VMMXX as cash

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rondebbs
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VMMXX as cash

Post by rondebbs » Tue May 07, 2019 2:37 pm

I have an IRA and Taxable brokerage accounts. I've been using VMMXX for the last year to kind of park cash while looking for opportunities to buy equities (like today). Much of my IRA is still in VMMXX as I had to liquidate my 401k and then rollover the cash to my IRA. For the year I have owned VMMXX is seems to be up 2.5% so it has worked well for a cash type investment. I'm not familiar with this type of MM fund. Is there something that could happen to cause a big change IE to go from 2.5% to 0%? Could it go negative? I'm guessing it has to be related to interest rates etc. but I just don't know the mechanics. Or can I just kind of count on 2%-2.5% indefinitely?

Also VMMXX is a mutual fund which means when I sell some today I have to wait one more day for settlement so I can now by equities. Is there an ETF similar to VMMXX where I would not have to deal with the lost day for settlement?

livesoft
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Re: VMMXX as cash

Post by livesoft » Tue May 07, 2019 2:51 pm

VMMXX will not go down, but it doesn't have to go up.

You cannot count on any additional 2% to 2.5% indefinitely, but I think you are good to count on something for a few months.
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stocknoob4111
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Re: VMMXX as cash

Post by stocknoob4111 » Tue May 07, 2019 2:53 pm

the NAV stays at $1.. 2.5% is the yield and that fluctuates with interest rate trends.

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rondebbs
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Re: VMMXX as cash

Post by rondebbs » Tue May 07, 2019 3:00 pm

So would rising interest rates be bad for vmmxx? For example if interest rates go up would the vmmxx yield go down? What if interest rates go down?

bikechuck
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Re: VMMXX as cash

Post by bikechuck » Tue May 07, 2019 3:03 pm

What is VMMXX for the many of us that have not memorized these symbols? I know that I can Google it but why not take the few extra seconds to type the fund name and save hundreds of people from looking it up?

rasta
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Re: VMMXX as cash

Post by rasta » Tue May 07, 2019 3:03 pm

vmmxx yield will slightly lag short-term rate movements
Last edited by rasta on Wed May 08, 2019 2:57 pm, edited 1 time in total.

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greg24
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Re: VMMXX as cash

Post by greg24 » Tue May 07, 2019 3:38 pm

rondebbs wrote:
Tue May 07, 2019 3:00 pm
So would rising interest rates be bad for vmmxx? For example if interest rates go up would the vmmxx yield go down? What if interest rates go down?
If interest rates go up, VMMXX yield will trend up. The yield does NOT move inversely, that is how bond funds behave, not money markets.

If interest rates go down, VMMXX yield will trend down.

VMMXX is a great fund. Usually near the top in yield. We use it.

AerialP
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Re: VMMXX as cash

Post by AerialP » Tue May 07, 2019 3:48 pm

I consider the Vanguard Prime Money Market Fund (VMMXX) to be cash. I parse my asset allocation into three categories: equities, bonds, and cash. This fund is very liquid to me within a day or two and has checkwriting capability so it greatly satisfies me as ready cash in my taxable portfolio. I also use it within both my Trad & Roth IRAs to receive the dividends/interest from their other holdings and then transfer from it to help achieve my yearly rebalancing goals (aka settlement fund).

smectym
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Re: VMMXX as cash

Post by smectym » Tue May 07, 2019 4:05 pm

VMMXX is a great fund and extremely safe. I prefer VUSXX as theoretically even safer. One of those “doesn’t matter till it matters” things, but as to money market funds, between “very safe” and “even safer,” I choose the latter—despite the yield differential.

https://personal.vanguard.com/pdf/VGMMR.pdf

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RickBoglehead
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Re: VMMXX as cash

Post by RickBoglehead » Tue May 07, 2019 4:37 pm

livesoft wrote:
Tue May 07, 2019 2:51 pm
VMMXX will not go down, but it doesn't have to go up.

You cannot count on any additional 2% to 2.5% indefinitely, but I think you are good to count on something for a few months.
Sure it can go down...
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Re: VMMXX as cash

Post by ruralavalon » Tue May 07, 2019 5:19 pm

rondebbs wrote:
Tue May 07, 2019 2:37 pm
I have an IRA and Taxable brokerage accounts. I've been using VMMXX for the last year to kind of park cash while looking for opportunities to buy equities (like today). Much of my IRA is still in VMMXX as I had to liquidate my 401k and then rollover the cash to my IRA. For the year I have owned VMMXX is seems to be up 2.5% so it has worked well for a cash type investment. I'm not familiar with this type of MM fund. Is there something that could happen to cause a big change IE to go from 2.5% to 0%? Could it go negative? I'm guessing it has to be related to interest rates etc. but I just don't know the mechanics. Or can I just kind of count on 2%-2.5% indefinitely?
No. You cannot count on the fund yield staying in that range indefinitely.

