Vanguard Announces New Treasury Bill ETFs: New Best Cash Alternative?

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Vanguard recently released an announcement that in “First Quarter 2025” they will be releasing two new index ETFs that both hold short-term US Treasury Bonds:

  • Vanguard 0-3 Month Treasury Bill ETF (VBIL). Holds Treasuries with maturities of 3 months or less. Estimated expense ratio of 0.07%.
  • Vanguard Ultra-Short Treasury ETF (VGUS). Holds Treasuries with maturities of less than 12 months. Estimated expense ratio of 0.07%.

Currently, I would say the two best options for those who want low-cost exposure to Treasury Bills as a cash alternative without having to manually manage their own T-Bill ladder are:

  • iShares 0-3 Month Treasury Bond ETF (SGOV). Holds Treasuries with maturities of 3 months or less (1.2 months weighted average as of 12/2024). Expense ratio of 0.09%. 30-day historical median bid/ask spread of 0.01%. Can be bought and sold at nearly any brokerage.
  • Vanguard Treasury Money Market Fund (VUSXX). Maintains a NAV of $1. Holds Treasuries with average maturity of 38 days (as of 10/31/24). Expense ratio of 0.09%. Usually must be bought and sold within a Vanguard brokerage accounts to avoid transaction fees.

The advantages of owning properly-managed T-Bill funds are that you hopefully maintain the state income tax exemption of T-Bill interest, while adding the convenience and easy liquidity of ETFs and mutual funds. T-Bills often give residents of states with high local/state income taxes the highest tax-equivalent yield available for a cash equivalent (minimal volatility, minimal principal risk).

For tax year 2023, SGOV reported 96.45% of interest was derived from qualified U.S. Government and agency obligations. In many states, this meant that 96.45% of the interest paid out was exempt from state and local income taxes.

For tax year 2023, VUSXX reported 80.06% of interest was derived from qualified U.S. Government and agency obligations. In many states, this means that 80.06% of the interest paid out was exempt from state and local income taxes.

Ideally, VBIL will be very similar to SGOV with a tight bid/ask spread and nearly all interest eligible for state income tax exemption, but with even lower expenses and thus higher net yields. Something to keep a look out for in early 2025.

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TreasuryDirect Customer Service Delays and Estate Planning Concerns

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TreasuryDirect.gov is the official site for individuals to directly purchase US savings bonds and US Treasury bonds, including new T-Bills and TIPS at auction. But is it still worth the hassle? Back in August 2024, TreasuryDirect sent me the following e-mail when converting my paper bonds to electronic:

Cases are worked in the order they are received in our office. Your request is important to us and will receive attention as soon as possible. Please be aware of our estimated processing times to process your case which are based on the case type:

Cases requesting to cash Series EE and/or Series I paper savings bonds held in your name, at least 4 weeks.
Cases requesting to cash Series HH savings bonds held in your name, at least 3 months.
Unlocking your TreasuryDirect account, updating bank information in that account, or converting your paper savings bonds into electronic bonds in TreasuryDirect, at least 4 weeks.
Claims for missing, lost, or stolen bonds, at least 6 months.
All other cases, at least 20 weeks.
If we require additional information to process your case, we will contact you. Thank you for your patience.

That’s at least a month for some pretty basic stuff like unlocking your account because you forgot what you said was your favorite movie. In October 2024, the WSJ published TreasuryDirect to Bond Buyers: Moving Your Money Could Take a Year regarding long delays transferring Treasury bonds to outside brokerages.

The resulting customer service backlog is straining the Treasury Department’s antiquated system, which can require verified signatures and paper forms sent through the mail. People transferring securities from TreasuryDirect to third-party brokerages face especially long waits because those requests are processed manually, according to people familiar with the matter.

TreasuryDirect tries to complete most of them within six weeks, but can take 12 months, depending on capacity. A notice on the TreasuryDirect website says some customer service requests “may require 12 months or more to process.” The notice had said the longest delays were about six months until the end of July.

