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A Peek into President Obama’s Personal Finance

The White House made financial disclosure reports for President Obama and Vice President Biden available last week. High-level federal officials must annually disclose their personal financial interests under the Ethics in Government Act of 1978. I couldn’t resist my voyeuristic interest in knowing how much our President earns, saves and how he invests. He is actually doing pretty well, in my opinion of course. So what does the first family’s personal balance sheet look like? What lessons can we learn from the first family?

President Obama’s Income

Mr. President continued to earn income from his best selling books. The report shows that he earned

Royalties from his top seller “Dreams from My Father $1 million – $5 million
Royalties from his book “The Audacity of Hope $100,000 – $1 million
Advance for a kid-friendly version of “Dreams” $225,000
Advance for the recently published “Of Thee I Sing $133,334
Royalties from the President’s late mother’s book “Surviving Against the Odds $1,000-$2,500

 

From his tax returns, we know that the exact amount is $1.57 million.  That is nearly 4 times what he receives for his day job of being the President of the United States.

Lesson learned : Even if you are the President of the United States, diversify your income! Earn income from other interests and hobbies. I don’t think I have a New York best seller in me but I will try my level best to use my strengths to generate some ancillary income.

Where he parks the money?

The Obamas have $250,000-$500,000 sitting around in a checking account at J.P.Morgan Chase Private Client Asset Management. They earned less than $200-$1000 in interest from this account. Even if the exact amount is closer to $250,000 and the interest is $1000, it seems low to me. But it is a checking account. May be someone should let Mr. President and first lady know about Online Savings accounts or Rewards checking, lol!

Lesson learned : Everyone needs an emergency fund. And debt free is the way to go.

How is he preparing for his future?

According the disclosure report President Obama has the following investments, retirement accounts and educational savings account.

Treasury Bills $1 million – $5 million
Treasury Notes $1 million – $5 million
Vanguard 500 Index $200,000 – $450,000
Pension Plan $50,000 – $100,000
SEP IRA $100,000 – $250,000
529 Plan $100,000 – $250,000
529 Plan $100,000 – $250,000

 

With a mix of retirement/non-retirement investments and education savings plan for each daughter he is doing well for someone who could lead a reasonably comfortable life even if he didn’t save much. And he is taking advantage of his self-employment status to get a tax break by using a SEP-IRA.

Lesson learned : Never turn down a tax break for retirement investing.

What is his investing style?

With the amount of money in Vanguard 500, they qualify for admiral shares which means they pay only 0.06% in expenses. A very good move here.  But as you can see from the table above, looks like he doesn’t put too much faith in the stock market. I thought he should try to be a little more aggressive with his investing until my husband said may be he is happy with what he has now. He might be looking to just keep up with inflation and not grow his money. That would certainly make sense if he can live the same lifestyle with what he has saved so far. As we don’t know what his future plans are we can only speculate. Even if he is satisfied with what he has, with his income almost touching $2 million, I thought mixing some muni bonds would be a good idea too?

For his 529 account, he has trusted an age-based (9-12 yrs) portfolio with Bright Directions College savings plan.

Lesson learned : Invest in low cost index funds. Passive investing would be the way to go.

How is Vice President Biden doing?

Bidens are not debt free, they reported six different liabilities including a home equity line of credit for $100,000 – $250,000. And they take a very active approach to investing. They own several funds – Fidelity 2020 fund ($15,000-$50,000), Invesco VI global health care, Invesco VI international growth, Dreyfus IP technology growth, Rydex SGI VT high yield, Janus Aspen Enterprise, Janus Aspen Janus portfolio, Leff Mason Western Asset Variable Global High Yield Bond, MFS VIT utilities, Rydex SGI VT Mid Cap Growth, and Rydex SGI VT Small Cap Value all valued at between $1,000 and $15,000. The Bidens also own several whole life insurance policies.

So there it is. What do you think about their finances? Do you think they have it under control and ready for their future? How do ou stacking up against the first family :) ?

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