Vanguard Prime Money Market Fund (VMMXX) current SEC Yield = 2.44%, current compound yield = 2.47%, is an excellent fund. Treat it as the equivalent of cash. The fund won't go negative, it will stay at $1 per share, it will continue to give a yield but the amount of yield will depend on interest rates.

Cash is not an really an "investment", if inflation is 2% then you get almost no real return. Why have you held this for a year?

You could have invested and can still invest in diversified, low expense stock or bond funds, which at least have the prospect of better real returns.

rondebbs wrote:
Tue May 07, 2019 2:37 pm
Also VMMXX is a mutual fund which means when I sell some today I have to wait one more day for settlement so I can now by equities. Is there an ETF similar to VMMXX where I would not have to deal with the lost day for settlement?
What is the rush? After waiting a year to invest this cash another day means nothing.

rondebbs wrote:
Tue May 07, 2019 3:00 pm
So would rising interest rates be bad for vmmxx? For example if interest rates go up would the vmmxx yield go down? What if interest rates go down?
If interest rates go up then the yield of Vanguard Prime Money Market Fund (VMMXX) will go up.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

livesoft
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Re: VMMXX as cash

Post by livesoft » Tue May 07, 2019 5:40 pm

RickBoglehead wrote:
Tue May 07, 2019 4:37 pm
livesoft wrote:
Tue May 07, 2019 2:51 pm
VMMXX will not go down, but it doesn't have to go up.

You cannot count on any additional 2% to 2.5% indefinitely, but I think you are good to count on something for a few months.
Sure it can go down...
It is very very unlikely that the NAV will go below $1.00 bordering on the impossible.
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jdb
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Re: VMMXX as cash

Post by jdb » Tue May 07, 2019 6:09 pm

Vanguard has three great money market funds. VMMXX, as referenced here, VMSXX, the muni market MMF great for those of us paying Uncle Sam more than 30 percent, and VUSXX, the Treasury MMF safest of all, albeit with $50K minimum. I am a little embarrassed that use all three though like each for different reasons. But you can’t go wrong with any of them. Good luck

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Re: VMMXX as cash

Post by RickBoglehead » Tue May 07, 2019 6:11 pm

jdb wrote:
Tue May 07, 2019 6:09 pm
Vanguard has three great money market funds. VMMXX, as referenced here, VMSXX, the muni market MMF great for those of us paying Uncle Sam more than 30 percent, and VUSXX, the Treasury MMF safest of all, albeit with $50K minimum. I am a little embarrassed that use all three though like each for different reasons. But you can’t go wrong with any of them. Good luck
Or up.

So either he was referring to the rate, as I thought, or is incorrect.
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Re: VMMXX as cash

Post by tibbitts » Tue May 07, 2019 6:18 pm

rondebbs wrote:
Tue May 07, 2019 2:37 pm
I have an IRA and Taxable brokerage accounts. I've been using VMMXX for the last year to kind of park cash while looking for opportunities to buy equities (like today). Much of my IRA is still in VMMXX as I had to liquidate my 401k and then rollover the cash to my IRA. For the year I have owned VMMXX is seems to be up 2.5% so it has worked well for a cash type investment. I'm not familiar with this type of MM fund. Is there something that could happen to cause a big change IE to go from 2.5% to 0%? Could it go negative? I'm guessing it has to be related to interest rates etc. but I just don't know the mechanics. Or can I just kind of count on 2%-2.5% indefinitely?

Also VMMXX is a mutual fund which means when I sell some today I have to wait one more day for settlement so I can now by equities. Is there an ETF similar to VMMXX where I would not have to deal with the lost day for settlement?
I have a feeling today was not an opportunity to buy equities relative to most of the days you've owned VMMXX.

mariezzz
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Re: VMMXX as cash

Post by mariezzz » Tue May 07, 2019 6:40 pm

rondebbs wrote:
Tue May 07, 2019 2:37 pm
Also VMMXX is a mutual fund which means when I sell some today I have to wait one more day for settlement so I can now by equities. Is there an ETF similar to VMMXX where I would not have to deal with the lost day for settlement?
I have no problem exchanging VMMXX same day for some other mutual fund at Vanguard - I don't have a lost day. I choose to 'exchange'; If I get my request in by market close, I sell VMMXX at the price as of close, and purchase something else at the price as of close (same day).

