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Short Term Cash..
Old 06-03-2014, 02:51 PM   #1
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Short Term Cash..

For various reasons, I have a quite a bit of short term cash. I'm not putting it all in the market at the moment, but I do need it readily available.

In the past I've just used a prime money market.. but, they currently yield about 0.02% (not 2%)

So, am I just left with "high yield" savings accounts.. Is there a better option that's very safe?
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Old 06-03-2014, 03:02 PM   #2
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For very safe I think you're stuck with online savings accounts. Even at just 0.9% it was nice to see real money coming in as interest instead of the 0.01% at the brokerage. You may do a little better with CD's if you have a longer time period to work with.
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Old 06-03-2014, 03:19 PM   #3
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Let's see.. I see Optimizer+ savings at .95% and Everbank MMA at 1.4% (6 month intro) I can't believe there aren't more options...
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Old 06-03-2014, 03:48 PM   #4
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Quote:
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Let's see.. I see Optimizer+ savings at .95% and Everbank MMA at 1.4% (6 month intro) I can't believe there aren't more options...
It's been like this for years now. My short term is at Ally, currently 0.87%. All I can say is it's beats the 0.01% at VMMXX and the like...
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Old 06-03-2014, 03:58 PM   #5
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Quote:
Originally Posted by jetpack View Post
For various reasons, I have a quite a bit of short term cash. I'm not putting it all in the market at the moment, but I do need it readily available.

In the past I've just used a prime money market.. but, they currently yield about 0.02% (not 2%)

So, am I just left with "high yield" savings accounts.. Is there a better option that's very safe?
Yep, high yield savings are the only game in town unless you can tie your money up for 2 years or more in which case you might find higher yielding CDs.

IBonds for money tied up over a year - you forfeit 3 months interest after a year until held for 5 years.
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Old 06-03-2014, 04:19 PM   #6
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There is no free lunch. If you want safe, maybe a CD ladder or I bonds as mentioned. I personally keep half of my emergency money in I bonds. The other 50% is in the Vanguard Retirement Income fund. I am willing to take a slight risk in order to hopefully beat inflation and make a few bucks. No easy answers here.
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Old 06-03-2014, 04:35 PM   #7
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I keep a lot in cash as well (one year of living expenses). I'm still using prime money market fund. There are better options out there but the interest is still going to be pitiful. So I don't bother.

If you want more interest you could try using one of the online banks (savings account or cd).
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Old 06-03-2014, 04:38 PM   #8
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It occurred to me that many who don't have IBonds look at them based on the current 1 year return. Since the formula for calculation is based on the CPI, and the interest rate at the time of the purchase, this is not necessarily the same as the longer term result. I have included a look at the current rate and yield of some Ibonds, purchased at an earlier time, when the actual limit was $30K per person/year.
It doesn't match the market return from that time period, (2001-2003), but the safety and the inflation hedge allows for peaceful sleep.

BTW current GE Bank (Optimizer)15 mo. CD's 1.15%

IBond summary:
Attached Images
File Type: jpg IBond.jpg (107.2 KB, 53 views)
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Old 06-03-2014, 05:54 PM   #9
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I have most of my ST cash @ Ally getting 0.87% and about 1/3 in VG ST bond fund paying a bit less. All in all we keep about 18 months of expenses in cash. Not a good time to be needing interest to live on.
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Old 06-05-2014, 01:28 PM   #10
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I agree with other posters. I have a high yield no fee savings account with Discover Bank on-line. Very easy to electronically transfer to/from my checking account (Bank of America). The yield is 0.85. CD's yield a little more but I like to keep my cash readily available.
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Old 06-05-2014, 01:40 PM   #11
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I am sitting on a lot of cash too while DW and I figure out what we are going to do next. I put mine in high yielding savings accounts for the FDIC insurance.
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Old 06-05-2014, 02:10 PM   #12
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Ally as well, although I try not to keep a lot of cash anywhere. That will change early next yeaer.
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Old 09-01-2014, 08:18 PM   #13
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I keep a lot in cash as well (one year of living expenses). I'm still using prime money market fund. There are better options out there but the interest is still going to be pitiful. So I don't bother.

If you want more interest you could try using one of the online banks (savings account or cd).
That's me too. I just keep it in my credit union. Have 2-4 years of living expenses, depending on how much I want to spend.

The annual budget figure I used for various retirement calculators would make it closer to 2 years than 4 years, though I can cut back a lot of discretionary things like travel and entertainment.

I'm thinking I would draw the cash down while allowing my investments to still accrue dividends and cap gains and reinvest them for a couple of years more after I FIRE.

Then I could start withdrawing in earnest and not keep more than one year of cash.
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