interest at the bank

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Calhoon
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interest at the bank

Post by Calhoon » Thu Sep 26, 2013 6:30 am

Know this must've come up at some point but a search wasn't pulling up anything.

What're you guys doing with money that isn't going into your retirement account or needed for an emergency fund? I'm feeling foolish every time I open my bank statement and see what they're paying me for interest. Is there anywhere, perhaps on-line, that people have found that's paying at least a little bit of interest?

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nisiprius
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Re: interest at the bank

Post by nisiprius » Thu Sep 26, 2013 6:37 am

Not really. Unless you find it exciting that my online bank is paying me 0.75% instead of my brick-and-mortar bank's 0.35%.

I would say series I savings bonds, although you can't redeem them for a year. They pay inflation plus 0%, i.e. inflation, period. But these days that isn't bad.
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mike143
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Re: interest at the bank

Post by mike143 » Thu Sep 26, 2013 7:05 am

All excess funds go into brokerage, right before Roth IRA deadline max Roth monies get transferred, already maxing 401k. I figured I could be up to debt to my eyeballs so I play it a little risky. The only savings accounts I maintain are the minimum required to have a account, usually $5. I always get excited when it grows to $5.01. I use to transfer the $0.01 to checking but I let it ride now.
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jackpistachio
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Re: interest at the bank

Post by jackpistachio » Thu Sep 26, 2013 7:11 am

mike143 wrote: ... right before Roth IRA deadline max Roth monies get transferred, ...
Why do you wait until right before the Roth IRA deadline? If you have the funds, why don't you contribute as soon as possible?
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mike143
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Re: interest at the bank

Post by mike143 » Thu Sep 26, 2013 7:26 am

jackpistachio wrote:
mike143 wrote: ... right before Roth IRA deadline max Roth monies get transferred, ...
Why do you wait until right before the Roth IRA deadline? If you have the funds, why don't you contribute as soon as possible?
I use my Roth as an emergency fund. If I put the monies in as soon as possible and later needed to take it out, in the same year, then I will not get to contribute for that year. I have more flexibility by waiting. Currently and in the foreseeable years we will be in the 15% tax bracket to realized 0% long term capital gains. I seen no negatives from this arrangement, correct me if I am wrong.
Nothing is free, someone pays...You can't spend your way to financial freedom.

camaro327
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Re: interest at the bank

Post by camaro327 » Thu Sep 26, 2013 7:38 am

nisiprius wrote:I would say series I savings bonds, although you can't redeem them for a year. They pay inflation plus 0%, i.e. inflation, period. But these days that isn't bad.
+1 for this. Tax deferred, exempt from state taxes, and keeps up with "CPI" inflation numbers. Nice for a savings account.

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Re: interest at the bank

Post by Grt2bOutdoors » Thu Sep 26, 2013 7:46 am

Paying down debt whose rate of interest far exceeds that of what is received at the bank.
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jackpistachio
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Re: interest at the bank

Post by jackpistachio » Thu Sep 26, 2013 8:02 am

mike143 wrote:
jackpistachio wrote:
mike143 wrote: ... right before Roth IRA deadline max Roth monies get transferred, ...
Why do you wait until right before the Roth IRA deadline? If you have the funds, why don't you contribute as soon as possible?
I use my Roth as an emergency fund. If I put the monies in as soon as possible and later needed to take it out, in the same year, then I will not get to contribute for that year. I have more flexibility by waiting. Currently and in the foreseeable years we will be in the 15% tax bracket to realized 0% long term capital gains. I seen no negatives from this arrangement, correct me if I am wrong.
That makes sense for your situation as you described. I wanted to check I wasn't missing something. Don't think I am, as I do backdoor Roths, am in a higher tax bracket, and don't use Roth for emergency funds.

