Where do you keep your emergency fund?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
User avatar
willthrill81
Posts: 22596
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Where do you keep your emergency fund?

Post by willthrill81 »

willthrill81 wrote: Sun Jan 27, 2019 1:02 pm
troutbum22 wrote: Sun Jan 27, 2019 12:34 pm
willthrill81 wrote: Sat Jan 26, 2019 4:41 pm 1/3 in hard cash, 2/3 in Wellesley Income (in a Roth IRA).
New to the forum and joined after reading this. 36 year old newbie and just set up a Vanguard account. Never thought about holding some in anything other than cash. Got a lot to learn, but thanks for the post. Makes sense to me to do something similar to this although I'm sure there are a lot of different options.
Conventional wisdom says that a fund like Wellesley Income is not appropriate for an EF due to its 30% allocation to stocks. However, the worst single year in its history (2008) only saw it drop about 10%. The future could be different, but I'm comfortable with a little volatility in our EF. A 7% drop in our EF isn't likely to make or break us, and I suspect that the long-term returns of Wellesley will be at least keep pace with inflation.
Last month, I actually decided to move the two-thirds of our EF that was invested in Wellesley into our main portfolio, doing away with that portion of our EF. We just don't need that liquidity any more.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
lotusflower
Posts: 289
Joined: Thu Oct 24, 2013 12:32 am

Re: Where do you keep your emergency fund?

Post by lotusflower »

I keep 12 months of mortgage + property tax in 12 online (2.5%) 1-year CDs plus some I bonds and some Money Market savings. The idea is to have security on the housing front, and then depending on the type of emergency we can see what else needs to happen.
John Laurens
Posts: 437
Joined: Mon Nov 14, 2016 7:31 pm

Re: Where do you keep your emergency fund?

Post by John Laurens »

I have my checking, emergency fund, quarterly tax fund, big purchase fund in FZDXX at Fidelity.

Regards,
John
Triple digit golfer
Posts: 6180
Joined: Mon May 18, 2009 5:57 pm

Re: Where do you keep your emergency fund?

Post by Triple digit golfer »

willthrill81 wrote: Sat Apr 20, 2019 7:11 pm
willthrill81 wrote: Sun Jan 27, 2019 1:02 pm
troutbum22 wrote: Sun Jan 27, 2019 12:34 pm
willthrill81 wrote: Sat Jan 26, 2019 4:41 pm 1/3 in hard cash, 2/3 in Wellesley Income (in a Roth IRA).
New to the forum and joined after reading this. 36 year old newbie and just set up a Vanguard account. Never thought about holding some in anything other than cash. Got a lot to learn, but thanks for the post. Makes sense to me to do something similar to this although I'm sure there are a lot of different options.
Conventional wisdom says that a fund like Wellesley Income is not appropriate for an EF due to its 30% allocation to stocks. However, the worst single year in its history (2008) only saw it drop about 10%. The future could be different, but I'm comfortable with a little volatility in our EF. A 7% drop in our EF isn't likely to make or break us, and I suspect that the long-term returns of Wellesley will be at least keep pace with inflation.
Last month, I actually decided to move the two-thirds of our EF that was invested in Wellesley into our main portfolio, doing away with that portion of our EF. We just don't need that liquidity any more.
We did something similar. I am finally over the "I need a dedicated EF in taxable" mentality. We have a portfolio split amongst tax deferred, tax free, and taxable accounts that is 4.8 yeara gross income and 8-10 years of expenses, with 2 years expenses in bonds. The mental acccounting is just not needed. We have around 5 months expenses in Prime Money Market in taxable, but as soon as more of my taxable equity gains are long term, I'm going to shift most to equities and shift equities to bonds in tax deferred.
User avatar
fortfun
Posts: 2847
Joined: Tue Apr 19, 2016 7:31 pm

Re: Where do you keep your emergency fund?

Post by fortfun »

Davinci wrote: Sat Jan 26, 2019 3:55 pm
Where do you keep your emergency fund?
Currently in Ally savings but I am seriously considering moving part of it to Vanguard PMM to quickly execute RBD in Taxable if the rare opportunity presents itself.

RBD under a rare opportunity and with an objective criteria I think is reasonable.

Livesoft has a great eye to see an RBD so it would be great if he could give us a heads up when there is one. My biggest concern is that I do not know yet when to RBD as a fairly new investor.

P.S I don't time the market but I think RBD is a reasonable strategy.

I know I might get challenged and get different opinions on this, so let's debate and please help me change my reasoning and undestanding if I am wrong.

DaVinci
You can execute the Vanguard purchase just as fast with the money in Ally as Vanguard PMM. The purchase is made the day of the trade, not the day the money clears Ally.
User avatar
TheAccountant
Posts: 266
Joined: Sun Nov 05, 2017 4:21 pm
Location: USA
Contact:

Re: Where do you keep your emergency fund?

Post by TheAccountant »

User avatar
corn18
Posts: 1863
Joined: Fri May 22, 2015 6:24 am

Re: Where do you keep your emergency fund?

Post by corn18 »

Don’t have an EF now that the taxable account is large enough.
Don't do something, just stand there!
retiredflyboy
Posts: 236
Joined: Sun Dec 02, 2018 10:02 pm

Re: Where do you keep your emergency fund?

Post by retiredflyboy »

Keep it simple. I use vanguard prime money market and ally bank savings.
Facts are stubborn things. Everything works until it doesn’t.
User avatar
willthrill81
Posts: 22596
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Where do you keep your emergency fund?

Post by willthrill81 »

corn18 wrote: Sat Apr 20, 2019 8:30 pm Don’t have an EF now that the taxable account is large enough.
Those for whom the primary emergency that would need funding is unemployment and who also have a 457 plan (i.e. penalty-free withdrawals at any age once separated from the employer) may have no need for an EF at all once the 457 plan has enough to meet their need for liquidity.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
2commaBH
Posts: 152
Joined: Mon May 29, 2017 9:23 am
Location: SFBA

Re: Where do you keep your emergency fund?

Post by 2commaBH »

PNC High Yield Savings (monthly transaction and *amount* limits, so buyer beware) +

Vanguard Federal Money Market Fund (Settlement fund) +

Vanguard California Intermediate-Term Tax-Exempt Fund Admiral Shares (VCADX)
yousha
Posts: 323
Joined: Tue Jun 12, 2018 2:36 pm

Re: Where do you keep your emergency fund?

Post by yousha »

At Vanguard Prime.....where else.
User avatar
baconavocado
Posts: 497
Joined: Fri Oct 13, 2017 3:03 pm

Re: Where do you keep your emergency fund?

Post by baconavocado »

I used to keep about 3/4 of our EF at Vanguard in VMFXX and 1/4 at Wells Fargo in a savings account, but the savings account wasn't earning anything so I bought VTI with that money (to satisfy the minimum balance requirements for WFB Portfolio account) and now I keep all my cash for the EF at Vanguard in VMFXX.
BUBear29
Posts: 335
Joined: Wed Aug 19, 2015 4:20 pm
Location: DFW

Re: Where do you keep your emergency fund?

