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"It Could Happen To You." Make you laugh. Schwab.

CrashCrash
edited May 17 in Other Investing
Transferred the Bruce money into Schwab via indirect rollover with a Bruce cheque. It sat as "cash" for ONE day in the account. That one day generated 13 CENTS of interest. After a chat on the Schwab website, there is clearly nothing to be done except to let that 13 cents ride, like a flea on a hippopotamus, for 438 years until it grows to be at least $1.00. THEN, it can be used to buy shares in the chosen mutual fund.

Truth is stranger than fiction. I shit you not.

Comments

  • msf
    While 13¢ may actually be something to sneeze at, you could move the money to Fidelity where you can open a house fund for a penny. Why, you might even open a baker's dozen different funds there!

    Slightly more seriously, you might be able to move the cash into SWVXX. According to Schwab's webpage for the fund, that has a true zero minimum, as opposed to, say, SNXFX that requires $1.00 to open. With the higher interest you'll get (assuming rates don't fall), you'll be able to open up that SNXFX account in just half a century give or take.

    For tax purposes, was the Bruce cheque made payable to Schwab FBO your IRA? If it was, then it counts as a trustee-to-trustee transfer, and not an indirect transfer. This matters because you are allowed just one 60-day (indirect) transfer per year, but an unlimited number of trustee-to-trustee transfers. Just in case you want to move that 13¢ to Fidelity:-)
  • rforno

    And I bet it costs them more then 13 cents to administer/track/journal that amount, too. LOL

    Cash management @ Schwab still sucks bigtime but I don't see that changing anytime soon unless there's a large exodus of AUM.
  • yogibearbullyogibearbull
    Whenever I deposited checks at Schwab, the funds were available to trade immediately, but they weren't available for withdrawals (i.e. Hold) until the check cleared. Similar for Fido.
    So, move the $s right away to a Schwab m-mkt fund.
  • hank
    edited May 17
    @Crash - Can you submit that $1 sell order now? (Use the “sell all” option.) Then it should automatically execute in 2462.

    In 1976, you could have mailed a letter first-class for 13-cents

    image
  • Low_TechLow_Tech
    I keep roughly 1% of assets in cash from two accounts at Schwab. Even if they paid me 5% it wouldn't change my life any. When it gets much more than 1% I will add to positions or put it in the MM fund.

    But, TBH, this is something I've never fretted over.
  • BaluBalu
    My bureaucratic retirement plan custodian issued the cheque made payable to Schwab FBO my name, instead of cheque made payable to Schwab FBO my name rollover IRA, notwithstanding my written instructions in their portal to issue the check in the name of my rollover IRA. Does it make a diferrence? I thought I would just wait until they issue a Form 1099-R to see what box they check, rather than ask them to reissue the check correctly, which they may not do after all the hassle.

    (I deposited the check into the rollover IRA.)
  • MikeMMikeM
    I keep roughly 1% of assets in cash from two accounts at Schwab. Even if they paid me 5% it wouldn't change my life any.
    Won't change my life either but 1% in say, a million dollar account(s), would be about $500 bucks more in my pocket each year. I play the Schwab game of moving between MM and the sweep account as they made the rules, typically limiting the sweep to a couple of bucks. If a trade kicks in you have a day or two to make the switch back.
  • msf
    The two key elements are the payee and the presence of FBO. The former means that you never have access to the cash, so this is not a 60 day rollover. The latter means that the money doesn't belong to Schwab.
  • BaluBalu
    edited May 17
    d
  • Low_TechLow_Tech
    MikeM said:

    I keep roughly 1% of assets in cash from two accounts at Schwab. Even if they paid me 5% it wouldn't change my life any.
    Won't change my life either but 1% in say, a million dollar account(s), would be about $500 bucks more in my pocket each year. I play the Schwab game of moving between MM and the sweep account as they made the rules, typically limiting the sweep to a couple of bucks. If a trade kicks in you have a day or two to make the switch back.
    I would get a couple free lunches per month. If I was worried that much about it I would eat lunch at home instead of going out every day.:)
  • MikeMMikeM
    edited May 17
    Understood @Low_Tech. To each their own, but again, I have no problem playing Schwab's game. My mind set is those who keep a higher dollar amount in the sweep are playing THEIR game. And if "the game" eeks out an extra $500 or so for me, the game becomes fun and worth doing, to me anyway.

    I'll add, where the low interest rate is painful is in their robo accounts. Those portfolios typically put 10 to 12% in the cash sweep. That's how they make their money on the Intelligent Portfolios. Seemed ok when all cash vehicles made close to nothing. But times have changed. I dumped the robo last year, mostly because of that.
  • yugo
    Alternatively, you can always sell something worth $0.87 in your account that does not have a transaction fee and then invest the $0.13 + $0.87 = $1 in the chosen fund...
  • Low_TechLow_Tech
    MikeM said:

    Understood @Low_Tech. To each their own, but again, I have no problem playing Schwab's game. My mind set is those who keep a higher dollar amount in the sweep are playing THEIR game. And if "the game" eeks out an extra $500 or so for me, the game becomes fun and worth doing, to me anyway.

    I'll add, where the low interest rate is painful is in their robo accounts. Those portfolios typically put 10 to 12% in the cash sweep. That's how they make their money on the Intelligent Portfolios. Seemed ok when all cash vehicles made close to nothing. But times have changed. I dumped the robo last year, mostly because of that.

    I'm retired and keep enough in my SEP cash for monthly RMDs with probably an extra month to spare. Bond interest and divvies come out of the bond and stock funds that I want them to automatically.

