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Consolidating at Vanguard
Old 10-12-2014, 11:24 AM   #1
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Consolidating at Vanguard

All - thanks for a lot of good information on line here about Asset Allocation and whether to use a Financial Adviser. Thru good info here and reading a lot of good books I feel confident enough to move forward.

I am in the process of opening a few index accounts at Vanguard to help build a diversified portfolio in US stock, international stocks, REIT, bonds (short and intermediate) for our retirement accounts.

In the process I also want to consolidate our non-retirement funds - CDs that are coming due and various savings accounts that we have opened over the years. Want to keep about 3 yrs emergency funds liquid and the rest can be tied up in a CD for better yield (laddering??).

Was curious what some of the folks are doing on here with parking cash and if using Vanguard for CDs or Money Market accounts.

Thanks

Kannon
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Old 10-12-2014, 11:52 AM   #2
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Kannon,
CD's at any brokerage firm are bought from many banks who offer them. You would have to compare the rate offered by Vanguard. That said, you may find better results by dealing with a bank directly, or, depending on how long you plan to hold the CD, by investing in a short-term bond fund. If you want to buy a CD for a tax-free (Roth), or tax-deferred (IRA) account, then Vanguard's CD marketplace or a short-term bond fund are your only options.

Money market accounts pay virtually nothing. If you intend to use the money short term for investment purchases, then leave that with Vanguard. If you want to keep an emergency fund that can be quickly liquidated, a high yield savings account may be a better alternative for funds needed within the next year.

Use bauerfinancial.com (click on CD Rates, then Consumer), to get recommendations for Money Market, High Yield, and CD rates. This site also rates the issuer so you know you are dealing with a strong bank or credit union (if you qualify).

-- Rita
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Old 10-12-2014, 01:09 PM   #3
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Was curious what some of the folks are doing on here with parking cash and if using Vanguard for CDs or Money Market accounts.
I don't think vanguard is optimal for cash and cash equivalents. Their money markets are paying nothing. What we do is a combination of high-yield savings accounts (0.9% at ally), penfed CDs (3%), I-bonds at treasury direct, and vanguard short term corporate (1.6%).

I haven't looked into vanguard CDs (are these all brokered?) but given the lack of postings on this, I suspect there's nothing really great there.
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Old 10-12-2014, 06:43 PM   #4
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Vanguard also has a Retirement Trust Fund that is paying almost 2% interest for a cash vehicle. I will probably use it to park my cash for the first 4 years of retirement and use Wellington for years 5 to 10. Then be more aggressive for years 11+.
Like you, I have been reading a lot of books, have had a 401k with Vanguard for 25 years and feel comfortable about investing with Vanguard funds for the remainder of my life.
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Old 10-12-2014, 06:52 PM   #5
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I am in the process of consolidation myself. I moved an old IRA CD from
Wells Fargo to Vanguard. It is sitting in their money market, while waiting for a good time to move to one of their Index fund.
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Old 10-12-2014, 10:07 PM   #6
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Quote:
Originally Posted by kannon View Post
All - thanks for a lot of good information on line here about Asset Allocation and whether to use a Financial Adviser. Thru good info here and reading a lot of good books I feel confident enough to move forward.

I am in the process of opening a few index accounts at Vanguard to help build a diversified portfolio in US stock, international stocks, REIT, bonds (short and intermediate) for our retirement accounts.

In the process I also want to consolidate our non-retirement funds - CDs that are coming due and various savings accounts that we have opened over the years. Want to keep about 3 yrs emergency funds liquid and the rest can be tied up in a CD for better yield (laddering??).

Was curious what some of the folks are doing on here with parking cash and if using Vanguard for CDs or Money Market accounts.

Thanks

Kannon
Generally speaking you want to avoided brokerage CDs. In most cases brokerage CD act like bonds, with the important benefit of FICA protection.