Post by BUBear29 »

Fidelity FDLXX Treasury Only MMF
There is no dignity quite so impressive, and no one independence quite so important, as living within your means.
mikeyzito22
Posts: 504
Joined: Sat Dec 02, 2017 5:42 pm

Re: Where do you keep your emergency fund?

Post by mikeyzito22 »

knpstr wrote: Sun Jan 27, 2019 8:17 pm
lostdog wrote: Sat Jan 26, 2019 3:52 pm Vanguard Federal Money Market. Brokerage sweep account.
+1
This works great as an emergency fund and it is an easy place to park some cash.

Short term treasury fund would be another good pick for another 0.2%. Warren Buffett suggests keeping one's bond portion in short-term treasuries for his 90/10 recommendation.
If you sell out of Vanguard Fed Money Market in a brokerage account, do you incur taxes? I'm only asking because I was thinking of putting our em in a bond fund, maybe risk level two, in taxable.....or in a PP money market. Still debating how to structure "tier two" emergency fund and thinking taxable. Don't currently have a taxable except the mm at Ally.
mikeyzito22
Posts: 504
Joined: Sat Dec 02, 2017 5:42 pm

Re: Where do you keep your emergency fund?

Post by mikeyzito22 »

willthrill81 wrote: Sat Apr 20, 2019 8:53 pm
corn18 wrote: Sat Apr 20, 2019 8:30 pm Don’t have an EF now that the taxable account is large enough.
Those for whom the primary emergency that would need funding is unemployment and who also have a 457 plan (i.e. penalty-free withdrawals at any age once separated from the employer) may have no need for an EF at all once the 457 plan has enough to meet their need for liquidity.
Will, does this also ring true for 403b's? I think so. If you are no longer with the employer you can liqudate it, correct?
djheini
Posts: 111
Joined: Fri Jul 29, 2016 5:53 pm
Location: Boston area

Re: Where do you keep your emergency fund?

Post by djheini »

mikeyzito22 wrote: Tue Jun 16, 2020 10:54 pm
knpstr wrote: Sun Jan 27, 2019 8:17 pm
lostdog wrote: Sat Jan 26, 2019 3:52 pm Vanguard Federal Money Market. Brokerage sweep account.
+1
This works great as an emergency fund and it is an easy place to park some cash.

Short term treasury fund would be another good pick for another 0.2%. Warren Buffett suggests keeping one's bond portion in short-term treasuries for his 90/10 recommendation.
If you sell out of Vanguard Fed Money Market in a brokerage account, do you incur taxes? I'm only asking because I was thinking of putting our em in a bond fund, maybe risk level two, in taxable.....or in a PP money market. Still debating how to structure "tier two" emergency fund and thinking taxable. Don't currently have a taxable except the mm at Ally.
MM funds aim to keep the price per share constant at $1. You'll pay taxes on the income each month (just like interest in a bank account), but there should be no capital gains when selling a MM fund, and if a Vanguard MM fund has "broken the buck" then you probably have bigger concerns than a potential small tax bill.

Non-MM bond funds can fluctuate in value however, but remember you only pay taxes on gains, so that should be a good problem to have.
User avatar
willthrill81
Posts: 22596
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Where do you keep your emergency fund?

Post by willthrill81 »

mikeyzito22 wrote: Tue Jun 16, 2020 10:56 pm
willthrill81 wrote: Sat Apr 20, 2019 8:53 pm
corn18 wrote: Sat Apr 20, 2019 8:30 pm Don’t have an EF now that the taxable account is large enough.
Those for whom the primary emergency that would need funding is unemployment and who also have a 457 plan (i.e. penalty-free withdrawals at any age once separated from the employer) may have no need for an EF at all once the 457 plan has enough to meet their need for liquidity.
Will, does this also ring true for 403b's? I think so. If you are no longer with the employer you can liqudate it, correct?
No. You cannot access a 403b before age 59.5 without penalties unless you're in one of the exceptional situations or using the SEPP 72(t) rule.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
mikeyzito22
Posts: 504
Joined: Sat Dec 02, 2017 5:42 pm

Re: Where do you keep your emergency fund?

Post by mikeyzito22 »

willthrill81 wrote: Wed Jun 17, 2020 9:16 am
mikeyzito22 wrote: Tue Jun 16, 2020 10:56 pm
willthrill81 wrote: Sat Apr 20, 2019 8:53 pm
corn18 wrote: Sat Apr 20, 2019 8:30 pm Don’t have an EF now that the taxable account is large enough.
Those for whom the primary emergency that would need funding is unemployment and who also have a 457 plan (i.e. penalty-free withdrawals at any age once separated from the employer) may have no need for an EF at all once the 457 plan has enough to meet their need for liquidity.
Will, does this also ring true for 403b's? I think so. If you are no longer with the employer you can liqudate it, correct?
No. You cannot access a 403b before age 59.5 without penalties unless you're in one of the exceptional situations or using the SEPP 72(t) rule.
Thanks Will, not planning on getting fired but good to know.
mikeyzito22
Posts: 504
Joined: Sat Dec 02, 2017 5:42 pm

Re: Where do you keep your emergency fund?

Post by mikeyzito22 »

djheini wrote: Tue Jun 16, 2020 11:41 pm
mikeyzito22 wrote: Tue Jun 16, 2020 10:54 pm
knpstr wrote: Sun Jan 27, 2019 8:17 pm
lostdog wrote: Sat Jan 26, 2019 3:52 pm Vanguard Federal Money Market. Brokerage sweep account.
+1
This works great as an emergency fund and it is an easy place to park some cash.

Short term treasury fund would be another good pick for another 0.2%. Warren Buffett suggests keeping one's bond portion in short-term treasuries for his 90/10 recommendation.
If you sell out of Vanguard Fed Money Market in a brokerage account, do you incur taxes? I'm only asking because I was thinking of putting our em in a bond fund, maybe risk level two, in taxable.....or in a PP money market. Still debating how to structure "tier two" emergency fund and thinking taxable. Don't currently have a taxable except the mm at Ally.
MM funds aim to keep the price per share constant at $1. You'll pay taxes on the income each month (just like interest in a bank account), but there should be no capital gains when selling a MM fund, and if a Vanguard MM fund has "broken the buck" then you probably have bigger concerns than a potential small tax bill.

Non-MM bond funds can fluctuate in value however, but remember you only pay taxes on gains, so that should be a good problem to have.
So we are in the 12% tax bracket and would
Like to take a little more risk with the second tier emergency fund. Would starting a taxable with a bond fund with $10,000 in it be appropriate? I know folks say keep bonds in tax-differed but we are not in a high tax bracket. What’s your take and thank you!
User avatar
willthrill81
Posts: 22596
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Where do you keep your emergency fund?

