We had our emergency money parked in a tax exempt money market fund making 2.7% (our marginal rate is 34%), so I'm thinking I can do better than this.
So I exchanged a stock fund in an IRA and bought VFIIX the Vanguard GNMA fund yielding about 5%. Since it's in a retirment account, the dividends are tax-free (well, really deferred). In the taxable account, I exchanged the tax-exempt money market fund for the Vanguard total stock market fund.
So I now have my emergency fund earning a tax-free 5%. As a bonus, if stocks go down, I would not have been able to deduct the loss on taxes if that stock fund was still in my IRA. But now that it is in a taxable account, I could sell for a loss and deduct that against other capital gains.
Bottom line: Your emergency fund could be in your IRA and save you some bucks.