Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Broker Sweep Money Market Account Yield
Old 11-27-2017, 10:54 AM   #1
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 3,934
Broker Sweep Money Market Account Yield

What does your broker pay for this? Have Schwab acct w/ cash swept into a Cash Reserves M.Mkt Acct. (and automatically withdrawn to pay expenses). After paying virtually nothing during the financial crisis, the yield has risen so that today it pays about 0.7% or so. Not great...but reasonably ok.

Now Schwab says they are changing to make the sweep account a bank acct. When prodded, they admit the yield will be 0.15% w/ FDIC protection. The words suggest (but don't say directly) that they are forced by govt. rules to do this.

If so, other sweep accounts should be in the same boat. What is your experience? Or is Schwab just trying to make $$ for itself?

I have the option to purchase other money market funds that have higher yields but I have to manually move them there
(buy/sell) so that's a problem when paying bills since I don't know exactly when they will arrive. The sweep funds do that automatically so no problem there.
__________________

kaneohe is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 11-27-2017, 12:53 PM   #2
Thinks s/he gets paid by the post
Gotadimple's Avatar
 
Join Date: Feb 2007
Posts: 2,036
Just got this info this weekend. Certainly re-positioning the sweep accounts to Schwab bank does save them some dollars and probably reducing some reporting burden for those funds. They also collapsed several of these money market accounts so that there are only two tiers: investor class and institutional class.

Re-read the section on FDIC protection. IRA/Roth account balances in the bank will be aggregated. Not sure about the brokerage account balance. But a footnote on the website (see note below) indicates they will introduce another bank in 2018 so funds can be separated for FDIC protection.

I don't pay bills from the sweep accounts but accumulate cash to use at re-balancing time. Given that I can shield income in the brokerage account from taxes, it might be worthwhile for me to set up and buy a muni money market to hold brokerage funds, and earn a little more cash for re-balancing.

You mention a rate of .15%, this is for the high-yield investor checking account. My understanding is the bank sweep account pays .10% (log in, go to Products/Cash Solutions to see the difference). Leaving it at .10% isn't a great option for the brokerage account, when the Schwab Municipal Money Fund is paying .66% (or tax equivalent .88%).

So I'm still considering a strategy for managing this money to gain tax-free income (same in the IRA and Roth accounts) throughout the year. More work!

I'd appreciate hearing what others are planning to do.

- Rita
__________________

__________________
Only got A dimple, would have preferred 2!
Gotadimple is offline   Reply With Quote
Old 11-27-2017, 01:11 PM   #3
Thinks s/he gets paid by the post
mpeirce's Avatar
 
Join Date: Feb 2012
Location: Columbus area
Posts: 2,252
I have a somewhat similar setup. I like the Schwab bank account specifically because the ATM/Debit card doesn't charge for access at foreign ATMs. Nice.

But the bank account only pays 0.15% so there's that.

To work around this low rate, I keep a modest pile of cash in SWVXX (Schwab Value Advantage - Investor Shares). It pays 1.0%, but has annual expenses of 0.35% so that's still paying 0.65% - better than the bank account.

One downside to SWVXX is that when you need the cash it's not there instantly like the bank account. You have the sell shares in SWVXX.
mpeirce is offline   Reply With Quote
Old 11-27-2017, 01:17 PM   #4
Thinks s/he gets paid by the post
 
Join Date: Jul 2012
Location: Mississippi
Posts: 1,894
Seems like this due to some SEC regulation amendents. I found a link to some schwab info on money market reform https://www.schwabfunds.com/public/c...esource-center
rbmrtn is offline   Reply With Quote
Old 11-27-2017, 01:21 PM   #5
Thinks s/he gets paid by the post
FIRE'd@51's Avatar
 
Join Date: Aug 2006
Posts: 2,416
Vanguard's settlement fund (VMFXX) is 1.05%.
__________________
I'd rather be governed by the first one hundred names in the telephone book than the Harvard faculty - William F. Buckley
FIRE'd@51 is offline   Reply With Quote
Old 11-27-2017, 02:22 PM   #6
Moderator
braumeister's Avatar
 
