Unexpected Bonus
FRUGALITY GETS A BAD rap these days. It seems today���s standard advice is to ���go ahead and buy your darn daily latte.��� Instead, we���re told to worry about bigger financial issues.
That���s probably good advice. Small purchases here and there will likely boost our mood, while clipping coupons probably won���t move the net worth needle. Still, I���ve adopted a cheapskate practice that can be lucrative: brokerage firm retention bonuses.
To snag these bonuses, you typically need a sizable IRA or taxable account. The strategy is to call up your brokerage firm and mention a juicy cash transfer offer you see at a competing asset manager. Don���t be surprised if the firm matches that offer if you simply stay put.
I had this happen three times last year.
I was simply looking to consolidate accounts, but none of the investment companies wanted me to leave. The result was more than $1,000 of retention bonus money plopped into one IRA and two taxable accounts.
Be aware that you���ll receive a 1099 on a bonus paid to your taxable account. Another thing to consider: If you end up sticking with high-cost funds, that can effectively negate any cash bonus. For example, if you own an index fund at 0.14%, but could own the same thing for 0.04% elsewhere, that���s $500 per year of extra fees on a $500,000 position.
I wasn���t looking to score retention bonuses a year ago. I just took what was offered. My plan (don���t tell anyone) is to try the same routine in about six months. I���ll let you know how it goes.
That���s probably good advice. Small purchases here and there will likely boost our mood, while clipping coupons probably won���t move the net worth needle. Still, I���ve adopted a cheapskate practice that can be lucrative: brokerage firm retention bonuses.
To snag these bonuses, you typically need a sizable IRA or taxable account. The strategy is to call up your brokerage firm and mention a juicy cash transfer offer you see at a competing asset manager. Don���t be surprised if the firm matches that offer if you simply stay put.
I had this happen three times last year.
I was simply looking to consolidate accounts, but none of the investment companies wanted me to leave. The result was more than $1,000 of retention bonus money plopped into one IRA and two taxable accounts.
Be aware that you���ll receive a 1099 on a bonus paid to your taxable account. Another thing to consider: If you end up sticking with high-cost funds, that can effectively negate any cash bonus. For example, if you own an index fund at 0.14%, but could own the same thing for 0.04% elsewhere, that���s $500 per year of extra fees on a $500,000 position.
I wasn���t looking to score retention bonuses a year ago. I just took what was offered. My plan (don���t tell anyone) is to try the same routine in about six months. I���ll let you know how it goes.
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