Robinhood Gold 3% Match Review: More Details on IRA Transfers and 401k Rollovers

April 16, 2024 By Jonathan Ping 29 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

Update: My transfer is complete after 3 business days. $7,885 bonus posted. Robinhood offers an improved 3% match on IRA contributions if you subscribe to their Gold membership, which costs either $5 or $6.99 per month. Through 4/30/24, you can also get a 3% match on IRA transfers and 401k/403b/457/401a rollovers. Please start with my initial 3% IRA Match overview, the Robinhood FAQ, and Robinhood Terms & Conditions [pdf]. After doing hours of additional research, this is a follow-up post with a lot of details for other folks that also like to cover all the bases.

I’m have just completed my own transfer, and here’s the full walkthrough:

  • Open a Robinhood brokerage account (done years ago) and put some money inside. If you haven’t opened one before, here is my referral link. It is overwhelmingly likely you’ll only get $5 of stock (as will I), but there is a very tiny chance you’ll get $200.
  • Signed up for Robinhood Gold (first 30-days free, then $5 or $6.99/month). It is important you do this first, before the transfer.
  • Opened a Roth IRA account on 4/10 (leave empty). I declined Securities Lending, as it removes SIPC protection.
  • Requested a transfer from Vanguard Roth IRA on 4/11 (all Vanguard ETFs inside).
  • Received email “Roth IRA account transfer request has been accepted’ on 4/15.
  • Received email “Good news! Your Roth IRA account transfer was completed” very late 4/16 (technically 4/17). So it took 3-4 business days, faster than the estimated 5-7 business day.
  • Robinhood credited the 3% immediately upfront (~$7,885). To keep it, I need to keep the transferred balance + bonus amount in the IRA for 5 years. I also need to keep paying for Robinhood Gold for a full year past the bonus paid date. I plan to turn on automatic dividend reinvestment and not touch it for 5 years.
  • I don’t plan on making future IRA contributions into Robinhood, as I don’t want to keep my IRA there past 5 years. (Let’s say you put in $100,000 in Year 1 and then $7,000 in Year 2, Year 3, Year 4, Year 5. If you attempt to take out any amount at all in Year 6, how can you designate that money as part of the “old” $100,000 and not any of the more recent $7,000 contributions? It would just seem like you’re taking out part of the $7,000 contribution from Year 5 and thus lose that match, right?)

Here are some screenshots from the process:

Robinhood doesn’t allow all asset types, so you can’t own mutual funds, individual bonds, and closed-end funds. Robinhood is not a full-featured brokerage firm. Here is the full list of what is and isn’t allowed. They support the following:

  • U.S. exchange-listed stocks and ETFs
  • Options contracts for U.S. Exchange-Listed Stocks and ETFs
  • ADRs for over 650 globally-listed companies

This means that if you want to move your balance over to Robinhood, you will have to sell any mutual funds (or convert them to ETFs), individual bonds, brokered CDs, and so on. I converted my Vanguard mutual funds to ETFs, and it took 1-2 business days.

SIPC insurance limits and excess insurance. Robinhood is a member of the Securities Investor Protection Corporation (SIPC), which steps if a broker fails. Robinhood has also purchased additional excess SIPC insurance on the private market. From the Robinhood site:

Robinhood Financial LLC and Robinhood Securities, LLC are both members of SIPC, which protects securities for customers of its members up to $500,000 (including $250,000 for claims for cash). Explanatory brochure available upon request or at www.sipc.org.

We’ve purchased an additional insurance policy for Robinhood Markets, Inc., Robinhood Financial LLC, and Robinhood Securities, LLC to supplement SIPC protection. The additional insurance becomes available to customers in the event that SIPC limits are exhausted. This additional insurance policy provides protection for securities and cash up to an aggregate of $1 billion, and is limited to a combined return to any customer of $50 million in securities, including $1.9 million in cash. Similar to SIPC protection, this additional insurance doesn’t protect against a loss in the market value of securities.

From SIPC.org::

SIPC protects against the loss of cash and securities – such as stocks and bonds – held by a customer at a financially-troubled SIPC-member brokerage firm. The limit of SIPC protection is $500,000, which includes a $250,000 limit for cash.

Is SIPC a U.S. Government Agency?
No. SIPC is not an agency or establishment of the United States Government. SIPC is a non-profit membership corporation created under the Securities Investor Protection Act.

My brokerage firm has excess SIPC insurance. How does that work?
Excess SIPC insurance is insurance provided by a private insurer and not by SIPC. The insurance is intended to protect brokerage customers against the risk that customers will not recover all of their cash and securities in the proceeding under the Securities Investor Protection Act (SIPA). Under many of these policies, customer eligibility for recovery is not determined until after the SIPA liquidation of the customer’s brokerage firm has concluded and the amount of the customer’s recovery in that proceeding has been established.

Some people have concerns that Robinhood is a smaller company with a history of questionable judgment and violating securities regulations. Robinhood holds the current record for highest FINRA fine ever. As a result, you may choose to limit the amount transferred to Robinhood to under $500,000 in assets (and $250,000 cash) per eligible account type. Here are the different “capacities”. For example, you could have an individual taxable account, a traditional IRA, and a Roth IRA at Robinhood and each one would have $500,000 in coverage. I will be staying under these limits as well, but my IRA balance simply isn’t that big anyway.

Note that if you opt-in (or don’t opt-out) to Stock Lending during the account transfer or account opening process, any securities that are loaned out are no longer protected by the SIPC. This is usually offset by a promise of 100% collateral, but that assumes trust that Robinhood will post that collateral. See Gamestop short squeeze for a very recent example of Robinhood… not posting enough collateral. Therefore, I also don’t recommend Stock Lending with Robinhood.

Robinhood limitations on beneficiaries. Robinhood only allows a primary beneficiary who is an adult. That means no trusts, no minors, and no “per stirpes” instructions. See article.

Whom can I designate as my beneficiary?
To be eligible as a TOD or IRA beneficiary, the individual must be a person who is at least 18 years old, a US Citizen, or otherwise be legally permitted to open a Robinhood account.

The Robinhood Gold IRA Deposit Match counts as interest earned inside your IRA. From the official Terms and Conditions:

Robinhood processes and treats the Robinhood Gold IRA Deposit Match as interest earned by the IRA account for tax reporting purposes. The interest amount is based on a percentage of contributions made into the IRA Account. The interest earned by the IRA account will not be subject to, or impact, the maximum annual dollar contribution limit or the maximum annual deductible amount. Please note that the Robinhood Gold IRA Deposit Match may be taxable income for conversions of a non-deductible IRA contribution to a Roth IRA. Robinhood does not provide tax advice. You are encouraged to consult with your tax professional about appropriate tax reporting and treatment relating to this bonus award and the deposit of the bonus award in your account. Any taxes resulting from the bonus award are your responsibility.

From the FAQ:

Does the IRA match count toward my annual IRA contribution limit?
No. The IRA match counts as interest income in your IRA and doesn’t count toward your annual IRA contribution limit.

How is the IRA match treated for tax reporting purposes?
The IRA match is treated as interest income in your IRA. We won’t deliver a 1099-INT due to the tax status of IRAs.

This important factor makes the effective value higher than the usual cash bonus that is taxable income. The amount gets to keep growing inside your Roth IRA, tax-free.

Robinhood will also reimburse your transfer fees up to $75 if you transfer at least $7,500 worth of assets. After the transfer is completed, you must contact then via the live chat function and they will reimburse you after you upload a screenshot of the fee charged.