To the OP, my income is > expenses and emergency tiers are always funded. Surplus funds are invested according to the timeframe I expect to use them. For me right now, that's all pretty much > 10 years out so its all part of my retirement allocation. If I had anything I expected to need sooner and it wasn't part of my emergency fund, I'd look into matching the liability of that expense with something of similar duration. Less than 1-yr I'd just use online savings. Last I checked these are somewhere between 0.75% and 1.00%. Greater than 1 yr would be I-bonds or CDs or a int treas bond at the duration I'd need the funds... whichever risk-free option is providing the best after tax yield at the moment (I'm ignoring what's going on with the FY13 end and debt ceiling in calling treas bonds risk free). I-bonds you get inflation protection, fed tax deferral, and no state tax. Lots of threads comparing I-Bonds with CDs with Bond funds.
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Re: interest at the bank

Post by grabiner » Thu Sep 26, 2013 8:04 am

I accumulate money in the bank, because my paycheck is more than my regular expenses. Once I have accumulated enough that the investment would be non-trivial, and I don't have short-term plans for spending the money (for example, saving for a car), I transfer it to my investment account to buy a mutual fund or ETF.
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Re: interest at the bank

Post by YDNAL » Thu Sep 26, 2013 9:52 am

Calhoon wrote:What're you guys doing with money that isn't going into your retirement account or needed for an emergency fund? I'm feeling foolish every time I open my bank statement and see what they're paying me for interest. Is there anywhere, perhaps on-line, that people have found that's paying at least a little bit of interest?
It depends what this money is for. For instance, you may feel more 'foolish' if you take added risk for marginal added return, and don't have the money available when you needed (whatever that need is).
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nordlead
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Re: interest at the bank

Post by nordlead » Thu Sep 26, 2013 9:53 am

I have a budget that leaves $0 left for the month. All of my money is either going towards a savings goal, or going towards expenses. If I spend less, I just throw it in my bank account, if I spend more, it comes out of my bank account. I have savings goals for home improvement, a new car, vacation, and so forth.

If I couldn't find anything useful to save for (403(b) and Roth IRA maxed out, and mortgage paid off), I'd throw it in a taxable account and invest it for when I did find something to spend it on. I doubt I'll ever have that problem though.

manwithnoname
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Re: interest at the bank

Post by manwithnoname » Thu Sep 26, 2013 12:08 pm

Calhoon wrote:Know this must've come up at some point but a search wasn't pulling up anything.

What're you guys doing with money that isn't going into your retirement account or needed for an emergency fund? I'm feeling foolish every time I open my bank statement and see what they're paying me for interest. Is there anywhere, perhaps on-line, that people have found that's paying at least a little bit of interest?
I dont have an emergency fund because my cash flow exceeds my expenses. In unlikely event I need emergency $ I can take it out tax free from my Roth. Extra cash is invested in investment opportunities to increase my returns.

Yossarian
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Re: interest at the bank

Post by Yossarian » Thu Sep 26, 2013 2:56 pm

The best I can find is 0.9% interest w/online savings. You can get higher for certain reward checking accounts, 3% up to 20k balance, but it requires a lot of work--required minimum number of debit transactions per month, direct deposit, etc.

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Meg77
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Re: interest at the bank

Post by Meg77 » Thu Sep 26, 2013 3:12 pm

Yossarian wrote:The best I can find is 0.9% interest w/online savings. You can get higher for certain reward checking accounts, 3% up to 20k balance, but it requires a lot of work--required minimum number of debit transactions per month, direct deposit, etc.
+1

I went through the trouble to get two of these reward checking accounts. You have to use online banking, set up automatic payroll deposits, and use the debit card X times per month. I think it's 8 times for one and 12 times for the other. LegacyTexasBank pays 2% on deposits up to $25K, and Prosperity Bank pays 1.25% up to $25K. That's all the EF I need, plus it's nice because I don't have to have a savings account in addition to my checking or worry about moving money back and forth. As soon as I buy a home I won't need the Prosperity account anymore since my cash will be under $25K and I plan to close it. For what it's worth both also offer free ATMs and free checks and have good customer service. I'm sure there are other banks like this. Though from a practical standpoint you could earn close to the same amount by going with one of the big bank's promotions; I get cards in the mail now and then advertising $100-$300 for opening up a Chase account (these usually have many of the same requirements as listed above).
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Khanmots
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Re: interest at the bank

Post by Khanmots » Thu Sep 26, 2013 3:40 pm

Calhoon wrote:Know this must've come up at some point but a search wasn't pulling up anything.