Post by willthrill81 »

mikeyzito22 wrote: Wed Jun 17, 2020 9:19 am
willthrill81 wrote: Wed Jun 17, 2020 9:16 am
mikeyzito22 wrote: Tue Jun 16, 2020 10:56 pm
willthrill81 wrote: Sat Apr 20, 2019 8:53 pm
corn18 wrote: Sat Apr 20, 2019 8:30 pm Don’t have an EF now that the taxable account is large enough.
Those for whom the primary emergency that would need funding is unemployment and who also have a 457 plan (i.e. penalty-free withdrawals at any age once separated from the employer) may have no need for an EF at all once the 457 plan has enough to meet their need for liquidity.
Will, does this also ring true for 403b's? I think so. If you are no longer with the employer you can liqudate it, correct?
No. You cannot access a 403b before age 59.5 without penalties unless you're in one of the exceptional situations or using the SEPP 72(t) rule.
Thanks Will, not planning on getting fired but good to know.
Keep in mind as well that paying the 10% penalty for early withdrawals is not the worst thing in the world. I believe that someone once demonstrated on the Mad Fientist's web site that depending on one's tax situation, early retirees paying the penalty still resulted in greater after-tax wealth vs. having used a taxable account instead. For instance, if someone was in the 22% bracket while working but 12% in early retirement, the 10% penalty basically resulted in a wash in terms of contributions, but the tax-deferred account experienced growth that the taxable account would not have.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
mikeyzito22
Posts: 504
Joined: Sat Dec 02, 2017 5:42 pm

Re: Where do you keep your emergency fund?

Post by mikeyzito22 »

willthrill81 wrote: Wed Jun 17, 2020 9:35 am
mikeyzito22 wrote: Wed Jun 17, 2020 9:19 am
willthrill81 wrote: Wed Jun 17, 2020 9:16 am
mikeyzito22 wrote: Tue Jun 16, 2020 10:56 pm
willthrill81 wrote: Sat Apr 20, 2019 8:53 pm

Those for whom the primary emergency that would need funding is unemployment and who also have a 457 plan (i.e. penalty-free withdrawals at any age once separated from the employer) may have no need for an EF at all once the 457 plan has enough to meet their need for liquidity.
Will, does this also ring true for 403b's? I think so. If you are no longer with the employer you can liqudate it, correct?
No. You cannot access a 403b before age 59.5 without penalties unless you're in one of the exceptional situations or using the SEPP 72(t) rule.
Thanks Will, not planning on getting fired but good to know.
Keep in mind as well that paying the 10% penalty for early withdrawals is not the worst thing in the world. I believe that someone once demonstrated on the Mad Fientist's web site that depending on one's tax situation, early retirees paying the penalty still resulted in greater after-tax wealth vs. having used a taxable account instead. For instance, if someone was in the 22% bracket while working but 12% in early retirement, the 10% penalty basically resulted in a wash in terms of contributions, but the tax-deferred account experienced growth that the taxable account would not have.
Right! I’ve been trying to convince people not to let taxes and or penalties be the biggest thing in the world. Especially if it’s actually for an emergency or life change. This is another reason I’ve been looking at starting a taxable account just for flexible spending or as part of an emergency fund. If I’m in the 12% bracket, would a $10,000 allocation to bonds be appropriate in a taxable for “second tier” emergencies?
atdharris
Posts: 675
Joined: Wed Jan 02, 2019 3:18 pm

Re: Where do you keep your emergency fund?

Post by atdharris »

How large of a taxable account is needed to pretty much dump an emergency fund?
User avatar
anon_investor
Posts: 4367
Joined: Mon Jun 03, 2019 1:43 pm

Re: Where do you keep your emergency fund?

Post by anon_investor »

atdharris wrote: Wed Jun 17, 2020 9:43 am How large of a taxable account is needed to pretty much dump an emergency fund?
I think it depends on whether your taxable account has all equities or whether there is some fixed income. I think if it is pure equities, I would not be comfortable unless it was double my desired emergency fund. For example, if I wanted a 6 month emergency fund, I would need double that amount in equities in my taxable account.

Personally, I think I would not feel comfortable dumping my emergency fund entirely unless I had triple my desired emergency fund size in equities.
atdharris
Posts: 675
Joined: Wed Jan 02, 2019 3:18 pm

Re: Where do you keep your emergency fund?

Post by atdharris »

anon_investor wrote: Wed Jun 17, 2020 9:54 am
atdharris wrote: Wed Jun 17, 2020 9:43 am How large of a taxable account is needed to pretty much dump an emergency fund?
I think it depends on whether your taxable account has all equities or whether there is some fixed income. I think if it is pure equities, I would not be comfortable unless it was double my desired emergency fund. For example, if I wanted a 6 month emergency fund, I would need double that amount in equities in my taxable account.

Personally, I think I would not feel comfortable dumping my emergency fund entirely unless I had triple my desired emergency fund size in equities.
Taxable is ~$155k with $12k of that in LTT. EF is ~$40k. I'm beginning to wonder if holding that much cash is efficient given I am 30 years out from retirement.
User avatar
anon_investor
Posts: 4367
Joined: Mon Jun 03, 2019 1:43 pm

Re: Where do you keep your emergency fund?

Post by anon_investor »

atdharris wrote: Wed Jun 17, 2020 9:57 am
anon_investor wrote: Wed Jun 17, 2020 9:54 am
atdharris wrote: Wed Jun 17, 2020 9:43 am How large of a taxable account is needed to pretty much dump an emergency fund?
I think it depends on whether your taxable account has all equities or whether there is some fixed income. I think if it is pure equities, I would not be comfortable unless it was double my desired emergency fund. For example, if I wanted a 6 month emergency fund, I would need double that amount in equities in my taxable account.

Personally, I think I would not feel comfortable dumping my emergency fund entirely unless I had triple my desired emergency fund size in equities.
Taxable is ~$155k with $12k of that in LTT. EF is ~$40k. I'm beginning to wonder if holding that much cash is efficient given I am 30 years out from retirement.
It is all about comfort level. I am assuming $40k is = 6 months living expenses? If I were you, I would probably still keep at least a couple of months of expenses in cash, in case there is an extreme market event like we had in March where even treasuries became illiquid and briefly lost a lot of value.

Are you keeping a 6 figure amount of LTT in your taxable account as equity crash insurance?

Personally I have starting shifting part of my emergency fund to Series I US Savings Bonds (https://www.bogleheads.org/wiki/I_savings_bonds). I do count my emergency fund as part of my fixed income allocation. But I plan to keep at least 2-3 months of expenses in no penalty CDs.
atdharris
Posts: 675
Joined: Wed Jan 02, 2019 3:18 pm

Re: Where do you keep your emergency fund?

