Finance

Fraud attempts seem to be coming at us 24/7, and this story of a couple losing $180,000 from their brokerage account was very sad. However, what really caught my eye is that not only could they not track down the funds (where was it withdrawn to? shouldn’t they only let you withdraw to a linked bank account?), Tastytrade only agreed to reimburse half of the $180,000 stolen from their account. Their reasoning was that the customer did not sign up for two-factor authentication (2FA), even though it was available.

In an email exchange, Tastytrade confirmed that the “intrusion” took place, but said it wasn’t the company’s fault, because the couple failed to sign up for an optional two-factor authentication protection.

“We rolled out this additional security feature to mitigate the risk of this occurring to our customers,” the email from a fraud manager read.

“I know that this was an option, but it was never made mandatory,” Erez said.

I hadn’t heard of this as an excuse before, but it is definitely something worth nothing. While I feel like 2FA with text codes are sort of the minimum level of security most people should maintain, I also feel that a broker needs to provide clear notice if it absolves them of liability. Either that or simply require it.

I found another example of a $37,000 Tastytrade hack, this time from a customer who claims they did enable 2FA. This time Tastytrade denied all liability.

We see that your username and password was obtained by the nefarious party outside of the control of our Firm. Because of this, we will unfortunately be unable to extend any relief or concessions.

Many of the major brokerages offer security guarantees (although I could not find one for Tastytrade!), for example the Fidelity Customer Protection Guarantee and Vanguard security promise. I looked and Fidelity and Vanguard do not explicitly require you to use 2FA, but I’m also not sure if 2FA is already required of everyone. I would note that none of these “guarantees” or “promises” will apply (as far as I’ve seen across the major brokerages) if you got tricked into giving out your password:

Fidelity will reimburse you for losses from unauthorized activity in your Covered Accounts occurring through no fault of your own.

What are examples of when I won’t be covered?
If you grant access or authority to, or share your Fidelity account access credentials or information with, any persons or entities, their activity will be considered authorized by you and not covered by the Customer Protection Guarantee.

The problem is, how do they know how the hackers got the password? What if it was obtained from an inside job from a brokerage employee, or an undiscovered hack?

Photo by Dan Nelson on Unsplash

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 announced at BLS.gov, which allows us to make an early prediction of the May 2026 savings bond rates just before the official announcement on the 1st. This also allows the opportunity to know exactly what an April 2026 savings bond purchase will yield over the next 12 months, instead of just 6 months. You can then compare this against a November 2025 purchase.

New inflation rate prediction. September 2025 CPI-U was 324.800. May 2026 CPI-U was 330.213, for a semi-annual inflation rate of 1.67%. 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 ~3.34 to 3.39%, depending on the fixed rate.

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. (You should always sell at the very beginning of the month.)

Buying in April 2026. If you buy before the end of April, the fixed rate portion of I-Bonds will be 0.90%. You will be guaranteed a total interest rate of 0.90 + 3.13 = 4.03% for the next 6 months. For the 6 months after that, the total rate will be 0.90 + 3.36 = 4.26%.

Buying in May 2026. If you buy in May 2026, you will get ~3.36% 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 with some reductions. In the previous 10 days, 5-year TIPS real rates have ranged from 1.34% to 1.42%. If I had to guess, I’d put a new fixed rate somewhere between 0.9 to 1.0%, for a total rate of about 4.26%. 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, if you are a long-term holder, you may consider waiting until May or even October to see if the fixed rate goes up a little. You may also think higher inflation is coming, and you’ll get that next inflation rate sooner if you buy in May. See below for why I am buying TIPS instead.

Unique features and benefits! There are definitely 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.

Unique drawbacks! You can only buy new savings bonds through TreasuryDirect.gov, which is limited in its customer service resources and features. There is also no option for paper tax forms nor statements (or even online monthly statements), so your heirs may never know they exist! If they do find it, it may take them several months and a lot of effort to close out all the estate paperwork. If you forget your password, it may take weeks or longer to unlock your account.

If you become a victim to theft or fraudulent activity, they will not replace any lost or stolen savings bonds. They explicitly accept no liability:

§ 363.17 Who is liable if someone else accesses my TreasuryDirect ® account using my password?

You are solely responsible for the confidentiality and use of your account number, password, and any other form(s) of authentication we may require. We will treat any transactions conducted using your password as having been authorized by you. We are not liable for any loss, liability, cost, or expense that you may incur as a result of transactions made using your password.

The juice may not be worth the squeeze when you can own individual Treasury bonds or TIPS within any full-service brokerage account. It’s sad that they’ve basically let this investment decay away due to neglect.

