out after 40 years; most bonds issued after that pay out for 30 years. No bond is too old to cash in. Simply head down to your bank with your bond and photo ID. Yes, you will likely owe federal tax on the payout (using it for college may give you a break), but that's no reason to leave your asset sitting in the U.S. Treasury earning nada for you. "You are essentially losing money the longer you hold, due to inflation," notes Stephen Meyerhardt, a spokesman for the Bureau of Public Debt. "You can be doing a lot better if you cash in, pay the tax, and reinvest it in something actually earning interest." (And hey--your bond is exempt from state tax.)

Take Interest in Your Savings Rate

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WHY BOTHER? Cash is making quite a comeback, as the recent steady upshift in the federal funds rate has pushed the payout on many savings accounts from 1% to nearly 5%. Many, but not all.

If you plunked your emergency savings in any old bank account, you're probably still earning a pitiful 1% or so. The same is true if you have a brokerage account. Chances are you're getting a lousy return on your sweep fund, the cash account where the dividends and interest you earn are deposited. The sweep account at Schwab recently paid 1.03% if your total household assets at the firm are below $100,000. E-Trade doesn't even pay 1% if your entire account is worth less than $100,000.

HOW TO DO IT To upgrade a savings account, turn to page 54, pick a high-yield money-market account or fund from the tables, pick up the phone, transfer your money and start earning close to 5%. If you're stuck with a low-paying sweep account, your job is to make sure you empty it out frequently. Simply move the money into a better-yielding fund at the same brokerage. The Schwab Investor Money Fund ($2,500 minimum), for instance, pays quadruple the rate of the sweep account now; at 4.5%, it's actually keeping up with inflation.

Stop Paying for Unneeded Life Insurance

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WHY BOTHER? It's easy to outgrow the need for life insurance. The kids become independent adults, you accumulate other assets for your family to fall back on or you finally burn your mortgage. But it's not so easy to figure out what to do with the whole life insurance policy you bought years ago, still pay a hefty annual premium for but no longer need.

HOW TO DO IT Cashing out--that is, taking whatever cash value has built up--is an option, but it can trigger a big tax bill. Any withdrawals you make that exceed what you paid in premiums will be taxed as income. Peter Katt, a life insurance adviser in Mattawan, Mich., suggests a strategy that can save you from paying the premium, free up some cash without generating a tax bill, and keep a tax-free inheritance intact for your heirs.

Your first step is to check whether the internal rate of return on the policy's investment component is at least 4% or 5%. (To calculate that, divide the current cash value by the sum of last year's cash value and your annual premium.) "If your policy is earning that much, then it can definitely be worth keeping," he says. "That's 4% or 5% tax-free." With an old policy, chances are your annual dividends are larger than your premiums. If so, stop paying the premium and tell your insurer to deduct that cost from your dividends every year. Your cash value will still grow, just more slowly. Eventually, you may want some of that cash. As long as you keep your withdrawals to less than your cost basis (the total value of the premiums you've paid so far), you won't owe taxes. As for the remainder: Unless you absolutely need the money, leave it untouched. When you die, it goes to your heirs tax-free. If the return is below 4%, however, you're better off withdrawing all the cash value, paying the taxes, and reinvesting the money.

One potential drawback to all this is the hassle factor; call your agent to put a stop to paying the premium, and you're likely setting yourself up for a sales pitch for another insurance product. Katt recommends contacting the insurer directly to see if a kind soul in customer service will send you the paperwork. The good news is that even if you must endure a chat with an aggressive agent, you shouldn't have to pay a fee to cancel your premium when the policy is old.

Consolidate Your Retirement Accounts

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WHY BOTHER? If you spent the '90s collecting IRAs and 401(k) plans the way Robert Parker collects wines, you probably need a drink (or three) when you try to keep track of all your separate accounts. Less can definitely be more.

Say you have a $2,000 IRA here and a $4,000 one there, and you left behind a 401(k) when you quit your last job (or two before that). Move all your scattered eggs into one nest, and you'll thank yourself later. Bookkeeping may be no sweat now, but consider that once you reach age 70K, you'll have to start withdrawing money from your traditional IRAs and 401(k)s. Does tracking a tax bill for each strike you as retirement fun?

Consolidating can also save you money. Many funds and brokerages slap an annual fee of $10 or more on IRAs worth less than $5,000. Transfer all your IRAs into one, add your old 401(k), and you may have a big enough balance to earn a fee waiver. Having all your money in one place will also make it easier to create and track a portfolio. Even better is the potential for higher returns: If you ditch a 401(k) that stuck you with expensive, underperforming funds and roll it over into an IRA with low-cost index funds, your bottom line is bound to benefit.