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Re: VMMXX as cash

Post by S_Track » Wed May 08, 2019 5:05 am

ruralavalon wrote:
Tue May 07, 2019 5:19 pm
Vanguard Prime Money Market Fund (VMMXX) current SEC Yield = 2.44%, current compound yield = 2.47%, is an excellent fund. Treat it as the equivalent of cash. The fund won't go negative, it will stay at $1 per share, it will continue to give a yield but the amount of yield will depend on interest rates.
The SEC yield of VMMXX is 2.44% as compared to 2.03% for Short Term federal (VSGBX). It would seem for now VMMXX is the better deal. Interestingly, YTD favors VSGBX, 1.52% to VMMXX .86%. How does this happen, is the YTD figure total return where VSGBX has some capital increase where VMMXX would not have any since it holds at $1 per share?

Thanks

3funder
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Re: VMMXX as cash

Post by 3funder » Wed May 08, 2019 6:58 am

My wife and I use VMMXX for money we will need to spend within the next five years.

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Re: VMMXX as cash

Post by goodenyou » Wed May 08, 2019 8:12 am

S_Track wrote:
Wed May 08, 2019 5:05 am
ruralavalon wrote:
Tue May 07, 2019 5:19 pm
Vanguard Prime Money Market Fund (VMMXX) current SEC Yield = 2.44%, current compound yield = 2.47%, is an excellent fund. Treat it as the equivalent of cash. The fund won't go negative, it will stay at $1 per share, it will continue to give a yield but the amount of yield will depend on interest rates.
The SEC yield of VMMXX is 2.44% as compared to 2.03% for Short Term federal (VSGBX). It would seem for now VMMXX is the better deal. Interestingly, YTD favors VSGBX, 1.52% to VMMXX .86%. How does this happen, is the YTD figure total return where VSGBX has some capital increase where VMMXX would not have any since it holds at $1 per share?

Thanks
I believe that it reflects distributions of dividends and capital gains. The NAV went up, therefore, the distributions went up and added to the total yield. The highs and lows ranged between $10.43-$10.64 (2.01%). Of course, VSGBX can go down. Prime Money Market is very unlikely to go down. If Prime Money Market goes down in asset value ("break the buck"), we are ALL in a world of hurts.
Last edited by goodenyou on Wed May 08, 2019 8:14 am, edited 1 time in total.
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Re: VMMXX as cash

Post by lostdog » Wed May 08, 2019 8:14 am

I think you can reduce your wait by 1 day if you use the Vanguard Federal Money Market settlement fund. The yield is very close to prime money market and is a bit less risky.
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sabtastic
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Re: VMMXX as cash

Post by sabtastic » Thu May 09, 2019 8:37 am

smectym wrote:
Tue May 07, 2019 4:05 pm
VMMXX is a great fund and extremely safe. I prefer VUSXX as theoretically even safer. One of those “doesn’t matter till it matters” things, but as to money market funds, between “very safe” and “even safer,” I choose the latter—despite the yield differential.

https://personal.vanguard.com/pdf/VGMMR.pdf
OP: Please be sure to read this link about money market reform.

It sounds like you are hoping to use this as dry powder to purchase equities. While Vanguard's retail funds are the highest quality and liquidity in the business, we haven't had a gut-wrenching crash to test these new SEC rules yet. Considering how small the yield spread is between these funds the return of a retail fund may not be worth the risk.

If you compare Vanguard's MM daily/weekly liquid assets to funds from other brokers it is quite an eye opening experience.

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VUSXX (Treasury Money Market Fund) is not subject to State tax

Post by Dontridetheindexdown » Thu May 09, 2019 9:29 am

Another consideration:

In addition to being the safest Vanguard MMF, VUSXX (Treasury Money Market Fund) yield is not subject to state tax.

For us, with a marginal state tax rate of 5.75%, VUSXX produces the same effective yield as VMMXX.