Finally, there are multiple posts on the Bogleheads, Early Retirement, and Reddit forums about the difficulties of dealing with TreasuryDirect after the account owner passes away. Here’s one example from a user that was already familiar with the website, knew all the account information, and had the beneficiaries assigned correctly, but still encountered multiple forms, conflicting instructions, and months of delays – Treasury Direct – The Eternal Wait and No Way To Track Transfer:

I’m closing in on 3 months waiting for Treasury Direct to transfer several EE bonds and an I bond that were in my dad’s online Treasury Direct account to my online Treasury Direct account. My dad passed away at the end of December 2022 and I was registered as the beneficiary with POD on all of the bonds.

And the follow-up (emphasis mine):

My dad’s I bonds were transferred to me around the 4-5 month mark.

After that experience, I decided to liquidate all of my TD accounts, and will encourage my husband to do the same. I personally don’t want a repeat of this experience, or make my heirs go through such a lengthy process in resolving my estate.

What I learned from this experience is to not discount how much stress and mental bandwidth it takes to deal with TD when you’re also grieving the loss of a family member, and trying to settle the estate so you can move on financially.

Another similar estate horror story here.

Takeaway #1: Expect and prepare for slow service. It’s very clear that TreasuryDirect is an underfunded government program with very limited resources. Even most mega banks no longer cash in old paper savings bonds, so that has increased their workload as well. Any time there is a surge in demand, either due to relatively attractive rates on savings bonds or Treasury bills, they are going to get backed up. If you happen to lock yourself out of your account during one of these times, it may take months to fix it! Be very careful before you close that old bank account linked through TreasuryDirect. Use a reliable password manager, and be sure to add your answers to questions like “Who is your favorite child?”. Be sure to note your account information in multiple documents, in case someone needs to find it.

Takeaway #2: Never use TreasuryDirect for anything besides US savings bonds. TreasuryDirect.gov is the only place where you can purchase US savings bonds, but it is not the only place you can buy individual Treasury bonds and TIPS. Just open an account with a broker with better resources and a bond desk like Fidelity, Schwab, or Vanguard and go through them.

Takeaway #3: Consider your heirs and simplifying your accounts as you age. In my opinion, I would also avoid TreasuryDirect if you are older and you don’t want to burden your estate executors with dealing with TreasuryDirect. You can save them several months and many hours of calls and paperwork by liquidating your assets and consolidating them elsewhere. TreasuryDirect will likely take the longest to resolve out of all of your financial accounts.

Personally, I continue to gradually liquidate the savings bonds in my TreasuryDirect account and buying individual TIPS in an outside brokerage account instead. I will have to pay some taxes on the deferred interest, but since I am getting a 1% to 2% higher fixed rate via TIPS in many cases, it’s not that bad. I also worry that my survivors might completely overlook this account if something unexpected happens (there are no mailed paper statements, or even monthly e-mails of online statements.) I’d like to minimize any unnecessary headaches and consider this part of my overall portfolio simplification process.

If I was younger and still grinding for every small edge, I would probably still accept these shortcomings for the right interest rate and tax deferral properties, but nowadays the calculations are different.

Image source: Sitejabber

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Coinbase: $50 Bitcoin Bonus for New Customers (Ends 11/22)

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Coinbase is offering a $50 BTC new user bonus for new customers that complete their first trade of at least $1. Offer expires soon on 11/22/24. The promo code GET50 should already be populated. Fine print says $50 in Bitcoin should arrive within 24-48 hours (arrived within 5 minutes for me). This limited-time offer is better than the standard offer ($5 bonus) and the current referral offer ($20 bonus).

Coinbase continues to try to be the largest, most reputable US-based cryptocurrency exchange platform. If you were ineligible for a Coinbase account in your state previously, I’d check again because they are now live in more states. As with a bank account, you will need to verify your identity using passport, driver’s license, or state ID card. I was able to upload my photo and get it approved instantly.

