Archives for August 2022

Credit Union 1 (CU1) New Checking Account Promo $500 w/ Direct Deposit

Posted on August 29, 2022 // 31 Comments

Credit Union 1 (CU1) has a $500 checking account promotion with qualifying direct deposits. Available to both new and existing customers who haven’t set up direct deposit yet. Based in Illinois, CU1 membership is open nationwide through membership in the Credit Union 1 Educational Development Association (one-time $5 CU1EDA fee + additional one-time $5 CU1 membership fee). Hat tip to reader Chuck. Offer expires 9/30/22.

$500 Direct Deposit bonus steps.

  • Open a CU1 Checking Account. Open a checking account with CU1 online and use Promo Code CHK500, at your local branch or by calling. Must open with $25 minimum or a $500 direct deposit. Already a member with a checking account? Setup your direct deposit in digital banking and call our team to mention the “$500 checking offer”.
  • Set up direct deposit ($1,000/month for 3 months). Establish direct deposit activity within 60 days of account opening or by September 30th, 2022. Minimum recurring aggregate total direct deposit of $1,000 per month for three (3) consecutive months.
  • Receive your $500 checking bonus. The $500 bonus will be deposited into your account following three (3) consecutive months of qualifying activity. Bonus will be paid by deposit into your CU1 checking account within 7 days of meeting all qualifying criteria.
  • Note: Must keep the checking account open for at least 12 months after opening.

Offer fine print:

1 To redeem this offer you must use Promo Code: CHK500 before September 30, 2022. Offer not available to existing members who already have direct deposit coming into a CU1 account, those whose accounts have been closed within 90 days, or closed with a negative balance within the last 3 years from the date of use of the Promo Code. Promo Code is only good for one-time use and is not redeemable with any other offers. To receive $500 bonus: (1) Within 90 days of use of the Promo Code, you must establish and receive a minimum recurring aggregate total direct deposit of $1,000 per month into a new or existing CU1 checking account. (2) Your direct deposit must be from an electronic deposit of your paycheck, investment account, pension or government benefits (such as Social Security) distribution from your employer or government agency. Person to Person transfers or payments are not considered a direct deposit. Bonus will be paid by deposit into your CU1 checking account within 7 days of meeting all qualifying criteria. To receive the bonus, the checking account must not be closed or restricted at the time of payout. Bonus is considered interest and will be reported on 1099-INT. Offer may be cancelled at any time without notice.

Account Closure: If the checking account is closed by the member or by CU1 within 12 months after opening, we will deduct the bonus amount from the checking account at closing.

Free Checking details.

  • No monthly maintenance fee.
  • CO-OP ATMs access. Get cash surcharge-free at more than 30,000 ATMs nationwide
  • No fee for online statements, $3 monthly paper statement fee unless age 65+.
  • Inactivity fee of $25 a month if no activity for 12 months.

Application experience and tips. Here are some tips based on my account opening experience from outside Illinois.

  • Note: CU1 performed a hard credit inquiry on Experian as part of my application. I don’t like this practice but many credit unions do this.
  • Applied online via promotion link above.
  • Enter your personal information including name, address, drivers license/ID, Social Security number, and so on. They will ask for a scan of the front and back of your photo ID.
  • Be sure to enter the promo code CHK500 when prompted towards the end of the application.
  • My initial deposit was via external checking account by providing them account and routing number. There was no option for credit card funding.
  • Your minimum deposit should be $40 by my math: $25 Free Checking minimum initial deposit, $5 CU1EDA, $5 minimum for Share Savings account, and $5 CU1 new member fee. See screenshot below.
  • After my online application was submitted, within an hour they asked for supporting documentation: another scan of front/back of ID, proof of address (utility bill, paystub), and proof of SSN (scan of SSN card or W2 2021). I submitted via email (can also fax) and my account was approved the same day.
  • Registered for online access and logged in to find out my checking account number. Also look under “Services > Setup Direct Deposit”. Routing number is 271188081.

CU1 looks eager to expand, as they have multiple other competitive offers while also recently acquiring Northside Community Bank in June 2022.