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Re: VMMXX as cash

Post by ruralavalon » Thu May 09, 2019 9:51 am

sabtastic wrote:
Thu May 09, 2019 8:37 am
smectym wrote:
Tue May 07, 2019 4:05 pm
VMMXX is a great fund and extremely safe. I prefer VUSXX as theoretically even safer. One of those “doesn’t matter till it matters” things, but as to money market funds, between “very safe” and “even safer,” I choose the latter—despite the yield differential.

https://personal.vanguard.com/pdf/VGMMR.pdf
OP: Please be sure to read this link about money market reform.

It sounds like you are hoping to use this as dry powder to purchase equities. While Vanguard's retail funds are the highest quality and liquidity in the business, we haven't had a gut-wrenching crash to test these new SEC rules yet. Considering how small the yield spread is between these funds the return of a retail fund may not be worth the risk.

If you compare Vanguard's MM daily/weekly liquid assets to funds from other brokers it is quite an eye opening experience.
If I was nervous about any Vanguard money market fund, I would be too nervous to invest in anything at all.
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Re: VUSXX (Treasury Money Market Fund) is not subject to State tax

Post by changingtimes » Thu May 09, 2019 10:11 am

Dontridetheindexdown wrote:
Thu May 09, 2019 9:29 am
Another consideration:

In addition to being the safest Vanguard MMF, VUSXX (Treasury Money Market Fund) yield is not subject to state tax.

For us, with a marginal state tax rate of 5.75%, VUSXX produces the same effective yield as VMMXX.
So, with a marginal state tax rate of 8.25%....? (math is hard, help me out :) )

Dontridetheindexdown
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Re: VMMXX as cash

Post by Dontridetheindexdown » Thu May 09, 2019 9:17 pm

For you VUSXX is worth even more.

You will only pay Federal tax on your VUSXX dividends.

I will leave it to the tax-aficionados to do the math.

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Re: VMMXX as cash

Post by HawkeyePierce » Thu May 09, 2019 11:29 pm

Here's a calculator to compare taxable, treasury and muni money market returns based on your individual tax situation: https://thefinancebuff.com/tax-equivale ... dated.html

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Re: VMMXX as cash

Post by sabtastic » Fri May 10, 2019 8:44 am

ruralavalon wrote:
Thu May 09, 2019 9:51 am
If I was nervous about any Vanguard money market fund, I would be too nervous to invest in anything at all.
I don't mean to imply that there is any chance of loss. Just a reminder that redemption gates and liquidity fees are real and they apply to retail funds. If you intend to keep the cash around for an indefinite period (we use VMMXX to save for our down payment) gates and fees don't matter. For "dry powder" it would make more sense to choose VMFXX when the difference in return is less than 0.1%.

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Re: VMMXX as cash

Post by welderwannabe » Fri May 10, 2019 8:45 am

rondebbs wrote:
Tue May 07, 2019 2:37 pm
Also VMMXX is a mutual fund which means when I sell some today I have to wait one more day for settlement so I can now by equities. Is there an ETF similar to VMMXX where I would not have to deal with the lost day for settlement?
This is one area where Fidelity is better. They treat all your MMs as available cash to trade and you don't have to issue an explicit sell order on the MM. Buy your stock, and they will automatically liquidate MM funds to cover it.
I am not an investment professional, but I did stay at a Holiday Inn Express last night.

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Re: VMMXX as cash

Post by lostdog » Fri May 10, 2019 8:49 am

welderwannabe wrote:
Fri May 10, 2019 8:45 am
rondebbs wrote:
Tue May 07, 2019 2:37 pm
Also VMMXX is a mutual fund which means when I sell some today I have to wait one more day for settlement so I can now by equities. Is there an ETF similar to VMMXX where I would not have to deal with the lost day for settlement?
This is one area where Fidelity is better. They treat all your MMs as available cash to trade and you don't have to issue an explicit sell order on the MM. Buy your stock, and they will automatically liquidate MM funds to cover it.
The Vanguard Federal Money market settlement account does the same. It treats it as cash and it's not a sell order.
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Re: VMMXX as cash

Post by welderwannabe » Fri May 10, 2019 9:25 am

lostdog wrote:
Fri May 10, 2019 8:49 am
The Vanguard Federal Money market settlement account does the same. It treats it as cash and it's not a sell order.
Yes, but he/she was asking about prime. Fidelity does this for all MMs you have...not just the settlement fund.
I am not an investment professional, but I did stay at a Holiday Inn Express last night.

