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June 18, 2048
Dear Future Self, Happy 65th birthday! If all has gone according to plan, we have $1+ million sitting in an IRA. You're welcome. Joe P.S. I really hope the Chargers have won a Superbowl by now. For anyone reading this website, you can follow along on the progress to $1 million by viewing my Google Sheet here. My Chase Sapphire Reserve arrived earlier this week so I tweaked my system a little bit.
Why You Should Get a Sapphire Reserve As long as you spend $3,667 on restaurants or travel, you will come out ahead with the Sapphire Reserve versus the Sapphire Preferred. The Sapphire Reserve has a $450 annual fee. This fee is offset by a $300 annual travel credit. The remaining delta of $150 is only $55 more per year than the Sapphire Preferred. Given that the Sapphire Reserve earns 3 points per dollar spent in restaurants and travel (vs. 2 points for Preferred) and that each point is worth a minimum of 1.5 cents, your breakeven between the cards is $55/$0.015 = $3,667. Oh, and the Sapphire Reserve comes with a 100,000 point sign up bonus after you spend $4,000 in the first 90 days. It's a no brainer if you are on the Retire on Rewards System. How This Changes the Retire on Reward System I made 3 simple changes to my system as a result of this card and the impact can be big.
Closing Thoughts Given the high demand for this card, Chase was much slower than normal in approving my application and delivering the card. When this happens, just call them on the Sapphire Preferred line. The agent can get an underwriter on the phone who can approve the application on the spot. You can also ask for expedited shipping so you get the card sent via FedEx instead of snail mail. Lastly, you should remember to downgrade your Sapphire Preferred so you don't get charged the $95 annual fee. I downgraded to the Chase Freedom Unlimited since I didn't have one yet. Questions? Comments? Tweet me @RetireOnRewards. [Updated July 2016]
I've been an active equity and options trader since the late 90s and I really enjoy watching the market and researching trades. I realize that not everyone wants to spend as much time thinking about the markets as I do. So this is my really simple trading methodology. In order to track to the market return, invest in the market. It's really that simple. From 1928 to 2014, the S&P 500 has returned 10% annually (with dividends reinvested). If you could achieve that rate, you would double your capital every 7 years! Put another way, if you add $3,500 to a stock account on every birthday from your 30th to 64th and that money compounds annually at 10%, you will wind up with just over $1 million dollars on your 65th birthday! That is the goal of the Retire on Rewards system. So how do you track the market? There are a couple of free, low-cost ETFs that broadly track the market: SCHW for Schwab, IVV for Fidelity and VTI for Ameritrade. Buy these ETFs in your IRA account and then turn on dividend reinvestment. You can then basically forget about it. Two other great ETFs that aren't free, but have a various advantages versus the broad market:
Advanced Option: I personally find this approach to be way too passive for my liking. So I prefer to buy ETFs like SPY or QQQQ that have an active options market. I then sell cash secured puts to initiate positions and sell covered calls when I already have a position. I use the cash premiums obtained from these trades to buy more shares in these ETFs. The options benefit from time decay and the net effect is that my returns get smoothed out. At some point I'll go into more detail on this strategy. Boom! That's it. Next step: Retire with $1 million dollars at age 65! Questions? Comments? Tweet me @RetireOnRewards. [Updated July 2015]
I am a big believer in the mantra that "you can't improve what you can't measure". So I track my reward redemption religiously in a Google doc which you can see here. There is one caveat to my system worth sharing. The values of my reward points are not equal to the dollar value of the reward. I wanted to have transparency and alignment in my my decision making process so I use a standard "minimum value" of a redeemed point. For example, international travel has the highest value for reward points. I've had opportunities to earn 6+ cents per mile on international award tickets! However, if I wasn't planning on taking that trip using cash, then I shouldn't be willing to do it just because the reward redemption is really good. Thus, I apply my standard value to reward points so that I am not motivated to redeem for silly rewards. My standard values for the rewards I use is this:
In my system, I don't worry about the accumulation of reward points, I only care about the actual redemption. When I redeem a reward, I mark it in the Google doc and then transfer the cash value into my brokerage account and into my IRA (I make the IRA transfer once per year). Next: Learn how to invest your hard earned reward dollars so they can compound into $1 million dollars! Questions? Comments? Tweet me @RetireOnRewards. [Updated June 2016]
The best way to optimize reward points is completely subjective to what you value. For me, I always decide what I want to do, then I decide how to get there and where to stay. The secret to optimizing points is to know what points are most valuable and in what circumstances. Some general rules of thumb that I've learned over the years:
For me personally, I use Chase ultimate reward points to convert into airline miles - primarily Southwest for flexible, short flights and the occasional international flight on a United affiliate (but NEVER United). I generally buy American and Delta economy long-haul or international flights and then use upgrade certificates or points to upgrade to business class. The reason I do this is because I generally need the qualifying miles from purchasing a flight in order to achieve status levels (which keeps the points flowing). I only use starpoints for nights at SPGs. One last set of tips...things you should NOT do:
Great, now you know how to optimize your rewards to save you cash. Click here to see my system for tracking rewards and assigning cash value. Questions? Comments? Tweet me @RetireOnRewards. |
Retire on Rewards
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