  • 44-month CD at 3.00% APY + up to $500 bonus:

    LIMITED TIME OFFER : Get an up to $500 Bonus2 when you open a 44-Month Share Certificate. There is a $1,000 minimum balance requirement to open the Share Certificate, and you can receive a bonus payment2 when you deposit NEW money over $100,000!

    $100,000 – $249,999 deposited | $250 one-time Bonus Payment2
    $250,000 and over deposited | $500 one-time Bonus Payment2

  • 22-month CD at 2.25% APY. Rates as of 8/29/22.
  • Need a big mortgage? They have what they call The Lowest Jumbo Rate Ever with possibly waived PMI, 80/10/10 structure, and $400 closing credit.
  • Auto Loan rates starting at 5.24% APR for up to 60 Months + $100 bonus:

    To qualify for the $100 bonus, there is a $15,000 minimum loan amount and loan must close within 30 days from the application date. Offer does not apply to existing Credit Union 1 loans or the refinancing of existing Credit Union 1 loans. Bonus will be deposited into the member’s CU1 account at the loan closing. Bonus will be reported on 1099-MISC.

  • If you live near a branch, it is also notable that they have a page on savings bonds which states that Credit Union 1 members can redeem US Savings Bonds at any branch location. This is nice to see, as many banks barely seem to know what a paper savings bond looks like nowadays.

Let’s hope they handle this promo better than certain other credit unions (*cough* Teachers FCU) and give them a chance to earn our continued business through their competitive term certificate, mortgage, and car loan rates.

Filed Under: Banking, Deals & Offers //

Vanguard Adds $20 Annual Paper Statement Fee For Accounts Under $1 Million

Posted on August 23, 2022 // 18 Comments

If you have brokerage accounts with Vanguard, you may have received an email with the somewhat vague subject line “The fee policy is changing for brokerage accounts”. Whenever fees goes down, the subject line is usually “WE SAVED YOU MONEY BY DROPPING THIS FEE!! 🎉🎉🎉” Whenever fees goes up, it’s “btw we made some changes”. So you can guess what this means.

The new policy is that all Vanguard brokerage accounts have a $20 annual fee, unless you have any one of the following:

  • You have elected e-delivery of statements and the annual privacy policy notice; confirmations; reports, prospectuses, and proxy materials; and notices, amendments, and other important account updates,
  • Your brokerage accounts are enrolled in an advisory program serviced by an affiliate of Vanguard,
  • You have at least $1 million in qualifying Vanguard assets, or
  • You are a client who has an organization or a trust account registered under an employee identification number (EIN).

To my knowledge, the $20 annual fee used to be waived for accounts with at least $10,000 in assets. Basically, Vanguard has effectively added a paper statement fee to anyone with less than $1,000,000 in assets. That’s quite a big change in the number of affected customers. You can still elect to receive paper tax forms for no fee.

I don’t mind stopping monthly paper statements, especially since Vanguard does a good job of collecting everything from the past quarter onto their quarterly statements (and past year on their end-of-year statements). The March statement contains all the transactions for January through March, and so on. I’m also happy to receive electronic versions of prospectuses and such, those thick booklets add up to a lot of paper.

However, I do like having an annual paper statement and it would be nice if they still offered that option for free for those with $10,000+ in assets. That’s already reducing the amount of paper mailings by over 90%. Having dealt with estate issues, it’s just nice to have any sort of physical paper trail when searching for accounts. I always say that I’ll collect my monthly e-statements and manually print out a year-end for every single financial account for physical storage, but in reality I don’t.

