The Sunday Best is a collection of articles I’ve curated from the furthest reaches of the internet for your reading pleasure.
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.
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 Bettermentlaunched a savings account backed by four banks that’s FDIC insured to $1 Million, and it’s offering 2.68% as of this date.
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 would improve my after-tax return by 26 basis points, or $260 per $100,000 invested per year.
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.