    I started RMDs in 2022 and I have to hand it to Schwab, they make it very easy and it was something I was fretting over. They tell you in January the amount you will owe for the year down to the penny, and you can have it transferred out in any time frame you want -- I like monthly and you can select any day of the month you want. I have it transferred into my brokerage account automatically, although I could have it moved to my local bank checking account automatically if I wanted.

    I could keep the cash in my brokerage account cleaned out and into the MM, and do when it gets high enough, but I never leave it empty.

    Now with 5%+ MMs, that has changed a lot of things. I have a lot in the MM where previously I would have had it in some kind of short bond fund.

    Ha, the robo accounts? I never got sucked into that for numerous reasons, the main one being that I want total control over my portfolio. When they came out with them I was still in the accumulation stage and I sure didn't want 10%+ of my portfolio sitting in cash.

    Oh well, so far so good.:)
  • CrashCrash
    yugo said:

    Alternatively, you can always sell something worth $0.87 in your account that does not have a transaction fee and then invest the $0.13 + $0.87 = $1 in the chosen fund...

    Giggle. I see what you mean. Is it worth my time? Will they PERMIT an .87 cent sale of ANYTHING? No.
  • Old_JoeOld_Joe
    @Crash - if you have a MMKT fund account you can transfer any odd amounts into it. I do it all the time.
  • CrashCrash
    +1.
    But there's a wall around wifey's Trad IRA.
  • msf
    edited May 18
    Old_Joe said:

    @Crash - if you have a MMKT fund account you can transfer any odd amounts into it. I do it all the time.

    I believe that it true at Schwab but it is not true for all MMFs everywhere. Some MMFs at Merrill can only process transactions in whole dollar amounts. Even div reinvestments are restricted to whole dollars; the remaining cents are deposited into your core (transaction) account.
  • catch22catch22
    @Crash
    But there's a wall around wifey's Trad IRA.
    What does this mean?
  • hank
    edited May 18
    Crash said:

    Will they PERMIT an .87 cent sale of ANYTHING? No.

    I can tell you from experience DraftKings allows you to buy and sell positions for as little as 50-cents. So 87-cents might work at Schwab. There are many similarities between online investing and online gaming.
  • Old_JoeOld_Joe
    With respect to Schwab IRAs why not just transfer a small amount of whatever's there now to a new MMKT account within the IRA? In fact both of our IRAs consist, at the moment, of nothing but MMKT accounts currently paying about 5%. And of course those accounts deal with odd change amounts. Those are generated when the monthly interest is paid, no?
  • CrashCrash
    edited May 18
    Old_Joe said:

    With respect to Schwab IRAs why not just transfer a small amount of whatever's there now to a new MMKT account within the IRA? In fact both of our IRAs consist, at the moment, of nothing but MMKT accounts currently paying about 5%. And of course those accounts deal with odd change amounts. Those are generated when the monthly interest is paid, no?

    Ostensibly, that's an idea; that would work. Anything we put in either of our IRAs these days would be non-deductible. But you're saying: just create a MMKT fund within that IRA and the spare change could go in there. We'd just have to combine the .13 cents with something big enough ($1, at least) in order for it to become actually useful money. Right?

    EDIT TO ADD: By law, are we even able to add to an IRA, if we both have no EARNED income? Even if we were to do it on a non-deductible basis?

    *Her IRA is at $11,000.00, and so I'm not seeing much use in diversifying and splitting up only that much.
  • Old_JoeOld_Joe
    Yes, that should work fine. But it also wouldn't hurt to diversify that IRA a bit by funding the MMKT with a reasonable amount. We use the SNSXX Treasury MMKT. Little point in having a MMKT acct with only $1.00 in it.
  • CrashCrash
    catch22 said:

    @Crash

    But there's a wall around wifey's Trad IRA.
    What does this mean?
    Hello, @catch22.

    There are a few angles going on. Neither of us has any earned income. Not officially, I mean. I don't think we are even eligible to put anything more into either of our Trad. IRAs. Years ago, you were recommending that we convert to Roths. We didn't, and it's worked out better for us.

    So... It's too early to withdraw anything from wifey's IRA without a penalty. She's not 59 and a half, yet. And we can't ADD, either. Neither can we add to my own IRA. No earned income. Which is why we created the taxable trading account.

    Here at MFO, we religiously don't speak in terms of raw dollar amounts. That's a good idea. So, in practical terms, we have erected our OWN wall around wifey's IRA, because it's premature to make withdrawals, and also because the whole thing is worth just a hair more than $11k. Kinda useless to be rearranging and "diworsifying," while dealing with only that much money.




  • msf
    In theory, you could add some money and subsequently pull it out as an "excess contribution". I would not suggest that without a lot more research. The IRS frowns on maneuvers done to circumvent rules. And even if you could do this, you'd need to check the exact mechanics and timing. Also, it could trigger a requirement that you file an 8606 form every year because you'll have added a non-deductible contribution. (Though pulling the money out might save you.)

    Bottom line: you might be able to make a temporary contribution, but the complexities and risk don't seem to make it worthwhile to earn a couple extra pennies interest.

    Since you have posted the size of the account ($11K), I can now illustrate how disclosing just a little information may reveal more than intended. People should be careful about posting any dollar amounts. (Percentages are usually okay since they don't say anything about the size of accounts.)

    Schwab's cash account (or bank sweep) pays 0.45% APY Assuming daily compounding and a 365 day calendar, that's 0.00123%/day.

    An account of $10,568 would earn 13¢ in a day at this rate. An account less than $11,381 would earn less than 14¢. So without being told that the account size was $11K, we already knew that the IRA cash transferred in amounted to between $10,568 and $11,381.
  • CrashCrash
    @msf

    Holy Jaypers crow! I dunno how you got there, but that's amazing. Of course, you're correct. When I grow up, I wanna be just like you! ;)
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