What to do with extra $30K in checking account?

[audreyh1]

Right, all that matters for a MM fund is current yield (which is net of expenses), and most folks compare the 7-day number as that is what is most often provided.

P.S. most folks add their comments after the quote.

 

[tulak]

Yes, their language has always been confusingly incomplete. And even calling in to Fidelity sometimes people get the wrong answer although the couple of Fidelity people I talked to pointed out the distinction of no transaction fee for the case of ATM withdrawal.



I had read about the Fidelity ATM card in several boards including here and many people shared their 0% FTF experience at ATMs. That’s what ultimately had me set up a cash management account to segregate it from my investment accounts.

A bit late to this thread, but I have a segregated investment account at Fidelity for only cash management and I get the same benefit with the debit card.

As far as I can tell, the only differences between a cash management account and brokerage account are FDIC insurance and where the cash balance is invested.

With a brokerage account, you can use an MM fund for cash balance, which you don’t get with the cash management account.

 

[audreyh1]

Yeah you have to work around that in a CMA when MM rates are higher. But it’s not that big a deal for me. I just occasionally load with funds to cover a few bills or overseas ATM use. And I transfer to a MM fund after deposit. Since the MM funds are automatically drawn from whenever the core is depleted this works well enough.

 

[G-Man]

The monthly dividends paid are ordinary income and taxed as such. It will appear on your brokerage 1099-DIV.

Even if I purchase more of SPRXX with the monthly dividend, the tax treatment will still be ordinary income? Please confirm. If yes, that seems very tax inefficient. Maybe I need to think about investing in something other than Money Market funds in my Fidelity cash management account.

 

[braumeister]

Even if I purchase more of SPRXX with the monthly dividend, the tax treatment will still be ordinary income? Please confirm.

What you do with the dividend is irrelevant. It's income when it's paid to you.

 

[G-Man]

The monthly dividends paid are ordinary income and taxed as such. It will appear on your brokerage 1099-DIV.

What you do with the dividend is irrelevant. It's income when it's paid to you.

Got it. Thanks. Still learning.

 

[G-Man]

What you do with the dividend is irrelevant. It's income when it's paid to you.

One more thing. Dividends generated in a TIRA or 401K account that is not reinvested but stays in your core position account does not trigger a taxable event. It's only when you a take a distribution (withdraw the cash from the core position account) is when a taxable event occurs.

I assume if I purchase more equities with the cash in the core position account that would not trigger a taxable event either. Just want to confirm.

 

[braumeister]

Nothing that happens inside a TIRA matters. You are only taxed (at ordinary income rate) when you take a distribution out of it.

 

[G-Man]

Nothing that happens inside a TIRA matters. You are only taxed (at ordinary income rate) when you take a distribution out of it.

Perfect. I assume the same for a 401K account as well.

 

[audreyh1]

Even if I purchase more of SPRXX with the monthly dividend, the tax treatment will still be ordinary income? Please confirm. If yes, that seems very tax inefficient. Maybe I need to think about investing in something other than Money Market funds in my Fidelity cash management account.

Yes, dividends are taxed in taxable accounts regardless of whether you reinvest them. Just like as interest.

 

[Jenna]

I need to look into using a credit card to pay my monthly bills to get those free points. I'm sure there are some websites that goes into more detail about this strategy and which credit cards are the best for this approach.

A little off topic but just returned from Portugal, 2 Business Class RT tickets, 17 Hotel nights-in nice Marriott resorts-all on points. I haven't "paid" for a flight since 2012...LOL

Finding the right credit card is worth it.

 

[G-Man]

A little off topic but just returned from Portugal, 2 Business Class RT tickets, 17 Hotel nights-in nice Marriott resorts-all on points. I haven't "paid" for a flight since 2012...LOL

Finding the right credit card is worth it.

Provide more details. How did you do it?

 

[Jenna]

Provide more details. How did you do it?

Lot's of research. Here's a good starting point. I started with the Southwest companion Pass and it just grew from there. https://www.travelmiles101.com/ There are tons of blogs and FB groups. Search for "Travel Hacking". I thought it was all a scam until I looked into it. At the very least rack of the points and pay someone to book the route for you. I use a guy that charges me only $100 per ticket (international flights) He knows how to optimize and the best airports-so it's worth paying him for the international stuff. The Mad Fi-entist has some good stuff, Go Curry Cracker blog, and The Points Guy are also good starting places. It's the hobby that "pays"!

 

[G-Man]

With the monthly dividend received in core position of my Fidelity cash management account from SPRXX, do you purchase more of the Money Market fund?

 

[audreyh1]

With the monthly dividend received in core position of my Fidelity cash management account from SPRXX, do you purchase more of the Money Market fund?

Yes, I usually just have it set up to reinvest.

 

[G-Man]

Yes, I usually just have it set up to reinvest.

Hmm. Set to reinvest in the Money Market fund? I thought the monthly dividend has to go to the core position first. Then you have to manually execute a buy trade for more of the Money Market fund.

 

[G-Man]

Hmm. Set to reinvest in the Money Market fund? I thought the monthly dividend has to go to the core position first. Then you have to manually execute a buy trade for more of the Money Market fund.

Is this the screen to select the reinvestment? How would I select the specific Money Market fund? In my case SPRXX.

 

[audreyh1]

No. Under More… at the top there is a place to configure whether or not to reinvest dividends. You may have to drill down a bit. I can’t remember off the top of my head.

Yes, that’s it. Just click on the reinvest in security button. Don’t worry about the right most column, that’s yet a third option.

 

[G-Man]

No. Under More… at the top there is a place to configure whether or not to reinvest dividends. You may have to drill down a bit. I can’t remember off the top of my head.

Yes, that’s it. Just click on the reinvest in security button. Don’t worry about the right most column, that’s yet a third option.

I think I found the page for reinvesting dividends.

 

[audreyh1]

Yes you did - you showed it in post #117.

Just click the “Reinvest in Security” button for both rows. Reinvest means to the same security.

 

[G-Man]

Yes you did - you showed it in post #117.

Just click the “Reinvest in Security” button for both rows. Reinvest means to the same security.

Thanks