When you transfer out eventually, Robinhood does charge a $100 Outgoing ACAT fee. Ideally, there will be another broker to reimburse that fee in the future, but who knows. Here is their full fee schedule [pdf].

Customer service tips. Robinhood does not have a traditional phone number to reach customer service. You have to go the help section, search for a topic, and then look for the “Contact Us” button at the bottom of the page (presumably after you have read the canned answer and still need help). Then you can either have a Live Chat or request a Callback where they will call you back on the phone at a later time.

Security and Privacy tips. To access these settings on the iPhone app, click on the head/body icon on the bottom right, then the three lines icon on the top left, and then “Security and privacy”. On the plus side, Robinhood supports a variety of 2FA options: SMS, Device passkeys, and Authenticator apps. Scroll down further and you can also opt out of their data sharing.

The deadline is April 30th, and the terms state the transfer has to be “initiated and completed” by that date. As of right now, there’s still a decent buffer as it takes about a week for most IRA transfers. For those with large IRAs, this can be a very significant bonus. You may have reservations about moving your assets to Robinhood, which is certainly understandable. I hope this helps you make a more informed decision for your own situation.

Filed Under: Deals & Offers, Investing, Retirement
Last updated: April 16, 2024
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Savings I Bonds May 2024: Predicted ~1.2% Fixed Rate, 2.97% Inflation Rate

April 14, 2024 By Jonathan Ping 9 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

Savings I Bonds are a unique, low-risk investment backed by the US Treasury that pay out a variable interest rate linked to inflation. With a holding period from 12 months to 30 years, you could own them as an alternative to bank certificates of deposit (they are liquid after 12 months) or bonds in your portfolio.

New inflation numbers were just announced at BLS.gov, which allows us to make an early prediction of the May 2024 savings bond rates a couple of weeks before the official announcement on the 1st. This also allows the opportunity to know exactly what a April 2024 savings bond purchase will yield over the next 12 months, instead of just 6 months. You can then compare this against a May 2024 purchase.

New inflation rate prediction. September 2023 CPI-U was 307.789. March 2024 CPI-U was 312.332, for a semi-annual inflation rate of 1.48%. Using the official composite rate formula:

Composite rate formula: [Fixed rate + (2 x semiannual inflation rate) + (fixed rate x semiannual inflation rate)]

This results in the variable component of interest rate for the next 6 month cycle being ~2.96% to 2.97% if you use a fixed rate of between 0% and 1%.

Tips on purchase and redemption. You can’t redeem until after 12 months of ownership, and any redemptions within 5 years incur an interest penalty of the last 3 months of interest. A simple “trick” with I-Bonds is that if you buy at the end of the month, you’ll still get all the interest for the entire month – same as if you bought it in the beginning of the month. It’s best to give yourself a few business days of buffer time. If you miss the cutoff, your effective purchase date will be bumped into the next month.

Buying in April 2024. If you buy before the end of April, the fixed rate portion of I-Bonds will be 1.30%. You will be guaranteed a total interest rate of 1.30 + 3.97 = 5.27% for the next 6 months. For the 6 months after that, the total rate will be 1.30 + 2.97 = 4.27%.

Let’s look at the scenario where you hold for the minimum of one year and pay the 3-month interest penalty. If you theoretically buy on April 30th, 2024 and sell on April 1st, 2025, I estimate that you’ll earn a ~4.04% annualized return for an 11-month holding period, for which the interest is also exempt from state income taxes. If you theoretically buy on April 30th, 2024 and sell on July 1, 2025, you’ll earn a ~4.09% annualized return for an 14-month holding period.

Comparing with the best interest rates of October 2023, these rates are lower than what is available via regular nominal Treasury bonds and other deposit accounts.

Buying in May 2024. If you buy in May 2024, you will get ~2.97% plus a newly-set fixed rate for the first 6 months. The new fixed rate is officially unknown, but is loosely linked to the real yield of short-term TIPS. My rough guess is somewhere between 1% and 1.5%. The current real yield on short-term TIPS is a tiny bit lower than it was during the last reset, when the fixed rate was set at 1.3%. Every six months after your purchase, your rate will adjust to your fixed rate (set at purchase) plus a variable rate based on inflation.

If you have an existing I-Bond, the rates reset every 6 months depending on your specific purchase month. Everyone will eventually get this variable rate. Your bond rate = your specific fixed rate (based on purchase month, look it up here) + variable rate (total bond rate has a minimum floor of 0%).

Buy now or wait? Between those two options, I would buy in April as you’ll likely get a the same or tiny bit higher fixed rate and a decent initial 6-month rate. However, I actually don’t plan to buy any savings bonds right now and will be waiting until the next CPI announcement in mid-October, as I have been buying longer-term TIPS instead (in tax-deferred) to lock in the current 2%+ real yields.

Unique features. I have a separate post on reasons to own Series I Savings Bonds, including inflation protection, tax deferral, exemption from state income taxes, and potential tax benefits if used toward qualified educational expenses.

Over the years, I have accumulated a nice pile of I-Bonds and consider it part of the inflation-linked bond allocation inside my long-term investment portfolio.

Annual purchase limits. The annual purchase limit is now $10,000 in online I-bonds per Social Security Number. For a couple, that’s $20,000 per year. You can only buy online at TreasuryDirect.gov, after making sure you’re okay with their security protocols and user-friendliness. You can also buy an additional $5,000 in paper I bonds using your tax refund with IRS Form 8888. If you have children, you may be able to buy additional savings bonds by using a minor’s Social Security Number. TheFinanceBuff has a useful post on gifting options if you are a couple and want to frontload your purchases now. TreasuryDirect also allows trust accounts to purchase savings bonds.

Concerns about TreasuryDirect customer service. Opening a TreasuryDirect account or conducting other transactions can sometimes be a hassle as they may ask for a medallion signature guarantee which requires a visit to a physical bank or credit union and snail mail. This doesn’t apply to everyone and seems to have gotten better recently, but plan to experience delays in any transaction that you try to accomplish (registration changes, converting paper bonds, changing bank accounts). They just seem to be overwhelmed in general. Also know that if your password in compromised, they will not replace any lost or stolen savings bonds.

Bottom line. Savings I bonds are a unique, low-risk investment that are linked to inflation and only available to individual investors. You can only purchase them online at TreasuryDirect.gov, with the exception of paper bonds via tax refund. For more background, see the rest of my posts on savings bonds.

[Image: 1942 US Savings Bond poster – source]

Filed Under: Banking, Investing, Retirement, Savings Bonds
Last updated: April 14, 2024
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Acorns App Results: How Much Did Folks Earn Rounding Up Spare Change?

April 9, 2024 By Jonathan Ping Leave a Comment
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

If you don’t remember, Acorns was a hot app for a little while due to their primary feature of allowing you to automatically “round up” your purchases and invest them into a portfolio of ETFs. So if you made a $10.45 purchase, it would be rounded up to $11.00 and $0.55 would be invested.

This Axios article managed to obtain some proprietary data from Acorns and reverse-engineers it to estimate how much the average Acorns user saved (and spent) from their Roundups from 2015 to 2024. While the big-picture conclusions aren’t exactly surprising, the fintech geek side of me appreciated the peek into these details. My takeaways:

  • Survivorship bias. These numbers are taken from roughly 50,000 of their most dedicated users from 2015 to March 2024. Nine years is a long time in the fintech world! Everyone who closed their account before March 2024 was not included.
  • Average roundup per user: $43 a month. Times 9 years = $4,644. Assuming randomly-distributed purchases, that’s about 86 purchases a month. This assumes no other deposits, no withdrawals, and no investment growth.
  • Average withdrawal per user: $28 a month. In reality, over half of these Roundups were withdrawn, which led to a lower final balance.
  • Average additional deposit per user: $86 a month. In addition to the automated round-ups, this is the average additional deposit per month.