I linked my PayPal account for simplicity and bought $5 in BTC, and my $50 bonus arrived nearly instantly. For the purchase, there is either a $0.99 commission or you can sign up for a 7-day free trial of Coinbase Pro and pay zero commission (just remember to cancel).

Coinbase also has a program called “Learning Rewards” that regularly offers additional small bonuses ($3 to $5 a pop) for watching videos about new crypto and completing a short quiz.

Fine print:

After your first trade, $50 worth of BTC will be added to your account. Limited redemptions of code may apply. Promotion code expires at 11:59 PST on 11/22/2024. Offer available to new users in the U.S. who have not previously made a crypto purchase on Coinbase. Minimum trade of $1. Allow 24 hours for the bonus to be deposited into your account. Offer not available to new users who were referred to Coinbase through the Referral Program or who have previously opened an account using different contact information. Coinbase may update the conditions for eligibility at any time. Cannot be combined with another offer or promotion.

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Halfmore App: Turn Your Kids’ Chores into a Roth IRA

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Roth IRAs are popular and powerful, and while they have an earned income requirement, they don’t have a minimum age requirement. As long as a child has “official” earned income, they can contribute that into a Roth IRA (technically a Custodial Roth IRA as a minor, with full rights when they turn 18).

There have been various tips floating around on how parents can help “support” the creation of earned income for their child. There was even a now-defunct website called 1417power.com that would “hire” your kids to take surveys online (of course, the parent had to “hire” 1417power.com first…).

A new app called Halfmore can now facilitate the creation of a nice paper trail between parents as employers and children as workers. They promise to turn chores into a Roth IRA balance. Based on their screenshots, examples of such chores include floor sweeping, washing the dishes, surface dusting, and plant watering. The screenshots also suggest a pay rate of $15 to $16 an hour.

For chores to be recognized as legitimate sources of income, your kids should be paid for tasks you would typically hire another neighborhood kid or a nanny to do (rather than for regular family chores). They should also be appropriate for your child’s age and abilities. Examples include cleaning the garage, mowing the lawn (without a machine), and babysitting. The work must be real, and the wages should be fair.

From what I can gather through the limited information on their website (I had to register to get more details), this is what they offer:

  • They will help you file for an EIN from the government, so you are registered as an official household employer. This is basically the type of thing you should do if you hired a full-time nanny.
  • Through the app, you can track the completion of chores and manage payroll for your children. For example, the washing of dishes can be marked down as 30 minutes of work.
  • They will prepare work documentation for IRS income tax filing and record-keeping requirements.
  • They will help you navigate Federal and State employment taxes.
  • They will help open a custodial Roth IRA for you at Fidelity or Schwab, and transfer money into that account.

The cost is $15 per month or ($144 per year). Their FAQ says this covers up to three children (another place on the website says up to five children). You could file for an EIN, track chores, and open up a custodial Roth yourself for “free”. You are essentially following the same steps as if you were hiring a full-time nanny as a household worker. But if you make enough money such that you are considering this scheme for your kids, then your hourly rate is probably high enough that the convenience factor makes this a reasonable fee.

If you need more chore ideas, here is the Montessori Chart of Age-Appropriate Chores For Kids that keeps floating around like a meme:

spoiledchores

Looking through my archives, I realized that I have already written about “Roth IRA for Kids” in 2007, 2012, and 2019. My eldest child is in middle school now, and I’m still working on how to best teach them about money. I can see a matching program later on in life when they have a real job from an outside employer. But right now, I don’t pay them anything to do their chores. Chores are not a job, they are a responsibility to their family. They can’t decline their chores by declining the money. Maybe I’ll pay for extra jobs around the house, but I think it’s gonna be a stretch for that to add up to thousands of dollars a year.

