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Unexpected Bonus

Mike Zaccardi

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.

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Nate Allen
Nate Allen
1 year ago

What do you consider “sizable” enough to ask?

Mike Zaccardi
Mike Zaccardi
1 year ago
Reply to  Nate Allen

If it’s an IRA (non-taxable bonus) $300 would be nice if there’s no leg work.

Guest
Guest
1 year ago

Nice work Mike. At first I thought maybe it wasn’t right to “ask” for a retention bonus when you really have no intention to transfer your account out anyway. But now think there’s nothing wrong with it. Certainly my brokerage firm has made gobs of money off me in unfair ways over the decades.

Carl Book
Carl Book
1 year ago
Reply to  Guest

How are they treating you unfairly? If they are cheating you, why would you keep your account there?

Mike Zaccardi
Mike Zaccardi
1 year ago
Reply to  Guest

All the folks I spoke with were super nice about it too.

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