Note: This fee is for Vanguard brokerage accounts. Vanguard mutual fund accounts also have their own new $20 fee, which is $20 for EACH Vanguard mutual fund (waived with at least $1 million in qualifying Vanguard assets). Vanguard really wants to you convert your mutual fund accounts to a brokerage account. (My opinion is that the conversion wasn’t that bad at all, but these days anything that might force a customer service interaction with Vanguard means a possible 1-hour phone hold time. 👎)

Filed Under: Investing //

Citi Self Invest Brokerage: Up to $500 New Deposit or ACAT Transfer Bonus

Posted on August 22, 2022 // 1 Comment

Citi has started their own self-directed brokerage arm called Citi Self Invest, joining $0 commission bank competitors like Chase, BofA, and Wells Fargo. They are also running a promotion for existing Citi banking or credit card customers to gather new deposits and ACAT transfers, with the current bonus worth up to $500, depending the value of assets that you move over:

  • $100 with $10,000-$49,999 in qualifying new money
  • $200 with $50,000–$199,999 in qualifying new money
  • $500 with $200,000+ in qualifying new money

Here are the steps:

  1. Fund a new or existing Citi Self Invest Account between 3/1/22 and 10/31/22. You must also have an eligible individual Citibank checking or Savings account or an eligible Citi Card account with digital access through Citibank Online.
  2. Fund the Citi Self Invest Account with a minimum of $10,000 in New-To-Citi funds within the Account Funding Period shown below (see below for New-To-Citi funds).
  3. Maintain the New-To Citi funds in your Citi Self Invest account through the Maintain Funds deadline shown below based on month of account opening.
  4. During the account opening process, allow for eDelivery of statements and confirmations,

Here is the deadline calendar:

Here’s their terms on what “new to Citi” funds means:

New-to-Citi Funds are cash that must come from an external, non-Citi, source through a standard transfer method (e.g., a standard Transfer of Assets form, check, electronic funds transfer, ADM deposit). New-to-Citi Funds are: 1) funds deposited from external accounts or payees other than Citibank, N.A. and its affiliates and 2) must be deposited using domestic ACH transfer, Direct Deposit, checks drawn on banks other than Citibank, N.A. wire transfer, trustee to trustee transfer, or ACAT securities transfers.

Update: A rep for Citi reached out to me to say:

To clarify, the value of marketable securities like stocks and ETFS that are transferred via ACAT are included in the definition of “new to Citi funds” and are eligible for the bonus.

This is good news and makes it easier to satisfy the higher tier requirements if you already have a portfolio of ETFs or individuals stocks to move over.

Even if you move over cash, according to the calendar, your minimum holding period is as little as a month. For example, open in August, fund by 9/30, and hold until 10/31 to qualify. The $100 bonus on $10,000 is earning 1% in a month, or the equivalent of 12% APY when annualized. Unfortunately, you have to wait until 1/31/23 to get the bonus, but at least this is a no fee, no minimum balance, no commission brokerage account.

If you keep your cash in there for longer than the minimum of one month, you should also take into account the potential lost interest if you are only using their default cash sweep account. You might consider investing your funds into ultra-short bond ETFs like MINT or Treasury Bill ETFs like GBIL (still possible to lose value). I’m not sure if Citi Self Invest will let you buy Treasury bills directly.

Citi also has an alternative bonus for their Citi Personal Wealth Management account, with better bonus ratios for new deposits of $50,000 and up, and total bonuses worth up to $5,000. However, I’m not sure about the fee structure for the Personal Wealth Management accounts which involve a “dedicated Citi Personal Wealth Management Financial Advisor who can provide personalized planning and investment guidance” with a vague “pricing varies based on investments selected”. Seems like it might be more work if you don’t want their financial advice, but might be worth a phone call to the number in the link if you have $50,000+ as the minimum holding period is still one month.

Filed Under: Deals & Offers, Investing //

How to Live on 24 Hours a Day: Published 100+ Years Ago, Still Practical Advice Today

Posted on August 21, 2022 // 2 Comments

Either Jonathan Clements or Jason Zweig (both long-time, award-winning personal finance columnists) once wrote that personal finance writing was all about finding the 1,000th different way to discuss the same five basic concepts. Early in the book How to Live on 24 Hours a Day by Arnold Bennett, first published in 1908, is the following mention of their professional ancestors:

Newspapers are full of articles explaining how to live on such-and-such a sum, and these articles provoke a correspondence whose violence proves the interest they excite. Recently, in a daily organ, a battle raged round the question whether a woman can exist nicely in the country on £85 a year.

100 years later, we have the exact same debates. 100 years later, financial freedom is still whether you control how you spend your time. Work is still trading your life energy (time) for money, and financial freedom means creating a different source of money so you can stop trading your life energy (time) away. We are all given 24 hours a day.