Join Date: Feb 2010
Location: Flyover country
Posts: 14,172
If they keep cranking up the money market rates, there's no reason my chicken should go hungry any more.
__________________
I thought growing old would take longer.
braumeister is offline   Reply With Quote
Old 11-27-2017, 04:13 PM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 24,797
Quote:
Originally Posted by FIRE'd@51 View Post
Vanguard's settlement fund (VMFXX) is 1.05%.
and if they could goose it a bit more then I could get rid of my online savings account... one less vendor/account to deal with... would keep my cash at Vanguard and have a monthly "paycheck" transfer to the credit union account that I use to pay my bills.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56...target 65/35/0 AA
pb4uski is online now   Reply With Quote
Old 11-27-2017, 04:21 PM   #8
Thinks s/he gets paid by the post
 
Join Date: Mar 2010
Location: Kerrville,Tx
Posts: 3,215
Quote:
Originally Posted by pb4uski View Post
and if they could goose it a bit more then I could get rid of my online savings account... one less vendor/account to deal with... would keep my cash at Vanguard and have a monthly "paycheck" transfer to the credit union account that I use to pay my bills.
Note you can get about .1 percent more with prime money market over federal money market, it is just a couple of clicks to move the money. prime is 1.18%
meierlde is offline   Reply With Quote
Old 11-27-2017, 06:31 PM   #9
Recycles dryer sheets
 
Join Date: Nov 2017
Posts: 61
Quote:
Originally Posted by meierlde View Post
Note you can get about .1 percent more with prime money market over federal money market, it is just a couple of clicks to move the money. prime is 1.18%
I closed out my online savings accounts and moved money to VG
pn3069 is offline   Reply With Quote
Old 11-27-2017, 06:41 PM   #10
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 3,934
Quote:
Originally Posted by FIRE'd@51 View Post
Vanguard's settlement fund (VMFXX) is 1.05%.
Can you write checks on the settlement fund? or autopay bills from there?
kaneohe is offline   Reply With Quote
Old 11-27-2017, 08:04 PM   #11
Thinks s/he gets paid by the post
FIRE'd@51's Avatar
 
Join Date: Aug 2006
Posts: 2,416
Quote:
Originally Posted by kaneohe View Post
Can you write checks on the settlement fund? or autopay bills from there?
No, but as mentioned above, with a couple of clicks, you can move money you don't need for settlement to the Prime money market fund (VMMXX) and earn about 10 basis points more. There you can write checks for $250 or more and transfer money electronically to a linked bank account to autopay bills or write checks for less than $250.
__________________
I'd rather be governed by the first one hundred names in the telephone book than the Harvard faculty - William F. Buckley
FIRE'd@51 is offline   Reply With Quote
Old 11-27-2017, 08:39 PM   #12
Thinks s/he gets paid by the post
GalaxyBoy's Avatar
 
Join Date: Jul 2009
Location: The Beautiful Blue Ridge Mountains
Posts: 1,741
It wasn't long ago that Schwab's "High Yield" checking account was paying 0.01%. This is why I keep my excess cash at Ally and transfer it to Schwab once per month for expenses.
GalaxyBoy is offline   Reply With Quote
Old 11-28-2017, 06:18 AM   #13
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 24,006
I currently keep most of the cash’s here that would otherwise be a time the brokerage in a Synchrony Bank high yield account earning 1.3%. I first set this up many years ago when most money market funds were yielding 0.07% and the safety issues of money market funds hadn’t been resolved. Now money market funds are yielding a lot more, and are considerably safer. But the high yield FDIC insured accounts still beat. It takes a quick online entry and only a day or two to transfer funds, so I’m sticking with this system.

Annual spending funds get transferred to American Express bank and monthly needs transferred to bank account automatically.
__________________
Retired since summer 1999.
audreyh1 is offline   Reply With Quote
Old 11-28-2017, 07:00 AM   #14
Recycles dryer sheets
 
Join Date: Jun 2014
Posts: 165
Quote:
Originally Posted by kaneohe View Post
Can you write checks on the settlement fund? or autopay bills from there?
You can write checks on the settlement fund if you are eligible for the Vanguard Advantage account. It also has bill pay.