If you already plan on gifting your child money anyway, this might be a more efficient method. For me, I already tell them that we spend a lot of money on their education right now, and that is our “gift”. I am already paying plenty for tutoring, swim lessons, tennis lessons, STEM camps, etc. Not to mention who knows how much college will cost! I suppose I just feel like this is too far down the list. Maybe my attitude will change later. Maybe I’ll just let them have the sense of accomplishment from funding their own retirement accounts. 😁

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Best Interest Rates Survey: Savings Accounts, Money Markets, Treasuries, CDs, ETFs – November 2024

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Here’s my monthly roundup of the best interest rates on cash as of November 2024, roughly sorted from shortest to longest maturities. There are lesser-known opportunities available to individual investors, often earning 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 11/12/2024.

TL;DR: Fed lowered rates again; slight drops are continuing on average. Still some 5%+ savings accounts. Still some 4%+ APY 5-year CDs. Compare against Treasury bills and bonds at every maturity, taking into account state tax exemption. I no longer recommend fintech companies due to the possibility of loss due to poor recordkeeping and/or fraud.

High-yield savings accounts
Since the huge megabanks still pay essentially no interest, everyone should at least 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 rates at the moment are from newcomers Pibank at 5.50% APY and TIMBR at 5.25% APY. I have no personal experience with either, but they are the top rates at the moment. Most others have dropped at least a little. For example, CIT Platinum Savings is now at 4.55% APY with $5,000+ balance.
  • SoFi Bank is at 4.20% APY + up to $325 new account bonus with direct deposit. You must maintain a direct deposit of any amount (even $1) 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 top rates, but a group that have historically kept it relatively competitive such that I like to track their history. Kind of an index like the Dow or S&P 500.

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. Marcus has a 7mo/9mo/11mo No Penalty CD at 3.90% APY with a $500 minimum deposit. Farmer’s Insurance FCU has 9-month No Penalty CD at 4.50% APY with a $1,000 minimum deposit. Consider opening multiple CDs in smaller increments for more flexibility.
  • Langley Federal Credit Union has a 10-month certificate special at 5.25% APY ($500 min, $50,000 max). This is a promo for new members only. Anyone can join this credit union nationwide; you must maintain $5 in their share savings account. Early withdrawal penalty is 90 days of interest.

Money market mutual funds
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.

  • Vanguard Federal Money Market Fund (VMFXX) is the default sweep option for Vanguard brokerage accounts, which has an SEC yield of 4.67% (changes daily, but also works out to a compound yield of 4.77%, which is better for comparing against APY). Odds are this is much higher than your own broker’s default cash sweep interest rate.
  • Vanguard Treasury Money Market Fund (VUSXX) is an alternative money market fund which you must manually purchase, but the interest will be mostly (80% for 2023 tax year) exempt from state and local income taxes because it comes from qualifying US government obligations. Current SEC yield of 4.63% (compound yield of 4.73%).

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 11/12/24, a new 4-week T-Bill had the equivalent of 4.60% annualized interest and a 52-week T-Bill had the equivalent of 4.38% annualized interest.
  • The iShares 0-3 Month Treasury Bond ETF (SGOV) has a 4.88% SEC yield and effective duration of 0.10 years. SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL) has a 4.57% 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.

  • “I Bonds” bought between November 2024 and April 2025 will earn a 3.11% 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 2025, 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 (my review) 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.
  • Genisys Credit Union pays 6.75% APY on up to $7,500 if you make 10 debit card purchases of $5+ each per statement cycle, and opt into online statements. Anyone can join this credit union via $5 membership fee to join partner organization.
  • La Capitol Federal Credit Union pays 6.25% APY on up to $10,000 if you make 15 debit card purchases of at least $5 each per statement cycle. Anyone can join this credit union via partner organization, Louisiana Association for Personal Financial Achievement ($20).
  • Credit Union of New Jersey pays 6.00% APY on up to $25,000 if you make 12 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.
  • 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 4.65% 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.