You wake up in the morning, and lo! your purse is magically filled with twenty-four hours of the unmanufactured tissue of the universe of your life! It is yours. It is the most precious of possessions.

For remark! No one can take it from you. It is unstealable. And no one receives either more or less than you receive.

This may also sound familiar:

Which of us is not saying to himself—which of us has not been saying to himself all his life: “I shall alter that when I have a little more time”?

I assumed that this would be a philosophical book, but was pleasantly surprised at the amount of practical and actionable advice inside. Please read the book for the full and original message; I am crudely paraphrasing below.

Notice that you want more out of life. I call this the “itch”. The “itch” is what makes people seek out and devour information about financial freedom.

If we further analyse our vague, uneasy aspiration, we shall, I think, see that it springs from a fixed idea that we ought to do something in addition to those things which we are loyally and morally obliged to do. We are obliged, by various codes written and unwritten, to maintain ourselves and our families (if any) in health and comfort, to pay our debts, to save, to increase our prosperity by increasing our efficiency. A task sufficiently difficult! A task which very few of us achieve! A task often beyond our skill! Yet, if we succeed in it, as we sometimes do, we are not satisfied; the skeleton is still with us.

And such is, indeed, the fact. The wish to accomplish something outside their formal programme is common to all men who in the course of evolution have risen past a certain level.

Realize that even with a full-time job, you DO have control over part of your day. Most of us will spend at least a couple decades working 8-9 hours a day, 5 days a week while building up those other income sources. However, even if you spend 10 hours a day working/commuting and 8 hours a day sleeping/eating/grooming, that still leaves 6 hours where you are free to do millions of different things. (Caregivers of young children and/or other family members: I know.) The point is, if you consciously spend even a fraction of that time on an invigorating activity, you can feel better about your entire life.

If my typical man wishes to live fully and completely he must, in his mind, arrange a day within a day. And this inner day, a Chinese box in a larger Chinese box, must begin at 6 p.m. and end at 10 a.m. It is a day of sixteen hours; and during all these sixteen hours he has nothing whatever to do but cultivate his body and his soul and his fellow men. During those sixteen hours he is free; he is not a wage-earner; he is not preoccupied with monetary cares; he is just as good as a man with a private income.

If a man makes two-thirds of his existence subservient to one-third, for which admittedly he has no absolutely feverish zest, how can he hope to live fully and completely? He cannot.

Spend 30 minutes each weekday morning doing meditation and/or mindfulness training. Either wake up a bit earlier, or use your commute. Training your mind is a worthwhile activity and strengthens it like a muscle. You will be more patient and focused with your co-workers, your kids, and yourself.

People say: “One can’t help one’s thoughts.” But one can. The control of the thinking machine is perfectly possible. And since nothing whatever happens to us outside our own brain; since nothing hurts us or gives us” pleasure except within the brain, the supreme importance of being able to control what goes on in that mysterious brain is patent. Hence, it seems to me, the first business of the day should be to put the mind through its paces […]

When you leave your house, concentrate your mind on a subject (no matter what, to begin with). You will not have gone ten yards before your mind has skipped away under your very eyes and is larking round the corner with another subject. Bring it back by the scruff of the neck. Ere you have reached the station you will have brought it back about forty times. Do not despair. Continue. Keep it up. You will succeed. […]

I do not care what you concentrate on, so long as you concentrate. It is the mere disciplining of the thinking machine that counts. But still, you may as well kill two birds with one stone, and concentrate on something useful. I suggest—it is only a suggestion—a little chapter of Marcus Aurelius or Epictetus.

Set aside 90 minutes per evening, three weeknights a week. During this time, you must find something that challenges your curiosity and makes you excited! If you pick the right activity, it will give you energy, not make you more tired. You might learn to rock climb, play tennis, rehearse for a community theater role, ballroom dance, read poetry, anything. You must consciously choose this activity and persevere with it for 3 months. It’s hard to break old habits, so that is why it is only for every other day.