HOW TO DO IT Fund companies and discount brokerages are salivating to get your retirement money, so they go out of their way to make it easy. With a 401(k), you simply complete an application that authorizes the new firm to contact your old plan provider and have the money moved directly into your IRA. With IRA transfers, it's the same one-application routine. Warning: Don't ever take possession of the money. If you do and then fail to reinvest it in an IRA within 60 days, you're looking at an income tax bill as well as a 10% early-withdrawal penalty.

Warning No. 2: Some financial institutions charge egregious fees to let you go. Transferring an IRA from Schwab will set you back $50; Fidelity hits you up for $50 as well. What can you do? Not much, so consolidate only if the payoff outweighs any fee.

Prune Your Credit Cards

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WHY BOTHER? What's in your wallet? Probably too many credit cards. It's not uncommon for Americans to tote around seven to nine cards, way more than they really need. Beyond eliminating the temptation to charge, getting rid of idle cards can be a smart safety move; the fewer accounts you have, the fewer chances you have of becoming an ID theft statistic.

HOW TO DO IT You may be holding on to unused cards because you've heard that canceling them would wipe out your "history," sending your credit score south. It's okay to let go. While it is smart to keep the card you've had the longest, you can close down others without incurring serious damage.

The only exception is if you carry a balance. A key factor behind your credit score is your debt-to-available-credit ratio. Let's go to the numbers: Say you have a $2,000 card balance and $20,000 worth of credit lines on four cards, for a low 10% debt-to-credit ratio. If you cancel three cards and shrink your available credit to $5,000, your ratio scoots up to 40%. One fix is to call up the issuer you're sticking with and ask for a higher credit limit. A safer strategy is to pay down your balances before canceling a card.

Unload Unused Gift Cards

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WHY BOTHER? This year billions of dollars' worth of gift cards--estimates range from $1.75 billion to $3.5 billion--won't be cashed in within 12 months of being purchased. Talk about looking a gift horse in the mouth.

Even if you received a Starbucks card for Christmas and gave up java for your New Year's resolution, or your aunt sent you a Victoria's Secret card and your taste runs more to Talbots or L.L. Bean, you can do better than stashing it away.

HOW TO DO IT A recent check of eBay turned up more than 3,000 gift cards being auctioned; many sell for 90% or more of their face value. The free website Cardavenue.com offers an additional twist: card trading. Yep, there is now a rotisserie league for gift cards. "If you prefer a Sears card to the Gap card you have, we help you find someone with the Sears card," says chief executive officer Robert Butler.

If you have a gift card that's more than a year old, it may be shrinking: Some stores subtract maintenance fees of $2.50 a month after a year or so of inactivity. If a card has an expiration date that has come and gone, it's still worth contacting the issuer; you may be able to reactivate the card for a $10 to $15 fee--worthwhile if you can then unload it on the Web for more.

Finally Sell That Lousy Investment

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WHY BOTHER? A Nobel Prize in economics and numerous tenured college positions have been granted for the study of how hard it is to break up with a bad investment. The highfalutin academic theories are typically riffs on the basic emotions of remorse and denial.

Knowing that you could have bailed out of a loser at a higher price is what often keeps you attached. "All it takes is the realization that 'had I acted, then I would have been better off'" to paralyze us, says Orit Tykocinski, an economics professor at Ben Gurion University who has studied "inertia inaction."

Or maybe you're an honors student of the I Deserve to Break Even school of investing. You insist that the Amazon shares you bought at $106 in 1999 will rocket back from today's $36 so you can exit with your pride and portfolio intact.

Former winning investments are another common weak spot, especially if you're still sitting on a gain. Just because MONEY magazine touted a mutual fund back in the day--PBHG Growth, Janus Worldwide, anyone?--doesn't mean it was a lifetime recommendation. A loss of performance mojo, managerial musical chairs or a merger with another fund are all strong signs that it's time for you to make a fresh start.

HOW TO DO IT Take a look at every dud investment you own and ask yourself why you still own it. You are not allowed to factor the purchase price and the long-ago value into your answer. All that matters is what you can rationally expect in the future. If it isn't a good investment, sell. Period. No more excuses. Get out and reinvest in a stock or fund with better prospects. Every month that you wallow in what used to be, you are squandering the opportunity to have your money do more for you elsewhere.

If that means selling for a loss, remember that Uncle Sam is standing by with a silver lining: You can deduct losses on your tax return (first against capital gains, then up to $3,000 in ordinary income). If you still have a profit on a long-term holding that has simply lost steam, don't hold on just to ward off a tax bill. With the top long-term cap-gains rate at 15%, you're not likely looking at a huge hit. It'll be a small price to pay for crossing one more entry off your to-do list.

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.