Need to move "safe" money to another place

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sheople2
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Need to move "safe" money to another place

Post by sheople2 » Sat Jan 13, 2018 9:01 pm

I have an online savings account and a few CDs at Ally Bank. I just discovered that they don’t have a contingent beneficiary choice. Since that’s important to me, I’ve decided to first move the savings account money elsewhere. Eventually when the CDs mature, I’ll move those out of Ally as well. I called several other banks and none of them offer anything other than a primary bene.

If I move the money into Vanguard they assured me that I can set up primary, contingent and even tertiary for these types of accounts. (I’m already a Vanguard customer, but I only currently utilize their stock mutual funds.)

My questions are - Is this a smart move? Will I be subject to fees that I wouldn’t have at Ally? Is it complicated to set up? What can I get that will duplicate my Ally savings account (1.25%) that will generate a bit of interest - do they offer those? ...Or would I have to get a money market account? I don’t even know how those work. I just know that I need to be able to access some of this savings account money quickly and easily at times. Also, are there CD rates comparable to Ally (2%)?

I have some money with Scottrade so another choice could be to move the money there. However, I don't care for their high-pressure sales.

Please keep answers simple. I’d be happy to provide additional info if you need it. Thanks.

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Kevin M
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Re: Need to move "safe" money to another place

Post by Kevin M » Sat Jan 13, 2018 9:28 pm

Are you talking about an IRA account or taxable account?
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Re: Need to move "safe" money to another place

Post by Kevin M » Sat Jan 13, 2018 9:37 pm

sheople2 wrote:
Sat Jan 13, 2018 9:01 pm
Will I be subject to fees that I wouldn’t have at Ally? Is it complicated to set up? What can I get that will duplicate my Ally savings account (1.25%) that will generate a bit of interest - do they offer those? ...Or would I have to get a money market account? I don’t even know how those work. I just know that I need to be able to access some of this savings account money quickly and easily at times. Also, are there CD rates comparable to Ally (2%)?
Regardless of type of account (IRA or taxable), at Vanguard you would use a money market account as a substitute for a savings account. They do not offer FDIC-insured savings accounts, like a bank does. The money market accounts are very safe, and now actually have slightly higher rates than an Ally savings account (prime money market, and perhaps a muni money market fund).

Depending on your marginal tax rates, you might want to consider a municipal money market fund. We can discuss this further if you are interested.

You can set up a link to your Ally checking account to get quick access to the money in a Vanguard money market fund using ACH transfer (like 2 business days).

There are no extra fees as long as you sign up for e-delivery service.

Kevin
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sheople2
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Re: Need to move "safe" money to another place

Post by sheople2 » Sat Jan 13, 2018 9:46 pm

No, not an IRA account.
I'm on SSDI so no tax liability at this time.
I'd like to be able to do transactions by phone, rather than internet - like I do now with Ally for free.
I may be confused, but I thought Vanguard told me that they could set it up for me initially and call Ally in order to take all of the money out of Ally online-savings account and send it over to Vanguard in one shot.
I need to be able to occasionally send money back and forth between my local checking account and Vanguard "savings" account. My local checking is not currently linked with Vanguard.
Last edited by sheople2 on Sat Jan 13, 2018 9:51 pm, edited 1 time in total.

JBTX
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Re: Need to move "safe" money to another place

Post by JBTX » Sat Jan 13, 2018 9:49 pm

Do you have a will or living trust? Ultimately you can designate secondary beneficiaries that way. I understand the desire to avoid probate and do a direct designation but I would probably consider FDIC insurance and higher yield more important.

sheople2
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Re: Need to move "safe" money to another place

Post by sheople2 » Sat Jan 13, 2018 9:59 pm

I don't own property. The general Will is almost complete. I have no plans for a trust. All of my money accounts currently have at least a primary bene via TOD or POD. These automatically bypass probate. TOD/POD supercedes a Will. (See concern below)

JBTX - can you dumb it down for me further. I'm not sure what you're suggesting. Are you saying that my money won't be safe / insured at Vanguard if it's in simple CDs or a simple savings account which I guess in this case would be the Prime Money Market account? ..And it won't earn as much interest as Ally? I'm 50 yrs old and have 60% in equities so I'd like that other 40% to be truly safe, but be able to make a little interest and have a continent beneficiary.

JBTX - My concern is this; If I just leave my money at Ally and my Will says that 100% will go to primary Person A but then Person A dies and can't collect - the money would then go to next in line, which is my siblings. That's not what I want. I'd like it all to go to Charity B as contingent, but Ally won't let me set it up this way. The Will should indicate the same thing as the TOD/POD.
Last edited by sheople2 on Sat Jan 13, 2018 10:23 pm, edited 3 times in total.

Lou354
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Re: Need to move "safe" money to another place

Post by Lou354 » Sat Jan 13, 2018 10:04 pm

Brokered CDs, available through Vanguard, are FDIC insured. Money market funds are not.

sheople2
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Re: Need to move "safe" money to another place

Post by sheople2 » Sat Jan 13, 2018 10:18 pm

Let me get this straight. It sounds like I have no good choices for moving this savings account money. The banks are FDIC insured but have no contingent beneficiaries. Vanguard (and probably Scottrade?) has no insurance but does have beneficiary choices.

I'm good and worried now. Need a break. Will continue with this tomorrow. Thanks.