Post by atdharris »

anon_investor wrote: Wed Jun 17, 2020 10:15 am
atdharris wrote: Wed Jun 17, 2020 9:57 am
anon_investor wrote: Wed Jun 17, 2020 9:54 am
atdharris wrote: Wed Jun 17, 2020 9:43 am How large of a taxable account is needed to pretty much dump an emergency fund?
I think it depends on whether your taxable account has all equities or whether there is some fixed income. I think if it is pure equities, I would not be comfortable unless it was double my desired emergency fund. For example, if I wanted a 6 month emergency fund, I would need double that amount in equities in my taxable account.

Personally, I think I would not feel comfortable dumping my emergency fund entirely unless I had triple my desired emergency fund size in equities.
Taxable is ~$155k with $12k of that in LTT. EF is ~$40k. I'm beginning to wonder if holding that much cash is efficient given I am 30 years out from retirement.
It is all about comfort level. I am assuming $40k is = 6 months living expenses? If I were you, I would probably still keep at least a couple of months of expenses in cash, in case there is an extreme market event like we had in March where even treasuries became illiquid and briefly lost a lot of value.

Are you keeping a 6 figure amount of LTT in your taxable account as equity crash insurance?

Personally I have starting shifting part of my emergency fund to Series I US Savings Bonds (https://www.bogleheads.org/wiki/I_savings_bonds). I do count my emergency fund as part of my fixed income allocation. But I plan to keep at least 2-3 months of expenses in no penalty CDs.
$40k is more like 9 months of living expenses. I am single and have no children or spouse to support. I keep about 10% of that $155k in LTT as a hedge against an equity crash, yes. I actually have another $10k in cash in the taxable account, which would bring my overall cash to about $50k.
User avatar
anon_investor
Posts: 4367
Joined: Mon Jun 03, 2019 1:43 pm

Re: Where do you keep your emergency fund?

Post by anon_investor »

atdharris wrote: Wed Jun 17, 2020 10:25 am
anon_investor wrote: Wed Jun 17, 2020 10:15 am
atdharris wrote: Wed Jun 17, 2020 9:57 am
anon_investor wrote: Wed Jun 17, 2020 9:54 am
atdharris wrote: Wed Jun 17, 2020 9:43 am How large of a taxable account is needed to pretty much dump an emergency fund?
I think it depends on whether your taxable account has all equities or whether there is some fixed income. I think if it is pure equities, I would not be comfortable unless it was double my desired emergency fund. For example, if I wanted a 6 month emergency fund, I would need double that amount in equities in my taxable account.

Personally, I think I would not feel comfortable dumping my emergency fund entirely unless I had triple my desired emergency fund size in equities.
Taxable is ~$155k with $12k of that in LTT. EF is ~$40k. I'm beginning to wonder if holding that much cash is efficient given I am 30 years out from retirement.
It is all about comfort level. I am assuming $40k is = 6 months living expenses? If I were you, I would probably still keep at least a couple of months of expenses in cash, in case there is an extreme market event like we had in March where even treasuries became illiquid and briefly lost a lot of value.

Are you keeping a 6 figure amount of LTT in your taxable account as equity crash insurance?

Personally I have starting shifting part of my emergency fund to Series I US Savings Bonds (https://www.bogleheads.org/wiki/I_savings_bonds). I do count my emergency fund as part of my fixed income allocation. But I plan to keep at least 2-3 months of expenses in no penalty CDs.
$40k is more like 9 months of living expenses. I am single and have no children or spouse to support. I keep about 10% of that $155k in LTT as a hedge against an equity crash, yes. I actually have another $10k in cash in the taxable account, which would bring my overall cash to about $50k.
Because you are single with no spouse/kids, assuming you have a stable job, if you are planning to reduce your cash to say 3 months living expenses and move the rest 90/10 (equities/LLT), that seems reasonable. My rough math says that would boast your LTT holdings to over $15k (which is equivalent to over 3 months of living expenses). So you would end up with 6 months combined in living expenses in cash + LTT. So if you had an emergency, if the market was up, no problem sell equities. If the market is down, LTT should be up so you can sell those, and if there is some kind of illiquidity issue like we experienced in March, you have 3 months of cash to hold you through it until the treasury markets work again to sell LTT. But this is only if you can sleep well at night without having the safety blanket of a large cash emergency fund. Personally, I would implement something like this, but my spouse likes to have a large cash emergency fund, since we have a mortgage, 2 young kids and 1 on the way. So as a compromise I am replacing no penalty CDs with I Bonds as the no penalty CDs expire (ultimately with the goal of reducing the cash portion of my emergency fund to 2-3 months of expenses in no penalty CDs). But I do have some LTT in my taxable account for the same reason you do.

Sounds like you have over 11 months of living expenses in cash. Is there a reason you have so much? Where are you keeping your cash now? I probably would not keep $10k in cash in a brokerage account, since money market funds pay only around 0.1% and online banks offer FDIC insured high yield savings accounts over 1% and no penalty CDs also over 1% (Ally, Marcus, CIT).
atdharris
Posts: 675
Joined: Wed Jan 02, 2019 3:18 pm

Re: Where do you keep your emergency fund?

Post by atdharris »

anon_investor wrote: Wed Jun 17, 2020 10:47 am
atdharris wrote: Wed Jun 17, 2020 10:25 am
anon_investor wrote: Wed Jun 17, 2020 10:15 am
atdharris wrote: Wed Jun 17, 2020 9:57 am
anon_investor wrote: Wed Jun 17, 2020 9:54 am

I think it depends on whether your taxable account has all equities or whether there is some fixed income. I think if it is pure equities, I would not be comfortable unless it was double my desired emergency fund. For example, if I wanted a 6 month emergency fund, I would need double that amount in equities in my taxable account.

Personally, I think I would not feel comfortable dumping my emergency fund entirely unless I had triple my desired emergency fund size in equities.
Taxable is ~$155k with $12k of that in LTT. EF is ~$40k. I'm beginning to wonder if holding that much cash is efficient given I am 30 years out from retirement.
It is all about comfort level. I am assuming $40k is = 6 months living expenses? If I were you, I would probably still keep at least a couple of months of expenses in cash, in case there is an extreme market event like we had in March where even treasuries became illiquid and briefly lost a lot of value.

Are you keeping a 6 figure amount of LTT in your taxable account as equity crash insurance?

