MMB Portfolio Dividend & Interest Income Update – July 2024 (Post Q2)

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Here’s my quarterly income update as a companion post to my July 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 after 2024 Q1 (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.

Why I like tracking dividends in general. 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. They have explicitly decided that they don’t need this money to improve their business, and that it would be better to distribute to shareholders. 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. There is also a growing trend towards buybacks, partially because they are easier to discontinue. 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.

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.

In the case of REITs, they are legally required to distribute at least 90 percent of their taxable income to shareholders as dividends. Historically, about half of the total return from REITs is from this dividend income.

Finally, the last component comes from interest from bonds and cash. This will obviously vary with the prevailing interest rates, the real rates on TIPS, and the current rate of inflation. In 2024, we are finally back to getting paid a small percentage more than inflation on our cash.

Dividend and interest income from my specific asset allocation. To estimate the income from my portfolio, I use the weighted “TTM” or “12-Month Yield” from Morningstar (checked 7/1/24), 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 2.65%.

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 your skillset, networking, 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. You don’t have to wait until you hit a huge magic number. FIRE is Life!

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MMB Portfolio Asset Allocation & Performance Update – July 2024 (Post Q2)

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Here’s my 2024 Q2 update for our primary investment holdings, 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 Q2 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 do 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. But if you step back and look at the big picture, my target portfolio is quite boring.

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. The reality is of course a bit more messy.

  • 35% US Total Market (VTI)
  • 5% US Small-Cap Value (VBR)
  • 20% International Total Market (VXUS)
  • 5% International Small-Cap Value (AVDV)
  • 5% 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 6% so far in 2024. The S&P 500 is up about 14.5% 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 to bring me back towards my target numbers. The US capital markets continue to reward the long-term investors who take on the risk of owning stocks.

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

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Savings I Bonds May 2024: 1.30% Fixed Rate, 2.98% Inflation Rate (4.28% Total for First 6 Months)

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Update: Savings I Bonds bought from May 1, 2024 through October 31, 2024 will have a fixed rate of 1.30%, for a total composite rate of 4.28% for the first 6 months. The semi-annual inflation rate was 1.48% as predicted (2.96% annually), but the full composite rate is dependent on the fixed rate for each specific savings bond and so it is a little bit higher. This total composite rate is a bit lower than current short-term Treasury yields, and the fixed rate is about 1% lower than that of current short-term TIPS yields.

Every existing I Bond will earn this inflation rate of ~2.96% 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-October for the next early prediction for November 2024.

Original post from 4/14/24:

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]

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.


Vanguard Sells All Solo 401(k) Accounts to Ascensus

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.

Vanguard recently announced that they are selling their individual 401(k), multiple-participant SEP, and SIMPLE IRA plan business to Ascensus (press release). They’ve already updated their small business retirement plan page. One-person SEP IRAs will stay at Vanguard.

Ascensus will provide custodial and trustee services, recordkeeping, client servicing, transaction processing, tax reporting, and other services, and plan participants will retain access to a diverse lineup of Vanguard mutual funds via the Ascensus platform.

This will affect a lot of small business owners who previously chose to open a Traditional Pre-Tax and/or Roth Solo 401k plan directly with Vanguard. The new stated fee schedule includes a $20 annual fee per Vanguard fund per account holder in the Individual(k) plan and a $20 annual fee per participant for custodial services. I believe the previous fee schedule was just the $20 annual fee per Vanguard fund per account holder, but it was waived if at least one participant had at least $50,000 in qualifying Vanguard assets.

I also find this move interesting in the context of the Vanguard company as a whole. This same week, Fidelity continued moving gradually towards being an “all-in-one” financial marketplace, recently adding a high-yield sweep option to their full-featured Cash Management Account. (I will note though, Fidelity does directly not offer a Roth Solo 401k option!) Fidelity is competing directly with the fintechs like Robinhood and SoFi that also want to be everything finance.