But remember, at the start, those ninety nocturnal minutes thrice a week must be the most important minutes in the ten thousand and eighty. They must be sacred, quite as sacred as a dramatic rehearsal or a tennis match. Instead of saying, “Sorry I can’t see you, old chap, but I have to run off to the tennis club,” you must say, “…but I have to work.” This, I admit, is intensely difficult to say. Tennis is so much more urgent than the immortal soul.

On your commute home, spend some time reflecting. What are the principles that you chose to live by? Are your actions aligned with those principles? If not, how can we fix that?

What leads to the permanent sorrowfulness of burglars is that their principles are contrary to burglary. If they genuinely believed in the moral excellence of burglary, penal servitude would simply mean so many happy years for them; all martyrs are happy, because their conduct and their principles agree.

We do not reflect. I mean that we do not reflect upon genuinely important things; upon the problem of our happiness, upon the main direction in which we are going, upon what life is giving to us, upon the share which reason has (or has not) in determining our actions, and upon the relation between our principles and our conduct.

Bottom line. Give it some modern edits, a snazzy book cover, and a powerful media blitz, and the 1908 short book How to Live on 24 Hours a Day by Arnold Bennett could be a modern bestseller. Don’t wait until retirement to scratch those itches. By carefully changing how you spend specifically selected hours a week and consciously choosing activities that excite, strengthen, and invigorate you, you can improve your entire life today. (The book doesn’t touch your weekends.) As the copyright has expired, you can read it for free via Project Gutenberg (or search on Libby). A final spicy quote:

If you are not prepared for discouragements and disillusions; if you will not be content with a small result for a big effort, then do not begin. Lie down again and resume the uneasy doze which you call your existence.

Filed Under: Book Reviews, Happiness, Inspirational, Time Management //

JP Morgan Guide to Retirement 2022: Personal Finance Charts and Graphics

Posted on August 17, 2022 // 2 Comments

The JP Morgan Guide to Retirement slide deck is provided to its advisors to discuss retirement planning with clients. Updated annually, they kindly share this document publicly and it contains many useful charts and graphs, like the one above that reminds us to focus on what you can control, and to not waste time and energy on what you can’t. Below are a few more highlights from the 52-page 2022 edition that I found most helpful.

How does everyone else manage given all the news of low savings balances? Well, the reason it is called “Social Security” is because without it, there would be widespread poverty amongst seniors. The higher your spending, the more you must rely on your other assets to replace your current income in retirement.

You may have seen variations of this chart elsewhere, where “Quitter Quincy” who starts early but completely stops after only 10 years ends up at the same place as “Late Lyla” who starts late but contributes for another 30 years (triple the time).

How the average household spending changes by age (amongst relatively well-off households).

How to prioritize your savings.

Look how “Escalating Ethan” does nearly as well by allowing a 1% auto-escalation once a year.

You might think that because you pay 401k loans back into the original account plus interest that it won’t hurt your final retirement balance, but the missed compounding growth can really impact things.

Filed Under: Investing, Retirement //

Robinhood New Account Deposit Bonus (Up to $600)

Posted on August 15, 2022 // 6 Comments

Robinhood brokerage app has up to a $600 bonus for new customers that deposit a certain amount of money. Here are the highlights:

  • New customers must sign up for Robinhood using the promotion page and get approved by August 17, 2022.
  • Link your bank account to your Robinhood brokerage account. (ACAT transfers also count.)
  • Deposit money into your account by September 16, 2022 and keep deposits in your account through October 16, 2022 to earn up to $600. You can earn $25 for depositing $1,000 – $9,999, $100 for $10,000 – $49,999, $300 for $50,000 – $99,999, or $600 for $100,000+.
  • Rewards will be delivered by October 21, 2022. If you receive a reward, you’ll have 30 days to claim it. Once claimed, you can use it to invest right away, but you can’t withdraw the cash value for 30 days.

See full terms.

This is a pretty good reward (if you have the cash) due to the short required holding period of just one month, plus the bonus is supposed to post within 5 days after the month is over.