Did Acorns make users rich? The article title was “How much Acorns savers amassed by investing spare change”? Their conclusion:

Now we know just how meaningful the amount is — enough to buy a decent vacation, but not remotely enough to make a down payment on a house.

Well… yeah? Did anyone expect what used to be a jar of coins to cover a house downpayment? Back in the day, the big jar of coins also often went towards a family vacation.

My wife’s family once filled up one of those 5-gallon office water cooler jugs, and they weren’t alone. From Reddit/Imgur, this 5-gallon jug held very close to $3,000 and took the user 7 years to fill:

Did Acorns inspire additional savings? The optimistic way to think of Acorns is that it can show you that saving is indeed possible and easier than you thought, and that realization can inspire even more savings. A not-so-optimistic way is to point out that paying $3 every month to help you put aside $43 of your own money is kind of a big percentage. Especially if you’re going to take a lot of it out and disrupt the compounding growth.

The real-world results are that amongst Acorn’s most loyal users (the ones that kept using and paying for the service for 9 years), roughly and on average, along with the $43 in monthly Roundups contributed an additional $86 a month via recurring deposits but ended up withdrawing roughly half of the total amount (including any investment gains). My view is that this account was treated more commonly like a small emergency fund cushion, which is not a bad thing but a much smaller scale than they might have hoped for.

Filed Under: Banking, Investing
Last updated: April 10, 2024
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Best Interest Rates on Cash Roundup – April 2024

April 4, 2024 By Jonathan Ping 3 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

Here’s my monthly roundup of the best interest rates on cash as of April 2024, roughly sorted from shortest to longest maturities. There are lesser-known opportunities available to individual investors, often earning you a lot more money while keeping the same level of safety by moving to another FDIC-insured bank or NCUA-insured credit union. Check out my Ultimate Rate-Chaser Calculator to see how much extra interest you could earn from switching. Rates listed are available to everyone nationwide. Rates checked as of 4/4/2024.

TL;DR: Future Fed rate cuts appear expected, and some banks are already making rate cuts themselves. Still 5%+ savings accounts and short-term CDs, but long-term CD rates dropped slightly again. Compare against Treasury bills and bonds at every maturity, taking into account state tax exemption.

Fintech accounts
Available only to individual investors, fintech companies often pay higher-than-market rates in order to achieve fast short-term growth (often using venture capital). “Fintech” is usually a software layer on top of a partner bank’s FDIC insurance.

  • 5.26% APY ($1 minimum). Raisin lets you switch between different FDIC-insured banks and NCUA-insured credit unions easily without opening a new account every time, and their liquid savings rates currently top out at 5.26% APY across multiple banks. See my Raisin review for details. Raisin does not charge depositors a fee for the service.
  • 5.36% APY (before fees). MaxMyInterest is another service that allows you to access and switch between different FDIC-insured banks. You can view their current banks and APYs here. As of 4/4/23, the highest rate is from Customers Bank and BankProv at 5.36% APY. However, note that they charge a membership fee of 0.04% per quarter, or 0.16% per year (subject to $20 minimum per quarter, or $80 per year). That means if you have a $10,000 balance, then $80 a year = 0.80% per year. This service is meant for those with larger balances. You are allowed to cancel the service and keep the bank accounts, but then you may lose their specially-negotiated rates and cannot switch between banks anymore.

High-yield savings accounts
Since the huge megabanks STILL pay essentially no interest, everyone should have a separate, no-fee online savings account to piggy-back onto your existing checking account. The interest rates on savings accounts can drop at any time, so I list the top rates as well as competitive rates from banks with a history of competitive rates and solid user experience. Some banks will bait you with a temporary top rate and then lower the rates in the hopes that you are too lazy to leave.

  • The top rate at the moment is at Poppy Bank at 5.50% APY. BrioDirect at 5.35% APY. I have no personal experience with Poppy or Brio, but they are the top rates at the moment. CIT Platinum Savings at 5.05% APY with $5,000+ balance.
  • SoFi Bank is at 4.60% APY + up to $325 new account bonus with direct deposit. You must maintain a direct deposit of any amount each month for the higher APY. SoFi has historically competitive rates and full banking features. See details at $25 + $300 SoFi Money new account and deposit bonus.
  • Here is a limited survey of high-yield savings accounts. They aren’t the highest current rate, but historically have kept it relatively competitive and I like to track their history. This past month, I have seen some quiet, small, ominous rate drops.

Short-term guaranteed rates (1 year and under)
A common question is what to do with a big pile of cash that you’re waiting to deploy shortly (plan to buy a house soon, just sold your house, just sold your business, legal settlement, inheritance). My usual advice is to keep things simple and take your time. If not a savings account, then put it in a flexible short-term CD under the FDIC limits until you have a plan.

  • No Penalty CDs offer a fixed interest rate that can never go down, but you can still take out your money (once) without any fees if you want to use it elsewhere. Raisin has a 9-month No Penalty CD at 5.10% APY with $1 minimum deposit and 30-day minimum hold time. Marcus has a 13-month No Penalty CD at 4.70% APY with a $500 minimum deposit. Consider opening multiple CDs in smaller increments for more flexibility.
  • CFG Bank has a 1-year certificate at 5.40% APY ($500 min). There is a 180-day interest penalty if you withdraw your CD funds before maturity.
  • CIBC Agility Online has a 13-month CD at 5.36% APY ($1,000 min). Reasonable 30-day penalty if you withdraw your CD funds before maturity.

Money market mutual funds + Ultra-short bond ETFs
Many brokerage firms that pay out very little interest on their default cash sweep funds (and keep the difference for themselves). Note: Money market mutual funds are highly-regulated, but ultimately not FDIC-insured, so I would still stick with highly reputable firms. I am including a few ultra-short bond ETFs as they may be your best cash alternative in a brokerage account, but they may experience losses.

  • Vanguard Federal Money Market Fund is the default sweep option for Vanguard brokerage accounts, which has an SEC yield of 5.28% (changes daily, but also works out to a compound yield of 5.41%, which is better for comparing against APY). Odds are this is much higher than your own broker’s default cash sweep interest rate.
  • The PIMCO Enhanced Short Maturity Active Bond ETF (MINT) has a 5.32% SEC yield and the iShares Short Maturity Bond ETF (NEAR) has a 5.10% SEC yield while holding a portfolio of investment-grade bonds with an average duration of ~6 months.

Treasury Bills and Ultra-short Treasury ETFs
Another option is to buy individual Treasury bills which come in a variety of maturities from 4-weeks to 52-weeks and are fully backed by the US government. You can also invest in ETFs that hold a rotating basket of short-term Treasury Bills for you, while charging a small management fee for doing so. T-bill interest is exempt from state and local income taxes, which can make a significant difference in your effective yield.

  • You can build your own T-Bill ladder at TreasuryDirect.gov or via a brokerage account with a bond desk like Vanguard and Fidelity. Here are the current Treasury Bill rates. As of 4/3/24, a new 4-week T-Bill had the equivalent of 5.36% annualized interest and a 52-week T-Bill had the equivalent of 5.04% annualized interest.
  • The iShares 0-3 Month Treasury Bond ETF (SGOV) has a 5.26% SEC yield and effective duration of 0.10 years. SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL) has a 5.21% SEC yield and effective duration of 0.08 years.

