The Sunday Best (7/28/2019)
Every week, I scan hundreds of headlines, read dozens of posts, and bring you the best of the best to save you time and mental energy.
Financial Independence (FI) is a primary focus, but it’s an awfully broad topic. I tend to approach FI and early retirement from a fatFIRE perspective and through the lens of a physician, so expect to see those biases in the selected articles.
For more great articles, take a peek at The Sunday Best Archives. Now let’s get to the best… The Sunday Best!
The Sunday Best
My wife makes her podcast debut at the request of our friend “Doc G” from DiverseFI and the What’s Up Next podcast. She’s got no interest in listening, but I thought she did great, as did Lara McElderry & the Chief Dad Officer. Married to Money?
Note that’s married to money, not married for money. Big difference. Money doesn’t solve your problems, anyway. Mr. Tako Escapes asks a semi-rhetorical question. Worth Millions and Don’t Feel Wealthy?
Not worth millions and don’t feel wealthy? We can help you with the first part. Joe from The Federal FIRE teamed up with Steve from Think Save Retire with the following guest post. Escaping the Death Spiral: A High Income Path to Financial Independence.
Don’t have a high income either? If you’re a primary care doctor, the White Coat Investor can help you. How to Double Your Income as a Primary Care Physician.
Not a doctor? You don’t have to be a doctor to make money in real estate. Passive Income MD shows us Different Ways to Make Five Million Dollars in Real Estate.
Not sure how to get started with Real Estate investing? Why not register for a free email course from a real estate investor who reached financial independence in his mid-thirties and wrote the book on Retiring Early with Real Estate?
Don’t want to retire early? ESI Money offers an alternative, based on Bob Clyatt’s Work Less, Live More. Early Semi-Retirement: An Alternative to Full Retirement.
If you love your work, you may never want to retire. But can you make that romance last? The Military Dollar explores The Problem With “Choose A Job You Love And You Will Never Work A Day In Your Life.”
It’s amazing how the days fill up when you start working less or not at all. Fire the 9 to 5 knows this all too well. Things I Haven’t Done Since I Retired Early (and a few I have).
He’s got no one to blame but himself for any inaction. Do you play the blame game? Trent Hamm of The Simple Dollar doesn’t play that game. Them: The Failure of the Blame Mindset in Financial Improvement.
If you’re going to dream, dream big. If you’re going to lose, lose big! I share my counterintuitive Life Goal: To Lose a Million Dollars.
As I continue to explore crowdfunded real estate investment opportunities, I’ve invested in each of the funds discussed in this recent syndicated guest post. If I’m going to share these offerings with my readers, the least I can do is put some of my money at stake. What You Need to Know about Fundrise and DiversyFund.
Do physicians have free will? Or do we owe it to the world to work ’til we drop? The Physician Philosopher checks out the arguments and whether or not they hold water. Is it Wrong for Doctors to Retire Early?
Tour de Rates
As Egan Bernal chases victory in the final stage of the Tour de France, I’m chasing down the best interest rate for my parked cash.
Earlier this year, I shared how I had moved my cash from Ally Bank (now paying 2.10% APY) to Vanguard’s Treasury Money Market (VUSXX), which now has a yield of 2.18% after accounting for the expense ratio, and the interest is state-income-tax free for most.
I don’t normally jump around, but for the first time in years, it seems you could be leaving a noticeable amount of money on the table if you’re not getting a good rate of return from some form of high-interest savings account. This is especially true if your emergency fund measures in the tens of thousands and it’s sitting in some crappy account paying 0.10%, which is not uncommon.
Now that I’ve officially moved to Michigan, the appeal of VUSXX is lesser. In Minnesota, my marginal state income tax on interest was 9.85%, whereas Michigan has a flat 4.25% state income tax. Avoiding state income tax doesn’t boost my after-tax returns as much as it once did.
This week, the well known roboadvisor Betterment launched a savings account backed by four banks that’s FDIC insured to $1 Million, and it’s offering 2.68%.
Let’s compare after-tax returns, assuming I’ll be in the 24% federal income tax bracket in 2019.
- Ally: 2.10% * (1 – 0.24 – 0.0425) = 1.51%
- Vanguard VUSXX: 2.18% * (1 – 0.24) = 1.66%
- Betterment: 2.68% * (1 -0.24 – 0.0425) = 1.92%
Moving some money to Betterment improves my after-tax return by 26 basis points, or $260 per $100,000 invested per year.
It’s important to note that the 2.68% APR includes a 0.25% bump through the end of the year for being on the waitlist to be notified when checking is available. They plan to pair it with an ATM card that will reimburse ATM fees worldwide. We’ve already got this through First Republic, and it’s a great feature to have with our travel plans that involve plenty of international vagabondng.
Is it worth moving money to maybe squeeze a couple hundred more bucks our of my cash? I decided it was. I didn’t move all of our parked dollars there, as we’re buying a home later this week, but I did sign up and move $40,000 there and will let Betterment keep the bulk of our savings / emergency fund, and I have drained the Vanguard money market fund down pretty close to zero.
VUSXX has a minimum investment of $50,000 to open, but you don’t have to maintain that. Once it’s open, you can leave it open, even if you only have pennies in there.
My Betterment Everday savings account was easy to open and fund. I think I spent 10 to 15 minutes doing it, but it would have been 5 if I wasn’t dealing with satellite internet here in the northwoods.
Obviously, the play here for Betterment is to get you into their environment, hoping that you’ll eventually invest with them also. They offer a robo-advisory service that invests in ETFs based on a number of factors, including your age, goals, and risk tolerance.
Automated tax loss harvesting is touted as a key feature, and the fees are relatively low at 0.25% of your balance. Personally, I would rather do my own investing and tax loss harvesting, so I have no plans to make that transition with Betterment. But I’ll gladly take the 2.68% as long it’s available. If the rate becomes unfavorable in the future, I can easily transfer money back to Ally or Vanguard.
After you answer some questions about your goals and select the fact that you’re interested in the savings account, you’ll have the opportunity to set that up, connecting with your other bank account for funding.
I funded mine directly from Ally Bank, and ended with this screen.
I don’t recommend switching banks every few months. It’s not going to be worth the hassle. I’m still going to do most of my banking with Ally and most of my investing with Vanguard. But Betterment’s going to hold on to my emergency fund, which equals about six months’ worth of expenses.
At that balance level, moving money from VUSXX is worth about an annual $100 in after-tax money. It’s not a huge difference, but as I expect the balance to be larger at times, especially as I transition from being an employee with tax withholding to a self-employed blogger paying quarterly estimates on my state and federal taxes.
Are there even better rates out there? Yes, but always read the fine print. Many of the higher yields I’ve seen come with strings attached. Some have a maximum you can invest. Others are from brand new companies with no track record. Some are local or regional credit unions, which may not be convenient to you.
Betterment’s been around since 2010 and has established itself as a leader in the online investing world, managing over $16 Billion in 2019. It’s good to see them disrupting online banking, as well.
Have an outstanding week!
-Physician on FIRE