Filed Under: Deals & Offers, Investing //

EFCU Financial Federal Credit Union 5-Year CD

Posted on August 14, 2022 // 8 Comments

Update: Rate has since dropped to 3.75% APY as of 8/16/22, and they have also stopped accepting application from people joining via a membership in the EFCU Financial Foundation or the Louisiana Wildlife Federation. Hope some folks got in that were interested. Thanks to reader Hugo for the heads up.

Original post:

EFCU Financial Federal Credit Union has some top certificate rates effective 8/11/22. NCUA-insured. Found via DepositAccounts. Here are the rate highlights:

  • Regular 60-month certificate 4.00% APY ($500 minimum)
  • Regular 60-month certificate 4.10% APY (Jumbo $100k minimum)
  • IRA 60-month certificate 4.10% APY ($500 minimum)
  • IRA 60-month certificate 4.20% APY (Jumbo $100k minimum)
  • Also available: 12-month, 18-month, and 24-month at 3.00% APY, 30-month CD at 3.25% with one-time rate bump allowed.

More details:

  • Early withdrawal penalty for 60-month certificate is 180 days of dividends.
  • Hard credit pull with a new membership application.
  • Must keep $5 minimum in Share Savings account as long as you are a credit union member.

Membership eligibility. Their eligibility criteria is open to anyone nationwide. Persons who live, work, worship, or attend school in these nine Louisiana Parishes can join for free: East Baton Rouge, West Baton Rouge, Ascension, East Feliciana, West Feliciana, Iberville, Livingston, Point Coupee, St. Helena. Anyone nationwide can join EFCU Financial with a membership in the EFCU Financial Foundation or the Louisiana Wildlife Federation. The cost is $35 for an annual membership.

Good deal? This is a very competitive CD rate for a 5-year CD, approximately 35 basis points higher than the next best rate. For comparison, as of 8/12/22, the 5-year Treasury bond rate is 2.97%. The hard credit pull and $35 entry fee make it better for high balances to make it worth the trouble.

Based on their website and mobile app, they appear to be using the same backend software as many other credit unions.

As with past credit union certificate deals, I would still recommend acting fast if you are interested. It’s a good enough deal that it is quite possible that there will be enough new applications to overwhelm their limited staff (and deposit needs). You might pony up $35, start the application process, take the credit pull hit, and have the deal fall apart before you can fund the certificate. I’m not saying this will happen, but it is possible. Of course, it is also possible that this is only the start of multiple places offering 4% APY CDs.

Filed Under: Banking, Deals & Offers //

Vanguard Cash Deposit Program: New Cash Sweep Option (Currently Invitation Only)

Posted on August 11, 2022 // Leave a Comment

Vanguard has been gradually rolling out a new option for the cash settlement sweep in your Vanguard Brokerage Account. The Vanguard Cash Deposit is FDIC-insured via partner banks and is currently available to select customers on an invitation-only basis:

Currently, enrollment in the Vanguard Cash Deposit program is by invitation only to existing clients who have at least one Vanguard Brokerage Account. Mutual fund accounts, 529s, or other accounts are not eligible for Vanguard Cash Deposit.

Here is a quick comparison of the interest rates from the two available options:

Banking Partners (as of 8/10/2022)

  • Valley National Bank (FDIC cert. 9396)
  • NexBank (FDIC cert. 29209)
  • Synovus Bank (FDIC cert. 873)
  • Bank of Baroda (FDIC cert. 33681) (coming soon)
  • Synchrony Bank (FDIC cert. 27314) (coming soon)

Commentary. Vanguard’s existing cash sweep fund, the Vanguard Federal Money Market Fund (VMFXX), already invests “at least 99.5% of its total assets in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash (collectively, government securities).” In other words, everything inside is also fully backed by the US government. I am a big fan of FDIC insurance, but even I don’t lose any sleep at all about the safety of VMFXX, not to mention I’ve found VMFXX historically tracks short-term interest rates quite well. As of this writing (8/10/22), VMFXX is yielding about 35 basis points more than the Cash Deposit sweep.