I believe this account requires Voyager Select status or higher.
catotx is offline   Reply With Quote
Old 11-28-2017, 02:05 PM   #15
Full time employment: Posting here.
 
Join Date: Nov 2006
Posts: 673
Quote:
Originally Posted by catotx View Post
You can write checks on the settlement fund if you are eligible for the Vanguard Advantage account. It also has bill pay.

I believe this account requires Voyager Select status or higher.
Agreed. I have a Vanguard Advantage account. It's basically a free checking account.

I move the settlement fund over to the Prime Money Market (1.19%) when I don't need the money available for the checking account.

In my financial simplification project, I dumped my Ally checking/savings and combined it into Vanguard where 95% of our retirement money is already located. I still have a local regional bank where we do most of our checking account transactions through, but leave very little extra money due to pathetic interest rates. It takes two days to get money from Vanguard to my local checking. If I need really fast money, I can just write a check out of the Vanguard account.
PatrickA5 is online now   Reply With Quote
Old 11-28-2017, 02:49 PM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
 
Join Date: Mar 2005
Location: Chicago
Posts: 10,887
Quote:
Originally Posted by FIRE'd@51 View Post
Vanguard's settlement fund (VMFXX) is 1.05%.
Is that a true sweep fund?
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
youbet is offline   Reply With Quote
Old 11-28-2017, 02:54 PM   #17
Thinks s/he gets paid by the post
 
Join Date: Mar 2010
Location: Kerrville,Tx
Posts: 3,215
Quote:
Originally Posted by youbet View Post
Is that a true sweep fund?
It is where dividends go at vanguard as well as where proceeds of sales go and costs of purchases come from. However it does not have checkwriting for some reason.
meierlde is offline   Reply With Quote
Old 12-03-2017, 05:53 AM   #18
Thinks s/he gets paid by the post
FIRE'd@51's Avatar
 
Join Date: Aug 2006
Posts: 2,416
Quote:
Originally Posted by meierlde View Post
However it does not have checkwriting for some reason.
I suspect it has something to do with the settlement fund being used to collateralize certain trading activities, e.g. selling cash-secured puts.
__________________
I'd rather be governed by the first one hundred names in the telephone book than the Harvard faculty - William F. Buckley
FIRE'd@51 is offline   Reply With Quote
Old 12-03-2017, 08:44 AM   #19
Recycles dryer sheets
 
Join Date: Jun 2014
Posts: 165
Quote:
Originally Posted by FIRE'd@51 View Post
I suspect it has something to do with the settlement fund being used to collateralize certain trading activities, e.g. selling cash-secured puts.
I don't believe that is the reason, because, as mentioned previously, check writing is available on the settlement fund for Voyager Select and Flagship clients.

I think the reason is cost, since providing the checking facility costs Vanguard money.
catotx is offline   Reply With Quote
Old 12-03-2017, 12:40 PM   #20
Thinks s/he gets paid by the post
FIRE'd@51's Avatar
 
Join Date: Aug 2006
Posts: 2,416
Quote:
Originally Posted by catotx View Post
I don't believe that is the reason, because, as mentioned previously, check writing is available on the settlement fund for Voyager Select and Flagship clients.
As I understand it, to get the check writing capability, you must open an Advantage account which also includes a credit card. This would allow a "margin" call incurred by writing checks to be charged to the credit card.
__________________

__________________
I'd rather be governed by the first one hundred names in the telephone book than the Harvard faculty - William F. Buckley
FIRE'd@51 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Fidelity money market sweep fund goes away. Neill FIRE and Money 21 01-17-2016 10:26 AM
VG sweep account tinlizzy FIRE and Money 7 01-06-2013 11:19 PM
Sweep Account HappyEarlyRetirementForum FIRE and Money 11 07-23-2011 08:32 PM
sweep account strategy. *what is it ? zuki FIRE and Money 5 04-26-2005 11:26 AM

» Quick Links

 
All times are GMT -6. The time now is 09:13 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2020, vBulletin Solutions, Inc.
×