  • Synchrony Bank has a 5-year certificate at 4.00% APY (no minimum), 4-year at 3.90% APY, 3-year at 3.90% APY, 2-year at 3.90% APY, and 1-year at 4.20% APY. Early withdrawal penalty for the 4-year and 5-year is 365 days of interest.
  • BMO Alto has a 5-year CD at 4.00% APY. 4-year at 3.90% APY. 3-year at 3.90% APY. 2-year at 3.90% APY. 1-year at 4.30% 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. However, 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 3.85% APY (callable: no, call protection: yes). Be warned that both Vanguard and Fidelity will list higher rates from callable CDs, which importantly means they can call back your CD if rates drop later. (Issuers have indeed started calling some of their old 5%+ CDs as of Fall 2024.)

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 [n/a] (non-callable) vs. 4.43% 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 11/12/2024.

Photo by Giorgio Trovato on Unsplash

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.


2025 401(k) Contribution Limits Announced; New Super Catch-Up for Ages 60-63

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The IRS officially announced the new 401(k) contribution limits for 2025 (full news release), which also included a new “super catch-up” allowance for people who are ages 60-63 at year-end 2025. Strangely, it goes back down once you are age 64. I hadn’t heard of this before now. As usual, by “401(k)” I mean that it applies to 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan.

The 2025 base 401(k) contribution limit is increased to $23,500, up from $23,000. This WSJ article (paywall) has a handy chart for reference.

The 2025 base IRA contribution limit remains at $7,000 (subject to income limits). Taken together, “maxing out” your IRA and 401(k) now takes more than $30,000 a year even ignoring any catch-ups. That’s a lot, but whatever you can cram in there may get roughly a 30% boost towards your final retirement balance.

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Visualizing Asset Allocation Choices: Risk vs. Return vs. Probability

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Howard Marks published another Oaktree Capital memo recently, Ruminating on Asset Allocation, which included several insights about asset classes and how to create a portfolio. I recommend reading the entire thing, but here are a few highlights about how to better understand the balancing act that is asset allocation. (I know many people follow them, but I ignore all the memos that lean toward macroeconomic forecasts.)

Here are the top-level takeaways, which set the table:

  • Fundamentally speaking, the only asset classes are ownership and debt.
  • They differ enormously in terms of their fundamental nature.
  • Ownership assets and debt assets should be combined to get your portfolio to the position on the risk/return continuum that’s right for you. This is the most important decision in portfolio management or asset allocation.

How do you pick the right relative amounts of equities (ownership of a business) and bonds (debt)? The top chart above adds a new dimension of probability to just “risk increases with return”, and is actually from a previous Howard Marks memo:

…we see that as the thing called “risk” increases (that is, as we move from left to right on the graph), not only does the expected return increase, but the range of possible outcomes becomes wider and the bad outcomes become worse. That’s risk! (I hope this way of presenting risk will be considered a lasting contribution to the investment industry when I’m gone.)

Below is a new chart that keeps with the theme of considering probability vs. return, but for different asset class mixes (I edited the chart to explain the colors directly).

Ownership assets typically have a higher expected return, greater upside potential, and greater downside risk. Everything else being equal, the expected returns from debt are lower but likely to fall within a much tighter range.

Again, as we move from left to right (more ownership assets, less debt), the expected return increases and the expected risk increases (that is, just as in Figure 6 [the first chart above], the range of possible outcomes grows wider and the left-hand tail stretches further into undesirable territory). This way of presenting the options might be more intuitively clear.

Someone who believes in “more risk, more return” as portrayed in Figure 5 should logically adopt a high-risk posture. But if they understand the real implications of increased risk, as suggested by Figures 6 and 7, then they might opt for something more moderate.

Hopefully, this visualization can help us investors understand the value in a “balanced” portfolio holding both stocks and bonds. I would point out this is based on a diversified portfolio of stocks and/or bonds. Single companies can of course fail, but so many people have also gotten burned with “safe” investments that ended up with a -100% return (complete loss).