Meanwhile, Vanguard already shut down their own Cash Management option, VanguardAdvantage, in 2019. They made their Admiral Shares mutual funds more expensive than their ETF equivalents (they were initially the same expense ratio), which removed a major incentive to use a Vanguard brokerage account (as most other brokers won’t let you trade Vanguard Admiral mutual funds). There isn’t much reason to hold Vanguard ETFs inside a Vanguard brokerage account now that everyone has commission-free trades, and Vanguard seems perfectly fine with that. Now, they are no longer going to service their past Solo 401(k) clients, whether they wanted to stay with Vanguard or not.

Vanguard definitely seems to be narrowing their focus towards offering investment products like ETFs and mutual funds and simple investment advice. They appear happy to move away from anything that requires high-touch customer interaction like phone calls and paperwork. (I would note that my more recent customer service interactions with Vanguard have been more positive with lower hold times.) This is not necessarily a bad thing, especially if it leaves more resources for their other customers, but definitely a different direction than others.

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

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 May 2024: This promo is now over.

Update 4/24/24: At some point within the last week, Robinhood has changed their language to say that if as long as you initiate your IRA transfer by 4/30 as a Gold member, you will receive the 3% match.

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.

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

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.

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

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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.

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

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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.

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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Social Security Optimizer by T. Rowe Price: New Free Retirement Income Tool

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T. Rowe Price (TRP) announced a new free tool called Social Security Optimizer to help decide when to start claiming Social Security benefits. You enter information like age, marital status, life expectancy, spousal information, and “Monthly Benefit Amount At Full Retirement Age”. It will ask you to register with your email address, but it is otherwise free. (After you register, you also get access to other free TRP tools.)

The new tool, which provides tailored insights through analysis of an individual’s specific circumstances, estimates when to begin claiming Social Security and how much they should expect to receive. Social Security Optimizer can also model life expectancy to see what claiming strategies will yield the most amount of money over time based on the inputted life expectancy. Individuals are guided through a short series of questions. The tool will then estimate the optimal age to take Social Security, the optimal age for their partner to take Social Security, and the amount of benefit the individual (and their partner) will receive, given their assumed life expectancy. The Social Security Optimizer also pairs broader education and resources to help individual investors and plan participants make more informed decisions.

Based on my initial tests, the tool is on the basic side. They do recommend a specific claiming strategy and provide some useful background information about how Social Security works, but it doesn’t go into much detail about all of the possible scenarios. I was honestly hoping for something more full-featured given that in March 2023, T. Rowe Price announced that it was acquiring Retiree Inc., which included several advanced software tools for both individuals and professional financial advisors like SSAnalyzer.com, Income Solver®, and Social Security Solutions™.

I’d still recommend checking it out, as Social Security claim timing is a big decision and I think exploring and using all available information is a good idea. These tools can introduce a lot of people to ideas that they would have not otherwise considered, like perhaps having one spouse claim as early as possible (age 62), and then have the other claim as late as possible (age 70).

Other free third-party Social Security tools that I recommend trying out include Open Social Security and SSA.tools.

A reminder that this tool (and all the others) will help to maximize the total income that you receive from Social Security. Often this means one or both spouses delay their claim date to age 70. This works out fine if you have alternative sources of income while you delay your claim start date. However, if you need the Social Security income to retire sooner (often now), then that is a new variable to work in. Income that lets you retire and stop working today when you are younger and healthier may be worth more than what comes out of some discounted interest rate analysis.

I’ve also found there is often a behavioral psychology element. For example, if one spouse stops working first while the other continues to work, the non-working spouse may feel an urge to have their “own income” and want to start claiming Social Security as soon as possible.

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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UBS Global Investment Returns Yearbook 2024: The Haystack Keeps Changing

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The 25th edition of the UBS Global Investment Returns Yearbook is available for free download in a 56-page PDF Summary Edition version on the UBS website. (Credit Suisse took over the publication of this yearbook in 2009, and UBS was voluntold to acquire Credit Suisse in 2023.) Hat tip to Abnormal Returns. This publication provides a nice “big picture” overview of the long-term performance of global financial assets:

With the depth and breadth of the financial database that underpins it, the UBS Global Investment Returns Yearbook is widely recognized as the unrivalled authority on long-term investment returns. We present a historical record of the real returns from equities, bonds, cash and currencies for 35 markets, spanning developed and emerging markets and stretching back to 1900.