Imagine you get a 5 years 2% CD (Penfed has 2.1% right now). Lets say interest rates move up 2% over the next 1.5 years. With a regular CD you can go to the bank pay a penalty of 6 months to 1 years interest which is 1%-2%, and take your funds and invest in 4% 5 year CD. With a brokerage CD, if you need cash, well you have to sell it on the open market and since interest rates have risen bond prices have fallen. Your brokerage CD would have dropped around 5-7%

In my observation the slightly higher interest rates of brokerage CDs doesn't compensate for the additional risk.
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Old 10-13-2014, 07:39 AM   #7
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I use Vanguard short and limited term muni bonds for my "almost" cash accounts. My after tax income is higher than all CD's except long term, my risk is minimal compared to long term bonds, my taxes are lower and it has worked well during this time of low interest rates. I have almost all my assets at Vanguard, they are the cheapest and offer the most index funds of anyone.
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Old 10-13-2014, 07:46 AM   #8
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I keep a bit of cash at AMEX bank -- mainly as a second source in case something glitches with VG systems. Other than that, the shortest duration I hold is Limited Term Tax Exempt Bond fund.
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Old 10-13-2014, 07:55 AM   #9
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I had everything at Vanguard with the cash portion in VMMXX. But I got tired of essentially zero interest, and moved my cash to Ally savings at then 0.95% (now 0.90%) and iBonds (unfortunately limited to $10K/person). There aren't many any good choices for true cash equivalents or fixed income these days...
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Old 10-13-2014, 09:22 AM   #10
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I had everything at Vanguard with the cash portion in VMMXX. But I got tired of essentially zero interest, and moved my cash to Ally savings at then 0.95% (now 0.90%) and iBonds (unfortunately limited to $10K/person). There aren't many any good choices for true cash equivalents or fixed income these days...
That's the problem I've found with trying to take advantage of special deals. The dollar amount is too small to be meaningful. The hassle of moving money between individual banks is a hassle that I don't need. I'm forced IMHO to rely on brokered CDs.

I'm almost totally consolidated at Vanguard. I have a small legacy ETrade checking and savings account to take advantage of their no fee ATM when traveling. I have a SERP plan that I can't touch until its payout dates. My 401k will move within a month after retiring. We're in the process of moving DW's 403b balance. It definitely simplifies life with fewer financial institutions to keep track of.
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Old 10-13-2014, 09:28 AM   #11
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Vanguard also has a Retirement Trust Fund that is paying almost 2% interest for a cash vehicle. I will probably use it to park my cash for the first 4 years of retirement and use Wellington for years 5 to 10. Then be more aggressive for years 11+.
Like you, I have been reading a lot of books, have had a 401k with Vanguard for 25 years and feel comfortable about investing with Vanguard funds for the remainder of my life.
I think you're referring to Vanguard Retirement Savings Trust which is a stable value fund found in some 401Ks administered by Vanguard. Is this correct? I don't think that most people have access to that fund.

We've consolidated all retirement accounts at Vanguard. Most of our outside cash is at either Ally or CapOne (ING) or Schwab. I'm thinking about consolidating all outside taxable money at Schwab just to simplify things, although their cash rates aren't that good. Ally used to be great because they only had a 60day penalty on their 5 year CDs, but they changed that recently.
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Old 10-14-2014, 03:11 PM   #12
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I think you're referring to Vanguard Retirement Savings Trust which is a stable value fund found in some 401Ks administered by Vanguard. Is this correct? I don't think that most people have access to that fund.

We've consolidated all retirement accounts at Vanguard. Most of our outside cash is at either Ally or CapOne (ING) or Schwab. I'm thinking about consolidating all outside taxable money at Schwab just to simplify things, although their cash rates aren't that good. Ally used to be great because they only had a 60day penalty on their 5 year CDs, but they changed that recently.

Looks like it takes 1 million for the Vanguard Retirement Savings Trust.
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Old 10-14-2014, 04:10 PM   #13
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I like keeping my FDIC insured CDs at a local bank that has decent CD interest rates.

There is also the added benefit that it's a small local bank that lends to the community. I like that my money are working "in the Kennedy House, and Mrs. Macklin's house, and, and a hundred others."

OK, I'm getting carried away, but seriously, it's doing a little bit of good around here.
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Old 10-14-2014, 07:09 PM   #14
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I like keeping my FDIC insured CDs at a local bank that has decent CD interest rates.

There is also the added benefit that it's a small local bank that lends to the community. I like that my money are working "in the Kennedy House, and Mrs. Macklin's house, and, and a hundred others."

OK, I'm getting carried away, but seriously, it's doing a little bit of good around here.
You got me thinking of the movie It's a wonderful life. You sound like Jimmy Stewart down at the savings and loan.
I do the same thing with local credit unions.
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