Money Market Alternatives

[BigMoneyJim]

LOL! posted an alternate emergency fund strategy: http://www.early-retirement.org/for...-retirement-investments-47992.html#post889730 . I briefly considered this, but decided against it for the lack of simplicity and the concern about liquidity and withdrawal limits. You also aren't guaranteed that you're buying and selling at the same price when taking money out.

In general I decided that I'm not going to jump through hoops to avoid taxes or eek out a little more return.

 

[TromboneAl]

Doesn't using VBISX, VSGBX or VFSTX complicate tax tracking?

What do you mean?

 

[RE2Boys]

Another alternative could be GE Interest Plus (Investment Opportunities: Corporate Notes from GE Interest Plus). Acts like a money market but is really an investment in GE bonds, but immediate cash out possible. Definitely more risk than conventional MM and not in any way FDIC insured, but decent rates. More suitable as a temporary investment than for emergency funds.

RE2Boys

 

[BigMoneyJim]

What do you mean?

Since their share price fluctuates, don't you have to keep track of the cost basis for tax accounting? With savings accounts, CDs and MM funds the share value doesn't vary, so you just have to worry about interest for taxes.

 

[Texas Proud]

Since their share price fluctuates, don't you have to keep track of the cost basis for tax accounting? With savings accounts, CDs and MM funds the share value doesn't vary, so you just have to worry about interest for taxes.

Not if you let VG do it...

Also, you really do not get a lot of gain or loss built up in the account... relative to other funds...

 

[Alan]

Not if you let VG do it...

Also, you really do not get a lot of gain or loss built up in the account... relative to other funds...

Yes, the accounting is trivial, particularly if you also let your tax software import your data from VG.

 

[TromboneAl]

Since their share price fluctuates, don't you have to keep track of the cost basis for tax accounting? With savings accounts, CDs and MM funds the share value doesn't vary, so you just have to worry about interest for taxes.

I just move the numbers from the form VG sends me to the tax prep app.

 

[geedee]

I prefer ING Direct for my living expenses backup cash supply. I keep a few thousand in Vanguard for the convenience of large amount paper check writing, and the rest in ING. The $100-$200/year extra interest is nice, but the timing is the real reason. ING will have it in/out of my local checking account in 2 days, and Vanguard seems to take up to a week nowadays (guessing). It's just long enough to require extra planning and caution. I've used ING Direct for maybe 8 years, small to very large amounts, and it's always been flawless.

 

[audreyh1]

I'm not an MD, but doesn't the yellow line mean the patient has died [flat-lined]?

I think that means the interest paid has essentially gone to zero.

 

[theloneranger]

I am getting 3.5% on 25 K through the credit union.
Have to safisfy a minimum number of debit transactions.
Using the debit card for coffee shops and other small purchases is working fine and i get more interest paid per month than I spend oftentimes.

 

[DeborahB]

I have had an account at INGdirect.com for years, and more recently opened one at Ally.com - the rates vary and have been going down. Still I can ACH to my checking account at the local bank and I've NEVER had a problem doing it with either ING or Ally. The rates vary... right now:

Online savings at Ally 1.09%
ING 1.10%
I didn't know about Discoverbank at 1.25% but I'm not sure it's worth the bother to change right now.
I've got a credit union account but I don't think it's earning much - I just keep it open because I can't join it again (since I retired from the company) if I close it.

I keep money in my local checking account but the bulk of my cash is in Ally right now - the ING account I kept open with a small amount. If the rates shift I can move the money.

It's better than the .01% my local bank pays... and all FDIC insured.

 

[Henry Lili]

Take a look at local banks

While Cap One @ 1.25% plus the quartley bonus holds up to national competition (I have money there as well) over the past couple of years I have received the best rates at local banks. They are not always listed on bankrate.com but you drive by them everyday.

 

[Dranoel]

American Express Bank High Yield Savings - 1.3% for me too...

 

[TromboneAl]

I found instead of MMKt...to get Ck writting and transfering $ In /out.. > VSGBX.
yr' Fund TotRtn
08'> VSGBX 7%
09' > VSGBX 3%
10'> VSGBX YTD + 3.14% ( 1.59% yld)

In bear yrs ( 00-02' & 08' ) I split it btwn VSGBX & VFISX

From Vanguard about VSGBX.:

The Vanguard Short Term Federal Fund Investor Shares (VSGBX) will have a
fluctuating share price, unlike a money market fund, but it does still have
the capability of electronic bank transfers and checkwriting. You can
access the fund's prospectus online by going to the Forms section of our
website. From there you will see a link that says Get prospectuses &
reports and you can print it from there.


Also ck out Paul Merriman's FundAdvice.com - Home
He comes up with good places

hope that helps someone

Thanks for that info. An added note: while VSGBX does have checkwriting, it cannot be connected to a VanguardAdvantage checking account -- only money market accounts can do that.

What I'm going to do is have about 30K in the Vanguard Short-Term Bond Index Adm, and 20K in Prime Money Market, and have my computer remind me to check the relative balances every few months (in case the MM gets so low that I could bounce a check).