[Side note: The Yotta/Synapse/Evolve drama continues… I actually found my lost pennies in the “anonymized” ledger (legal?!?), but you can also see that so many others lost really significant amounts of money on what was supposedly FDIC-insured deposits.]

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Savings I Bonds November 2024: 1.20% Fixed Rate, 1.91% Inflation Rate (3.11% Total for First 6 Months)

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Update: Savings I Bonds bought from November 1, 2024 through April 30, 2025 will have a fixed rate of 1.20%, for a total rate of 3.11% for the first 6 months. As a quick and dirty comparison, the nominal yield on 5-year Treasury bonds is currently 4.15% and the real yield on 5-year TIPS is currently 1.77%.

Every existing I Bond will earn this inflation rate of ~1.91% eventually for 6 months; you will need to add your own fixed rate that was set based the initial purchase month. See you again in mid-April for the next early prediction for May 2025.

Original post:

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 November 2024 savings bond rates a couple of weeks before the official announcement on the 1st. This also allows the opportunity to know exactly what an October 2024 savings bond purchase will yield over the next 12 months, instead of just 6 months. You can then compare this against a November 2024 purchase.

New inflation rate prediction. March 2024 CPI-U was 312.332. September 2024 CPI-U was 315.301, for a semi-annual inflation rate of 0.95%. 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 ~1.90% to 1.91%, depending on the fixed rate.

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. (You should always sell at the very beginning of the month.)

Buying in October 2024. If you buy before the end of October, the fixed rate portion of I-Bonds will be 1.30%. You will be guaranteed a total interest rate of 1.30 + 2.98 = 4.28% for the next 6 months. For the 6 months after that, the total rate will be 1.30 + 1.91 = 3.21%.

Buying in November 2024. If you buy in November 2024, you will get ~1.91% 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 with some reductions. My rough guess is somewhere between 0.9% and 1.2%. The current real yield on short-term TIPS is 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 October as you’ll likely get a higher fixed rate and a decent initial 6-month rate. However, I actually don’t plan to buy any savings bonds this year. The yields are simply not very interesting as compared to other options. Short-term, it’s better to go T-Bills with the state tax exemption. For my inflation-protected needs, I have been buying longer-term TIPS instead to lock in the higher current 2%+ real yields (in tax-deferred).

Unique features and considerations. 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.

The main drawback is hassle. You can only buy new savings bonds through TreasuryDirect.gov, which is limited in its customer service resources and features. Conducting certain transactions may require a medallion signature guarantee which requires a visit to a physical bank or credit union and snail mail. If your password is compromised, they will not replace any lost or stolen savings bonds. The juice may not be worth the squeeze when you can own individual Treasury bonds or TIPS within any full-service brokerage account. (Finding a bank that will redeem a physical paper savings bond at all can be difficult these days.)

Over the years, I have accumulated I-Bonds and consider it part of the inflation-linked bond allocation inside my long-term investment portfolio. However, after converting all my paper bonds to electronic versions earlier this year, I have been selling the lower fixed rate bonds and reinvesting in 2%+ real yield TIPS.

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. As of 2024. you can only buy online at TreasuryDirect.gov, after making sure you’re okay with their security protocols and user-friendliness. (No more tax refund savings bonds.) Technically, the purchase limits are per Social Security Number or Employer Identification Number. For those looking for another way to expand their purchasing power, that means you can also buy for a child, grandchild, LLC, or a trust.

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

[Image: 1942 US Savings Bond poster – source]

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Acorns Early 1% Match on Kid Custodial Accounts / Acorns Later 3% Match on IRA Contributions

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Acorns, known for their “Round-Ups” on purchases that encourage recurring small savings of spare change and beyond, also has a match program for IRA contributions. They also just added a new match program for UTMA/UGMA custodial accounts for kids.