Personally I have starting shifting part of my emergency fund to Series I US Savings Bonds (https://www.bogleheads.org/wiki/I_savings_bonds). I do count my emergency fund as part of my fixed income allocation. But I plan to keep at least 2-3 months of expenses in no penalty CDs.
$40k is more like 9 months of living expenses. I am single and have no children or spouse to support. I keep about 10% of that $155k in LTT as a hedge against an equity crash, yes. I actually have another $10k in cash in the taxable account, which would bring my overall cash to about $50k.
Because you are single with no spouse/kids, assuming you have a stable job, if you are planning to reduce your cash to say 3 months living expenses and move the rest 90/10 (equities/LLT), that seems reasonable. My rough math says that would boast your LTT holdings to over $15k (which is equivalent to over 3 months of living expenses). So you would end up with 6 months combined in living expenses in cash + LTT. So if you had an emergency, if the market was up, no problem sell equities. If the market is down, LTT should be up so you can sell those, and if there is some kind of illiquidity issue like we experienced in March, you have 3 months of cash to hold you through it until the treasury markets work again to sell LTT. But this is only if you can sleep well at night without having the safety blanket of a large cash emergency fund. Personally, I would implement something like this, but my spouse likes to have a large cash emergency fund, since we have a mortgage, 2 young kids and 1 on the way. So as a compromise I am replacing no penalty CDs with I Bonds as the no penalty CDs expire (ultimately with the goal of reducing the cash portion of my emergency fund to 2-3 months of expenses in no penalty CDs). But I do have some LTT in my taxable account for the same reason you do.

Sounds like you have over 11 months of living expenses in cash. Is there a reason you have so much? Where are you keeping your cash now? I probably would not keep $10k in cash in a brokerage account, since money market funds pay only around 0.1% and online banks offer FDIC insured high yield savings accounts over 1% and no penalty CDs also over 1% (Ally, Marcus, CIT).
I really don't know why I have so much cash. I suppose I thought my risk tolerance was lower, but I did not lose any sleep in March when the market was crashing. I kept thinking it would bounce back, and I am still employed and my employer did not lay anyone off, so I was optimistic I would be ok. I actually increased my 401k contribution during that time and realized I had a stronger stomach for a market drop than I thought (although I lived through 2008 albeit I was a college student). The cash is currently in a HYSA at Amex earning only 1.15% (it was twice that a year ago, so I felt better about it).


The only thing I would use the cash for would be a house, but I have no immediate plans to buy a house as I live in a high COL city.
User avatar
willthrill81
Posts: 22596
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Where do you keep your emergency fund?

Post by willthrill81 »

mikeyzito22 wrote: Wed Jun 17, 2020 9:41 am
willthrill81 wrote: Wed Jun 17, 2020 9:35 am
mikeyzito22 wrote: Wed Jun 17, 2020 9:19 am
willthrill81 wrote: Wed Jun 17, 2020 9:16 am
mikeyzito22 wrote: Tue Jun 16, 2020 10:56 pm
Will, does this also ring true for 403b's? I think so. If you are no longer with the employer you can liqudate it, correct?
No. You cannot access a 403b before age 59.5 without penalties unless you're in one of the exceptional situations or using the SEPP 72(t) rule.
Thanks Will, not planning on getting fired but good to know.
Keep in mind as well that paying the 10% penalty for early withdrawals is not the worst thing in the world. I believe that someone once demonstrated on the Mad Fientist's web site that depending on one's tax situation, early retirees paying the penalty still resulted in greater after-tax wealth vs. having used a taxable account instead. For instance, if someone was in the 22% bracket while working but 12% in early retirement, the 10% penalty basically resulted in a wash in terms of contributions, but the tax-deferred account experienced growth that the taxable account would not have.
Right! I’ve been trying to convince people not to let taxes and or penalties be the biggest thing in the world. Especially if it’s actually for an emergency or life change. This is another reason I’ve been looking at starting a taxable account just for flexible spending or as part of an emergency fund. If I’m in the 12% bracket, would a $10,000 allocation to bonds be appropriate in a taxable for “second tier” emergencies?
I would favor using Roth contributions as a second tier emergency fund.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
mikeyzito22
Posts: 504
Joined: Sat Dec 02, 2017 5:42 pm

Re: Where do you keep your emergency fund?

Post by mikeyzito22 »

willthrill81 wrote: Wed Jun 17, 2020 4:35 pm
mikeyzito22 wrote: Wed Jun 17, 2020 9:41 am
willthrill81 wrote: Wed Jun 17, 2020 9:35 am
mikeyzito22 wrote: Wed Jun 17, 2020 9:19 am
willthrill81 wrote: Wed Jun 17, 2020 9:16 am

No. You cannot access a 403b before age 59.5 without penalties unless you're in one of the exceptional situations or using the SEPP 72(t) rule.
Thanks Will, not planning on getting fired but good to know.
Keep in mind as well that paying the 10% penalty for early withdrawals is not the worst thing in the world. I believe that someone once demonstrated on the Mad Fientist's web site that depending on one's tax situation, early retirees paying the penalty still resulted in greater after-tax wealth vs. having used a taxable account instead. For instance, if someone was in the 22% bracket while working but 12% in early retirement, the 10% penalty basically resulted in a wash in terms of contributions, but the tax-deferred account experienced growth that the taxable account would not have.
Right! I’ve been trying to convince people not to let taxes and or penalties be the biggest thing in the world. Especially if it’s actually for an emergency or life change. This is another reason I’ve been looking at starting a taxable account just for flexible spending or as part of an emergency fund. If I’m in the 12% bracket, would a $10,000 allocation to bonds be appropriate in a taxable for “second tier” emergencies?
I would favor using Roth contributions as a second tier emergency fund.
Me too, but I was under the impression that I should hold all stock in the Roth, due to it being tax-free growth. I guess I'm just overthining this, but I want to know WHERE to put the second tier. I already know I want a short term or Total Bond as the vehicle. And yes, I've read about keeping Bonds in the 403b and switching selling stock and replacing with stock in the other account. Maybe I'm just trying to rationalize opening a taxable.
User avatar
abuss368
Posts: 23045
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Where do you keep your emergency fund?

Post by abuss368 »

We have no separate account. One simple checking and one simple money market with Vanguard has done the job. We have cash that is available when needed. Add a little each pay period and it has worked.
John C. Bogle: “Simplicity is the master key to financial success."
mikeyzito22
Posts: 504
Joined: Sat Dec 02, 2017 5:42 pm

Re: Where do you keep your emergency fund?

Post by mikeyzito22 »

abuss368 wrote: Wed Jun 17, 2020 4:47 pm We have no separate account. One simple checking and one simple money market with Vanguard has done the job. We have cash that is available when needed. Add a little each pay period and it has worked.
Is the simple moneh market in a taxable account with other mutual funds?
User avatar
abuss368
Posts: 23045
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Where do you keep your emergency fund?

Post by abuss368 »

mikeyzito22 wrote: Wed Jun 17, 2020 5:21 pm
abuss368 wrote: Wed Jun 17, 2020 4:47 pm We have no separate account. One simple checking and one simple money market with Vanguard has done the job. We have cash that is available when needed. Add a little each pay period and it has worked.
Is the simple moneh market in a taxable account with other mutual funds?
Actually no. A separate account. I did this intentionally. When we purchased a home a few years ago I only needed to disclose the cash to buy the home. The broker was satisfied with the cash balances. Did not need to disclose any investments and thus kept confidential. That is why I kept a separate account.
John C. Bogle: “Simplicity is the master key to financial success."
mikeyzito22
Posts: 504
Joined: Sat Dec 02, 2017 5:42 pm

Re: Where do you keep your emergency fund?

