Category: Wisdom

EDITORS NOTE: In 2024, I’ve introduced Guest Post Saturdays. I’m still looking for more guest posts, please reach out if you have something interesting to share with the community! Today’s guest post is from Southwest Airlines kingpin and family travel guru, Brian M!

Garden The Flexible Options (GTFO) and travel better! Employing gardening strategies for multiple travel options reserved with flexible change and cancellation terms mitigates the risks of uncertainty and dampens the negative impacts of uncontrollable factors that affect travel.  Moreover, one’s travel plans become more adaptable.  For those about to travel, we salute you!

The concept of gardening a reservation is not new. In the travel maximization context, “Gardening” is the practice of booking and monitoring a travel reservation while consistently analyzing whether the booked reservation (which may have been impacted by some outside factor like a schedule change) may be efficiently improved through some sort of action(s) or change(s) and the activity of undertaking that action or change to improve the subject reservation.   When factors affect a reservation that one is monitoring, then one may be able to (or may have to) undertake some action that could lead to an improved reservation. Always be probing the alternatives of a reservation to determine whether inaction, a change, or a cancellation may be the best decision. Deals can vary at original booking and over time; so, using and revisiting different levels of one’s travel waterfall of techniques is essential.  

Flexible reservations are also not new; but, flexibility does have value. Most car rentals have long had very flexible cancellation terms.  And, many hotel reservations have had flexible change and cancellation terms.  More recently, flight reservations issued by more carriers, especially through their award loyalty programs, have become more flexible.  Importantly, flexibility may be free!  Okay, that’s not quite true because even if there is no monetary cost to a change or cancellation, one would still need to undertake the effort to book, change, or cancel a reservation (so, there is an expenditure of time and effort) and there’s an opportunity cost of those points or miles.  Regardless, booking flexible rates/fares can preserve the ability to be ready for uncertainty, including both known unknowns and unknown unknowns. Fares and rates may drop. Flight times may change. New, more preferred, flights may become available. Accommodation amenities may close. Natural disasters may impact a destination. A car type may no longer be available or suitable. A travel companion may become ill or simply decide to no longer travel. To be impacted by an external force is human; to prepare for uncertainty is divine.  Changes will happen and the adept can adapt by gardening existing flexible reservations. When the reservation gets tough, the tough garden the flexible reservation!

Options in travel, like in life, are important. Reserving multiple flexible options for aspects of travel or flexible options for entire trips enables one to gain more value and empowers one with more control to exercise the desired option (and cancel the undesired flexible option(s)) when it becomes time to strike. Furthermore, gardening those options amplifies the value and control unlocked by flexible change and cancellation terms. Could one sow one’s travel field with inexpensive option seeds with the intent that some schedule change or weather lemons may grow to produce a bushel of opportunities and enjoy some refreshing non-stop lemonade? However, to reserve multiple flexible options with award program currencies, one must earn those currencies first. Miles need to be earned before they can be burned.  So, earning a sufficient volume of miles and points can be helpful to book early and book often. But, what volume may be sufficient varies and could be lower than may initially seem to be required given the ability to reduce, reuse, and recycle miles and points over time as options are canceled and changed. Miles burned for a reservation may rise like a phoenix from the ashes of cancellation ready to fly into action for the next reservation. Consideration about how to option the travel is also important – which traveler(s)? which flight(s)? which accommodation(s)? which date(s)/night(s)? which elite benefit(s)? which booking method? Considerations are unique for each aspect of each trip for each traveler. 

And, putting these three concepts together creates a travel strategy greater than the sum of its parts empowering one to travel better. A trip that may have been originally booked with a 2-stop flight itinerary on a less preferred day to a counter pick up for an expensive compact rental car to drive to the Hyatt Place Lubbock may be gardened to become become a better option – a non-stop flight to stroll directly to the rental car aisle to choose any inexpensive full-size car to drive to the Hyatt Regency Wichita after freely canceling non-preferred flexible alternatives. However, time, effort, and organization are mandatory to the success of any GTFO travel strategy.  So, determining how deep to dive into each aspect can be critical to maintaining sanity and avoiding The Optimizer’s Curse. Therefore, too many specifics related to a GTFO travel strategy would be imprudent. One must decide for oneself whether to, when to, and how much to utilize such a travel strategy. Of course, there are risks associated with the strategy beyond loss of sanity, including that duplicate reservations may be automatically canceled by the travel provider. Furthermore, speculation is undesirable: one must decide for oneself where to draw one’s own line – how far is too far and what may create too much risk given potential adverse consequences.

