$350k in Money Market Funds

[wallygator69]

Hey,


Bailed out on two of my IRA's and now have $350k in each and in Vanguard Federal MM fund VMFXX. Yes I am a Dirty Rotten market Timer....I'd rather not make $500k now than lose $100k....



I am a little concerned about FDIC insurance and being over the limit.


Not sure Bond fund is smart now.


I have no need for the money for 10 years.



Any thoughts on a safe haven considering the debt ceiling crap going on


Thx


Wally

 

[mrfeh]

I have no need for the money for 10 years.

Invest it and ignore the news.

https://www.bogleheads.org/wiki/Bogleheads®_investing_start-up_kit

 

[pb4uski]

^^^ Agree that if your time horizon is 10 years then bonds will go down as interest rates rise but then recover over their duration as a result of the higher rates. You could also buy individual bonds... the value will decline as interest rates rise but you'll get par value at maturity... another option is target-maturity bond ETFs like BulletShares or iBonds... these are portfolios of bonds that all mature in a stated year and the ETF makes a terminal distribution of cash at the end of the stated year and that is the end of that ETF. There are typically ETFs for each year so you can easily build a ladder similar to a CD or bond ladder.

Or if you definitely don't want bonds, then you could split it into two FDIC insured online savings accounts at different banks... they currently pay as much as 0.5%.

Another cash like investment that provides better returns are programs like Dominion Energy Reliability Investment Notes (up to 1.25%), Toyota IncomeDriver Notes (1.35%) and GM RightNotes (1.5%)... they operate similar to an online savings account in that you can deposit or withdraw at any time and there is no interest rate risk...obviously not FDIC insured so credit risk of the issuers.

Or a some of each.

 

[DayDreaming]

Just curious - what do you mean that you bailed out of 2 IRA's? Did you withdraw the money and pay taxes, or did you just move the money from other funds into VMFXX within the 2 IRAs?

 

[Another Reader]

I assume you left the money in the Vanguard IRA's but took it out of equity funds and moved it to the money market fund.

Vanguard recently changed its' treasuries only MMF to a plain treasury MMF. The plain treasury MMF's all play the yield juicing swaps and repurchase agreements game, which expose you to some finite risk if they blow up. I recently took most of my money out of VUSXX, which I opened probably 40 years ago, and moved it to the Fidelity treasuries only fund because Vanguard changed the fund strategy to include the riskier yield enhancing games. My objective in a treasury fund is the security of the principal, not a few pennies of yield.

This may be the last straw with Vanguard for me. They are just no longer customer oriented. For the OP, the small but finite risk is something to evaluate.

 

[VanWinkle]

^^^ Agree that if your time horizon is 10 years then bonds will go down as interest rates rise but then recover over their duration as a result of the higher rates. You could also buy individual bonds... the value will decline as interest rates rise but you'll get par value at maturity... another option is target-maturity bond ETFs like BulletShares or iBonds... these are portfolios of bonds that all mature in a stated year and the ETF makes a terminal distribution of cash at the end of the stated year and that is the end of that ETF. There are typically ETFs for each year so you can easily build a ladder similar to a CD or bond ladder.

Or if you definitely don't want bonds, then you could split it into two FDIC insured online savings accounts at different banks... they currently pay as much as 0.5%.

Another cash like investment that provides better returns are programs like Dominion Energy Reliability Investment Notes (up to 1.25%), Toyota IncomeDriver Notes (1.35%) and GM RightNotes (1.5%)... they operate similar to an online savings account in that you can deposit or withdraw at any time and there is no interest rate risk...obviously not FDIC insured so credit risk of the issuers.

Or a some of each.

Maybe a MYGA(Multi Year Guaranteed Annuity) from an A rated insurer would fit into this thread also. It also acts like a CD with much higher interest at this time. I am assuming that the MYGA can be held in the IRA.

 

[OldShooter]

... Any thoughts on a safe haven considering the debt ceiling crap going on ...

Probably that depends on your definition of "safe." If a guaranteed loss in buying power is "safe" then there are a lot of options. TIPS maybe the best. If you recognize that volatility is not risk, though, and given your time horizon, a total market fund is probably the safest.

IOW:

Invest it and ignore the news.

 

[donheff]

We do this debt ceiling dance every few years. If it precipitates a crisis it will be short lived. Certainly not 10 years. More likely, it will get suspended or raised through a reconciliation budget bill.

That's not to say something else won't whack us for ten years. Maybe Covid will evolve and start all over again, or the eruption at Las Palmas will kick loose the Cumbre Vieja mass and cause a 500 meter global tsunami, or the Yellowstone super volcano will blow and eradicate life as we know it. Yikes, there are a lot of bad possibilities..

 

[ERD50]

.... Yes I am a Dirty Rotten market Timer....



... Any thoughts ...

Thx

Wally

See if you can find a 12 step program for that?

-ERD50

 

[pb4uski]

Maybe a MYGA(Multi Year Guaranteed Annuity) from an A rated insurer would fit into this thread also. It also acts like a CD with much higher interest at this time. I am assuming that the MYGA can be held in the IRA.

Yes, that would be another good option.

 

[wallygator69]

Just curious - what do you mean that you bailed out of 2 IRA's? Did you withdraw the money and pay taxes, or did you just move the money from other funds into VMFXX within the 2 IRAs?

Yes I sold everything in a ROTH and a TIRA no taxes.



