Where to Invest Emergency Fund and Money that's in ING?

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Where to Invest Emergency Fund and Money that's in ING?

Postby TVKNSC » Fri Feb 01, 2013 1:21 pm

First-time poster and very excited about this forum! Here's a quick background on my situation:

I already have over $40, 000 in the Vanguard 2040 (Roth-IRA), along with $60,000 in the Vanguard Wellington (admiral). I have roughly $15,000 (emergency fund) in ING that I would like to move to a very liquid, conservative investment. Obviously ING isnt doing that well. Is a bond fund a good option due to its' level of aggression?

I also have another $20,000 some-odd dollars that I'd like to invest that's also in ING. I have already maxed out my roth contribution, so this money would need to go into a non-retirement fund. I was looking at the Wellesley, Bond fund, or Wellington as options. I like 60/bond-40/stock split with the Wellesley and I dont know how the rates would impact a bond fund investment. Should I just lump this money into my current Wellington account? I am sure there will be some over-lapping with 2040, Wellington, and Wellesley, which is somewhat of a concern.

Another dilemma of mine is weather to pull-out of TSP 2040 fund and reinvest the money into my Vanguard IRA or non-retirement investment? I want to say I have about $4,000 in my TSP. I am active National Guardsman that contributes 4% of my basic pay each month. My issue is, they dont match my contribution and it really doesnt bring my taxable income down that much. I just sense I can do better elsewhere.

I really apprecaite any advice or guidance. I am somewhat new to investing and I will try to soak in as much as possible. :sharebeer
Last edited by TVKNSC on Fri Feb 01, 2013 2:49 pm, edited 1 time in total.
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Re: Where to Invest Emergency Fund and Money that's in ING?

Postby feh » Fri Feb 01, 2013 2:35 pm

TVKNSC wrote:I have $15,000 (emergency fund) in ING that I would like to move to a very liquid, conservative investment. Obviously ING isnt doing that well. Is a bond fund a good option due to its' level of aggression?


Your emergency fund should be in cash. Or possibly a CD. It shouldn't be in an investment that can lose money, which could put you in a position where you have to sell low.
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Re: Where to Invest Emergency Fund and Money that's in ING?

Postby Xanadu » Fri Feb 01, 2013 2:38 pm

You should look into I-bonds
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Re: Where to Invest Emergency Fund and Money that's in ING?

Postby FinancialDave » Fri Feb 01, 2013 3:19 pm

You didn't say how much you have in the TSP plan, but IMHO you need about as much money in your tax deferred TSP has you have in your Roth.

I would invest new money in the TSP into the C fund, which is the large-cap fund -- this will essentially be like using a longer dated target fund, which would lower your bond exposure somewhat -- depending of course if your "risk profile" can take it.

As far as emergency fund I would NOT "invest" it. That is not the purpose of it. There are other saving type accounts that can earn 1%, but it is not really about the small returns, it is about the protection.

Depending on your age and income you need to be doing at least 15% of your salary into retirement.

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Re: Where to Invest Emergency Fund and Money that's in ING?

Postby wilked » Fri Feb 01, 2013 3:21 pm

I keep my emergency fund in ING

I recommend you leave it alone...
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Re: Where to Invest Emergency Fund and Money that's in ING?

Postby linuxuser » Fri Feb 01, 2013 3:25 pm

FinancialDave wrote:As far as emergency fund I would NOT "invest" it. That is not the purpose of it.

+1

About the best rate you can get for emergency fund money is 1%.
You don't want to be selling something at a loss just because an emergency came up and you needed the money immediately.
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Re: Where to Invest Emergency Fund and Money that's in ING?

Postby Niko » Fri Feb 01, 2013 3:31 pm

Agree with others on keeping your 20K emergency fund in ING. No need to play with safe money.

And on the TSP, don't touch that. No institution -- including the thriftiest in Vanguard -- can match the low expenses of the funds in the TSP. It also offers you access to the G fund, which is a sort of hybrid fund that really isn't replicated precisely anywhere on the open market.
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Re: Where to Invest Emergency Fund and Money that's in ING?