Post by mikeyzito22 »

abuss368 wrote: Wed Jun 17, 2020 8:17 pm
mikeyzito22 wrote: Wed Jun 17, 2020 5:21 pm
abuss368 wrote: Wed Jun 17, 2020 4:47 pm We have no separate account. One simple checking and one simple money market with Vanguard has done the job. We have cash that is available when needed. Add a little each pay period and it has worked.
Is the simple moneh market in a taxable account with other mutual funds?
Actually no. A separate account. I did this intentionally. When we purchased a home a few years ago I only needed to disclose the cash to buy the home. The broker was satisfied with the cash balances. Did not need to disclose any investments and thus kept confidential. That is why I kept a separate account.
Okay. I bought a home and never had a broker ask me how much I had in investments. They just asked me how much I wanted to put down. That's odd. Anyway, was the seperate account still at Vanguard? I guess I'm asking because I have a HYS (somewhere else), a checking, and then Vanguard. Again, I'm probably over thinking.
User avatar
abuss368
Posts: 23045
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Where do you keep your emergency fund?

Post by abuss368 »

mikeyzito22 wrote: Wed Jun 17, 2020 8:20 pm
abuss368 wrote: Wed Jun 17, 2020 8:17 pm
mikeyzito22 wrote: Wed Jun 17, 2020 5:21 pm
abuss368 wrote: Wed Jun 17, 2020 4:47 pm We have no separate account. One simple checking and one simple money market with Vanguard has done the job. We have cash that is available when needed. Add a little each pay period and it has worked.
Is the simple moneh market in a taxable account with other mutual funds?
Actually no. A separate account. I did this intentionally. When we purchased a home a few years ago I only needed to disclose the cash to buy the home. The broker was satisfied with the cash balances. Did not need to disclose any investments and thus kept confidential. That is why I kept a separate account.
Okay. I bought a home and never had a broker ask me how much I had in investments. They just asked me how much I wanted to put down. That's odd. Anyway, was the seperate account still at Vanguard?
At the time it was with the bank. Now in a separate Vanguard account by itself. We did not cash out of pocket and used existing equity. The wanted a statement of net worth. Broker reviewed cash and said that was plenty. No need to disclose portfolio which made us happy.

I learned the value of keeping cash segregated in a different account. Other folks may not be worried but I prefer not to disclose the portfolio if not needed.
Last edited by abuss368 on Wed Jun 17, 2020 9:48 pm, edited 1 time in total.
John C. Bogle: “Simplicity is the master key to financial success."
mikeyzito22
Posts: 504
Joined: Sat Dec 02, 2017 5:42 pm

Re: Where do you keep your emergency fund?

Post by mikeyzito22 »

abuss368 wrote: Wed Jun 17, 2020 8:22 pm
mikeyzito22 wrote: Wed Jun 17, 2020 8:20 pm
abuss368 wrote: Wed Jun 17, 2020 8:17 pm
mikeyzito22 wrote: Wed Jun 17, 2020 5:21 pm
abuss368 wrote: Wed Jun 17, 2020 4:47 pm We have no separate account. One simple checking and one simple money market with Vanguard has done the job. We have cash that is available when needed. Add a little each pay period and it has worked.
Is the simple moneh market in a taxable account with other mutual funds?
Actually no. A separate account. I did this intentionally. When we purchased a home a few years ago I only needed to disclose the cash to buy the home. The broker was satisfied with the cash balances. Did not need to disclose any investments and thus kept confidential. That is why I kept a separate account.
Okay. I bought a home and never had a broker ask me how much I had in investments. They just asked me how much I wanted to put down. That's odd. Anyway, was the seperate account still at Vanguard?
At the time it was with the bank. Now in a separate Vanguard account by itself. We did not cash out of pocket and used existing equity. The wanted a statement of net worth. Broker reviewed cash and said that was plenty. No need to disclose portfolio which made us happy.

I learned the value of keep cash segregated in a different account. Other folks may not be worried but I prefer not to disclose the portfolio if not needed.
Smart man. I wouldn't want to disclose anything if I could help it. I've really enjoyed your posts. You've been really helpful.
User avatar
abuss368
Posts: 23045
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Where do you keep your emergency fund?

Post by abuss368 »

mikeyzito22 wrote: Wed Jun 17, 2020 8:33 pm
abuss368 wrote: Wed Jun 17, 2020 8:22 pm
mikeyzito22 wrote: Wed Jun 17, 2020 8:20 pm
abuss368 wrote: Wed Jun 17, 2020 8:17 pm
mikeyzito22 wrote: Wed Jun 17, 2020 5:21 pm
Is the simple moneh market in a taxable account with other mutual funds?
Actually no. A separate account. I did this intentionally. When we purchased a home a few years ago I only needed to disclose the cash to buy the home. The broker was satisfied with the cash balances. Did not need to disclose any investments and thus kept confidential. That is why I kept a separate account.
Okay. I bought a home and never had a broker ask me how much I had in investments. They just asked me how much I wanted to put down. That's odd. Anyway, was the seperate account still at Vanguard?
At the time it was with the bank. Now in a separate Vanguard account by itself. We did not cash out of pocket and used existing equity. The wanted a statement of net worth. Broker reviewed cash and said that was plenty. No need to disclose portfolio which made us happy.

I learned the value of keep cash segregated in a different account. Other folks may not be worried but I prefer not to disclose the portfolio if not needed.
Smart man. I wouldn't want to disclose anything if I could help it. I've really enjoyed your posts. You've been really helpful.
Thanks! :beer
John C. Bogle: “Simplicity is the master key to financial success."
User avatar
knpstr
Posts: 2890
Joined: Thu Nov 20, 2014 8:57 pm
Location: Michigan

Re: Where do you keep your emergency fund?

Post by knpstr »

mikeyzito22 wrote: Tue Jun 16, 2020 10:54 pm
knpstr wrote: Sun Jan 27, 2019 8:17 pm +1
This works great as an emergency fund and it is an easy place to park some cash.

Short term treasury fund would be another good pick for another 0.2%. Warren Buffett suggests keeping one's bond portion in short-term treasuries for his 90/10 recommendation.
If you sell out of Vanguard Fed Money Market in a brokerage account, do you incur taxes? I'm only asking because I was thinking of putting our em in a bond fund, maybe risk level two, in taxable.....or in a PP money market. Still debating how to structure "tier two" emergency fund and thinking taxable. Don't currently have a taxable except the mm at Ally.
You shouldn't have any capital gains. MM are intended to stay at a value of $1 per share always any "gains" are paid out as dividends. You can always look at your statement and see if it has any unrealized gains, I would doubt that it does.
Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius
RTF
Posts: 67
Joined: Thu Jan 30, 2020 10:08 am

Re: Where do you keep your emergency fund?

