6 mo CD vs money market etf right now ?

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Mardoc01
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6 mo CD vs money market etf right now ?

Post by Mardoc01 »

Have large amount and don’t wish to go into stock/bonds currently. In a no tax state so only federal taxes matter. I know both of these instruments are taxed as ordinary income. Just checking for opinions on what way the Board consensus is the way to go next week ?
muffins14
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Re: 6 mo CD vs money market etf right now ?

Post by muffins14 »

Mardoc01 wrote: Wed May 15, 2024 10:18 am Have large amount and don’t wish to go into stock/bonds currently. In a no tax state so only federal taxes matter. I know both of these instruments are taxed as ordinary income. Just checking for opinions on what way the Board consensus is the way to go next week ?
When do you want to spend the money?

Depending on your tax rate, some short-term muni bonds may be good.

Or short-term treasury bonds / bills. TBills go down to 4 week maturity so there is not much risk for price movement.
You could get a 6-month TBill now that returns about 5.17% annualized, I'm not sure how much your CD option is offering.
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Mardoc01
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Re: 6 mo CD vs money market etf right now ?

Post by Mardoc01 »

muffins14 wrote: Wed May 15, 2024 10:31 am
Mardoc01 wrote: Wed May 15, 2024 10:18 am Have large amount and don’t wish to go into stock/bonds currently. In a no tax state so only federal taxes matter. I know both of these instruments are taxed as ordinary income. Just checking for opinions on what way the Board consensus is the way to go next week ?
When do you want to spend the money?

Depending on your tax rate, some short-term muni bonds may be good.

Or short-term treasury bonds / bills. TBills go down to 4 week maturity so there is not much risk for price movement.
You could get a 6-month TBill now that returns about 5.17% annualized, I'm not sure how much your CD option is offering.
Thx. I don’t need the money. But I guess money market would give me flexibility to invest if there is a correction. I was in muni but my salary is gone as I’m retiring so I sold it. I guess really for a six month time period what would give me highest return and or yield . MM vs Cd vs 6 mon t bill ?
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Mardoc01
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Re: 6 mo CD vs money market etf right now ?

Post by Mardoc01 »

I realize t bills have state tax adv as they are not taxed but that doesn’t matter in my state
muffins14
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Re: 6 mo CD vs money market etf right now ?

Post by muffins14 »

Mardoc01 wrote: Wed May 15, 2024 10:34 am
muffins14 wrote: Wed May 15, 2024 10:31 am
Mardoc01 wrote: Wed May 15, 2024 10:18 am Have large amount and don’t wish to go into stock/bonds currently. In a no tax state so only federal taxes matter. I know both of these instruments are taxed as ordinary income. Just checking for opinions on what way the Board consensus is the way to go next week ?
When do you want to spend the money?

Depending on your tax rate, some short-term muni bonds may be good.

Or short-term treasury bonds / bills. TBills go down to 4 week maturity so there is not much risk for price movement.
You could get a 6-month TBill now that returns about 5.17% annualized, I'm not sure how much your CD option is offering.
Thx. I don’t need the money. But I guess money market would give me flexibility to invest if there is a correction. I was in muni but my salary is gone as I’m retiring so I sold it. I guess really for a six month time period what would give me highest return and or yield . MM vs Cd vs 6 mon t bill ?
I think you just need to do some research to see what kind of CDs you can get.

I think a broader question is also - why do you want to keep this in cash if you don't "need the money"?
Last edited by muffins14 on Wed May 15, 2024 10:41 am, edited 1 time in total.
Crom laughs at your Four Winds
Topic Author
Mardoc01
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Re: 6 mo CD vs money market etf right now ?

Post by Mardoc01 »

Any other opinions ?
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Mardoc01
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Re: 6 mo CD vs money market etf right now ?

Post by Mardoc01 »

muffins14 wrote: Wed May 15, 2024 10:41 am
Mardoc01 wrote: Wed May 15, 2024 10:34 am
muffins14 wrote: Wed May 15, 2024 10:31 am
Mardoc01 wrote: Wed May 15, 2024 10:18 am Have large amount and don’t wish to go into stock/bonds currently. In a no tax state so only federal taxes matter. I know both of these instruments are taxed as ordinary income. Just checking for opinions on what way the Board consensus is the way to go next week ?
When do you want to spend the money?

Depending on your tax rate, some short-term muni bonds may be good.

Or short-term treasury bonds / bills. TBills go down to 4 week maturity so there is not much risk for price movement.
You could get a 6-month TBill now that returns about 5.17% annualized, I'm not sure how much your CD option is offering.
Thx. I don’t need the money. But I guess money market would give me flexibility to invest if there is a correction. I was in muni but my salary is gone as I’m retiring so I sold it. I guess really for a six month time period what would give me highest return and or yield . MM vs Cd vs 6 mon t bill ?
I think you just need to do some research to see what kind of CDs you can get.

I think a broader question is also - why do you want to keep this in cash if you don't "need the money"?
Good point. I guess though I would have to spread a few cds though to keep limit at 250k ?
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Rocinante Rider
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Re: 6 mo CD vs money market etf right now ?