US Savings Bonds
Series I Savings Bonds offer rates that are linked to inflation and backed by the US government. You must hold them for at least a year. If you redeem them within 5 years there is a penalty of the last 3 months of interest. The annual purchase limit for electronic I bonds is $10,000 per Social Security Number, available online at TreasuryDirect.gov. You can also buy an additional $5,000 in paper I bonds using your tax refund with IRS Form 8888.

  • “I Bonds” bought between November 2023 and April 2024 will earn a 5.27% rate for the first six months. The rate of the subsequent 6-month period will be based on inflation again. More on Savings Bonds here.
  • In mid-April 2024, the CPI will be announced and you will have a short period where you will have a very close estimate of the rate for the next 12 months. I will have another post up at that time.

Rewards checking accounts
These unique checking accounts pay above-average interest rates, but with unique risks. You have to jump through certain hoops which usually involve 10+ debit card purchases each cycle, a certain number of ACH/direct deposits, and/or a certain number of logins per month. If you make a mistake (or they judge that you did) you risk earning zero interest for that month. Some folks don’t mind the extra work and attention required, while others would rather not bother. Rates can also drop suddenly, leaving a “bait-and-switch” feeling.

  • OnPath Federal Credit Union pays 7.00% APY on up to $10,000 if you make 15 debit card purchases, opt into online statements, and login to online or mobile banking once per statement cycle. Anyone can join this credit union via $5 membership fee to join partner organization. You can also get a $100 Visa Reward card when you open a new account and make qualifying transactions.
  • Credit Union of New Jersey pays 6.00% APY on up to $25,000 if you make 15 debit card purchases, opt into online statements, and make at least 1 direct deposit, online bill payment, or automatic payment (ACH) per statement cycle. Anyone can join this credit union via $5 membership fee to join partner organization.
  • Andrews Federal Credit Union pays 6.00% APY on up to $25,000 if you make 15 debit card purchases, opt into online statements, and make at least 1 direct deposit or ACH transaction per statement cycle. Anyone can join this credit union via partner organization.
  • Pelican State Credit Union pays 6.05% APY on up to $20,000 if you make 15 debit card purchases, opt into online statements, log into your account at least once, and make at least 1 direct deposit, online bill payment, or automatic payment (ACH) per statement cycle. Anyone can join this credit union via partner organization membership.
  • Orion Federal Credit Union pays 6.00% APY on up to $10,000 if you make electronic deposits of $500+ each month (ACH transfers count) and spend $500+ on your Orion debit or credit card each month. Anyone can join this credit union via $10 membership fee to partner organization membership.
  • All America/Redneck Bank pays 5.15% APY on up to $15,000 if you make 10 debit card purchases each monthly cycle with online statements.
  • Find a locally-restricted rewards checking account at DepositAccounts.

Certificates of deposit (greater than 1 year)
CDs offer higher rates, but come with an early withdrawal penalty. By finding a bank CD with a reasonable early withdrawal penalty, you can enjoy higher rates but maintain access in a true emergency. Alternatively, consider building a CD ladder of different maturity lengths (ex. 1/2/3/4/5-years) such that you have access to part of the ladder each year, but your blended interest rate is higher than a savings account. When one CD matures, use that money to buy another 5-year CD to keep the ladder going. Some CDs also offer “add-ons” where you can deposit more funds if rates drop.

  • First Internet Bank has a 5-year CD at 4.55% APY. 4-year at 4.50% APY. 3-year at 4.66% APY. 2-year at 4.82% APY. 1-year at 5.31% APY. $1,000 minimum. The early withdrawal penalty (EWP) for CD maturities of 2 years or more is 360 days of interest. For CD maturity of 1 year, the EWP is 180 days of interest.
  • BMO Alto has a 5-year CD at 4.50% APY. 4-year at 4.50% APY. 3-year at 4.50% APY. 2-year at 4.65% APY. 1-year at 5.95% APY. No minimum. The early withdrawal penalty (EWP) for CD maturities of 1 year or more is 180 days of interest. For CD maturities of 11 months or less, the EWP is 90 days of interest. Note that they reserve the right to prohibit early withdrawals entirely (!). Online-only subsidiary of BMO Bank.
  • You can buy certificates of deposit via the bond desks of Vanguard and Fidelity. You may need an account to see the rates. These “brokered CDs” offer FDIC insurance and easy laddering, but they don’t come with predictable early withdrawal penalties. Right now, I see a 5-year non-callable CD at 4.30% APY (callable: no, call protection: yes). Be warned that now both Vanguard and Fidelity will list higher rates from callable CDs, which importantly means they can call back your CD if rates drop later.

Longer-term Instruments
I’d use these with caution due to increased interest rate risk (tbh, I don’t use them at all), but I still track them to see the rest of the current yield curve.

  • Willing to lock up your money for 10 years? You can buy long-term certificates of deposit via the bond desks of Vanguard and Fidelity. These “brokered CDs” offer FDIC insurance, but they don’t come with predictable early withdrawal penalties. You might find something that pays more than your other brokerage cash and Treasury options. Right now, I see a 10-year CDs at 4.05% (callable: no, call protection: yes) vs. 4.36% for a 10-year Treasury. Watch out for higher rates from callable CDs where they can call your CD back if interest rates drop.

All rates were checked as of 4/4/2024.

Photo by micheile henderson on Unsplash

Filed Under: Banking, Deals & Offers, Investing
Last updated: April 4, 2024
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

SoFi Offers: 4.60% APY + Up to $325 Checking Bonus, 2.2% Cash Back Credit Card, $300 Personal Loan Bonus

April 3, 2024 By Jonathan Ping 77 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

Update April 2024: SoFi made a few notable changes recently, both positive and negative:

  • The SoFi Unlimited 2% Credit Card will now offer 10% boost on their rewards with direct deposit into SoFi Checking or Savings. This would work out to 2.2% cash back rewards points on everyday purchases, 3.3% cash back rewards points on SoFi Travel purchases, and 27.5% cash back rewards points on SoFi Stadium purchases.
  • There is a new inactivity fee of $25 per account for every 6 months of login inactivity.
  • The outgoing ACAT transfer fee was increased to $100. Previously $75.
  • The SoFi 2% IRA match promo is scheduled to end soon; it runs until 4/15/24.

The rest of the offers:

SoFi (“Social Finance”) is an all-in-one finance app that expanded from students loans into banking, stocks, crypto, credit cards, and more. Here are some of their other offers; New users can receive a separate opening bonus for each separate part of SoFi (Money, Invest, Loans, etc).

