Cash In Bank...Or Not.

[scrabbler1]

I've been considering this fund/option as a supplement to my HELOC emergency fund... i.e. use this fund to repay the HELOC (depending on interest rates, etc).

How did you determine how much you wanted in this relatively low risk tier? Is it your entire emergency fund or a percentage of it? Do you syphon off any portion as it grows (e.g. $1k or more) to a fund offering better returns or has that tier grown to that point and continues to grow without touching it?

To answer your questions, let me give you a history of this muni bond fund and another one in my portfolio in the 20+ years I have been in them.

Back in my working days, I had a lot more money in muni bond funds because I was in a higher tax bracket. I was just getting into stock funds in the mid to late 1990s (just in time for the big booming markets of those glory years).

But when I ERed in late 2008, I knew my income would drop along with my tax bracket (from 25% to 15%), so I began looking for ways to reduce my muni bond fund holdings. I did that by paying some large expenses with my muni bond funds and by doing some rebalancing away from muni bond funds. The intermediate-term muni bond fund dropped into the $40k-$50k after a few years while my other muni bond fund (a long-term, home-state fund) has just recently dropped into the about the same amount.

I always considered my muni bond fund holdings to be more part of my overall AA than my EF. I just tap into my intermediate-term muni bond fund as my first choice if my bank account's surplus can't cover an expense.

Other than the interest both bond funds earn, I haven't added any new money to them, only subtracted from them since I ERed in late 2008. The two bond funds now make up about 6% of my total taxable account's value.

I hope that answers your questions.

 

[mistershankly]

I hope that answers your questions.

Yes, it does. Thank you!