Monday, March 17, 2008

In defiance of all logic...

CAUTION: Rant ahead with capital letters and much yelling

Man has long sought to defy gravity. Makeup companies entreat us to ‘defy’ our age. Our defiance of the inequities of life can define who we are – so I suppose it stands to reason that financial institutions would expect us to defy logic and go blindly along with their strange and unusual rules and regulations.

This weekend, I had one of those logic defying moments during what I hoped would be a rather routine attempt to make a deposit into my individual retirement account.

When my deposit was ‘denied’ by the bank my curiosity got the better of me and I called them to find out why they would not take my money. As it turns out, since the bank has recently changed ownership, they have a host of new rules, one of which is that a customer cannot add to their existing IRA account. They no longer accept those little monthly or quarterly deposits that add up over the year to your federally mandated deposit limit.

Now, each time a customer makes a deposit to their IRA, A NEW ACCOUNT IS FORMED.

Got that? Each deposit, no matter the amount, FORMS A NEW ACCOUNT. So instead of having one nice fluffy pot of money into which you squirrel away little nuggets of gold over the course of your life so that when you retire and Social Security goes bust, you will still have money to eat, you must now have 30 or 40 INDIVIDUAL SMALL ACCOUNTS which the bank will ‘add up for you and tell you how much money you have to withdraw upon your retirement.’

Am I the only one who finds this concept mind-boggling? I had a long, drawn out conversation with a flummoxed bank representative who seemed confused by my confusion. I kept saying, “This is the most ridiculous thing I’ve ever heard of. You mean I cannot deposit any more money into my existing IRA account? I have to open a new account now and next week, next month, etc, when I have more money I’d like to put away for my retirement, I HAVE TO OPEN UP ANOTHER NEW ACCOUNT?”

Yes, she tells me. That’s how all banks do it.


Let’s just say a person begins their account at age 20 and doesn’t plan to retire until age 70. Then let’s say during those intervening 50 years that person chooses to make two deposits per year into their account. That means that in the 50th year, they will have ONE HUNDRED separate IRA accounts which the bank will then add up, and begin distributing money from one account at a time in order to pay that person back their retirement income?

AM I IN BIZZARO WORLD? Am I on Mars?? Can someone explain to me how it behooves the bank to manage 100 accounts for a single individual? What if that person chooses to make a deposit every month? That would amount to 600 SEPARATE ACCOUNTS over the course of 50 years.

IS THAT INSANE? Or is there something wrong with me? Please, I beg of you all, if it’s me, please tell me. Please explain what I’m failing to see here. Or could it simply be that the bank will ultimately have to pay less interest on 600 small accounts than it would on one big one?? Hmm...have I hit on something here?

Anyone, please?? Help me understand this nonsense because I’m a total loss.


Jen said...

okay, not to get in the way of your rant or anything, but YOU seem to be cursed when it comes to banking

Bernadette Gardner and Jennifer Colgan said...

I know. I think it's because I've often been disparaging of math in general, being a word person and not a number person. So the God of Arithmatic punishes me by making me deal with the bank.

But seriously, am I overreacting to this? The bank employees seem to think there's nothing at all suspicious about this practice, so why does it rub me the wrong way??

Kristen Painter said...

What the...? Seriously? This seems not just wrong but...extra wrong.

Bernadette Gardner and Jennifer Colgan said...

According to DH who spoke to a friend of his who works with an investment firm, said bank employee had to be smoking something funny. He says I should call back and ask for an explanation from the bank manager, which I will do, but only when I know where I'm going to put my money. I want to be able to take it out of Funky Monkey Bank and put it somewhere I know it will be safe.

Anonymous said...

Okay, I've been in banking for over 15 years and this is the first I've heard of this! I'm in the midwest though, so I s'pose it could be a trend or something, but I sure hope not! That is CRAP! Call someone higher up and demand an explaination, then move your money if you aren't happy. Rollover that money to a place that will take care of you. Might I suggest a credit union?