Post by RTF »

Question for you guys. My wife and I are currently living in New Jersey. We moved here about a year ago for my wife’s work. We are currently renting but will probably be buying a house here or in Pennsylvania in the next few years. I currently keep our EF/ Down payment fund in a CIT bank MM that was yielding decent returns at one point but not so much anymore. I found that vanguard has a MM fund specifically for NJ residents that is Federal and State tax exempt. (VNJXX) I’m thinking of moving this money (~105k) to my vanguard taxable brokerage account for 2 reasons, the first for simplicity and having one less account. The second is it seems like a a good move to avoid paying more taxes albeit nothing major. Our tax bill still hurts me to talk about after living here for our first year. Is this a sound plan? Any gotchas or anything I’m missing?
mikeyzito22
Posts: 504
Joined: Sat Dec 02, 2017 5:42 pm

Re: Where do you keep your emergency fund?

Post by mikeyzito22 »

knpstr wrote: Thu Jun 18, 2020 12:27 pm
mikeyzito22 wrote: Tue Jun 16, 2020 10:54 pm
knpstr wrote: Sun Jan 27, 2019 8:17 pm +1
This works great as an emergency fund and it is an easy place to park some cash.

Short term treasury fund would be another good pick for another 0.2%. Warren Buffett suggests keeping one's bond portion in short-term treasuries for his 90/10 recommendation.
If you sell out of Vanguard Fed Money Market in a brokerage account, do you incur taxes? I'm only asking because I was thinking of putting our em in a bond fund, maybe risk level two, in taxable.....or in a PP money market. Still debating how to structure "tier two" emergency fund and thinking taxable. Don't currently have a taxable except the mm at Ally.
You shouldn't have any capital gains. MM are intended to stay at a value of $1 per share always any "gains" are paid out as dividends. You can always look at your statement and see if it has any unrealized gains, I would doubt that it does.
According to things I see, if I’m in the 12% bracket, I wouldn’t pay cap gains on anything, even a bond fund in there. Does hat sound correct?
mikeyzito22
Posts: 504
Joined: Sat Dec 02, 2017 5:42 pm

Re: Where do you keep your emergency fund?

Post by mikeyzito22 »

mikeyzito22 wrote: Thu Jun 18, 2020 1:30 pm
knpstr wrote: Thu Jun 18, 2020 12:27 pm
mikeyzito22 wrote: Tue Jun 16, 2020 10:54 pm
knpstr wrote: Sun Jan 27, 2019 8:17 pm +1
This works great as an emergency fund and it is an easy place to park some cash.

Short term treasury fund would be another good pick for another 0.2%. Warren Buffett suggests keeping one's bond portion in short-term treasuries for his 90/10 recommendation.
If you sell out of Vanguard Fed Money Market in a brokerage account, do you incur taxes? I'm only asking because I was thinking of putting our em in a bond fund, maybe risk level two, in taxable.....or in a PP money market. Still debating how to structure "tier two" emergency fund and thinking taxable. Don't currently have a taxable except the mm at Ally.
You shouldn't have any capital gains. MM are intended to stay at a value of $1 per share always any "gains" are paid out as dividends. You can always look at your statement and see if it has any unrealized gains, I would doubt that it does.
According to things I see, if I’m in the 12% bracket, I wouldn’t pay cap gains on anything, even a bond fund in there. Does hat sound correct?
knpstr wrote: Thu Jun 18, 2020 12:27 pm
mikeyzito22 wrote: Tue Jun 16, 2020 10:54 pm
knpstr wrote: Sun Jan 27, 2019 8:17 pm +1
This works great as an emergency fund and it is an easy place to park some cash.

Short term treasury fund would be another good pick for another 0.2%. Warren Buffett suggests keeping one's bond portion in short-term treasuries for his 90/10 recommendation.
If you sell out of Vanguard Fed Money Market in a brokerage account, do you incur taxes? I'm only asking because I was thinking of putting our em in a bond fund, maybe risk level two, in taxable.....or in a PP money market. Still debating how to structure "tier two" emergency fund and thinking taxable. Don't currently have a taxable except the mm at Ally.
You shouldn't have any capital gains. MM are intended to stay at a value of $1 per share always any "gains" are paid out as dividends. You can always look at your statement and see if it has any unrealized gains, I would doubt that it does.
According to things I see, if I’m in the 12% bracket, I wouldn’t pay cap gains on anything, even a bond fund in there. Does that sound correct?
djheini
Posts: 111
Joined: Fri Jul 29, 2016 5:53 pm
Location: Boston area

Re: Where do you keep your emergency fund?

Post by djheini »

mikeyzito22 wrote: Thu Jun 18, 2020 1:30 pm
knpstr wrote: Thu Jun 18, 2020 12:27 pm
mikeyzito22 wrote: Tue Jun 16, 2020 10:54 pm
knpstr wrote: Sun Jan 27, 2019 8:17 pm +1
This works great as an emergency fund and it is an easy place to park some cash.

Short term treasury fund would be another good pick for another 0.2%. Warren Buffett suggests keeping one's bond portion in short-term treasuries for his 90/10 recommendation.
If you sell out of Vanguard Fed Money Market in a brokerage account, do you incur taxes? I'm only asking because I was thinking of putting our em in a bond fund, maybe risk level two, in taxable.....or in a PP money market. Still debating how to structure "tier two" emergency fund and thinking taxable. Don't currently have a taxable except the mm at Ally.
You shouldn't have any capital gains. MM are intended to stay at a value of $1 per share always any "gains" are paid out as dividends. You can always look at your statement and see if it has any unrealized gains, I would doubt that it does.
According to things I see, if I’m in the 12% bracket, I wouldn’t pay cap gains on anything, even a bond fund in there. Does hat sound correct?
The lower/zero tax rate only applies to capital gains (difference between purchase and sale price when you sell) and *qualified* dividends. As far as I know generally only stocks pay qualified dividends, so bond funds would pay ordinary dividends which would be taxable at your normal tax rate.

So as an example:
Buy $10,000 of bond fund
It pays $20/month in interest/dividends
The share price raises to $10,100 by the time you sell.
So if you held it for at least one year (to get long term capital gain treatment), you'd end up paying the lower tax rate (which might be 0 if you're in a low bracket) on the $100 in share price gain, and regular income tax rates on the $20/month.
mikeyzito22
Posts: 504
Joined: Sat Dec 02, 2017 5:42 pm

Re: Where do you keep your emergency fund?

