I Won't Give Any App My Password. Here's What I Do Instead (FQF)

Summary

Rob Berger answers five personal-finance questions about account-linking security, Roth IRA withdrawal rules, Treasury income, retirement-planning horizons, and the stocks included in VTI.

1. Linking brokerage accounts to apps

Berger says newer account connections may use token-based authorization. The user logs in directly through the financial institution, which can issue an aggregator a read-only token. The aggregator can retrieve account data but cannot trade in the account.

In his Empower demonstration, the Fidelity login appeared on a Fidelity domain, and the connection used Yodlee. He said he had two-factor authentication enabled.

Berger personally feels comfortable linking accounts when credentials are entered directly with the financial institution and a token is issued. He would avoid connecting if he had to give an aggregator his username and password. He notes that some institutions may still use older credential-based access, where an aggregator logs in with the user’s credentials and collects data.

2. Opening a Roth IRA at age 62

Berger says it is not too late to open and contribute to a Roth IRA, provided the person has earned income. He distinguishes contributions from investment earnings:

• Contributions can generally be withdrawn at any time without tax or penalty.
• Under the rule he discusses, withdrawing earnings from a first Roth IRA before it has been open for five years may result in taxes and penalties. Being 59½ or older does not, by itself, satisfy this five-year rule.
• There is also a separate five-year rule for Roth conversions.

Berger cautions that Roth rules are complicated and recommends checking with the IRA provider.

3. Living on Treasury interest

The question proposes investing in 20-year Treasury bonds yielding about 5% and spending only the interest. Berger notes that a 30-year Treasury could also be considered for a longer horizon.

For example, $100,000 at a 5% yield would produce $5,000 per year. If the bond is held to maturity and the government pays, the investor receives the principal back.

The main concern is inflation: a fixed $5,000 will buy less over time. Berger contrasts this approach with the 4% rule, under which the initial withdrawal is adjusted for inflation each year. Using FI Calc and historical simulations, he reports:

• Over 30 years, a 100% bond portfolio with inflation-adjusted withdrawals had a 57% success rate at a 4% initial withdrawal rate.
• Over 20 years, the 4% withdrawal scenario had a 98% success rate.
• At a 5% withdrawal rate over 20 years, the reported success rate was 71%.

Berger stresses that these are historical results, not guarantees about the future. A fixed-income strategy may be more acceptable for discretionary spending, but is riskier if the income must cover rising living expenses.

4. Why plan for 30 years of retirement?

The viewer cites average U.S. life expectancy of 79 years—76 for men and 81 for women—and questions planning for a 30-year retirement.

Berger says life expectancy at birth is not the right measure for someone already age 65. He describes expected lifespan at that age as roughly 80, while acknowledging that planning to age 85 would mean about 20 years of retirement.

He favors stress-testing longer lifespans because of uncertainty around longevity, inflation, and poor market returns early in retirement. For a conservative scenario, he suggests testing ages 95, 100, or 105.

Lifespan assumptions can also affect decisions about Social Security timing, annuities, and pension lump sums or survivor benefits.

5. Why VTI holds fewer stocks than the number of U.S. public companies

VTI, Vanguard’s total U.S. stock-market ETF, is described as holding about 3,500 stocks, compared with a cited figure of about 9,400 publicly traded U.S. companies. Berger says he cannot confirm the 9,400 figure.

He explains that the index VTI tracks applies eligibility filters, including:

• A minimum market capitalization, stated as $15 million
• A minimum publicly available share float
• Trading-volume requirements
• Listing on an eligible exchange

Some very small, illiquid, or over-the-counter stocks are therefore excluded.

Berger says this is not a material concern for VTI because the index is market-cap weighted: larger companies account for far more invested capital, and he believes VTI still provides adequate U.S. equity-market coverage.

Assets, tickers, and instruments mentioned

• VTI — Vanguard Total Stock Market ETF
• U.S. equities, including large- and micro-cap stocks
• Treasury bonds — 20-year and 30-year maturities
• Roth IRA and traditional IRA conversions
• Social Security, pensions, and annuities
• 100% bond portfolio in the FI Calc example
• Nvidia — cited as an example of a very large company in a market-cap-weighted index

Disclosures and cautions

• Berger says he is not an online-security expert and not an expert on Roth IRA rules; he recommends consulting an account provider for Roth questions.
• He presents his view on account linking as a personal opinion and says individuals must decide their own comfort level.
• The retirement simulations are based on historical data; future outcomes may differ.
• No formal “not financial advice” disclaimer is stated in the subtitles.

Presenters and sources mentioned

• Presenter: Rob Berger
• Question contributors: Mark, Ted, and Scott
• Sources and services referenced: Fidelity, Empower, Yodlee, Plaid, MX, Finicity, Stripe, FI Calc, Morningstar’s index methodology guide, CDC life-expectancy figures, Vanguard/VTI, and a Plaid representative interviewed by Berger.