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Doing some general financial housekeeping after spending way too many hours reading the adventures of zaurg and realized our savings account that's linked with our normal checking is only a 0.1% APY. Seems like I might as well have most of my cash savings doing a bit more for me and Nerdwallet has a bunch of options for 3.0-3.83%. Is it a fairly common practice to have 'long term savings' (emergency fund, slow-moving 'project fund'-type savings, etc) in a high-yield account distinct from your regular bank? What should I be on the lookout for to not make this more trouble than it's worth? Things I have already thought of:
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Nov 14, 2022 03:30
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aunt jenkins posted:Doing some general financial housekeeping after spending way too many hours reading the adventures of zaurg and realized our savings account that's linked with our normal checking is only a 0.1% APY. Seems like I might as well have most of my cash savings doing a bit more for me and Nerdwallet has a bunch of options for 3.0-3.83%. Yes, get a HYSA (high yield savings account). I personally moved my checking and savings to Ally bank 12 years ago and never regretted firing Bank of America. But you can leave your checking account where it is. Ally is super solid (I think it just went to 3%), other companies like AmEx have the same HYSA setup. You’re correct, just make sure there’s no stupid gotcha fees and make sure it is FDIC insured. General fyi you will pay tax on it on your yearly taxes (just the earnings) but totally worth it.
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Nov 14, 2022 10:31
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For the record, all savings account interest is taxed. It’s just that at 0.1% it’s immaterial. Ally, Marcus, and American Express seem to be fairly consistent in their interest rates and used by lots of goons. There is usually some kind of sign up bonus going. There may be better rates available than those three but there will be strings attached. Former thread darling HMBradley had higher rates initially, but then started locking those rates behind things like debit card use and over time became kind of poo poo. IMO better to just go with known entity with good rates rather than trying to min/max too much.
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Nov 14, 2022 12:08
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I’m having a hard time deciding what to do, and I was hoping to get advice from the thread. I’m currently investing 46% of income each month, no debt and house paid off. My job is such that I can’t be laid off except if the entire public healthcare system collapses. I have about $7500 to invest, and I’m trying to decide between fully-funding next year’s IRA, dumping it my 401k, or buying I bonds. My 401k is from my business that’s closing at the end of the year, so it’s use-it-or-lose-it. The I Bonds would be part of the down payment for an EV van in 2024 that I’m estimating to be ~$70k. I realize some of this boils down to “Do you want the money now or in retirement?” My partner has a degenerative physical disability, so we’re not factoring that in because we have no idea what life is going to be like in 30 years. Valicious fucked around with this message at 19:58 on Nov 15, 2022 |
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Nov 14, 2022 18:42
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You can't put it into your 2023 IRA until January but that's not far off. It sounds like you can put it into your 401k right now, which is functionally equivalent since you're managing your own 401k and therefore I assume have similarly good options. So you're correct that the decision is how long in the future you anticipate needing the money. The I bonds you'll have to hold for a year. If you want it sooner than that, put it into a high yield savings account. If you don't need it till retirement, put it into your 401k. If you want to save for medical expenses for your partner, your partner should consider a high-deductible medical plan and an HSA, or, you might consider setting up a trust with your partner as the beneficiary.
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Nov 14, 2022 18:50
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I’m of the opinion that you should always use use-it-or-lose-it tax advantaged space first since you can never get that back. I suppose I bonds are also use or lose but imo the benefits are a lot lower than reduction in taxable income or untaxed growth in a Roth IRA or 401(k). If you contribute to a Roth IRA there a lot more favorable withdrawal rules than for pretax money if you end up potentially needing the money before retirement age.
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Nov 14, 2022 19:06
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Valicious posted:I’m having a hard time deciding what to do, and I was hoping to get advice from the thread. I’m currently investing 46% of income each month, no debt and house paid off. My job is such that I can’t be laid off except if the entire Medicaid system collapses. 46% "sounds" like a lot maybe (awesome!). By the time 2023 rolls around I imagine you'll be able to max that year's IRA contribs relatively quickly? So max 401k now, probably?
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Nov 14, 2022 19:45
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Talking about finances is like taking your clothes off. It can be intimate, it can be embarrassing, you are vulnerable. The locker room after your team won a big game is an good time for it. Hopefully you like doing it with your romantic partner. If someone isn't down, don't press it. Corporations deliberately make you feel ashamed, inadequate, hopeless.
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Nov 14, 2022 21:01
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Regarding rates for high-yield savings accounts, how often can the rate for a particular account change once it's open? I'm seeing Marcus offering 3%, which would be pretty nice to lock in for cash emergency savings. And yet, I can't imagine it staying that high down the line if/when the Fed changes its current course.
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Nov 14, 2022 23:13
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As often as the bank wants, AFAK, they change it to stay competitive, not because they are forced to. For reference, Ally increased theirs at least 3 times in the past month.
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Nov 14, 2022 23:17
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Yeah, you pay a price for liquidity, and part of that price is your rate isn’t guaranteed to stick around very long. If you want to lock in a rate, you generally have to lock the money away with it (e.g. a typical CD).