  • SoFi Checking Referral Offer: Up to $325 new user bonus. Open a new SoFi Money account and add at least $10 to your account within 5 days, and get $25. Then get up to $300 additional bonus with qualifying direct deposit. Plus up to 4.60% APY.
  • SoFi Invest Referral Offer: $25 new user bonus. Brokerage account. Open an Active Investing account with $10 or more, and you’ll get $25 in stock.
  • SoFi Invest Alternate Offer: Claw Game. Feeling lucky? Compare a guaranteed $25 above against having a 0.028% chance of a $1,000 bonus. (That is less than 1 in 1000 odds.)
  • SoFi Invest Asset Transfer Offer: Up to $5,000 Bonus. Transfer over your existing assets from another broker and SoFi will pay you a bonus. From $50 bonus for transferring $5,000 in assets all the way up to $5,000 bonus for $2 million in assets.
  • SoFi Student Loan Refi: $300 bonus. Warning: Do your research before refinancing your Federal student loans to a private lender.
  • SoFi Doctors and Dentists Student Loan Refi: $1,000 bonus. Special low rates just for doctors and dentists.
  • SoFi Private Student Loan: $100 bonus.
  • SoFi Personal Loans Referral Offer: Fixed $300 bonus. Fixed $300 bonus, 90 days after successful funding. The loan has no fees and you can pay it back in full after 90 days (you can pay it down to $50 before then to accrue minimal interest).
Filed Under: Banking, Deals & Offers, Investing
Last updated: April 3, 2024
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Retirees Spend Down Their Assets Much Less Than You Probably Think

April 3, 2024 By Jonathan Ping 6 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

Deep in my accumulation stage, I drastically underestimated how much retirees hate spending down their nest eggs. I have since struggled to convince my parents to spend their money, while also working longer than I planned (albeit not crazy hours) for likely similar underlying reasons. Watching your hard-earned nest egg shrink is hard.

Check out these findings from the Blackrock whitepaper titled To spend or not to spend? [pdf]:

This was not what we expected to find: on average across all wealth levels, most current retirees still had 80% of their pre-retirement savings after almost two decades of retirement according to research conducted jointly with the Employee Benefit Research Institute (EBRI). One-third even grew their assets over the course of retirement.

Why is this? Here are my takeaways:

  • The majority of retirees favor financial security over maximizing spending.
  • Spending is hampered by a deep-seated fear that they may experience a critical financial or medical shock or otherwise outlive their money.
  • Recent retirees report higher anxiety and pessimism than those retired for 10+ years. Fear of major investment loss is more concerning to recent retirees. They feel more comfortable with spending as they reach further into retirement.
  • Only 1 in 4 retirees feels they will have to spend down principal at all to fund their desired lifestyle.
  • Retirees with pension income are the least likely to spend down their assets. (Not really surprising.)
  • Retired women report higher levels of financial worry and are more risk-averse than retired men. (Also quite justifiable due longer lifespan and less assets on average.)
  • Blackrock believes that due to the decline in pensions and longer lifespans, the “strong retirement asset retention seen in this last generation of retirees will not likely be repeated for much longer”.

I was still surprised to see that 1 out of 3 managed to end up with more money after 17 years. If I’m honest with myself, this is probably going to be me. I don’t necessarily think that’s a good thing, but I guess I have some company.

Filed Under: Investing, Retirement
Last updated: April 3, 2024
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

MMB Portfolio Dividend & Interest Income Update – April 2024 (Q1)

April 2, 2024 By Jonathan Ping 8 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

Here’s my quarterly income update as a companion post to my April 2024 asset allocation & performance update. I prefer to track the income produced as an alternative metric to performance. The total income goes up much more gradually and consistently than the number shown on brokerage statements (market price), which helps encourage consistent investing. Here’s a related quote from Jack Bogle (source):

The true investor will do better if he forgets about the stock market and pays attention to his dividend returns and to the operating results of his companies. – Jack Bogle

Here is the historical growth of the S&P 500 total dividend, which tracks roughly the largest 500 stocks in the US, updated as of Q4 2023 (via Yardeni Research):

That is a much smoother ride than the price index. I imagine my portfolio as a factory that churns out dollar bills, or a tree that gives dividend fruit.

More details on dividends. Stock dividends are a portion of profits that businesses have decided to distribute directly to shareholders, as opposed to reinvesting into their business, paying back debt, or buying back shares. The dividends may suffer some short-term drops, but over the long run they have grown faster than inflation.

In the US, the dividend culture is somewhat conservative in that shareholders expect dividends to be stable and only go up. Thus the starting yield is lower, but grows more steadily with smaller cuts during hard times. Here is the historical growth of the trailing 12-month (ttm) dividend paid by the iShares Core S&P 500 ETF (IVV) via StockAnalysis.com. (They seem to have a data glitch at the moment with respect to VTI.)

European corporate culture tends to encourage paying out a higher (sometimes fixed) percentage of earnings as dividends, but that also means the dividends move up and down with earnings. The starting yield is currently higher but may not grow as reliably. Here is the historical growth of the trailing 12-month (ttm) dividend paid by the Vanguard Total International Stock ETF (VXUS).

The dividend yield (dividends divided by price) also serve as a rough valuation metric. When stock prices drop, this percentage metric usually goes up – which makes me feel better in a bear market. When stock prices go up, this percentage metric usually goes down, which keeps me from getting too euphoric during a bull market.

My portfolio income history. I started tracking the income from my portfolio in 2014. Here’s what the annual distributions from my portfolio look like over time:

  • $1,000,000 invested in my portfolio as of January 2014 would started out paying ~$24,000 in annual income over the previous 12 months. (2.4% starting yield)
  • If I reinvested the dividends/interest every quarter but added no other contributions, as of January 2024 it would have generated ~$50,000 in annual income over the previous 12 months.
  • If I spent all the dividends/interest every quarter and added no other contributions, as of January 2024 it would have generated ~$37,000 in annual income over the previous 12 months.

This chart shows how the annual income generated by my portfolio has increased over time and with dividend reinvestment.

At any given time, this is a pretty arbitrary number. But over a long period, I find it a much more pleasant way to track my progress.

TTM income yield. To estimate the income from my portfolio, I use the weighted “TTM” or “12-Month Yield” from Morningstar (checked 3/31/24), which is the sum of the trailing 12 months of interest and dividend payments divided by the last month’s ending share price (NAV) plus any capital gains distributed (usually zero for index funds) over the same period. My ttm portfolio yield is now roughly 2.53%.

What about the 4% rule? For big-picture purposes, I support the simple 4% or 3% rule of thumb, which equates to a target of accumulating roughly 25 to 33 times your annual expenses. I would lean towards a 3% withdrawal rate if you want to retire young (closer to age 50) and a 4% withdrawal rate if retiring at a more traditional age (closer to 65). Too much time is spent debating this number. It’s just a quick and dirty target to get you started, not a number sent down from the heavens!

During the accumulation stage, your time is better spent focusing on earning potential via better career moves, improving in your skillset, and/or looking for asymmetrical entrepreneurial opportunities where you have an ownership interest.

As a semi-retired investor that has been partially supported by portfolio income for a while, I find that tracking income makes more tangible sense in my mind. Our dividends and interest income are not automatically reinvested. They are simply another “paycheck”. As with our other variable paychecks, we can choose to either spend it or invest it again to compound things more quickly. You could use this money to cut back working hours, pursue a different career path, start a new business, take a sabbatical, perform charity or volunteer work, and so on.

Working less helps me be a better parent. (I need all the help I can get.) I am consciously choosing to work when they are at school but also consciously turning down work that doesn’t fit my priorities and goals. This portfolio income helps me do that.

Filed Under: Goals, Investing, Retirement
Last updated: April 2, 2024
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

MMB Portfolio Asset Allocation & Performance Update – April 2024 (Q1)

March 31, 2024 By Jonathan Ping Leave a Comment
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

Here’s my 2024 Q1 update for our primary investment holdings (numbers taken after market close 3/29), including all of our combined 401k/403b/IRAs and taxable brokerage accounts but excluding our house and side portfolio of self-directed investments. Following the concept of skin in the game, the following is not a recommendation, but a sharing of our real-world, imperfect, low-cost, diversified DIY portfolio.