Post by Rocinante Rider »

If it's a large amount that you have no pending need to spend, you might consider holding the cash (whether in MMkt, T-bills, CDs, etc.) in a tax-deferred account.
https://www.bogleheads.org/wiki/Placing ... ed_account
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Mardoc01
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Re: 6 mo CD vs money market etf right now ?

Post by Mardoc01 »

Rocinante Rider wrote: Wed May 15, 2024 10:54 am If it's a large amount that you have no pending need to spend, you might consider holding the cash (whether in MMkt, T-bills, CDs, etc.) in a tax-deferred account.
https://www.bogleheads.org/wiki/Placing ... ed_account
Unfortunately it is in my taxable
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Rocinante Rider
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Re: 6 mo CD vs money market etf right now ?

Post by Rocinante Rider »

Mardoc01 wrote: Wed May 15, 2024 10:59 am
Rocinante Rider wrote: Wed May 15, 2024 10:54 am If it's a large amount that you have no pending need to spend, you might consider holding the cash (whether in MMkt, T-bills, CDs, etc.) in a tax-deferred account.
https://www.bogleheads.org/wiki/Placing ... ed_account
Unfortunately it is in my taxable
If you have substantial tax-deferred accounts, then you can simultaneously sell in tax-deferred and buy a similar investment in taxable. For example, if you have 500k of unneeded cash in a taxable account and 500k of a S&P 500 index fund in a tax-deferred account, you simultaneously sell the 500k of the S&P fund/ETF in tax-deferred and buy the same (or something similar such as a total stock index fund) with the cash in your taxable account. Bingo - you've now moved the cash into tax-deferred without incurring taxes on the sale and without changing your asset allocation. It's just a matter of tax efficient placement.
JoeJohnson
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Re: 6 mo CD vs money market etf right now ?

Post by JoeJohnson »

Mardoc01 wrote: Wed May 15, 2024 10:59 am
Rocinante Rider wrote: Wed May 15, 2024 10:54 am If it's a large amount that you have no pending need to spend, you might consider holding the cash (whether in MMkt, T-bills, CDs, etc.) in a tax-deferred account.
https://www.bogleheads.org/wiki/Placing ... ed_account
Unfortunately it is in my taxable
Did you read the link and understand the concept of what they are suggesting?
Topic Author
Mardoc01
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Re: 6 mo CD vs money market etf right now ?

Post by Mardoc01 »

Rocinante Rider wrote: Wed May 15, 2024 11:09 am
Mardoc01 wrote: Wed May 15, 2024 10:59 am
Rocinante Rider wrote: Wed May 15, 2024 10:54 am If it's a large amount that you have no pending need to spend, you might consider holding the cash (whether in MMkt, T-bills, CDs, etc.) in a tax-deferred account.
https://www.bogleheads.org/wiki/Placing ... ed_account
Unfortunately it is in my taxable
If you have substantial tax-deferred accounts, then you can simultaneously sell in tax-deferred and buy a similar investment in taxable. For example, if you have 500k of unneeded cash in a taxable account and 500k of a S&P 500 index fund in a tax-deferred account, you simultaneously sell the 500k of the S&P fund/ETF in tax-deferred and buy the same (or something similar such as a total stock index fund) with the cash in your taxable account. Bingo - you've now moved the cash into tax-deferred without incurring taxes on the sale and without changing your asset allocation. It's just a matter of tax efficient placement.
I see. Thx
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Re: 6 mo CD vs money market etf right now ?

Post by Cocoa Beach Bum »

Rocinante Rider wrote: Wed May 15, 2024 11:09 am
Mardoc01 wrote: Wed May 15, 2024 10:59 am
Rocinante Rider wrote: Wed May 15, 2024 10:54 am If it's a large amount that you have no pending need to spend, you might consider holding the cash (whether in MMkt, T-bills, CDs, etc.) in a tax-deferred account.
https://www.bogleheads.org/wiki/Placing ... ed_account
Unfortunately it is in my taxable
If you have substantial tax-deferred accounts, then you can simultaneously sell in tax-deferred and buy a similar investment in taxable. For example, if you have 500k of unneeded cash in a taxable account and 500k of a S&P 500 index fund in a tax-deferred account, you simultaneously sell the 500k of the S&P fund/ETF in tax-deferred and buy the same (or something similar such as a total stock index fund) with the cash in your taxable account. Bingo - you've now moved the cash into tax-deferred without incurring taxes on the sale and without changing your asset allocation. It's just a matter of tax efficient placement.
And when he needs to spend that cash, how would he reverse this maneuver in a tax efficient manner?
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Re: 6 mo CD vs money market etf right now ?

Post by Rocinante Rider »

Cocoa Beach Bum wrote: Wed May 15, 2024 11:46 am And when he needs to spend that cash, how would he reverse this maneuver in a tax efficient manner?
Not suggesting doing this with cash that one needs to spend anytime soon. OP says there's a "large amount" not needed for spending but wants "flexibility to invest if there is a correction."
hudson
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Re: 6 mo CD vs money market etf right now ?