Travel is about the journey and the destination. So, utilize a GTFO travel strategy to burn some miles to GET THE F* OUT – both to travel better than one otherwise might and to spend less! Or, don’t travel – cash-out miles and improve life in a different way! No matter what, miles earned are only worth the value gained when burned. 

“Better to be prepared for an opportunity and not have one, than to have an opportunity and not be prepared.” Travel opportunity is knocking and you may have the option to seize it today while maintaining the flexibility to seize a different opportunity tomorrow by gardening each of those seized opportunities until one becomes the best option.

– Brian M

Preparing to garden a few existing bookings.

EDITORS NOTE: In 2024, I’ve introduced Guest Post Saturdays. Today’s guest post is from a new travel blogger but seasoned financial hacker, Graham, who offers great insight on application of churning techniques to other aspects of finance.

tl;dr:

• The tricks you know from churning can be applied elsewhere in life, such as when you change jobs:
  • You can double dip on 401k matches and mega backdoor contributions
  • You can hold out for the best offer on a once-in-a-lifetime operation like rolling an old 401k to IRA
  • You can drain corporate benefits, like you’d drain an Amex coupon book before closing the card
  • You can get your annual fees (aka taxes) refunded if you get money clawed back by your employer
  • Just like you book refundable bookings as backups, you can rely on COBRA as a refundable (never charged, really) backup insurance option

Intro

In the world of churning and travel hacking, we’re used to using all sorts of tricks to get the most value for ourselves. We double or triple dip on annual benefits, we hold out for the best offers on NLL cards, we drain the coupon book benefits on a card before closing it, we take advantage of grace periods for getting annual fees refunded, and we make preventative refundable travel bookings. It turns out that the kinds of tricks we use for credit cards and travel also apply to many other aspects of life. In this post, I go through all the ways I’ve found to apply churning tricks to the process of changing jobs.

It should go without saying, but I’m just some random dude on the internet that isn’t a lawyer or accountant (and more importantly isn’t your lawyer or accountant). I’ve done my best to research and cite these tricks, and to include my own experience where I have it, but make sure to do your own research and understand the consequences of what you’re doing before blindly applying tips in this post.

401ks

Double Dipping: Two 401k Matches

Many employers offer to match the money you contribute to your 401k each year. Those matches apply to an overall per-employer limit ($69,000 for 2024) not your personal limit ($23,000 for 2024). Having two employers gives you the opportunity to get two full matches. Let’s imagine this scenario:

• Employer 1 offers a 50% match on contributions (up to some fraction of your salary), and you’ve earned enough for up to a $7.5k match on 15k contributions
• Employer 2 offers a 50% match on contributions (up to some fraction of your salary), and you will earn enough for up to a $5k match on 10k contributions

There are multiple ways to optimize this scenario:

• Easier, Less Profitable Way – Limiting Contributions at Employer 1: You could limit your contributions to Employer 1’s plan to $15k, so you maximize the match without going over. Then when you join Employer 2, you can use your remaining space to contribute $8k, getting $4k of your possible $5k match. This leaves some money on the table, but nets you more than if you’d just maxed your 401k at one or the other employer.
• Riskier, More Profitable Way – Excess Deferral + Corrective Distributions: You could contribute $15k to Employer 1’s plan and $10k to Employer 2’s plan. This would put you in a situation where you’ve achieved the maximum match, however, it also puts you $2k over your $23k personal limit and means you’ve made an Excess Deferral. The consequences of an Excess Deferral are double taxation on that money, and potentially additional penalties, which probably outweigh the value of the additional match. You can avoid the double taxation and penalties with a Corrective Distribution that removes $2k from Employer 1’s plan. The catch is that Employer 1’s plan may not be willing to provide Corrective Distributions, or Employer 1 may attempt to claw back the match. Before attempting this method, you should confirm your plan supports Corrective Distributions and you should be prepared to really pay attention when filing your taxes.