Postby TVKNSC » Fri Feb 01, 2013 3:37 pm

Much apprecaited and good copy on keeping the emergency fund in ING. I have around $5,000 in my TSP, but like I said, the non-matching and little amount I put in makes me wonder if I am wasting my time.
Financial Dave = why are you so big into the TSP? I understand the tax-deferred piece, but I am failing to see the big advantages with it. I am somewhat happy with TSP in the 2040 fund, so maybe I dont want to pursue other options.

After further research, any opinions about possible moving the $20,000 in ING into a combination of the following:

Wellesley or Lifstyle Moderate Growth
Vanguard Total Stock Market Index Fund
Vanguard Total International Stock Index Fund
Vanguard Total Bond Market Fund

I am probably coming across as a newbie, but I really am doing research to see if I would be getting involved in too many funds or not. I would prefer one fund if it hit all the key areas. Keep in mind my $15,000 emergency fund is separate from the other $20,000 that I am looking to invest.
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Re: Where to Invest Emergency Fund and Money that's in ING?

Postby FinancialDave » Fri Feb 01, 2013 4:05 pm

TVKNSC wrote:Much apprecaited and good copy on keeping the emergency fund in ING. I have around $5,000 in my TSP, but like I said, the non-matching and little amount I put in makes me wonder if I am wasting my time.
Financial Dave = why are you so big into the TSP? I understand the tax-deferred piece, but I am failing to see the big advantages with it. I am somewhat happy with TSP in the 2040 fund, so maybe I dont want to pursue other options.

After further research, any opinions about possible moving the $20,000 in ING into a combination of the following:

Wellesley or Lifstyle Moderate Growth
Vanguard Total Stock Market Index Fund
Vanguard Total International Stock Index Fund
Vanguard Total Bond Market Fund

I am probably coming across as a newbie, but I really am doing research to see if I would be getting involved in too many funds or not. I would prefer one fund if it hit all the key areas. Keep in mind my $15,000 emergency fund is separate from the other $20,000 that I am looking to invest.


As was said above the TSP expenses are the LOWEST anywhere (Vanguard included), so maxing out the TSP is your better play, as far as index investing goes. Which funds you use in the TSP is totally up to you, the expense ratios are all about .025%. I personally just perceive stocks as doing better long term, so if you are going to leave the money in there for 20-30 years, more C or S fund will probably get you a better return -- IMHO.

Once again as many others have said to try to "earn" a return on your emergency fund -- if you want to ladder some of it into I-bonds slowly that is ok, because they are "principal protected" everything else is NOT.

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Re: Where to Invest Emergency Fund and Money that's in ING?

Postby FinancialDave » Fri Feb 01, 2013 4:11 pm

As far as Roth vs TSP allocation, there is no difference assuming the same tax rates in (now,) as out (later,) which is really all the prudent investor should do. HOWEVER, when you have both type of funds of sufficient allocation you can essentially "pick" your in retirement tax bracket -- and when you do make it lower, all those TSP tax deferred funds come out at a very low tax rate making them quite valuable, if you follow the logic (they went in at no tax and come out almost the same.)

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Re: Where to Invest Emergency Fund and Money that's in ING?

Postby TVKNSC » Fri Feb 01, 2013 4:16 pm

FD,
I sincerely appreciate the input. It actually makes sense. Over the years I havent devoted enough time and effort into learning more about investing, but I hope I am young enough (mid-thirties) where I can change that. The results of my current investments have been good,if not great, but I am working on getting a better grasp of the "big picture."
“There seems to be some perverse human characteristic that likes to make easy things difficult. ” ― Warren Buffett
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Re: Where to Invest Emergency Fund and Money that's in ING?

Postby nydad » Sat Feb 02, 2013 11:40 am

I'd recommend reading the bogleheads guide to
Investing, and then the book all about asset allocation
By Rick ferri. That will help you decide on an asset
Allocation in line with your goals - then
You can sort out the proper funds...
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Re: Where to Invest Emergency Fund and Money that's in ING?