Acorns Early is their UTMA/UGMA custodial account for minors, and they will give a 1% match on contributions for Acorns Gold subscribers. These UTMA/UGMA custodial accounts have a few different wrinkles. They are a flexible brokerage account, not like 529 plans where you have to pick from a menu. They can be spent more flexibly as well, not just for qualified educational expenses. A certain amount of income is tax-free each year. However, money in a custodial account is the property of the minor and they assume full control of the account when they become of age.

For 2024, the gift tax exclusion if $18,000 per person ($36,000 from a couple), so the 1% match could be worth up to $180/$360 per kid per year (you can give more, but this is without potentially triggering a gift tax). Friends and family are allowed to contribute as well.

Acorns Later is their IRA account, and they give a 3% match on contributions for Acorns Gold subscribers. Per the 2024 contribution limits, $7,000 x 3% = $210 and $8,000 x 3% = $240 (Age 50+). There is a 4-year hold period.

Acorns Gold costs $12 a month (first month free) and is their highest premium tier with other various perks. So you’d have to balance it all out for your situation.

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IRA and 401k Accounts Can Earn You 30% More After 40 Years

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We’re all told that we should use IRA and 401k accounts to save for retirement due to their great tax benefits. But how valuable exactly are those benefits? 🤔 A huge difference? A little difference? This Morningstar article crunches some numbers for “traditional” pre-tax IRA/401ks within a broadly-representative tax situation and three example portfolios. (Although the benefits should be basically the same for Roth accounts, as they end up assuming the same tax rate during the working and retirement years.)

A one-time $5,000 contribution (pre-tax) is invested for 40 years within both the tax-deferred IRA/401k and a taxable brokerage account. The three example portfolios are “100% zero-dividend stocks”, “100% stock index”, and “60% stocks/40% bonds balanced” – essentially most to least tax-efficient. All are assumed to return 8% annually. Here are the results:

Here is the conclusion, quoted directly from the article:

To address this article’s original question, for investments made over a full working career, from age 25 to 65, IRA/401(k) accounts improve the final aftertax value of the study’s assets by 17% for a no-dividend portfolio, 30% for a stock market index fund, and 44% for a low-turnover balanced fund. Those figures, of course, will vary according to personal circumstances, but I conducted enough offscreen spreadsheet tests, using different tax brackets, to conclude that they are broadly representative.

As you might expect, the advantage is greater when the portfolio is less tax-efficient. The more something spins off dividends, capital gains, or interest, the more it should try to go in the tax-deferred bucket.

If you assume the use of the most popular target date retirement funds, they are 90% to 100% stock market index for the majority of the working years (25-65). So there you have it. A 30% boost is a reasonable estimate for most people to carry around in their heads. Roughly 1/3rd more. That’s a lot!

In short, IRA/401(k) plans are a very good deal. And should the latter offer a company match, they become a truly great deal.

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Robinhood Gold Review: 1% Deposit Boost Ends 11/25/24

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Update October 2024: Well, that didn’t last very long. Right as competitors rush to copy the feature, Robinhood sends me a message that the last day to get your 1% Deposit Boost is November 25, 2024.

Update June 2024: The 1% Deposit Boost for Robinhood Gold subscribers is now live. As previously announced, the 1% boost is paid out gradually over 24 months on net new deposits. If you make future withdrawals, this may affect your unpaid boosts. If you were already paid a boost payment, it may affect the boost on future deposits. In other words, they are paying attention and it’s not simple to game by withdrawing your cash. You can find additional details on this FAQ page. The following deposits are eligible:

Standard bank account transfers (originated ACH)
Wires in
Direct deposit (non-originated ACH)
Debit card transfers (including Apple Pay)
Request for Payment (ex. Zelle or PayPal transfer)
Transfers from spending account
Transfers from IRA account

I tested it out with a $500 deposit with a debit card transfer via Apple Pay (for another 1%*). Hello, $0.21 a month! 💰 Here’s a screenshot. I’m already locked into a Robinhood relationship for 5 years with the expired IRA promo, so I will try to see how to best utilize this promo for the next 3 years.