Note that there are plenty of other nuances of 401k plans that might affect your personal results, such as true ups and vesting schedules. Make sure you know both plans inside and out and have thought it through before attempting.

Double Dipping: Two Mega Backdoor Contributions

The mega backdoor roth is the lesser-known big brother of the backdoor roth, and it lets you sock away tens of thousands of dollars through your employer’s 401k plan. An even lesser known thing is that because mega backdoor contributions are not Elective Deferrals, they’re only subject to the overall per-employer limit ($69,000 for 2024), not your personal contribution limit. That means if you change employers through the year –and both plans support it– you can do the mega backdoor roth twice.

Holding Out for the Best Offer: Saving a 401k to Transfer

When leaving a company, you often have three choices for what to do with your 401k:

1. Keep it with the current plan administrator (beware: there may be fees)
2. Roll it into an IRA
3. Roll it into your new 401k plan

There are many pros and cons to each that are beyond the scope of this post (eg. IRAs have fewer bankruptcy protections than 401ks), but here are two reasons you might want to hold off on rolling your old 401k into your new plan:

• You can sometimes roll a 401k into an IRA to get relationship pricing at banks. For example, I used an old 401k to get to the next relationship pricing tier on my mortgage, saving an additional 1/8% on my mortgage rate. Note that including retirements in relationship pricing is not the norm, and Citi is one of a few banks I found that did that.
• You can sometimes find significant bonuses to bring an IRA to brokerages. For example, Robinhood has a 3% match right now (beware they require you to keep the money there for 5 years)

One thing to be aware of if you plan to use one of these tricks is the pro rata rule. If you do backdoor roth IRA contributions, the rule can create negative tax consequences if you leave your pre-tax money in an IRA through the end of the year. My personal workaround was to roll my old 401k into an IRA to get the Citi relationship pricing, and then roll the IRA into my new 401k a month later (all within the same year).

Draining Benefits: Using up Annual Benefits

Many companies have miscellaneous benefits that reset to full at the beginning of the year, and have a use-it-or-lose-it model. Examples include commuter cards and FSAs. Many benefits will cease to be available once you leave, and others will have a limited window to submit expenses after you leave. Make sure to keep track of the deadlines for these accounts, and drain them.

Note that some benefits like FSAs are based on paycheck deductions that happen throughout the year, but the full amount may be available in your account starting on Jan 1. I don’t believe there are laws governing this, but on departure my company doesn’t claw back FSA spend that exceeded paycheck contributions. If this is the case at your company an you know you’re leaving far enough in advance during open enrollment period, you could max out your FSA contributions to take advantage of this edge case.

Fee Refunds: Tax Refunds on Clawbacks

If you get any money clawed back when changing jobs (eg. a signing bonus that didn’t fully vest), keep track of it. If you previously paid income taxes on that money, you may be able to deduct the clawback from your income. I personally was able to deduct a $14,000 clawback for the 2019 tax year and had my return accepted with no audit, but this may be a scenario where you want an accountant for CYA purposes.

Backup Bookings: COBRA for Health Insurance

Insurance from your old job usually lasts to the end of the month that you left. If you don’t start your new job by then, COBRA is a program that lets you pay to continue your old coverage. You have 60 days from when your coverage ends to request that continuation of coverage under COBRA, and the coverage “is always retroactive to the day after your employer coverage ends”. You pay the full cost if you do elect, but if you have a short gap in insurance, you can hold off on electing for COBRA until you know if you happen to need it or not. If it turns out you did need it, elect after the fact and be covered. If it turns out you didn’t need it, you’ve saved on the cost of insurance.

About the Author

I love understanding systems, and optimizing for the best outcomes within the rules as implemented (rather than as written, which is a distinction all churners should be keenly aware of). This love has led me to a career in cyber security, to churning, and also to a general obsession with optimizing all things finances. I’ve recently turned that last point into a blog where I write posts like this one (with many more in the pipeline). If you’re interested in that kind of content, there’s a subscribe box at the bottom of the blog. And if you think I’ve missed something, gotten something wrong, or should write future posts on a particular topic, please drop me a line.

– Graham

Graham’s light evening reading, prolly.