Post by mikeyzito22 »

Sounds correct. Since this is such a small amount it looks like it would be so small it wouldn’t be worrisome. Thank you!
crossbow
Posts: 197
Joined: Mon Nov 12, 2018 6:47 pm

Re: Where do you keep your emergency fund?

Post by crossbow »

RTF wrote: Thu Jun 18, 2020 1:26 pm Question for you guys. My wife and I are currently living in New Jersey. We moved here about a year ago for my wife’s work. We are currently renting but will probably be buying a house here or in Pennsylvania in the next few years. I currently keep our EF/ Down payment fund in a CIT bank MM that was yielding decent returns at one point but not so much anymore. I found that vanguard has a MM fund specifically for NJ residents that is Federal and State tax exempt. (VNJXX) I’m thinking of moving this money (~105k) to my vanguard taxable brokerage account for 2 reasons, the first for simplicity and having one less account. The second is it seems like a a good move to avoid paying more taxes albeit nothing major. Our tax bill still hurts me to talk about after living here for our first year. Is this a sound plan? Any gotchas or anything I’m missing?
You might want to factor in that VNJXX has an expense ratio of 0.16%. If you moved $100K into VNJXX, you'd be paying $160/year in fees, but you save on paying taxes on your interest income.
Wings5
Posts: 184
Joined: Sun Nov 16, 2014 5:17 pm

Re: Where do you keep your emergency fund?

Post by Wings5 »

We've been keeping about 9 months in a CU checking account that earns 4% interest on the entire balance, provided we make 15 debit card transactions each month. We only use the card for those transactions, and parcel out things that we're buying already. Since we're in the 22% bracket, that's a 3.78% return after tax, I think. (It's late night math with a beer in hand - the JosephsBrau Hef is tasty.) We also have another 9 months in Roth IRAs, mainly in bonds as part of our total AA.

9 months cash at >3% and 9 months in VBMFX as a Roth IRA.

Am I better off using this for my entire EF, versus a 3-tier approach using 3 months each in cash, CDs, then short-term Treasury bonds? The return and the accessibility seem better, at least on the checking account.
“Ronald James Read was an American philanthropist, investor, janitor, and gas station attendant.”
JimmyJammy
Posts: 252
Joined: Sat Oct 26, 2013 1:08 pm

Re: Where do you keep your emergency fund?

Post by JimmyJammy »

What do folks here think of Vanguard's Short-Term Federal Fund? (VSGDX and VSGBX)

https://investor.vanguard.com/mutual-fu ... view/vsgdx

The investor fund has a .2% ER and the Admiral fund has a .10% expense ratio. And with the actions of the Fed and also with investors using treasuries as their #1 safety cushion of choice, the value keeps going up and up, with very little risk. (Granted more risk than a money market fund).

The 30 day SEC yield is 1.43% on the Admiral.

For those willing to take on a little more risk than a money market fund (tax-free muni or otherwise) the rewards seem enticing.

There's also the Short-Term Treasury fund. VFIRX. I really don't know what the difference is (the 30 day yield is much lower at .4%): https://investor.vanguard.com/mutual-fu ... view/vfirx
User avatar
anon_investor
Posts: 4367
Joined: Mon Jun 03, 2019 1:43 pm

Re: Where do you keep your emergency fund?

Post by anon_investor »

JimmyJammy wrote: Sat Jun 20, 2020 11:04 am What do folks here think of Vanguard's Short-Term Federal Fund? (VSGDX and VSGBX)

https://investor.vanguard.com/mutual-fu ... view/vsgdx

The investor fund has a .2% ER and the Admiral fund has a .10% expense ratio. And with the actions of the Fed and also with investors using treasuries as their #1 safety cushion of choice, the value keeps going up and up, with very little risk. (Granted more risk than a money market fund).

The 30 day SEC yield is 1.43% on the Admiral.

For those willing to take on a little more risk than a money market fund (tax-free muni or otherwise) the rewards seem enticing.

There's also the Short-Term Treasury fund. VFIRX. I really don't know what the difference is (the 30 day yield is much lower at .4%): https://investor.vanguard.com/mutual-fu ... view/vfirx
I am considering using VSGBX for funds from an expiring no penalty CD that is part of my emergency fund. I would only get 1% if I renewed. Looks like the 30 day SEC yield of VSGBX is still over 1.3%. Looks like the fund is pretty safe and the bulk of my emergency fund is still in no penalty CDs still earning 1.35% to 1.85% until next year so I can take a little risk, but still undecided.
JimmyJammy
Posts: 252
Joined: Sat Oct 26, 2013 1:08 pm

Re: Where do you keep your emergency fund?

Post by JimmyJammy »

anon_investor wrote: Sat Jun 20, 2020 11:30 am
JimmyJammy wrote: Sat Jun 20, 2020 11:04 am What do folks here think of Vanguard's Short-Term Federal Fund? (VSGDX and VSGBX)

https://investor.vanguard.com/mutual-fu ... view/vsgdx

The investor fund has a .2% ER and the Admiral fund has a .10% expense ratio. And with the actions of the Fed and also with investors using treasuries as their #1 safety cushion of choice, the value keeps going up and up, with very little risk. (Granted more risk than a money market fund).

The 30 day SEC yield is 1.43% on the Admiral.

For those willing to take on a little more risk than a money market fund (tax-free muni or otherwise) the rewards seem enticing.

There's also the Short-Term Treasury fund. VFIRX. I really don't know what the difference is (the 30 day yield is much lower at .4%): https://investor.vanguard.com/mutual-fu ... view/vfirx
I am considering using VSGBX for funds from an expiring no penalty CD that is part of my emergency fund. I would only get 1% if I renewed. Looks like the 30 day SEC yield of VSGBX is still over 1.3%. Looks like the fund is pretty safe and the bulk of my emergency fund is still in no penalty CDs still earning 1.35% to 1.85% until next year so I can take a little risk, but still undecided.
Good to know someone else in interested in that fund. I have no CDs. I do not want to go outside of Vanguard and right now their best brokered CD for 13-18 months is yielding .25%. Not worth it for me. I guess I should have locked in the good rates when I had a chance.
scottcar
Posts: 1
Joined: Sat Jun 27, 2020 2:13 pm

Re: Where do you keep your emergency fund?

Post by scottcar »

Would the equivalent in Fidelity of Vanguards VSGBX be FFXSX? Similar risk to VSGBX?
User avatar
geerhardusvos
Posts: 1565
Joined: Wed Oct 23, 2019 10:20 pm
Location: heavenlies

Re: Where do you keep your emergency fund?

Post by geerhardusvos »

siriusblack wrote: Sat Jan 26, 2019 10:41 am I have my emergency fund in VFSTX (Vanguard Short-Term Investment Grade Bond Fund) -- but I was recently wondering whether maybe I'm carrying too much risk for an emergency fund. What do you all think?
6 months living expenses in ally no pen cd
VTSAX and chill
Post Reply