I don’t know if this new cash sweep option is in response to consumer demand, or if it will serve as a profit source for Vanguard. I’m sure that some people out there will prefer having FDIC insurance, even it means less interest income. (Be sure not to exceed the FDIC limits at any of the partner banks, such as having separate account held there.) For now, I’ll pass. If the Cash Deposit sweep does start earning a lot more, I would consider switching.

If you wish to opt in to this option, you can try to check if you are “invited” by visiting the product page, clicking on “Choose Vanguard Cash Deposit”, and logging into your Vanguard brokerage account. I was also repeatedly greeted by a pop-up window upon login.

Filed Under: Banking, Deals & Offers, Investing //

How Do Your 401(k) Stats Compare? Vanguard How America Saves 2022

Posted on August 10, 2022 // 2 Comments

Vanguard recently released the 2022 edition of their annual How America Saves report, a 110-page report targeted at industry insiders which looks at the nearly 5 million 401k, 403b, and other defined-contribution retirement plans. If you wish to geek out on 401k stats, there is a great deal of information in this report. Here are a few highlights based on 2021 data:

Employee contributions. The average/median employee contribution rate amongst participants was 7.3%/6.1% in 2021. Median means that half of people were saving more, while half were saving less. Average is weighted more by absolute dollar savings. (Click to enlarge.)

Employer contributions (company match). The total average/median contributions by year was 11.2%/10.3% (employer and employee combined). This means that the average/median employer/company contribution was about 4%. (Click to enlarge.)

How much does Vanguard think we should be saving? I found this quote noteworthy:

We believe participants need to reach a total saving rate of 12% to 15% or more to meet their retirement goals.

Maxing it out! Overall, 14% of participants saved the maximum annual amount of $19,500 ($26,000 age 50+) for 2021. However, 58% of those with incomes of $150,000+ maxed out their contributions. Here is the full breakdown by income:

(Not really sure how the folks earning under $15k per year are doing it… maybe these income numbers are after subtracting the contributions?)

How are people investing? Asset allocation. This chart shows the trends in asset allocation as the participants age. The increased use of Target-date funds and other professional management options has changed it so that young people are less likely to hold cash. (Click to enlarge.)

Account balances. The average account balance was $141,542 for 2021; the median balance was $35,345. This disparity means that a small number of plans with very high balances skews this often-quoted average upward. (Click to enlarge.)

I don’t pay much attention to this stat because the average includes workers across different age groups, income levels, job tenures, and so on. If I just switched jobs and rolled over my old 401k into an IRA, technically my balance is zero no matter what.

Filed Under: Investing, Retirement //

Retirement Income Green vs. Red Zones from Jim Otar

Posted on August 9, 2022 // Leave a Comment

Jim Otar is a retired engineer-turned-financial-planner who has written many books and articles about retirement income. I recently found an old bookmark and reread his article Lifetime Retirement Income: The Zone Strategy from RetirementOptimizer.com. One core principle of his retirement advice that you don’t plan using averages:

The averages don’t cut it. For proper retirement planning, you must base your retirement solutions and strategies on adverse outcomes and not average outcomes.

For example, you don’t plan for average life expectancy. You plan for reaching age 95 for both you and your spouse/partner if applicable.

Green Zone: You have enough money that you can simply live off a balanced portfolio of stocks and bonds, even if returns are on the unlucky side of history and much lower than average. Here are the numbers for his calculated sustainable withdrawal rate until age 95:

For example, if you are 65 years old and need $40,000 of annual income from your portfolio (above Social Security and other income sources), then you would need a portfolio balance of $40,000 divided by 3.8% = $1,052,631. (Alternatively, multiply $40,000 by 26.3.) If you have more than this, you are in the green zone. You’ll have enough money even after a market run that is bad historically, and you’ll probably end up leaving a decent estate or be able to spend more later on.

Red Zone: You need guaranteed income. You don’t have enough to live off of a portfolio of stocks without a decent chance of running completely out of money. The most prudent advice is to buy annuities that will provide a guaranteed level of income and stretch your limited assets for the rest of your lifetime, no matter how long that is.