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changingtimes
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Re: VMMXX as cash

Post by changingtimes » Fri May 10, 2019 10:28 am

HawkeyePierce wrote:
Thu May 09, 2019 11:29 pm
Here's a calculator to compare taxable, treasury and muni money market returns based on your individual tax situation: https://thefinancebuff.com/tax-equivale ... dated.html
Thank you!

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Re: VMMXX as cash

Post by Broken Man 1999 » Fri May 10, 2019 11:04 am

lostdog wrote:
Wed May 08, 2019 8:14 am
I think you can reduce your wait by 1 day if you use the Vanguard Federal Money Market settlement fund. The yield is very close to prime money market and is a bit less risky.
We use Vanguard Federal Money Market exclusively for our money market account(s). When the settlement fund was changed to Vanguard Federal Money Market I ditched all our Vanguard Prime Money Market holdings. Fewer accounts to manage, I'm always looking to simplify. Strictly using Vanguard Federal Money Market fund saves transferring activities as well.

We don't hold much in any money market account as I prefer being fully invested as much as possible.

I prefer Vanguard Federal Money Market, but those who keep a significant amount in their money market fund could pick up a bit more interest.

Both money market funds are safe enough I believe, but perhaps Vanguard Federal Money Market is a bit safer.

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stocknoob4111
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Re: VMMXX as cash

Post by stocknoob4111 » Fri May 10, 2019 11:08 am

I just use VMFXX (Settlement Fund) instead of VMMXX because here in CA VMFXX is 78% tax exempt at the state level. This makes the yield slightly better than Prime MM.

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rondebbs
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Re: VMMXX as cash

Post by rondebbs » Sat May 11, 2019 4:04 pm

stocknoob4111 wrote:
Fri May 10, 2019 11:08 am
I just use VMFXX (Settlement Fund) instead of VMMXX because here in CA VMFXX is 78% tax exempt at the state level. This makes the yield slightly better than Prime MM.
Thanks everyone for great info. My brokerage and Trad IRA are both with Wells Fargo. I guess that is why I have the settlement day. I am in CA as well. This year I am 59 going through divorce and living off savings with my only income about $14,000 (from VMMXX dividends). Should I change from VMMXX to VMFXX with so little income. I guess if I sell my rental condo this year I will all the sudden jump into a high tax bracket ($150,000+ gain on condo sale). I'm not sure if I will sell it this year or a future year.

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rondebbs
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Re: VMMXX as cash

Post by rondebbs » Sat May 11, 2019 4:11 pm

additional info to my above post. I'm sitting on all this VMMXX cash waiting for opportunities. If QQQ or IVG have a decent pullback this week I want to quickly buy (I need to replenish my tech positions). But if I have to wait for settlement of sale of VMMXX it can mess things up. I want to be able to buy immediately when opportunities present themselves.

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Re: VMMXX as cash

Post by iamblessed » Sat May 11, 2019 5:27 pm

bikechuck wrote:
Tue May 07, 2019 3:03 pm
What is VMMXX for the many of us that have not memorized these symbols? I know that I can Google it but why not take the few extra seconds to type the fund name and save hundreds of people from looking it up?
+++++So true I wish we named the fund then the folks that wanted to buy it could look up the symbol. Not the other way around.

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Re: VMMXX as cash

Post by Wiggums » Sat May 11, 2019 6:00 pm

We use VMMXX for money we will need to spend within the next few years. I got tired of chasing rates, setting up accounts and transferring money. There are other things that I prefer to do now.

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Re: VMMXX as cash

Post by stocknoob4111 » Sat May 11, 2019 11:01 pm

rondebbs wrote:
Sat May 11, 2019 4:04 pm
well. This year I am 59 going through divorce and living off savings with my only income about $14,000 (from VMMXX dividends). Should I change from VMMXX to VMFXX with so little income.
you have to do this calculation to see which comes out ahead.. personally I think you will save a few bucks switching, full CA taxes on $14k or the slightly lesser (.08% so virtually nothing) yield of VMFXX but pay only 22% of the full CA taxes due.

Looking at the CA tax table, if you are filing single, it looks like your bracket is around 1.5% so it's not a whole lot.

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Re: VMMXX as cash

Post by welderwannabe » Sun May 12, 2019 5:17 pm

Also, if you are getting $14,000 a year of dividends from VMMXX, you certainly have the minimum for VUSXX (Treasury Money Market). $50,000 buy-in, but will be 100% state tax free versus VMFXX which is only a percentage tax free (albeit high).
I am not an investment professional, but I did stay at a Holiday Inn Express last night.

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