$80K Severance Windfall - What to do with it?

[InvestorSC2024]

Recently left a job and picked up a severance windfall and am trying to figure out where to park it.

Right now, it is in a HYSA pulling in 4.25% in interest. Not terrible, but that will go down as rates are cut.

I already have a 6-month EF. I have no debt to apply it to, so I figure my options are:

-Leave it in the HYSA at 4.25% or less

-Put some of it in a 1-year CD at 4.5% (maybe higher rates elsewhere) Do a ladder, etc.

-Put it in Fidelity SPAXX, Government Money Market Fund 4.96% currently

I don't want to invest it, because I may use it for a down payment on a house in 1-2 years, etc.

What say the Bogleheads? Thanks in advance.

[toddthebod]

SPAXX is fine

[stimulacra]

All those look like fine options.

I would also consider upgrading 6-month EF to 12 months.

[scophreak]

If you worry about declining savings rates in your HYSA then you should have similar concerns regarding MM funds. I don't have a reliable crystal ball to understand when this may occur, but locking in higher rates (CDs, no-penalty CDs, treasuries, etc) would be a safeguard to ensure a higher return.

[pasadena]

SPAXX is fine

SPRXX has very slightly higher APY, if OP is going with Fidelity anyway.

[ryuns]

SPAXX is fine

SPRXX has very slightly higher APY, if OP is going with Fidelity anyway.

I'll just note that FDLXX might be a better option if you're in a high-tax state, like California.

[CoAndy]

Have you landed another job yet? Will this money be used to help fund living expenses for a while?

[bmelikia]

All those look like fine options.

I would also consider upgrading 6-month EF to 12 months.

If another job has not been secured, I'd bump EF to 12 months - then use remaining to live off until finding new employment. . .but mostly because I scare easily

[InvestorSC2024]

Thanks everybody for the help. To answer your questions:

-I live in South Carolina, taxes are favorable

-No new job yet, taking some time off before I jump back into corporate

-12-month EF is a good idea. I can easily set that aside in the HYSA

-I think I'll buy some T-Bills, Do a CD and then keep the EF (plus some more) in the HYSA

-Good advice all.

[pasadena]

Thanks everybody for the help. To answer your questions:

-I live in South Carolina, taxes are favorable

-No new job yet, taking some time off before I jump back into corporate

-12-month EF is a good idea. I can easily set that aside in the HYSA

-I think I'll buy some T-Bills, Do a CD and then keep the EF (plus some more) in the HYSA

-Good advice all.

A Money Market is just as safe for an emergency fund as a HYSA. The only differences are that the APY is higher (in the case of funds like SPRXX for example) and they are not FDIC-insured if that matters to you. It's still cash.

[hoofaman]

What's the reason to use an "HYSA" with below market yields? Plenty of short term treasury funds offer 5%+ yields, honest question as I've never understood the benefits behind using bank savings accounts with below market yields and am curious

[JMACatfish]

What's the reason to use an "HYSA" with below market yields? Plenty of short term treasury funds offer 5%+ yields, honest question as I've never understood the benefits behind using bank savings accounts with below market yields and am curious

The big difference from what I've seen is the FDIC insurance. A HYSA might also be more convenient to move money to/between; if you have, say a Capital One credit card, checking account, and HYSA, maybe you value having lots of your finances on one platform vs the higher yield from VUSXX or whatnot.

I agree that money market funds with high yields are about as safe as one could need, and the notion of convenience being the decider doesn't really apply if OP is already considering putting money into SPAXX, especially since Fidelity works so well as a one-stop shop.

[physics911]

SPAXX is fine

SPRXX has very slightly higher APY, if OP is going with Fidelity anyway.

I'll just note that FDLXX might be a better option if you're in a high-tax state, like California.

Or FZFXX, which doesn't trigger state taxes either, with a current 7-day yield of 4.91%

[InvestorSC2024]

What's the reason to use an "HYSA" with below market yields? Plenty of short term treasury funds offer 5%+ yields, honest question as I've never understood the benefits behind using bank savings accounts with below market yields and am curious

The big difference from what I've seen is the FDIC insurance. A HYSA might also be more convenient to move money to/between; if you have, say a Capital One credit card, checking account, and HYSA, maybe you value having lots of your finances on one platform vs the higher yield from VUSXX or whatnot.

I agree that money market funds with high yields are about as safe as one could need, and the notion of convenience being the decider doesn't really apply if OP is already considering putting money into SPAXX, especially since Fidelity works so well as a one-stop shop.

That's exactly it. Just the convenience. It's all right there in the same bank app. I can move money back and forth instantly. I am new to using Fidelity for regular banking, but I do have their debit card. I agree, I am losing some interest by having it in there instead of money market funds, so I will look to balance that out.