“Never ask anyone for their opinion, forecast, or recommendation. Just ask them what they have in their portfolio.” – Nassim Taleb

How I Track My Portfolio
Here’s how I track my portfolio across multiple brokers and account types. There are limited free advanced options after Morningstar discontinued free access to their portfolio tracker. I use both Empower Personal Dashboard (previously known as Personal Capital) and a custom Google Spreadsheet to track my investment holdings:

  • The Empower Personal Dashboard real-time portfolio tracking tools (free) automatically logs into my different accounts, adds up my various balances, tracks my performance, and calculates my overall asset allocation daily. Formerly known as Personal Capital.
  • Once a quarter, I also update my manual Google Spreadsheet (free to copy, instructions) because it helps me calculate how much I need in each asset class to rebalance back towards my target asset allocation. I also create a new tab each quarter, so I have a personal archive of my holdings dating back many years.

2024 Q1 Asset Allocation and YTD Performance
Here are updated performance and asset allocation charts, per the “Holdings” and “Allocation” tabs of my Empower Personal Dashboard.

I own broad, low-cost exposure to productive assets that will provide long-term returns above inflation, distribute income via dividends and interest, and finally offer some historical tendencies to balance each other out. I have faith in the long-term benefit of owning businesses worldwide, as well as the stability of high-quality US Treasury debt. My stock holdings roughly follow the total world market cap breakdown at roughly 60% US and 40% ex-US. I add just a little “spice” to the broad funds with the inclusion of “small value” factor ETFs for US, Developed International, and Emerging Markets stocks as well as diversified real estate exposure through US REITs.

By paying minimal costs including management fees, transaction spreads, and tax drag, I am trying to essentially guarantee myself above-average net performance over time.

The portfolio that you can hold onto through the tough times is the best one for you. Every asset class will eventually have a low period, and you must have strong faith during these periods to earn those historically high returns. You have to keep owning and buying more stocks through the stock market crashes. You have to maintain and even buy more rental properties during a housing crunch, etc. A good sign is that if prices drop, you’ll want to buy more of that asset instead of less. I don’t have strong faith in the long-term results of commodities, gold, or bitcoin – so I don’t own them.

I do not spend a lot of time backtesting various model portfolios, as I don’t think picking through the details of the recent past will necessarily create superior future returns. You’ll usually find that whatever model portfolio is popular at the moment just happens to hold the asset class that has been the hottest recently as well.

I have settled into a long-term target ratio of roughly 70% stocks and 30% bonds within our investment strategy of buy, hold, and occasionally rebalance. My goal has evolved to more of a “perpetual income portfolio” as opposed to a “build up a big stash and hope it lasts until I die” portfolio. My target withdrawal rate is 3% or less. Here is a round-number breakdown of my target asset allocation along with my primary ETF holding for each asset class.

  • 35% US Total Market (VTI)
  • 5% US Small-Cap Value (VBR)
  • 15% International Total Market (VXUS)
  • 5% International Small-Cap Value (AVDV)
  • 10% US Real Estate (REIT) (VNQ)
  • 15% US “Regular” Treasury Bonds or FDIC-insured deposits
  • 15% US Treasury Inflation-Protected Bonds (or I Savings Bonds)

Performance details. According to Empower, my portfolio is up about 5% so far in 2024. The S&P 500 is up about 10% YTD, while the US Bond index is down around 1%. I hold enough bonds and international stocks that I’m always going to be lagging the hottest sector, and I’m pretty much used to that now.

As usual, not much action. These quarterly updates are mostly for me to manually log into all my accounts to make sure they still exist. I didn’t sell a single share of anything. I did reinvest some dividends and interest into TIPS and Treasury bonds to bring me back towards my target numbers. I also made my 2024 contributions to a Backdoor Roth IRA and bought VNQ in it.

I’ll share about more about the income aspect in a separate post.

Filed Under: Giving Back, Investing, Retirement
Last updated: March 31, 2024
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Robinhood Gold Review: 1% Deposit Boost, 3% Cash Back Credit Card, 3% IRA Transfer Match Ending Soon

March 28, 2024 By Jonathan Ping 21 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

Updated. Robinhood recently held a Steve Jobs-esque product announcement about new upcoming features for their Robinhood Gold paid membership tier ($5 a month or $50 per year upfront). Here are the highlights of the new features:

  • 1% match on all deposits. Called “Unlimited Deposit Boost”, Gold members will get a 1% match on all incoming deposits. For example, if you transfer $500 every month to invest at Robinhood, they will give you an extra $5 a month to invest. If you transfer in $100,000, they will give you $1,000. Doled out over a 2-year period if you keep your deposits there during that time.
  • 3% cash back on all categories with their new credit card. Redeems directly into a Robinhood account. Can create virtual numbers and extra cards for family members. No annual fee, but does require Gold membership.
  • New customizable user interface. One of Robinhood’s strengths has always been it’s modern user interface. That’s always been countered by their fintech-average level of customer service.

Here are the existing Robinhood Gold features:

  • 5% APY on cash sweep deposits. (1.5% APY without Gold until May 2024, then 0.01% APY after that.)
  • 3% match on annual IRA contributions. (1% match without Gold.) 5-year lock-up period. This is meant to be a recurring thing. See FAQ for details.
  • 3% match on incoming IRA transfers and rollover amounts (end 4/30/24). This is a limited-time offer and potentially huge for those with big IRAs. 5-year lock-up period. See link for details.
  • Bigger instant deposits. Instant Deposit eliminates the three-day wait period for funds to transfer from your bank into Robinhood. With Gold, customers can get larger Instant Deposits of up to $50,000 depending on their brokerage account balance and status.
  • Free premium stock reports from Morningstar. Gold members get unlimited access to Morningstar’s stock research reports. These reports are available for approximately 1,700 stocks and are updated frequently to reflect important company events.
  • Level II market data from Nasdaq. Level II market data shows multiple bid and ask prices from Nasdaq for any given security so investors can better determine the availability or desire for a security at a certain price.

In my opinion, the hottest deal is still the 3% match on incoming 401k rollovers and IRA transfers. There is a 5-year lock-up required, but it’s still much more money than any other broker will give you. That deal is scheduled to end soon on April 30th, but they’ve literally added billions of IRA assets with this promo:

The second hottest deal is the new 1% unlimited deposit match, doled out over a 2-year period. It hasn’t rolled out yet, but 1% is pretty solid in terms of deposit bonuses.

Deposit boost is divided into 24 monthly payouts. To earn your full boost, hold or invest your brokerage deposits for 2 years. If you cancel Gold, you’ll lose future payouts you haven’t earned yet.

The third hottest deal is the 3% cash back credit card, even though the credit card is getting the most press attention. 3% cash back with no annual fee is certainly noteworthy, but the card also doesn’t have an upfront sign-up bonus (and technically requires Gold at $50/$60 a year). If you currently have a 2% cash back card and spend even $50,000 a year on your credit card, 1% more is only $500 a year in extra cash back. Meanwhile, I don’t spend that much on any single card (due to other better promos that will earn me $500+ upfront) and I already get 2.6% back from my Bank of America credit card with Preferred Rewards. I like the idea of simple 3% cash back, but not quite worth a credit pull for me (we’ll see how long it lasts, 3% has historically been too high to last).

If you are one of the first 5,000 people to refer 10 people to Robinhood Gold, apparently they will send you a credit card made of actual gold. Even though I am a private person and have nobody to impress, here is my referral link.

