The Clark Howard Podcast – Episode Summary (12.05.24)

Episode Title: Update: Series I Savings Bonds / A Warning About Fidelity
Host: Clark Howard
Release Date: December 5, 2024

Introduction

In this episode, Clark Howard delves into two primary topics: the current status and future of Series I Savings Bonds and concerns surrounding Fidelity Investments' recent practices. Additionally, Clark addresses several listener questions, providing actionable financial advice.

Series I Savings Bonds: An Update

Understanding the Decline in Returns

At the onset of the discussion (01:00), Clark highlights the significant drop in returns for Series I Savings Bonds, which were once highly sought after during the peak inflationary period.

• High Demand and Initial Success:
  "Series I savings bonds were hot, hot, hot during the hot inflationary cycle we had from the supply chain disruptions in the COVID cycle." (01:00)

• Current Low Returns:
  "The Series I rate has just gone down, down, down, down, as inflation has trended steadily down and is now generally back in the twos. So the Series I rate again resetting every six months for people who bought them when the rates were so very high on the I bonds now are earning 1.91%." (03:25)

• Comparison with Online Savings Accounts:
  "You can put money in a simple savings account with online banks that are paying the best rates around 5 or so percent." (04:00)

Recommendations for Bond Holders

Clark advises bondholders to reassess their investments:

• Dumping Old Bonds:
  "If you have those old Series I bonds, you need to dump them. You're going to forfeit 90 days of interest, but that interest now is pitiful, 1.9%." (05:10)

• Exchange for New Bonds:
  "You can actually exchange your old ones, four new ones. If you go to savingsbonds.gov it will take you to the link that will explain how you do the exchange." (05:45)

• Future-Proofing Investments:
  "With newly purchased I bonds where those older ones, when those were sold, you got no bonus... So if inflation rises again for whatever reason, you are getting that higher inflation money, plus you're getting the 1.2%." (06:15)

Redirecting Investments

Clark emphasizes shifting investments to more favorable options, such as online savings accounts offering higher returns.

A Warning About Fidelity Investments

Fidelity's Dubious Practices

Clark shifts focus to Fidelity Investments, expressing concerns about their recent behavior:

• Dual Roles and Misleading Practices:
  "Fidelity doing things, wearing two hats, being a fiduciary, and then not being a fiduciary and potentially misleading customers into crummy products because there was more money in it for Fidelity." (16:13)

• Whistleblower Incident:
  "Barron's has a story just in the last week about a longtime Fidelity employee who was with fidelity, I think, 24 years, who fidelity fired because the person became a whistleblower, calling Fidelity out for purposely putting people in inferior investments because they generated higher income for Fidelity." (17:00)

• Fidelity's Response to Criticism:
  "Fidelity should not be playing both sides of the street. They shouldn't be behaving like the dirty, dealing at full commission stockbrokers at the same time." (18:45)

Balancing Fidelity's Offerings

Despite the criticisms, Clark acknowledges some of Fidelity's positive contributions:

• Innovative Financial Products:
  "Fidelity Zero Funds that I love, that a young person can come in and put $1 in. By Young, I mean a teenager. Open an account with a dollar, invest commission free and fee free." (19:30)

• Fiduciary Responsibility:
  "If you invest through Fidelity and you're dealing with a Fidelity salesperson who is recommending something you need in writing from them, that they are operating at that moment as a fiduciary." (21:00)

Final Takeaway

Clark urges listeners to remain vigilant and informed when dealing with Fidelity, ensuring that they are receiving honest and beneficial financial advice.

Listener Questions and Answers

1. Best Financial Publication (23:06)

Question from Zach, Pennsylvania:
"I only have time to regularly read one financial publication. What do you recommend?"

Clark's Recommendation:
Clark suggests the Financial Times as his top choice due to its in-depth financial coverage:

• "The Financial Times is my most important read. Comes out six days a week, doesn't waste much of its efforts... It's just so in the weeds about finance." (11:12)

He also mentions Barron's and The Wall Street Journal as alternatives, noting that the latter has evolved into a lifestyle publication.

2. Investing Advice for Young Adults (23:28)

Question from Zach, 18-year-old College Student:
"I have about $2,000 that I would like to invest long term with the intention of adding to it over time. What are my best options?"

Clark's Advice:

• Open a Roth IRA:
  "Roth IRA allows that money to grow tax free through the years and ultimately later in life you spend it tax free." (23:30)

• Target Retirement Fund (2070):
  "You could go into the Target retirement fund. 2070. What that is designed for is specifically for retirement accounts where the mix of money changes over the decades to match the risk level you should be doing." (24:15)

• Fidelity Zero Funds:
  "If this is not money from work, you would do an investment account... It would be awesome for you to open an investment account and put the money in the Fidelity Zero." (25:00)

Clark commends Zach's discipline and encourages consistent investing for long-term growth.

3. HOA Affidavit of Occupancy (26:19)

Question from Chris and Georgia:
"I received a letter from my HOA management company claiming I must sign an affidavit of occupancy. What are the implications?"

Clark's Response:

• Purpose of the Affidavit:
  "They have rules that limit the number of rentals permitted in the community. So you have to... Track of who's in a place, are there tenants, is this owner occupied." (26:30)

• Legal Implications:
  "This is a legal document... Swearing to something that you could get in trouble later with the law." (26:40)

• Advice:
  "If you are lying, if you are an owner occupant of your property, it is a legal demand that is considered to be reasonable and proper... you fill it out, you attest to or whatever it says and you're good to go." (27:10)

Clark assures that signing the affidavit is generally safe if the homeowner occupancy status is accurate.

4. Best Place to Get Hearing Aids (28:26)

Question from Caroline, Florida:
"What and where in your opinion is the best place to get a hearing aid for value?"

Clark's Recommendation:

• Apple's AirPods as Hearing Aids:
  "Apple AirPods... FDA certified as hearing aids for minor to moderate hearing loss... an actual real hearing aid that can make life so much better." (28:30)

• Traditional Hearing Aids at Costco:
  "Costco now they have the largest share of hearing aids sold in the United States far and away... their prices are generally one fourth of what the traditional industry price has been." (29:15)

Clark advises getting a professional hearing test and considering both modern tech solutions and traditional options based on the severity of hearing loss.

Conclusion

Clark Howard provides insightful updates on Series I Savings Bonds, cautioning investors about declining returns and advising strategic shifts to more profitable alternatives. He also raises serious concerns regarding Fidelity Investments' recent practices, urging consumers to stay informed and vigilant. Through addressing listener questions, Clark reinforces his commitment to empowering individuals to make informed financial decisions.

Notable Quotes:

• "Series I savings bonds were hot, hot, hot during the hot inflationary cycle." – Clark Howard (01:00)

• "If you have those old Series I bonds, you need to dump them. You're going to forfeit 90 days of interest, but that interest now is pitiful, 1.9%." – Clark Howard (05:10)

• "Fidelity should not be playing both sides of the street. They shouldn't be behaving like the dirty, dealing at full commission stockbrokers at the same time." – Clark Howard (18:45)

• "Roth IRA allows that money to grow tax free through the years and ultimately later in life you spend it tax free." – Clark Howard (23:30)

For more information and to listen to the full episode, visit Clark.com.