What're you guys doing with money that isn't going into your retirement account or needed for an emergency fund? I'm feeling foolish every time I open my bank statement and see what they're paying me for interest. Is there anywhere, perhaps on-line, that people have found that's paying at least a little bit of interest?
I may be reading too much into your question, but you seem to be conflating account purpose with tax-advantaged restrictions... A checking account can be a retirement account if you treat it as such.

So... if you have more money than you need for your emergency fund, day-to-day expense fund, and upcoming big expenses fund... then maybe you should treat it as retirement fund. Weather that money is in a checking account, you transfer it to an investment account, or you pay down debt... it's funds meant for retirement.
grabiner wrote:I accumulate money in the bank, because my paycheck is more than my regular expenses. Once I have accumulated enough that the investment would be non-trivial, and I don't have short-term plans for spending the money (for example, saving for a car), I transfer it to my investment account to buy a mutual fund or ETF.
This is what I do. Funds in my checking account accumulate over time.. and I treat the excess as retirement funds even if it's not in a "retirement account". I'll then periodically transfer money to a regular old investment account at vanguard.

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Re: interest at the bank

Post by jdb » Thu Sep 26, 2013 6:46 pm

Might as well accept the reality of today's low interest, almost no interest environment, as to cash allocation of portfolio. It is not a meaningful place to earn a return. Any after tax yield you can scrape up from short term deposits probably less than inflation rate as small as that is. But it is an important allocation both for buying and saving needs as well as a safe haven in event of downturn in stocks and/or bonds and to keep powder dry for next investment opportunity. But probably waste of time scrambling to get meaningful yield on cash allocation in portfolio.

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Re: interest at the bank

Post by nisiprius » Thu Sep 26, 2013 7:24 pm

Meg77 wrote:
Yossarian wrote:...You can get higher for certain reward checking accounts, 3% up to 20k balance, but it requires a lot of work--required minimum number of debit transactions per month, direct deposit, etc.
I was able to reorganize my financial life to take advantage of that without too much work. It helps that I do 2/3 of our grocery shopping on foot, partly as an exercise motivator, so do twenty-odd POS swipes a month without even trying. But I just closed the account. When I opened it a few years ago, it paid 3.51% on the first $25,000 in the account, i.e. $877/year. The interest is now down to 1.25% but they just dropped the parameters so that it is only paid on the first $10,000, i.e. $125/year. For various reasons we want to simplify; $877/year seemed worth a little complexity, $125 doesn't.

The deal did work exactly as I expected, not like one of those carnival games that looks easy but isn't. I actually qualified for the high rate every month we had the account, for, how long, three or four years.

(We also got an account-opening gift, something I haven't seen since the 1970s: a three-piece Corningware microwave-to-table set with three lids none of which fit the ramekin-things properly. Have to wonder if it was seconds...)

There may be better deals if you shop nationally...
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tuckeverlasting
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Re: interest at the bank

Post by tuckeverlasting » Fri Sep 27, 2013 2:40 pm

nisiprius wrote:
Meg77 wrote:
Yossarian wrote:...You can get higher for certain reward checking accounts, 3% up to 20k balance, but it requires a lot of work--required minimum number of debit transactions per month, direct deposit, etc.
I was able to reorganize my financial life to take advantage of that without too much work. It helps that I do 2/3 of our grocery shopping on foot, partly as an exercise motivator, so do twenty-odd POS swipes a month without even trying. But I just closed the account. When I opened it a few years ago, it paid 3.51% on the first $25,000 in the account, i.e. $877/year. The interest is now down to 1.25% but they just dropped the parameters so that it is only paid on the first $10,000, i.e. $125/year. For various reasons we want to simplify; $877/year seemed worth a little complexity, $125 doesn't.