In my Robinhood app, I saw that they offered me $5 to “learn about” Robinhood Gold, so along with the free 30-day trial that’s two months of free Robinhood to test these features out. I haven’t taken advantage of the 3% IRA bonus, but am thinking about it harder now.

Filed Under: Deals & Offers, Investing
Last updated: March 29, 2024
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Finally Converted my Vanguard Mutual Fund Admiral Shares to ETF Equivalents in 2024

March 24, 2024 By Jonathan Ping 26 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

I recently decided to convert my Vanguard mutual fund shares into each of their respective ETF equivalents. These were all held inside a Vanguard.com brokerage account. I remember first considering this mutual fund to ETF option way back in 2010 (aspects of that article may now be outdated). Instead of covering all of the possible decision factors, here I’ll just document my own personal factors and my experience completing the process.

Why did it take 14 years for me to convert my Vanguard mutual fund shares?

Back in 2010, here was my rationale for staying put:

  • I had no plans to ever leave Vanguard as my primary brokerage custodian. Everything worked well enough; I had no complaints. My personal financial situation was also relatively simple.
  • Vanguard was still simple. Minimal annoying fees. Things were somewhat barebones but everything worked for the most part. A human answered the phone relatively quickly. They sent me paper statements for free. My account only allowed mutual funds, no individual stocks. Vanguard had the vibe that “We’re different and that’s fine. People aligned with our views will find us.”
  • The expense ratios for ETFs and mutual funds were either identical or nearly idential and both had the same tax-efficiency due to their share class construction. For a long time, the Admiral and ETFs remained at pretty much the same cost. When you buy ETFs, there are also bid/ask spreads and premiums/discounts to NAV to navigate. Any tiny difference in performance could be wiped out by all this “noise”.
  • I preferred the simplicity and ease of dollar-based transactions. For example, back then if I had $1,000 to invest in VTI, at the current share price of $256, I would only be able to purchase three VTI shares and the remaining would remain in $232 cash.

Fast forward to 2024, and things were a little different:

  • I am seriously considering leaving Vanguard as my primary brokerage custodian. This came after a few frustrating incidents and long hold times, in which I felt that it would be easier on my spouse if our assets were located at a place committed to top customer service. Essentially, an estate planning issue after handling my parent’s finances. There are definitely good and helpful people at Vanguard, but the level of service is not nearly as consistent as with Fidelity. If I consolidated, then there would also be one less major account to manage. Many outside brokerages won’t trade Vanguard mutual funds (besides full sales), so this was the main reason for converting to ETFs.
  • Vanguard is trying to grow assets as hard as everyone else. Vanguard still has a low-cost structure, but now it just seems like it wants more, more, more. The CEO is leaving under questionable circumstances without a replacement ready from within, so they are likely hiring an outsider. (Tim Buckley started as Jack Bogle’s research assistant 33 years ago!) The Vanguard now serves me more browser pop-up windows (e-statements) and upsell ads (Advisory services) than both Fidelity and Schwab. For example, Fidelity mails me paper statements for free. This is helpful for older people that may lose track of accounts. Vanguard wants $25 a year for every single account unless I have $5 million. In that case, why not simply own Vanguard ETFs inside a Fidelity brokerage account? If Vanguard hires a CEO from another brokerage company, that just shows the direction the ship is heading.
  • The expense ratio spread has widened slightly to the range of 0.01% up to 0.06% (VWO). This is still not a big deal to me, but it is apparent that Vanguard gave up trying to maintain parity and in the future the ETFs will always be cheaper. The trend is a wider gap over time, not a narrower one. I rarely sell (or even buy) these days, so I have minimal transaction costs.
  • Vanguard now supports fractional share ownership for ETFs. Today, If I had $1,000 to invest in VTI, at the current share price of $256, I would be able to invest every penny and end up with 3.906 shares of VTI. Therefore, even if I do stay with Vanguard, I can still perform dollar-based transactions. The conversion is not a taxable event, so there is no tax impact.

Which Vanguard mutual funds can your convert? Although it hasn’t been updated since 2019 and thus may be outdated, this Vanguard PDF listing which mutual funds are convertible to ETFs may still be useful. Here are the specific mutual fund and ETF pairings (with expense ratios) that I converted and their expense ratios as of March 2024:

  • Vanguard Total Stock Market Index: VTSAX (0.04%) to VTI (0.03%). Difference of 0.01%.
  • Vanguard Total International Stock Index: VTIAX (0.12%) to VXUS (0.08%). Difference of 0.04%.
  • Vanguard Small-Cap Value Index: VSIAX (0.07%) to VBR (0.08%). No difference.
  • Vanguard Emerging Markets Stock Index: VTIAX (0.14%) to VWO (0.08%). Difference of 0.06%.
  • Vanguard Intermediate-Term Treasury Index VSIGX (0.07%) to VGIT (0.04%). Difference of 0.03%.

Again, the absolute differences in expense ratios aren’t that significant in my opinion unless you are talking in the millions. But the direction of the trend is pretty clear, and I do hope to have millions in each eventually. 🤑

Quick rundown of actual conversion process:

  • Download all cost basis information. You should log into your account and download all of the cost basis information for all your mutual fund shares. This is especially true for non-covered shares. The cost basis for covered shares should carry over, but it’s better to be safe.
  • I had to call Vanguard on the phone to initiate the conversion. Use the phone in your account or try 866-499-8473. (I could not find a way to do it online.) It took a couple jumps to find the right person, but after that the process was straightforward. As long as the request is entered before market close, it should go through at the end of that same day. Otherwise, it’ll be the next day. You will acknowledge that this is a one-way, non-reversible conversion. Again, you are not selling anything, so there is no taxable event.
  • The next day, my shiny new ETF holdings were available in my account. and I was also able to confirm that all of the tax lots for cost basis carried through without an issue. The conversion was done at the net asset value (NAV) of the funds at market close. All of my mutual fund shares were converted, and I was issued fractional shares of ETFs.

Filed Under: Investing Tagged With:
Last updated: March 27, 2024
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Typical Target Date Fund Glide Path vs. Simple Fixed Asset Allocation?

March 20, 2024 By Jonathan Ping 6 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

John Rekenthaler questions the industry-standard Target Date Fund glide path in the Morningstar article Should Target-Date Funds Allot More to Equities?. He runs tests comparing the traditional target date glide path alongside two alternatives:

  • “Traditional” Target Date Glide Path: 85% stocks/15% bonds from ages 25 to 35. Stock % gradually decreases to 48% stocks from ages 35 to 65 (averages out to 70% stocks over the entire 40-year career).
  • Flat Glide Path: 70% stocks/30% bonds constant for all 40 years.
  • “Reverse” Target Date Glide Path: As another data point to explore, this starts at 48% and gradually increases to 85% stocks from 25 to 55 and then stays at 86% for age 55 yo 65 (last 10 years). Again, averages out to 70% stocks over the entire 40-year career.

This caught my eye because that’s pretty much my personal asset allocation: a fixed 70% stock/30% bond allocation that I intend to keep more or less forever. My background reasons are somewhat different, as my goal is a lower “perpetual” withdrawal rate from an earlier starting age than 65.

At the top of this post is a chart showing the average industry glide path alongside Vanguard’s popular fund series, also from Morningstar. I added the hot pink “Flat” line for illustration.

The article discusses many different wrinkles, but here is a chart summarizing the results based on the percentile scenario (99th is the 10th worst total return, 1st is nearly the best total return). Annual contributions start at $5,000, increase over the next 10 years to $10,000, increase again over the next 10 years to $15,000, and stay there (they also increase to adjust with inflation).