The late Jack Bogle was often credit with the saying: “Don’t look for the needle in the haystack. Just buy the haystack.”

If you look at the entire haystack of individual companies, over time there are a lot of losers and a few big winners. If you buy the entire investable US stock market, or the entire investable world stock market, you can be sure that you own all the eventual winners. Even if you bought the S&P 500 index in the 80s or 90s, you would eventually own Apple, Google, Nvidia, and so on. For example, who knows who the final winner in the AI battle will be?

I recommend scrolling through the Yearbook Summary just to look at the cool charts with data from 1900. Check out how different the US stock market looked in 1900 vs 2024:

I think about international diversification in a similar way. Inside a recent WSJ article (gift article) about Japan’s Nikkei stock index reaching its previous high from 1989, there was an updated chart of the historical breakdown of global stock market value between the US and the rest of the world. Upon closer inspection, I realized that the chart is based on one from the UBS Yearbook.

The US made up only about 15% of the world’s market cap in 1900, had a recent low of about 40% in 2010, but after the recent run is now over 60%. What will happen in the future? If you think US stocks will outperform the rest of the world over the next decade or longer, you are then betting that this 60% number will continue to increase. And it might! It’s been as high as about 70% in the past.

As for me, I simply don’t know. I’ll hopefully have 40+ more years being invested in the stock market, and the haystack will continue to change. I choose to maintain diversification and “own the haystack” when it comes to both individual US companies and global countries. I prefer to know I’ll own the needles and have less worry, even at the cost of potentially somewhat lower returns.

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Study: 100% Stocks The Best Portfolio For Both Accumulation and Retirement Income?

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The academic paper Beyond the Status Quo: A Critical Assessment of Lifecycle Investment Advice by Anarkulova, Cederburg and O’Doherty had a conclusion that caught my eye. From the abstract:

We challenge two central tenets of lifecycle investing: (i) investors should diversify across stocks and bonds and (ii) the young should hold more stocks than the old. An even mix of 50% domestic stocks and 50% international stocks held throughout one’s lifetime vastly outperforms age-based, stock-bond strategies in building wealth, supporting retirement consumption, preserving capital, and generating bequests.

Now, the actual paper was not written for non-academics and there was very slim pickins’ in the “easy-to-understand graphic that summarizes our results” department, but I’ll try my best. They studied 8 different portfolios, summarized below. (They also picked the names.)

  • TDF. Follows the asset allocation of the most popular target-date funds, which use a glide path that starts at 90% equities but reduces equity percentage over time.
  • Balanced. 60% US stocks, 40% bonds.
  • Balanced/I. 30% US stocks, 30% International stocks, 40% bonds.
  • Age. (120-Age)% US stocks, (Age-20)% bonds.
  • Age/I. (60-Age/2)% US stocks, (60-Age/2)% International stocks, (Age-20)% bonds.
  • Bills. Invests only in Treasury bills.
  • Stocks. 100% US stocks.
  • Stocks/I. 50% US stocks, 50% International stocks.

In the chart below, the authors show the equivalent savings rate that would have been required to reach the same level of “expected utility of retirement consumption” (retirement income provided + leftover money at death) throughout the entire lifecycle of a 10% savings rate during the working years and then spending it down at a 4% withdrawal rate in retirement.

Let’s look at the highlighted pink box. This is the line for the best performing portfolio of 50% US stocks, 50% International stocks (“Stocks/I”). In order to have gotten the same amount of retirement income + bequest as a 10% savings rate with Stocks/I, you would have had to save 14.1% with a TDF, 16.9% with the Balanced portfolio, and so on. Note that staying in cash “bills”, you would need to ratchet up to 47% savings rate!

In another chart, we see that 50% US stocks, 50% International stocks (“Stocks/I”) also creates the highest income replacement rate in retirement, based on a 10% savings rate. This is true on average (50% percentile) and even in the worst-case scenarios (5th percentile), as long as you stayed with the plan. The drawdowns would have been temporarily more severe over certain periods of time, however.