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Nov 14, 2022 23:22
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Ersatz posted:Regarding rates for high-yield savings accounts, how often can the rate for a particular account change once it's open? Here is a post with w graph of Ally's history until late 2020. It sat at 0.5% until the last few months shooting up to 2.75% currently. https://www.bogleheads.org/forum/viewtopic.php?t=326261&start=50
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Nov 14, 2022 23:24
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spwrozek posted:Here is a post with w graph of Ally's history until late 2020. It sat at 0.5% until the last few months shooting up to 2.75% currently. Thanks, this is super helpful.
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Nov 14, 2022 23:31
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I've read that because of Ally's popularity, Marcus will always adjust their rates to be just barely above them.
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Nov 14, 2022 23:33
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Unsinkabear posted:I've read that because of Ally's popularity, Marcus will always adjust their rates to be just barely above them. I do not think this is borne out by data but I'm too lazy to actually try to gather it. I know at many points in time when I have checked have been the same. edit: rates generally move with changes in the FFR, logically KYOON GRIFFEY JR fucked around with this message at 23:52 on Nov 14, 2022 |
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Nov 14, 2022 23:49
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KYOON GRIFFEY JR posted:I do not think this is borne out by data but I'm too lazy to actually try to gather it. I know at many points in time when I have checked have been the same. Same. I didn't feel like verifying that either and it was delivered with confidence by the source (I want to say it was doctorofcredit's living document of top HYSA rates?), but I'm more inclined to trust you than them.
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Nov 14, 2022 23:52
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Both Discover and Citibank currently have better rates than Ally (3 vs 3,10), although Citibank does require you to keep $10.000 in the savings account if you want to avoid fees. Edit: apparently Brilliant bank has 4% rates? Never heard of them but they're FDIC insured, so who cares.
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Nov 15, 2022 00:35
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I know yield chasing for a HYSA is bad etc etc, but it's kind of annoying that my Ally account never seems to have better rates than anyone else. Marcus at least seems to be in the running?
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Nov 15, 2022 00:48
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Residency Evil posted:I know yield chasing for a HYSA is bad etc etc, but it's kind of annoying that my Ally account never seems to have better rates than anyone else. Marcus at least seems to be in the running? If your emergency fund is big enough for you to care your emergency fund is too big. It's a simple rule that easily scales in either direction of income level.
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Nov 15, 2022 01:24
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Unsinkabear posted:I've read that because of Ally's popularity, Marcus will always adjust their rates to be just barely above them. Marcus has supposedly been a money furnace for GS, so this might not last forever.
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Nov 15, 2022 02:45
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Yep I'm not losing any sleep over even a 1% difference on my HYSA, I'm just glad it's earning something rather than nothing. Most of the draw for me when I set it up was its at a different bank so it just feels untouchable vs my savings account on my regular checking account which is definitely there so I could overspend a little and be fine.
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Nov 15, 2022 06:19
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Residency Evil posted:I know yield chasing for a HYSA is bad etc etc, but it's kind of annoying that my Ally account never seems to have better rates than anyone else. Marcus at least seems to be in the running? IDK, if savings account interest didn’t matter then there’d be little point in getting a HYSA
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Nov 15, 2022 13:01
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silence_kit posted:IDK, if savings account interest didn’t matter then there’d be little point in getting a HYSA It’s all marginal utility vs marginal cost imo. To set up a new HYSA takes a little bit of time. You have to link the thing to your checking account which has some small amount of risk. You have a username and password with access to your money with a new entity. A new entity has your SSN. You receive an additional 1099-INT. Then when you want to switch again you gotta close the account down. All of this stuff is small ish potatoes and probably worth it for like 300 bps. It’s not worth it imo for 50 bps especially since there is no guarantee that a given accounts rates stay high. The HMBradley yield chasers made about 1% for a year in return for this work. Even with my very bloated single income HCOL efund that’s like 70 bucks.
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Nov 15, 2022 13:26
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Motronic posted:If your emergency fund is big enough for you to care your emergency fund is too big. It's a simple rule that easily scales in either direction of income level. We keep about 5% of our net worth in cash, but that includes the emergency fund, savings for a car, savings for a bulk student loan repayment when the pause finally ends, etc. It's money that theoretically will be used in 1-2 years, but shouldn't be invested. 
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Nov 15, 2022 17:30
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Residency Evil posted:We keep about 5% of our net worth in cash, but that includes the emergency fund, savings for a car, savings for a bulk student loan repayment when the pause finally ends, etc. It's money that theoretically will be used in 1-2 years, but shouldn't be invested. And you're going to spend this amount of mental energy + potentially more tax forms at the end of the year to make an extra $100-300 in a year with it? Surely you have better things to do with your time.
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Nov 15, 2022 17:37
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Residency Evil posted:We keep about 5% of our net worth in cash, but that includes the emergency fund, savings for a car, savings for a bulk student loan repayment when the pause finally ends, etc. It's money that theoretically will be used in 1-2 years, but shouldn't be invested. You might want to consider a portion of it in t-bills. Six month t-bills are paying a bit under 4.5%. Even one month t-bills are paing over 3.5%. You can set them to autoroll through your broker.