Postby Dandy » Sat Feb 02, 2013 12:00 pm

ING has had its day. I used it briefly but other competitors are providing great service and better rates. Ally and Discover bank and Pen Fed Credit Union to name a few. They would be good choices for your emergency fund. Of course the key for an emergency fund is that it is safe and liquid -- but why leave $ on the table when there are better choices.
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Re: Where to Invest Emergency Fund and Money that's in ING?

Postby crowd79 » Sat Feb 02, 2013 12:06 pm

Barclays now has the highest savings account rate at 1.00%. Seems even more stable than Ally Bank, which lowered rates from .95% to .90% just a week ago. Since Barclays is England-based and their online savings is new in the U.S., I suspect they're still trying to attract depositors.
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Re: Where to Invest Emergency Fund and Money that's in ING?

Postby FinancialDave » Sun Feb 03, 2013 2:09 am

For $15k or more you can earn 1.05% at GE interest Plus, which I have used for about 15 years. It's not FDIC insured but I have used it for 15+ years and it has always tracked near the highest going rates. You can easily link it to your checking account just like your ING account.
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Re: Where to Invest Emergency Fund and Money that's in ING?

Postby DonDraper » Sun Feb 03, 2013 9:24 am

Dandy wrote:ING has had its day. I used it briefly but other competitors are providing great service and better rates. Ally and Discover bank and Pen Fed Credit Union to name a few. They would be good choices for your emergency fund. Of course the key for an emergency fund is that it is safe and liquid -- but why leave $ on the table when there are better choices.


Well switching a $25K balance from ING at .0075 to a bank paying 1% will give you a whopping $62.50 a year additional interest. After taxes you are looking at 40 bucks a year. It's questionable whether that's worth your time or effort. If you want to play those games, you would get more bang for your buck chasing the credit card sign up bonuses. I once got $500 in gift cards(tax free) for signing up for a Citi Card.
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Re: Where to Invest Emergency Fund and Money that's in ING?

Postby Aptenodytes » Sun Feb 03, 2013 9:33 am

You are mixing up different things. As to where to keep your emergency fund, cash equivalent and I Bonds are recommended. You are also asking about gaining control of your taxable retirement accounts - - what you call non-retirement accounts. There's no way to give advice on that without getting your big picture in the usual format. And you need to be more clear about the purpose of these accounts - retirement, house down payment, college tuition, whatever. I'm assuming it is retirement but that may not be right, so tell us.
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Re: Where to Invest Emergency Fund and Money that's in ING?

Postby TVKNSC » Mon Feb 04, 2013 10:07 am

L&G,
This will help in getting a clearer picture of my situation:

Emergency funds: Yes. 6 months worth
Debt: school loan = $12,000 (2.9%), school loan = $10,000 (6.8%), car loan = $17,000 (1.9%). I am looking to pay off the loan at 6.8%. , and 30-year mortgage = $250,000 (3.4%)
Tax Filing Status: Married Filing Jointly
Tax Rate: 28%
State of Residence: SC
Age: 35
Desired Asset allocation: 70% stocks / 30% bonds
Desired International allocation: 30% of stocks
Portfolio size = low six-figures (IVO $200,000)

Current retirement assets

His 401k at TSP = 2.5%
$5,000 in L Fund-2040 (0.025%). I contribute about $1,600 per year in traditional IRA or 4% per month. I can switch to Roth TSP as it's now an option.
Company match? NO

His Roth IRA at Vanguard = 20%
$40,000 in VG 2040 (0.18%) 62% total stock market / 27 % in international stock index/10% in total bond market

Her Roth IRA at Vanguard = 30%
$60,000 at VG 2040 (0.18%) 62% total stock market / 27 % in international stock index/10% in total bond market

VG Wellington (admiral) = 30%
$60,000 (0.19%)
65% stocks/ 35% bonds-short-term reserves

$15,000 emergency fund and $20,000 to invest = 17.5% of assets

Contributions

New annual Contributions
$5,500 his Roth IRA
$5,500 her Roth IRA

Available funds

After emergency fund, I have roughly $15,000 that I need to invest in a non-retirement account (taxable).

