Ask Doc

The Nanny Police Strike Again

I'm sick of this mindless mantra...

On Wednesday, the Food and Drug Administration ("FDA") published guidelines to bully the food industry into lowering sodium levels in foods to "recommended" levels. It's a huge overreach of government power.

If you remember from my reaction to the New York City legislature, I'm tired of hearing "the less salt, the better."

Most Americans consume about 3,400 mg of sodium per day, or about 1.5 teaspoons a day. The recommendation from the Nanny Police is about 1,500 mg to 2,300 mg... and even less for older folks.
Here's the problem... These government regulations intimidate folks into cutting back too much.

Not enough salt is just as dangerous as too much. We need salt for our bodies to function properly. In fact, a 2014 study published in the New England Journal of Medicine found that people consuming less than 3,000 mg (30% higher than the "recommended" amount) of salt had a 27% increased risk of having a heart attack or stroke and dying from a cardiovascular event.
The secret is to get the right amount of salt... not too much, and not too little.

Tired of the Nanny Police? Let us know at [email protected].

Now let's get into this week's Q&A...

Q: A lot of people believe only old people get cataracts, but I had cataract surgery at the age of 51. They were disrupting my vision in both eyes and were large. I had to have surgery. Please keep away from this perception that it is only for old people in their 80's. – S.C.

A: For readers who don't know... a cataract is the clouding of the eye lens. Cataracts are strongly linked to aging. More than 50% of Americans 80 years old and older will develop cataracts. If we lived long enough, it's likely nearly everyone would develop cataracts.

Cataracts can develop when you're younger. According to the National Eye Institute, around 2.5% of Americans aged 40 to 49 have cataracts. That jumps to 5.2% for 50 to 54 year olds, and continues to increase as you age.

So yes, cataracts aren't just a problem for the elderly, but they're rare (especially severe cases) in middle-aged folks.

No matter your age though, it's important to take care of your eyes so that you don't have to worry about the risks associated with eye surgery.

Q: What about ginger ale? – D.H.

A: I'd bet most folks think of ginger ale when they've got an upset stomach or gastrointestinal system. And with good reason...

As we mentioned last week, ginger is a natural antiemetic, which means it calms the stomach. So ginger ales with real ginger will give you similar results. Even ginger ales without real ginger contain carbonation that can calm your stomach. (A slightly flattened coke will work similarly.)

But I prefer a more natural way... I mash up frozen ginger and mix it with club soda. You get a good dose of whole ginger and some carbonation, without all the sugars in soda.

Q: I have a general question about IRA accounts with a brokerage firm. If I have a brokerage account and I open an IRA account with the same firm, can I transfer a portion of a position I have in my regular brokerage account to the IRA account and count it as part of my $5,500/year allowable contribution to the IRA? – J.J.

A: According to IRS rules, IRA contributions can only come in the form of cash. You can't transfer securities from a different account without selling your shares.

[optin_form id="286"]

Q: [You've] outlined some benefits of compounding. A $50 dividend is used to buy five more $10 shares and so forth. Where do income taxes come into play? Is there any way to avoid them by setting up DRIP arrangements? If the marginal tax is 30%, that would allow only $35 to be invested, etc.

I have noticed a lot of analysts run the numbers without taxes... is this reasonable? In addition to the cost of taxes, there is the management fee that you mention. In your example, 1% of $1000 is a $10 cost, so the net return would be around $25 not $50. All of this reduces the return to 2.5% or so, and probably cuts the 12-year total by more than half. – R.L.

A: Great question...

First, you can and should legally dodge the tax man by investing through tax-sheltered IRAs or your 401(k). Whether you reinvest your dividends or not, you won't have to pay taxes on them until you start making withdrawals. Those kinds of retirement accounts allow you to compound at the maximum rate and significantly reduce Uncle Sam's cut.

If you are investing in a taxable account, then yes, the numbers won't work as well... Taxes cut into almost any investment. We compute gains without considering taxes simply because everyone will have different tax brackets or tax treatments depending on income levels or account types.

Of course, if you're in a taxable account, you'll have to pay taxes on your dividends, which comes to 15% for most folks (those in the 25% to 35% tax brackets). Of course, if you make less than $37,600, you don't pay income tax on dividends.

In any event, seeing the sums that folks pay in taxes over time on their investments gets my blood boiling. Invest as much as you can in tax-sheltered IRAs or your 401(k) to keep money away from the IRS.

What We're Reading...