(* Debit card deposit side note: I also stacked it with by making the deposit with Apple Pay linked to my 1% cash back debit card from Upgrade. This way, I’ll get another 1% on the $500. Now, this method should be used carefully and for deposits that you intend to invest at Robinhood, as I’ve read reports of Robinhood freezing accounts if this option is abused by depositing and immediately withdrawing. This works for me because I plan to invest smaller deposits there for 24 months to get the Robinhood 1% match anyway. Besides Upgrade, a few other places offer 1% cash back on debit card purchases, but Upgrade is also offering a $300 bonus which is noteworthy even if it is a fintech.)

Full review:

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.)
  • $1,000 in free margin ($2,000 until 8/18/24).
  • 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 (ended 4/30/24). This WAS 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.

The hottest deal WAS the 3% match on incoming 401k rollovers and IRA transfers. I participated for an $8,000+ payout and am now stuck in its 5-year lock-up period. They’ve added billions of new assets with this promotion.

The second hottest deal is the new 1% unlimited deposit match, doled out over a 2-year period. I find it a very clever way to keep customers locked-into their Robinhood accounts AND keep them paying for a Robinhood Gold subscription. Don’t be surprised if the price of Gold goes up within the next year or so!

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 the equivalent of more than 3% back) 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, since 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. After reading the terms closely, even if I do get enough referrals for the “Solid Gold” card, I’ll get a 1099 for over $1,000. If they run out of Gold cards, you just get the cash, but there doesn’t seem to be an option to simply decline and opt for the cash. I’m not interested in paying $400 in taxes for a gaudy 10 karat credit card.

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SoFi Invest: 1% Match on Recurring Deposits to Brokerage or IRA

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SoFi Plus is now offering an unlimited 1% match on all recurring SoFi Invest deposits. This includes their self-directed “active” or robo-advisor “automated” accounts. There is a two-year minimum hold requirement. Both taxable brokerage and IRAs are eligible, and this benefit may be stacked the with SoFi Invest 1% match on IRA contributions.

You must be a member of SoFi Plus, their premium status that requires opening both a SoFi Checking and Savings account and then setting up a monthly direct deposit into either account. However, that direct deposit can be any amount, as little as $1.

New to SoFi? Take advantage of the following sign-up bonuses first:

  • 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 4.30% 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.

After you have your accounts set up and have qualified for SoFi Plus status (it’ll show in your app after the direct deposit posts), here is how to set up a recurring deposit per their FAQ:

There are two ways to set up a recurring deposit:

1. Set up a weekly, biweekly, or monthly ACH transfer into your SoFi Invest® account. You can do this by adding cash to your Invest account and changing the frequency from “one-time, today” to recurring on a weekly, bi-weekly, or monthly cadence.

2. If you have Autopilot through a SoFi Checking & Savings account from SoFi Bank, N.A, you can use it to set up a recurring deposit into your Automated Invest (SoFi Wealth, LLC ) account. Afterwards, click the “Set up Autopilot” button to start your recurring investment. Next, select the dollar amount or percentage you want to invest from each paycheck, and we’ll automatically transfer it into your new account.

Remember that you get the match for the deposit of funds, and it must stay there for 2 years or they’ll try to claw it back. You’ll have to invest it separately by making a trade.

The 1% match is technically paid out in SoFi rewards points (1 point = $0.01), but you can set it to auto-convert to cash into a designated SoFi account every month (that’s what I do). The match will be paid out within two weeks of the end of each calendar month.

This is structured very similarly to Robinhood’s “1% Deposit Boost”, down to the 2-year hold period. You don’t need a checking account or direct deposit at Robinhood, but it does require an active Robinhood Gold subscription at $5 per month ($60 a year).

Here are more details on other SoFi promotions, including their 2.2% cash back credit card and $300 Personal Loan bonus.

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.

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