That’s precisely the question explored by Rob, in his article The Torn-Up Credit Card Application. Following the advice both from a credit card issuer and the FTC website to shred or tear up unwanted credit card applications, he documents an interesting experiment that he ran. He tore up an application he received into small pieces and then taped the whole thing back together to simulate the efforts of a potential thief. He then filled out the application, including a change of address and cell phone number for verification, before sending it in.

As much as I hoped that the company offering the Chase MasterCard would discard any applications showing obvious signs of tampering, the card was issued and mailed to the address provided. Rob used his parents’ address so that the card wouldn’t fall into the wrong hands. He then used his cell phone to activate the card. The net effect is that he proved that a card would be sent to a new address and could be verified with a new phone number, even when the application had clearly been tampered with.

The conclusion is that simply ripping up a credit card application (or similarly sensitive document) is not sufficient. Investing in a shredder is probably worthwhile to protect your credit record and personally identifying information. Even shredded documents could be recovered and used, but shredding makes the task much more difficult. To make things even harder for thieves, you can split shredder output across multiple weeks of trash pickup. That way, only a portion of the shreds necessary to reconstruct your documents would be available to a thief at any one time.

It’s disconcerting that tearing up sensitive documents isn’t sufficient to thwart potential identity thieves. Learning about the results of Rob’s experiment will probably make you think twice before discarding anything other than the smallest shreds of personal information.

Do you use a shredder for all of your sensitive waste?

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There are three major financial differences when you work through the first year of your planned retirement. First, your job (and not your nest egg) will cover your expenses. Second, you can make additional contributions to your portfolio. Third, your money will have to last one year less, assuming your lifespan is the same in either case.

Reviewing the assumptions from the previous post, consider a retirement portfolio worth $1,250,000, expenses of $50,000, 30% of the portfolio in equities, and a decline in portfolio value of 16.5%.

By working through the first year, $50,000 won’t need to be withdrawn from the portfolio for expenses. You would also be permitted to contribute an additional $20,500 to your portfolio, assuming that you were using a 401(K) and at least 50 years old. Even if you received no employer matching, your portfolio would be worth $1,064,250 at the end of the year. To get that number I reduced your starting portfolio (of $1,250,000) by 16.5% and added your $20,500 contribution. The actual number would be slightly different since contributions would be made throughout the year and may also be subject to market forces.

Plugging those numbers into the FIRECalc, we raised the success rate from 44.4% to 51.9%. Is working an extra year worth raising the probability of your money lasting through retirement by 7.5%? Also remember that this extra year worked was assumed to occur during an extraordinarily bad year for the stock market. Working one extra year during flat or positive gains of the market could have an even greater effect.

Would you consider working an extra year to significantly increase the likelihood of having enough money to last your entire retirement?

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• Reinvesting Monthly Payments: until now, it took some efforts to keep your money invested. We have made it a lot easier by offering the ability to schedule a search that runs automatically when your cash balance equals or exceeds a given amount. This feature currently uses LendingMatch; we will be adding the ability to use the more granular credit criteria soon. To find this feature, log into your lender account and go to Invest > Reinvest
• Notes Already Invested in: many of you have asked for this feature in the last few months: you will now be able to see which series of notes you have already invested in and avoid investing a second time. You can also exclude them altogether when browsing and searching for notes to invest in, by selecting a check box at the top of the search page.
• Give your friends $50: you can now pass the word out to your friends and family and give them $50 to try Lending Club. Simply log into your lender account, click on the "Invite" tab, and fire up emails to your connections.
• Charged off loans and notes: we have added a “charged off” status to your account, so that you can now differentiate defaults from charge-offs. While “default” occurs automatically when a loan is 120 days past due, a loan or note only gets charged off when Lending Club considers it unrecoverable after a review of the collections activities (which can happen before or after 120 days). These charge-offs will appear in your end of year statement so that you can report them as losses for tax purposes.

Let us know how useful you find these new features, and feel free to tell us in the comments below which new features we should be working on.

Happy New Year!

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