Questions:
1. Based on above, where do I invest the $15,000? I was looking at VG Wellesley or the LifeCycle Growth Fund ( I am drawn to the "three-fund portfolio" which the 2040 follows, but I can only deposit $5,500 into my ROTH VG 2040 ).

2. How focused should I be on paying off those loans? My real concern is the school loan at near %7. I am looking at paying that off in-full this week! The other school loan and car loan have reasonable rates, but I still want to chip-away at those.

3. Would you switch from the traditional TSP to Roth TSP and increase the monthly allotment to TSP? I read about the pros/cons of each TSP, but I sort of like having tax-free money when I eventually withdraw. The TSP has the lowest expense ratios around, so increasing my allotment is something I am considering. I can max that out at $17,500 a year.

4. My goal with these non-retirement funds is long-term growth towards retirement. Am I on the right track with the right asset allocations, rate of saving, and level of aggression?

5. We're going to have about $3,000 a month to contribute to a taxable account, so is the right move to put it into the Wellington or another fund I dont have opened yet? Any advantage to ETFs vs other type of fund?
Last edited by TVKNSC on Mon Feb 04, 2013 11:05 am, edited 2 times in total.
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Re: Where to Invest Emergency Fund and Money that's in ING?

Postby ProfessorX » Mon Feb 04, 2013 10:52 am

ING no longer exists, even in name. If you go to their log-in page, it is now Capital One 360 (ugh).

I just transferred the last of my cash out of their system. My savings account is now at Ally Bank. (I get an extra .2% from Ally. But better than that Ally seems to currently be committed to maintaining some of the most competitive rates, and ING is no longer in that category.)
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Re: Where to Invest Emergency Fund and Money that's in ING?

Postby TVKNSC » Mon Feb 04, 2013 12:51 pm

is it okay to bump this towards the top? I am new to the forum and it gets a lot of activity.
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Re: Where to Invest Emergency Fund and Money that's in ING?

Postby bUU » Mon Feb 04, 2013 1:09 pm

I haven't seen a significant-enough change in ING/CapitalOne 360 to prompt me to make the move to Ally Bank yet.
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Re: Where to Invest Emergency Fund and Money that's in ING?

Postby wilked » Tue Feb 05, 2013 12:20 pm

TVKNSC wrote:L&G,
This will help in getting a clearer picture of my situation:

Emergency funds: Yes. 6 months worth
Debt: school loan = $12,000 (2.9%), school loan = $10,000 (6.8%), car loan = $17,000 (1.9%). I am looking to pay off the loan at 6.8%. ,
.
.
.
Questions:
1. Based on above, where do I invest the $15,000?

I think that I found a match! Gauranteed 6.8% return on the first $10,000, and 2.9% return on the $5000. Not going to find better than that right now...
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Re: Where to Invest Emergency Fund and Money that's in ING?

Postby TVKNSC » Tue Feb 05, 2013 1:02 pm

WILKED,
I am on-board with you. We are actually paying off the 6.8%er in-full this week and the rest if going towards my school loan. I hope to have mine paid off by July. I actually just revised my TSP and now I am putting in $1,000 a month into a ROTH 2040 TSP. I know I can max out at $17,500, but I didnt feel comfortable taking that much out of my income. I may increase at a later date, but that is what I am currently comfortable with.

Even if I max out my TSP and both our ROTH IRAs each year, we still have about $10,000 per year that will need to go into a non-retirement account. Should I just stick with the Wellington for that? I dont want to overlap other accounts or pay unnecessary fees.

I appreciate all the feedback i've gotten!
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Re: Where to Invest Emergency Fund and Money that's in ING?

Postby FinancialDave » Tue Feb 05, 2013 2:32 pm

TVKNSC wrote:
Even if I max out my TSP and both our ROTH IRAs each year, we still have about $10,000 per year that will need to go into a non-retirement account. Should I just stick with the Wellington for that? I dont want to overlap other accounts or pay unnecessary fees.

I appreciate all the feedback i've gotten!


$10,000 would be a nice amount to start an I-Bond ladder.

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