Post by hudson »

Mardoc01 wrote: Wed May 15, 2024 10:34 am
muffins14 wrote: Wed May 15, 2024 10:31 am
Mardoc01 wrote: Wed May 15, 2024 10:18 am Have large amount and don’t wish to go into stock/bonds currently. In a no tax state so only federal taxes matter. I know both of these instruments are taxed as ordinary income. Just checking for opinions on what way the Board consensus is the way to go next week ?
When do you want to spend the money?

Depending on your tax rate, some short-term muni bonds may be good.

Or short-term treasury bonds / bills. TBills go down to 4 week maturity so there is not much risk for price movement.
You could get a 6-month TBill now that returns about 5.17% annualized, I'm not sure how much your CD option is offering.
Thx. I don’t need the money. But I guess money market would give me flexibility to invest if there is a correction. I was in muni but my salary is gone as I’m retiring so I sold it. I guess really for a six month time period what would give me highest return and or yield . MM vs Cd vs 6 mon t bill ?
I'd compare all 3 on the day that I was going to make the purchase.
Then I'd go with the best deal.
MM is too short term for me. I'd go with either the T or the non-callable CD.
CloseEnough
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Re: 6 mo CD vs money market etf right now ?

Post by CloseEnough »

Cocoa Beach Bum wrote: Wed May 15, 2024 11:46 am
Rocinante Rider wrote: Wed May 15, 2024 11:09 am
Mardoc01 wrote: Wed May 15, 2024 10:59 am
Rocinante Rider wrote: Wed May 15, 2024 10:54 am If it's a large amount that you have no pending need to spend, you might consider holding the cash (whether in MMkt, T-bills, CDs, etc.) in a tax-deferred account.
https://www.bogleheads.org/wiki/Placing ... ed_account
Unfortunately it is in my taxable
If you have substantial tax-deferred accounts, then you can simultaneously sell in tax-deferred and buy a similar investment in taxable. For example, if you have 500k of unneeded cash in a taxable account and 500k of a S&P 500 index fund in a tax-deferred account, you simultaneously sell the 500k of the S&P fund/ETF in tax-deferred and buy the same (or something similar such as a total stock index fund) with the cash in your taxable account. Bingo - you've now moved the cash into tax-deferred without incurring taxes on the sale and without changing your asset allocation. It's just a matter of tax efficient placement.
And when he needs to spend that cash, how would he reverse this maneuver in a tax efficient manner?
Wouldn't you sell the amount needed in the taxable account, either at a loss or gain depending on what the stock market has done, and then buy the same amount of the stock fund back with the cash in the tax-deferred? Yes, if you have to sell in the taxable account at a gain you pay tax, but it should still be less than you would of paid in tax for ordinary income on the cash - I would think. Depends on the specifics, but that would be the logic.
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Re: 6 mo CD vs money market etf right now ?

Post by HE Pennypacker »

Rocinante Rider wrote: Wed May 15, 2024 11:09 am
Mardoc01 wrote: Wed May 15, 2024 10:59 am
Rocinante Rider wrote: Wed May 15, 2024 10:54 am If it's a large amount that you have no pending need to spend, you might consider holding the cash (whether in MMkt, T-bills, CDs, etc.) in a tax-deferred account.
https://www.bogleheads.org/wiki/Placing ... ed_account
Unfortunately it is in my taxable
If you have substantial tax-deferred accounts, then you can simultaneously sell in tax-deferred and buy a similar investment in taxable. For example, if you have 500k of unneeded cash in a taxable account and 500k of a S&P 500 index fund in a tax-deferred account, you simultaneously sell the 500k of the S&P fund/ETF in tax-deferred and buy the same (or something similar such as a total stock index fund) with the cash in your taxable account. Bingo - you've now moved the cash into tax-deferred without incurring taxes on the sale and without changing your asset allocation. It's just a matter of tax efficient placement.
Very interesting strategy I've never thought of this...i suppose one could even take hardship withdraw from the tax deferred if needed ? I guess it would depend if you hold taxable long enough (>1 year for long term)
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Mardoc01
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Re: 6 mo CD vs money market etf right now ?

Post by Mardoc01 »

Decided to go MMF. Getting nearly 5.4%. I know this can change but instantly available if there is a dramatic downturn to employ etc. and I don’t foresee it dropping precip. I know this market timing lol
hudson
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Re: 6 mo CD vs money market etf right now ?

Post by hudson »

Mardoc01 wrote: Wed May 22, 2024 8:14 am Decided to go MMF. Getting nearly 5.4%. I know this can change but instantly available if there is a dramatic downturn to employ etc. and I don’t foresee it dropping precip. I know this market timing lol
It's not market timing. It's getting the best deal for the needed duration.
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Mardoc01
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Re: 6 mo CD vs money market etf right now ?

Post by Mardoc01 »

hudson wrote: Wed May 22, 2024 8:42 am
Mardoc01 wrote: Wed May 22, 2024 8:14 am Decided to go MMF. Getting nearly 5.4%. I know this can change but instantly available if there is a dramatic downturn to employ etc. and I don’t foresee it dropping precip. I know this market timing lol
It's not market timing. It's getting the best deal for the needed duration.
I hear ya
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