I also used to believe that the government would not tamper or attempt to politically influence these BLS CPI statistics that are at the core of many important functions, including Social Security inflation adjustments, TIPS, and these Savings Bonds. Now I’m not so sure. I found this guest article from TIPSWatch to offer some perspective: A historical look at political influence over the BLS.

Personally, I sold all my savings bonds in 2024 and do not plan to buy any more. I’m older now and I feel the small potential benefit just doesn’t outweigh the small possibility that I could lose the entire amount due to estate-handling mistakes or online hack. I’d rather own TIPS and US Treasuries directly in a full-service brokerage account. As a long-term holder, I can lock in a 2 to 2.7% real yield with a longer term TIPS bond.

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 poor service. (No more tax refund savings bonds.) Technically, the purchase limits are per Social Security Number or Employer Identification Number. For those looking for another way to expand their purchasing power, that means you can also buy for a child, grandchild, LLC, or a trust.

Bottom line. Savings I bonds are a unique, low-risk investment that are linked to inflation and only available to individual investors. You can now only purchase them online at TreasuryDirect.gov. They have both unique benefit and drawbacks. For more background, see the rest of my posts on savings bonds.

[Image: US Savings Bond advertisement – source]

I’ve gotten a few reader questions about my personal cash and bond holdings, so I thought I’d combine them here. You may be surprised that I don’t chase the top rates that much myself anymore, although I still do attractive deposit bonuses (most recently CIT Bank and Marcus). I’ve found that I can get pretty darn close to the top rates without being spread across as many bank accounts as in the past. My specific situation is that I have state income taxes of ~10%, so the fact that US Treasury obligations are exempt from state income tax makes a significant difference to me.

Big picture, I am roughly 70% stocks and 30% bonds and I let it float between 65%/35% or 75%/25% without worrying about. I mostly rebalance with both new cash inflows and internal flows of interest/dividends.

30% in bonds is broken down into 20% US “Regular” Treasury Bonds and/or FDIC-insured deposits and 10% US Treasury Inflation-Protected Bonds. For the US Treasury bonds, I hold mostly Vanguard Short-Term Treasury ETF (VGSH). The current 30-day SEC yield is 3.83%. Again, this converts to a tax-equivalent yield of ~4.25 APY due to the state-tax exemption for my situation.

VGSH is essentially a basket of US Treasury bonds held at a rock-bottom expense ratio of 0.03% with an average effective maturity and average duration of about 2 years. I converted to the ETF because the equivalent mutual fund has an expense ratio of 0.06%. If you think about it, a ladder of 1-year, 2-year, 3-year, 4-year, and 5-year bank certificates of deposit (CDs) with an added rung of “0-year” cash has an average duration of 2 to 2.5 years depending on how close they are to maturity. I used to spend a lot of time creating a 5-year CD ladder with top rates spread across multiple different credit unions, but right now I doubt you’ll beat a weighted average rate of 4.25% (again due to my 10% state tax rate).

What about more interest rate risk? The Vanguard Intermediate-Term Treasury ETF (VGIT) has an average duration of 5 years. The current 30-day SEC yield is 4.02% (roughly 0.20% higher). The steepness of the yield curve changes, but for the most part it is pretty flat right now, such that I haven’t felt that the slight increase in yield is worth the added interest rate risk. If interest rates go up, then that little bit of extra yield can be offset completely. Overall it’s a minor difference, VGIT would be fine really, but I do make sure to avoid long-term bonds. I used to own both short-term and intermediate-term funds, but now it’s just short-term for simplicity and lower stress. I choose to take my risk in the stock portion of the portfolio.

What about more credit risk? I can compare with Vanguard Total US Bond ETF (BND), which contains corporate bonds and mortgage-backed securities and such, with a current 30-day SEC yield of 4.34%. While BND also holds some Treasuries, it doesn’t meet the 50% threshold requirements for California, Connecticut, and New York, so residents don’t get any tax break in those states. That makes the difference only about 0.10%. For me, the extra risk doesn’t seem worth the extra yield.

Municipal bonds are also not competitive right now if you compare them directly (AAA-rated short-term munis to short-term Treasuries). I have held Vanguard muni bond funds in the past when their tax-equivalent yield was a full 1% higher than the same term US Treasury.

(* I know that there is discussion about the credit quality of the United States, which is fine and fair, but I still think they are the relative safest and don’t feel the need to diversify into corporate bonds or debt from other countries. The Treasury literally creates the money. Inflation is more of a concern to me.)

Speaking of inflation, my 10% in TIPS is mostly held in individual TIPS bonds because I can buy them in my Fidelity Solo 401k account and I can pick them up when the real yield is high and lock in that real yield for the entire term of the bond. That’s a very unique feature. I also hold TIPS ETFs like SCHP when I am looking to buy but the real yield is not good enough to lock in for a longer term. I got rid of my precious savings bonds because I don’t want my spouse to deal with TreasuryDirect if something happens to me.