We have no heirs and are living on less the 3% SWR.



We will have SS and 2 pensions worth 4% SWR in 2 and 6 years.


Won the game and not wanting to play anymore. So MYGA may be the way to go but was thinking to keep it simple with VG. I don't think they do MYGA's yet.


Thanks,


Wally

 

[pb4uski]

Please clarify... using the Roth as an example... did you sell all your equities and now have a big wad of cash in your Roth account or did you sell equities and take the money out of the Roth as well and it is now in a taxable account?

Same questions for the tIRA.

 

[pb4uski]

....I don't think they do MYGA's yet. ...

And they probably never will.... they used to sell annuities but stopped cold turkey for income annuities and then phased out their VA business to Transamerica.

You could buy a MYGA and have it held in an IRA with the issuer.

 

[OldShooter]

... You could buy a MYGA and have it held in an IRA with the issuer.

You can buy them at Schwab but I haven't comparison shopped the rates. If Schwab sells them, Fido almost certainly does too.

 

[CRLLS]

I'm not sure how Vanguard handles it, Fidelity will automatically sweep some funds into separate banks keeping each account under 250,000. It might be worth checking with Vanguard.

Fidelity's FDIC Insured Deposit Sweep Program details
In utilizing the Program, your uninvested cash balance is swept to a program bank where the deposit is eligible for FDIC insurance. If you have more than $245,000 in uninvested cash in your account, the Program maximizes your eligibility for FDIC insurance by systematically allocating this uninvested cash across multiple program banks. At a minimum, there are generally five banks available to accept customer deposits, making customers eligible for nearly $1,250,000 of FDIC insurance.2

 

[pb4uski]

What are the yields like?

 

[wallygator69]

Please clarify... using the Roth as an example... did you sell all your equities and now have a big wad of cash in your Roth account or did you sell equities and take the money out of the Roth as well and it is now in a taxable account?

Same questions for the tIRA.

I sold the equities and now have a wad of cash in both ROTH and TIra..


Thx

 

[Luvtoride]

What are the yields like?

This should show you the rates for MYGAs from 3 to 10 years.

https://www.annuityadvantage.com/lp/rate-report/Monthly Rate Report.pdf

Not great, but sure meets most alternatives. I have an Oceanview MYGA which I invested in about a year ago. Rate at that time was 3% and I’m glad I got in then.

 

[GravitySucks]

You can buy them at Schwab but I haven't comparison shopped the rates. If Schwab sells them, Fido almost certainly does too.

FIDO will be very happy to sell you a MYGA, look under Annuities/deffered-fixed-annuities.

Recent rate for NY based 3 year jumbo 1.45%

 

[Dtail]

Maybe a MYGA(Multi Year Guaranteed Annuity) from an A rated insurer would fit into this thread also. It also acts like a CD with much higher interest at this time. I am assuming that the MYGA can be held in the IRA.

True it belongs, but probably more similar to the Investment programs that PB4USKI mentioned, rather than CD's due to the credit risk involved vs. typical FDIC insured CD's.

 

[Luvtoride]

FIDO will be very happy to sell you a MYGA, look under Annuities/deffered-fixed-annuities.

Recent rate for NY based 3 year jumbo 1.45%

Yes, at that low rate FIDO would be happy to sell you a MYGA. Much better rates buying from an insurer.

 

[jazz4cash]

True it belongs, but probably more similar to the Investment programs that PB4USKI mentioned, rather than CD's due to the credit risk involved vs. typical FDIC insured CD's.

Not at all similar IMO. MYGA has State Guaranty Association backing and much much better rates compared to corporate note programs. I like corporate note programs for smaller sums and short term access. Corporate notes feature liquidity similar to a MM whereas MYGA have severe early withdrawal penalties. Some allow limited withdrawals, though.

 

[OldShooter]

I'm not sure how Vanguard handles it, Fidelity will automatically sweep some funds into separate banks keeping each account under 250,000. It might be worth checking with Vanguard.

One of life's little mysteries for me is why sophisticated investors even care about FDIC insurance.

First, bank failures are incredibly rare. Average is something like seven per year out of 5000, less than 0.2%.

Second, deposits in excess of FDIC limits do not go away; their owners are secured creditors and IIRC the habit of the regulators is to make them good.

But most importantly, bank risks pale in the shadow of the risks investors take every day by buying stocks (no guarantees, ever) and corporate bonds (default rates many times the bank failure rate). Sure, people are concerned about these kinds of risks, but not to the extent they seem to be concerned about having FDIC insurance.

Sure, if it's free take it and maneuver to maximize the amount, but in the scale of investment risks bank failures seem negligible to me.

Thread drift, I suppose. Sorry.

 

[jazz4cash]

Second, deposits in excess of FDIC limits do not go away; their owners are secured creditors and IIRC the habit of the regulators is to make them good.

FDIC insurance is very important for a tiny allocation of my assets (nowhere near the limits). I generally agree with your point but I was not aware of any security for my bank deposits. I’m curious about that.

 

[OldShooter]

FDIC insurance is very important for a tiny allocation of my assets (nowhere near the limits). I generally agree with your point but I was not aware of any security for my bank deposits. I’m curious about that.

IANAL but you are definitely a creditor in a bankruptcy and I believe you are secured, not unsecured. Don't rely on my belief though; there are facts out there somewhere. The point is that the uninsured balance does not vaporize. There is the possibility of getting some or all of it back.