One way to summarize the results is that the Traditional glide path is relatively better in low return, worst-case scenarios. The Reverse glide path is relatively better in high return, best-case scenarios. The Flat strategy is in the middle, worse than Traditional in the low-return scenarios, but better than Traditional in the higher-return scenarios. The Traditional glide path is the most conservative with the most downside protection, which sounds like a reasonable choice for a default investment to me.

However, my personal takeaway is that there is less difference than you might think between the Flat and Traditional scenarios. Either one will work for the most part, as long as you stay invested the entire time. The most important factor is to pick the asset allocation method that lets you stay invested the entire time. For most people, I’d guess that is the default target date fund in their 401(k) plan. For me, I prefer my “perpetual” flat asset allocation that is closer to a classic balanced fund.

(I don’t see the Reverse scenario being very popular, but it might encourage some people to elevate their stock holdings over their entire career.)

Filed Under: Investing
Last updated: March 20, 2024
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Cummins & Atmus Filtration Odd Lot Tender Opportunity (Final Result: $4,819 Profit)

March 19, 2024 By Jonathan Ping 48 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

Final update 3/19/24: Cummins has released the final results of this exchange offer. See original post below for past details, although the opportunity has passed. The final proration factor was ~6.99%. However, those with “odd lots” of 99 shares or less were not subject to proration, which created an opportunity for smaller individual investors.

Here are my stats:

  • Bought 99 shares of CMI @265.86 (2/26) for $26,320.14
  • Tendered all 99 shares, exchanged for 1190.95 shares of ATMU.
  • Received 1190 ATMU shares and $25.24 cash for the partial shares of ATMU (3/19).
  • Sold 1190 shares of ATMU @26.15 and 26.14 for $21,076.68 and $10,037.66, respectively (3/19).

Net profit of $4,819.44. This took a total of 23 calendar days, so that works out to an internal rate of return of 1527.59% 🤑 according to my financial calculator. (At 5% APY, my return over 23 days would be about $80.) The absolute ROI is 4819/26320 = 18.3%. Not bad for less than a month! I hope that it worked out just as well for everyone who chose to participate.

Update 3/15/24: This exchange offer is now expired and the preliminary results have been released. The final exchange ratio was 12.0298, which means 99 CMI shares will be exchanged for 1190.95 ATMU shares. Out of the 5,574,050 shares that will be accepted for tender, 1,006,609 of those shares were from odd lot holders. That’s a relatively high amount, but still less than 20% of the total and odd lot holders won’t be pro-rated. On the other hand, everyone else who held more than 99 shares will be pro-rated down to approximately 6.7% of tendered shares.

ATMU has been seeing a lot of short interest, and may even be experiencing a bit of a “short squeeze” right now. This may be partially due to people hedging their bets on the stock. ATMU stock is up about 17% since this exchange was announced in mid-February. You might have made more money simply buying ATMU at the announcement rather than participating in the exchange! (You could have even made more money letting people borrow those shares to short.) As I said, this is as much an educational opportunity as a profit opportunity. I’ll have to keep an eye out for the ATMU shares showing up in my account. The two choices are to (1) sell all shares immediately, or (2) hold the ATMU shares for a couple months until the short interests and other market pressures subside. I’ll probably do the former, but here is another opinion on the latter.

I have no idea what the value of ATMU will be when the shares arrive (rough guess 0-2 weeks) and when I sell, so I won’t bother to post speculative numbers. I will provide a final update after selling.

Original post from 2/25/24:

Back in May 2023, Cummins (CMI) spun off a company called Atmus Filtration Technologies (ATMU) which makes products for commercial vehicles and equipment (think big rigs, agricultural machines, and yellow construction equipment). Cummins still owns about 80% of ATMU and are trying to complete the split-off via an exchange offer to CMI shareholders: tender $100 of CMI and receive $107.53 of ATMU in return.

Similar to the Johnson & Johnson odd lot tender from last year, this ~7.5% premium is meant to incentivize the deal and make sure it happens successfully, and as a result it may be “oversubscribed” with tenders having to be pro-rated. However, there is an “odd lot” provision in the deal, where if you only have 99 shares of less of CMI and tender them all, you won’t be subject to pro-ration. This is a corner of the market where small individual investors have an advantage that the bigger money can’t access.

Please know upfront that I’m not an expert on this stuff, and there are risks involved. The following two articles and the official informational site explain the various details and risks in much better detail.

From the official site above that tracks the share prices for the exact tender ratio (upper limit not in effect at time of writing):

If the Exchange Offer is oversubscribed and Cummins cannot accept all tenders of Cummins Common Stock at the exchange ratio, then all shares of Cummins Common Stock that are validly tendered will generally be accepted for exchange on a pro rata basis in proportion to the number of shares validly tendered, which is referred to as “proration.” Stockholders who beneficially own “odd-lots” (less than 100 shares) of Cummins Common Stock and who validly tender all of their shares will not be subject to proration. Direct or beneficial holders of 100 or more shares of Cummins Common Stock will be subject to proration.

For each $100 of Cummins Common Stock accepted in the Exchange Offer, you will receive approximately $107.53 of Atmus Common Stock, subject to an upper limit of 13.3965 shares of Atmus Common Stock per share of Cummins Common Stock. The Exchange Offer does not provide for a lower limit or minimum exchange ratio. See “The Exchange Offer — Terms of the Exchange Offer” in the Prospectus. IF THE UPPER LIMIT IS IN EFFECT, YOU MAY RECEIVE LESS THAN $107.53 OF ATMUS COMMON STOCK FOR EACH $100 OF CUMMINS COMMON STOCK THAT YOU TENDER, AND YOU COULD RECEIVE MUCH LESS.

To quickly summarize the potential deal:

  • Buy 99 shares* of CMI at your broker, for an approximate cost of $26,133 (as of market close 2/23, will change daily).
  • Tender ALL your shares through your broker. You can’t own 100+ shares and only tender 99. The deadline is supposed to be March 13, 2024, but some brokers may require your tender instructions earlier than that. (At Fidelity, it is 03/12/2024 7:00 PM ET.) Your broker may have an online form to fill out (look for “Corporation Actions”, or you’ll have to call them).
  • If all goes smoothly (not guaranteed!), then you’ll get ~$28,100 of ATMU approximately 7 business days after the deadline. You can then sell the shares for cash if you are not interested in actually holding the stock as an investment. At the 7.5% premium, the potential profit is ~$1,960. You may get less depending on the relative share prices of CMI and ATMU.
  • * You can buy less than 99 shares for less financial commitment (and less upside), but you have to tender them all.

This is the type of deal that I find both interesting and educational, on top of having a positive expected value. Warren Buffett today wouldn’t bother with this deal, but Warren Buffett age 14 might. This is a calculated gamble, rather than a fixed return. There is risk involved, including either the deal being canceled somehow (you end up with 99 shares of CMI at whatever market price) or the limit ratio being reached and you get less than a 7.5% premium of ATMU shares. This is also an area where a broker with good customer service is useful (I use Fidelity). You should perform your own due diligence.

Disclosure: I ended up deciding to participate and bought 99 shares of CMI after publication of this post (which was on a Sunday night). During mid-day trading on Monday, I bought 99 shares at $265.xx a share. This is not a recommendation to buy.

Filed Under: Deals & Offers, Investing
Last updated: March 19, 2024
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Next Page »