Cash. As part of my bond allocation, I include at least a year’s worth of expenses in “cash”. Let’s say my rough withdrawal rate is 3%, so I keep about 3% of my portfolio in cash. This is mostly held in a combination of the following three accounts and whatever deposit bonuses I am currently pursuing.

• Vanguard Treasury Money Market Fund (VUSXX) has a currently APY equivalent of ~3.68%, which converts to a tax-equivalent yield of ~4.08% APY due to the state-tax exemption. Vanguard is a traditional brokerage and doesn’t provide things like Bill Pay or checking account features, but it is also where most of my stock dividends and bond interest payments land every quarter. Too bad they don’t offer VUSXX as a default sweep option, even though their default is pretty good.
• Fidelity® Treasury Only Money Market Fund (FDLXX) has a currently APY equivalent of ~3.3%, which converts to a tax-equivalent yield of ~3.67% APY due to the state-tax exemption. This is not as good as Vanguard or the very top online savings accounts, but I like that it usually stays relatively competitive without having to move any funds. I also use Fidelity for its brokerage/IRA/Solo 401k already. Direct deposit (and some dividends) goes in, and Bill Payments go out. Fidelity “pushes” these payments out. I don’t use Fidelity for anything else requiring their routing numbers, checkwriting, or debit card (anything “pulled” from Fidelity). Many of their banking services are farmed out through UMB Bank and if there is any kind of issue (like debit card fraud or ACH fraud), then dealing with them can be a pain as they can blame each other for the problem. Also see: Fidelity Treasury Only Money Market (FDLXX) as Fidelity Core Position Workaround.
• Ally Savings, SoFi Savings, and CIT Bank. I’ve used each of these for a while and I like that they are reliable especially when dealing with lots of smaller transactions (ACH pulls, check deposits, Venmo, etc) and interbank ACH transfers. They have competitive interest rates, if not the highest every month. They each also have invested in their own user interface for interbank transfers. Honestly, I’d stick with just Ally if I could as I like their system the best, but they’ve been lagging in the interest rate department recently.

Here’s my 2026 1st Quarter income update as a companion post to my 2026 1st Quarter asset allocation & performance update. Even though I don’t focus on high-dividend stocks or covered-call strategies, I still track the income from my portfolio as an alternative metric to price performance. The total income goes up much more gradually and consistently than the number shown on brokerage statements, which helps encourage consistent investing. Here’s a 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

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 it to shareholders. The dividends may suffer some short-term drops, but over the long run they have grown faster than inflation.

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 2026 Q1 (via Yardeni Research):

Tracking the income from my portfolio. Three of the primary “trees” that produce “fruit” in my portfolio are Vanguard Total US Stock ETF (VTI), Vanguard Total International Stock ETF (VXUS), and Vanguard Real Estate Index ETF (VNQ).

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. Companies do buybacks as well, often because they are easier to discontinue. Here is an updated chart of the trailing 12-month (ttm) dividend per share over the last 15 years paid by the Vanguard Total US Stock ETF (VTI) via WallStNumbers.com.

European corporate culture tends to encourage paying out a higher (sometimes even 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 an updated chart of the trailing 12-month (ttm) dividend per share over the last 15 years paid by the Vanguard Total International Stock ETF (VXUS).

In the case of Real Estate Investment Trusts (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. Here is an updated chart of the trailing 12-month (ttm) dividend per share over the last 15 years paid by the Vanguard Real Estate Index ETF (VNQ).

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.

Finally, the last income component of my portfolio comes from interest from bonds and cash. Vanguard Short-Term Treasury ETF (VGSH) and Schwab US TIPS ETF (SCHP) are example holdings, with the actual amount varying with the prevailing interest rates, the real rates on TIPS, and the current rate of inflation.

Dividend and interest income yield. To estimate the income from my portfolio, I use the weighted “TTM” or “12-Month Yield” from Morningstar (checked 4/8/26), 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 2.61%.

In dividend investing circles, there is a metric called yield on cost, which is calculated by dividing the current dividend by the original purchase price. In other words, while my portfolio yield today is may be lower than say a target withdrawal rate of 3%, that is because the current market price is also a lot higher. Due to increasing dividends on average over time, my yield-on-cost based on my portfolio value from 10 years ago is over 5%.

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). 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 (unlimited upside, limited downside) entrepreneurial opportunities where you have an ownership interest.

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 magic number. Our life path has been very different because of this philosophy. FIRE is Life!