The deal did work exactly as I expected, not like one of those carnival games that looks easy but isn't. I actually qualified for the high rate every month we had the account, for, how long, three or four years.

(We also got an account-opening gift, something I haven't seen since the 1970s: a three-piece Corningware microwave-to-table set with three lids none of which fit the ramekin-things properly. Have to wonder if it was seconds...)

There may be better deals if you shop nationally...
This strategy is working great for me. I found 2 rewards checking accounts at local credit unions by searching at http://www.depositaccounts.com/

One is 2.25% on the first $15,000 (down from 2.5% on $20,000 when I joined awhile back), plus a little on the amount over $15k--the other is 3% on the first $20k. For using my debit cards a total of 24 times a month I get over $80 a month in interest--well worth it to me. I also like banking locally. I don't even buy that much stuff, mostly food, every month, but find it easy to do things like ask to ring up a few items separately each time I am in the store, etc. (2 separate transactions, thus 2 card uses--of course if the checker is very busy or a long line behind me I do not do this).

I have even thought about opening a third rewards checking account. :greedy One thing to consider, though, is the institutions can change the terms and rewards anytime, but so far this is working out for my EF.
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Kevin M
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Re: interest at the bank

Post by Kevin M » Fri Sep 27, 2013 3:58 pm

You are asking two completely different questions:
Calhoon wrote: What're you guys doing with money that isn't going into your retirement account or needed for an emergency fund?
I consider it part of my portfolio. It is in a variety of assets (stock funds, bond funds, CDs, cash).
Calhoon wrote: Is there anywhere, perhaps on-line, that people have found that's paying at least a little bit of interest?
Yes, a good source for info different types of deposit accounts is http://www.depositaccounts.com (DA).

Reward checking accounts pay the highest interest on a limited amount. I am currently earning 3% on up to $20K. As others have said, balance caps and interest rates change, so you may have to switch now and then. That is more of a hassle to me than meeting the monthly requirements. This is my third RCA.

You can earn between 0.8% and 1% in an online savings account. See DA to find them.

An Ally 5-year CD earns about 1.5%, but the early withdrawal penalty (EWP) is only 60 days of interest, so that's about 1.25% if you withdraw after one year. You can earn about 2% on a 5-year CD with a higher EWP (180 days of interest), which is better if you don't withdraw the money for at least two years or so.

I Bonds are good for a 0% real return, so your return will depend on inflation. Current rate is 1.18%. You can buy $10K for yourself, for your spouse, and for your living trust if you have one, so $30K per year for a couple with a living trust.

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Calhoon
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Re: interest at the bank

Post by Calhoon » Sat Sep 28, 2013 8:00 am

Thanks for the information everyone.

One thing I realize from the responses is I'm going to have to think about the purpose of this money and maybe rethink my financial plans going. In the past any bank account money was funneled into my 401k/IRA accounts, my kids 529 accounts, then anything left over was used to whittle down my mortgage. Paid off the mortgage, the kid's 529 accounts each have four years worth of tuition for a state school saved, and this year I reduced my 401 contributions from max to 15 percent. Recently, I ran a bunch of online calculator and according to these my standard of living will be much higher in retirement will be much higher in retirement than currently (especially when you consider I won’t be saving for retirement anymore). This doesn’t make sense to me at all, hence the pullback. Hadn’t put any thought into the fact that with expenses suddenly dropping on multiple fronts the bank account had been racking up the way it is. Never considered what I’m going to do with this money. What is its purpose.

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