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Nov 15, 2022 17:41
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laxbro posted:You might want to consider a portion of it in t-bills. Six month t-bills are paying a bit under 4.5%. Even one month t-bills are paing over 3.5%. You can set them to autoroll through your broker. or just pretend drk and I waved and pointed back up at the SGOV posts
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Nov 15, 2022 18:35
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laxbro posted:You might want to consider a portion of it in t-bills. Six month t-bills are paying a bit under 4.5%. Even one month t-bills are paing over 3.5%. You can set them to autoroll through your broker. This seems like the real "maixmize your emergency fund" strategy. Keep maybe 2k on hand or whatever you are comfortable with, then set up rolling t-bills or CDs such that you have 1 month of your six month emergency fund become available every month. If you do need to tap into you just stop the rolling and you'll have the money to pay your bills. But you don't have to keep changing bank accounts.
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Nov 15, 2022 18:36
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Well, if this is money for a car in a couple years, it's not your e-fund; and I think it's fair to say that there's a distinction between genuine emergency cash, which should not be locked in illiquid investments, vs. your short to intermediate-term cash savings that you can get a few percent out of with more or less zero-risk investments with three to twelve month lockup periods.
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Nov 15, 2022 18:51
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I want to keep savings in my brokerage account so everything is at Schwab, is there any reason to use their US Treasury Money Market Fund instead of the regular Schwab Money Market one? Is it just technically safer for a smaller yield?
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Nov 16, 2022 00:26
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I know that the odds of Schwab collapsing are very low, but Money Market accounts are not FDIC insured and generally not recommended as a place to store emergency funds. Edit: also IDK if this is still true, but at least in Vanguard you used to not be able to liquidate or withdraw MM funds outside of business hours. dpkg chopra fucked around with this message at 00:38 on Nov 16, 2022 |
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Nov 16, 2022 00:35
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I posted this in the Credit Card thread since the degenerates over there are more familiar with the ins and outs of banks being dicks, but maybe someone here knows the answer. I'm about to open a Citibank account for my wife. She absolutely hates the idea of having multiple accounts in different banks, so I want to also open an Accelerate Savings account for her, which has a high interest rate. We currently live in GA but will be moving to NY in about a month. The Accelerate Savings account isn't offered in NY. Will Citi close or convert the account if (when) it detects we changed addresses?
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Nov 16, 2022 00:37
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dpkg chopra posted:Will Citi close or convert the account if (when) it detects we changed addresses? Yes.
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Nov 16, 2022 00:58
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Dang, that sucks. Thanks!
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Nov 16, 2022 01:07
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Ganon posted:I want to keep savings in my brokerage account so everything is at Schwab, is there any reason to use their US Treasury Money Market Fund instead of the regular Schwab Money Market one? Is it just technically safer for a smaller yield? SWVXX holds commercial paper (short term business debt), so the risk is higher than funds that only hold treasuries and other federal government debt. However low, I wouldnt personally take that risk with emergency funds when treasury bills pay more anyways. edit: Schwab is one of the places that can autoroll treasuries for you, which is kinda like getting a personal zero expense treasury fund made custom for you drk fucked around with this message at 01:12 on Nov 16, 2022 |
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Nov 16, 2022 01:08
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It’s generally inadvisable to make decisions off of seven day yields in funds that trade in short term paper
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Nov 16, 2022 03:15
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Ganon posted:I want to keep savings in my brokerage account so everything is at Schwab, is there any reason to use their US Treasury Money Market Fund instead of the regular Schwab Money Market one? Is it just technically safer for a smaller yield? SNSXX is state tax exempt. With that much of a spread that doesn't really matter though. Residency Evil posted:I know yield chasing for a HYSA is bad etc etc, but it's kind of annoying that my Ally account never seems to have better rates than anyone else. Marcus at least seems to be in the running? Marcus and Ally usually do new funds deposit bonuses so one of each will usually net you a couple of hundred dollars every year. I would wait until Marcus is running a promotion to open an account though. Harry fucked around with this message at 15:45 on Nov 16, 2022 |
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Nov 16, 2022 15:40
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dpkg chopra posted:I know that the odds of Schwab collapsing are very low, but Money Market accounts are not FDIC insured and generally not recommended as a place to store emergency funds. I thought MM funds were similar to HYSAs (though higher risk, but small interest and still liquid) used as tools to store funds to earn a little interest before you invest it in something.
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Nov 16, 2022 20:55
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CmdrRiker posted:I thought MM funds were similar to HYSAs (though higher risk, but small interest and still liquid) used as tools to store funds to earn a little interest before you invest it in something. They aren’t FDIC insured and they are somewhat less liquid in that you have to sell and transfer to a bank account.
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Nov 16, 2022 21:10
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KYOON GRIFFEY JR posted:they are somewhat less liquid in that you have to sell and transfer to a bank account. You can write checks on (at least) the Vanguard settlement money market fund in your brokerage account.
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Nov 16, 2022 21:13
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