My takeaways are:

  • You might consider a 100% stock portfolio with international exposure, if you really have the stomach for it. I’d probably recommend waiting until after you have survived a 50% crash first. Optimally, your portfolio would grow so much that by retirement, you may not even need a 4% withdrawal rate.
  • All of the other portfolios that contains some bonds (TDF, Balanced, Balanced/I, Age, Age/I) had very similar results over the entire lifecycle of accumulation and spending down. They still did pretty well.
  • Everyone should definitely own a good chunk of stocks, as trying to accumulate enough money with just safe “cash” in the form of Treasury bills or bank accounts is going to require in the neighborhood of five times the savings rate.
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CFP Course Notes #1: The 7-Step Financial Planning Process

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Whew! 😅 I just passed my first mid-term test in about 20 years. The first half of Fundamentals of Financial Planning, the first course from my self-paced CFP program, included coverage of the official 7-Step “Financial Planning Process”. The image above was found in my course materials, but the text (and I believe the graphic itself) is from the CFB Board’s Financial Planning Practice Standards.

Below are my completely non-official notes and takeaways. Remember, this is from the perspective of the financial planner.

Step 1: Understanding the Client’s Personal and Financial Circumstances

  • You must explain, obtain, and analyze all of the qualitative and quantitative information needed to fulfill the scope of your engagement.
  • Qualitative topics include (but are not limited to) health, family, goals, risk-tolerance, and priorities.
  • Quantitive topics include (but are not limited to) income, expenses, cashflow, savings, investments, assets, liabilities (debts), estate plans, and retirement/work benefits.
  • If the client is unwilling or unable to provide sufficient and accurate information (both personal and financial), you must terminate the engagement.

Step 2: Identifying and Selecting Goals

  • Identify potential goals for the client, using the information gathered in Step 1.
  • This means that in addition to the goals the clients brings up themselves, you may find other ones like adequate life insurance or a clear estate plan.
  • After developing this list of potential goals, work with the client to select and prioritize amongst these goals.

Step 3: Analyzing the Client’s Current Course of Action and Potential Alternative Courses of Action

  • Analyze the client’s current course of action. What are they doing now? Will their goals be met this way?
  • Analyze potential alternative courses of action. Find at least one alternative for any goal that won’t be met with current action.

Step 4: Developing the Financial Planning Recommendations

  • Develop a specific recommendation of action for each selected goal. It’s possible that the recommendation is to “stay the course” for one or more goals.
  • If an alternative is presented, work out why it is better than the current action. Include any assumptions and estimates used in your calculations.
  • Consider if each specific recommendation is independent or must be implemented along with another recommendation.

Step 5: Presenting the Financial Planning Recommendations

  • Present your recommendations to the clients. Your goal is to have the client understand all of the factors that were considered and why the recommendation presented is the best recommendation.

Step 6: Implementing the Financial Planning Recommendations

  • Now that the recommended actions have been agreed upon, who is responsible for implementation? Might be you (the financial planner), might be the client.
  • What products, actions, or services are the most appropriate for the job?
  • Select and implement!

Step 7: Monitoring Progress and Updating

  • Who is responsible for monitoring and updating? Might be you (the financial planner), might be the client.
  • If you (the financial planner) is responsible for monitoring and updating, then you must regularly monitor the client’s progress and keep the process going. Update with current client information, update goals, update recommendations, etc.

Other random thoughts:

The CFP Board makes a big deal about the difference between “Financial Advice” and “Financial Planning”. Financial Advice is the more limited act of making a recommendation to act or not to act, often focused on a specific niche topic. On the other end, the most encompassing (and expensive) term is Financial Planning, which requires you to follow all their Standards and obtain a deep understanding of the client’s personal and financial situation. Accordingly, CFPs will ask you to sign an Engagement Letter that clearly outlines the services and products being provided (and how you’ll pay for them).

I also spent a good deal of time learning how to use the HP-12C financial calculator to solve for internal rates of return, time value of money, cash flow analysis, amortization, and other financial scenarios. I have an engineering background, but had never used this calculator before, so I had to order a new one online. In the meantime, I used an HP-12C emulator to do the coursework. It’s definitely handy for finance.

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.