The advice is then to use your money to buy a single premium immediate life annuity with payments that are indexed to inflation (CPI). At the time of writing, such an inflation-indexed SPIA would pay more that the sustainable rate above. The effective “safe withdrawal rate” for the same 65-year-old above would be 4.5% to 4.9%. Unfortunately, this article was written back in 2007 and as of 2022 there are zero insurance companies that offer inflation-indexed immediate annuities.

However, the same overall concept still applies. The Red Zone means you need to take critical action. You should see how much guaranteed lifetime income you can receive from a single premium immediate annuity (SPIA), perhaps with an escalation rider that increases your payout 1%-3% every year. You will need to consider reducing expenses somehow (downsize home, relocate to lower cost-of-living area). You may need to find additional income (keep working, rent out property). You might need to do all three.

Grey Zone used to mean that you were between the 3.8% withdrawal rate of the Green Zone and the 4.5% withdrawal rate of the Red Zone. Today, I assume it simply means you are close to green, but not quite. You should take some of those Red Zone actions listed above.

I found the Green/Grey/Red Zone concept to be an interesting retirement planning framework to consider. If you don’t have enough, you shouldn’t just wing it with stocks and hope for the best. SPIAs can help you stretch your money for a more secure retirement. I believe that SPIAs aren’t discussed enough in personal finance, and if there were more demand, perhaps the competition would create better and higher-yielding SPIA products. The problem is that non-transparent products like indexed annuities that promise things like “market-linked returns with no downside risk” are both better sellers and offer higher commissions to most insurance salespeople.

Filed Under: Investing, Retirement //

Maxing Out the 401k Company Match: How Many Actually Do It?

Posted on August 8, 2022 // 6 Comments

At the top of many personal finance “To-do Lists” is to max out the employer match offered in your 401k/403b retirement plan. It’s usually the first “savings” step after paying down high-interest debt and keeping up with your bills. Here’s a screenshot from the Standardized Personal Finance Advice Flowchart via Reddit:

And here it is again from JP Morgan Asset Management, right after building up an emergency fund:

I’ve read this advice so many times, but how many people even complete this Top 3 item on the list? To be clear, this is just contributing enough to maximize your employer match contribution, not maxing out your allowable employee contribution. (That’s on the list of standardized advice as well, but at a slightly lower priority level.)

Vanguard recently released its How America Saves 2022 report with tons of data about the retirement accounts that they help manage. Let’s see what they found.

First of all, what does it take to max out your 401k company match? Roughly a 6% contribution rate over the years.

So… how many people actually max out their 401k company match? Roughly 70% of participants contributed at least the max match rate in 2021. For participants in plan with an auto-increase feature, this number goes up to 77% overall after three years.

If you aren’t at least maxing out the company match and getting your “free money”, hopefully this stat provides some peer pressure. Over 2/3rds are doing it! You don’t want to be below-average, do you?? 😱

Filed Under: Investing, Retirement //

Facebook Internet Tracking Class Action Settlement ($90 Million, 2010-2011)

Posted on August 5, 2022 // 4 Comments

Facebook has proposed to settle a class action lawsuit alleging that they “improperly obtained and collected data from Facebook Users in the United States who visited non-Facebook websites that displayed the Facebook Like button between April 22, 2010 and September 26, 2011, inclusive.”

If this applies to you, first check your inbox (including spam folder) for an email from “Facebook Internet Tracking Settlement Administrator” [donotreply@fbinternettrackingsettlement.com] with the subject line “Notice of Proposed Settlement of Class Action.” Inside on the top of the e-mail, you should find a Notice ID and Confirmation Code that will make it easier to file a claim. My e-mail arrived in late June, but decided to wait for additional details. Nothing else came out that I am aware of, so I just went ahead and submitted a claim before I forget completely.

Submit your claim online at www.FBInternetTrackingSettlement.com. Claim form must be submitted no later than September 22, 2022. You don’t need to have received the e-mail to file a claim, but the codes may help confirm your eligibility.

Based on my past experience, I would simply submit a claim and forget about it. The claim process was quite simple and only took a minute. Choose a payment method that you are confident will still work years from now (I picked PayPal). I look forward to a random $13.44 deposit a few years down the road, but who knows, it might be bigger.

Filed Under: Deals & Offers //
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