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Tyler Aspect
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Re: Need to move "safe" money to another place

Post by Tyler Aspect » Sat Jan 13, 2018 10:18 pm

For long term safe investment most Bogleheads use a total bond market index fund, such as ticker symbol VBTLX, BND, or AGG. For a termed deposit it could be a brokered CD, or US Treasury Notes. Short term cash could be in Vanguard's Treasury money market fund.
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sheople2
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Re: Need to move "safe" money to another place

Post by sheople2 » Sat Jan 13, 2018 10:25 pm

Not using a bond fund. And I'm trying to duplicate what I have at Ally. I'm now leaning on just leaving it there.

sheople2
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Re: Need to move "safe" money to another place

Post by sheople2 » Sat Jan 13, 2018 10:30 pm

Prime and Treasury money markets suggested. What is the difference? Which have a better annual percentage yield.
Neither are insured? Do people worry about that?

I just Googled "what is a money market account" and got a link to Ally which claims to offer money-market accounts that are FDIC insured. Can someone explain simply. What's goin' on?

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Re: Need to move "safe" money to another place

Post by TheDDC » Sat Jan 13, 2018 10:31 pm

sheople2 wrote:
Sat Jan 13, 2018 10:25 pm
Not using a bond fund. And I'm trying to duplicate what I have at Ally. I'm now leaning on just leaving it there.
Have you checked out your local community type banks and shopped around? Lots of them have the Kasasa type products to entice new customers. Around here in PA there are two banks who offer 2% APY on a checking account... one up to $50k, and the other up to $25k. Before I discovered Vanguard funds I had most of my money tied up between these two banks in cash. I'm pretty sure they could set up a beneficiary to your specifications.

EDIT: one bank offers this in checking, the other in savings.

Happy shopping!

-TheDDC

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Tyler Aspect
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Re: Need to move "safe" money to another place

Post by Tyler Aspect » Sat Jan 13, 2018 10:49 pm

US Treasury securities are generally considered as more safe compared to FDIC insured products. Vanguard Treasury Money Market's current yield is 1.24%.

If you insist in ultra-safe long term investments, then maybe a ladder of US Treasury Notes can work for you. They should be able to get you a yield that is above 2%. You can start a non-traditional ladder by purchasing two units of 4 year Note for every one unit of 6 year Note. The same strategy can be applied to brokered CDs.
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Re: Need to move "safe" money to another place

Post by Katietsu » Sat Jan 13, 2018 11:14 pm

1) I was told that, legally, a FDIC insured bank account can NOT have contigent beneficiaries.
So, I don’t think you can do exactly what you want. You would have to slightly adjust your plan.
2) If the person listed on your bank account is deceased then the money goes to your estate. If you have a will it goes to whoever the will says it goes to. The only way it goes to your siblings is if state law has to step in because you do not have a will. So you can keep the money at Ally and do a will in case the named beneficiary dies before you.

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Re: Need to move "safe" money to another place

Post by jimishooch » Sun Jan 14, 2018 12:07 pm

sheople2 wrote:
Sat Jan 13, 2018 10:18 pm
Let me get this straight. It sounds like I have no good choices for moving this savings account money. The banks are FDIC insured but have no contingent beneficiaries. Vanguard (and probably Scottrade?) has no insurance but does have beneficiary choices.

I'm good and worried now. Need a break. Will continue with this tomorrow. Thanks.
try synchrony...

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Kevin M
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Re: Need to move "safe" money to another place

Post by Kevin M » Sun Jan 14, 2018 12:53 pm

sheople2 wrote:
Sat Jan 13, 2018 9:46 pm
No, not an IRA account.
OK, so we're talking POD/TOD. Using a trust account at Ally would solve your problem, but I understand that you don't want to draft a living trust.

Vanguard allows TOD accounts for individuals, but not for joint accounts. I assume that if Vanguard told you they could meet your needs for contingent beneficiaries with a TOD account, that you are talking about an individual account.
I'm on SSDI so no tax liability at this time.
OK, so you wouldn't use a municipal money market. There are several money market funds to choose from. The Treasury fund is the safest, but has the lowest yield. I consider Prime Money Market fund to be extremely safe--there were no problems with this fund during the 2008 financial crisis. The yield on Prime MM is 1.42%, so quite a bit better than the Ally savings account.

The Treasury MM fund, with a yield of 1.19%, requires a minimum investment of 50,000.

If you want government backing, so aren't comfortable with Prime MM, and you are talking about less than 50,000, you could buy either short-term Treasuries or FDIC-insured CDs, but these won't provide the instant liquidity you seem to want. You could use a combination of these with some in a money market fund for liquidity.
I'd like to be able to do transactions by phone, rather than internet - like I do now with Ally for free.
You probably can do most things by phone. Vanguard can tell you whether or not you can do everything you want to do by phone. I do everything online, so have little direct knowledge here.
I may be confused, but I thought Vanguard told me that they could set it up for me initially and call Ally in order to take all of the money out of Ally online-savings account and send it over to Vanguard in one shot.
If they told you they could do it, they probably can.
I need to be able to occasionally send money back and forth between my local checking account and Vanguard "savings" account. My local checking is not currently linked with Vanguard.
You will need to link your local checking account to your Vanguard account to do this. It's very easy to do online; maybe Vanguard can help you do it without having to go online.

Kevin
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CAsage
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Re: Need to move "safe" money to another place

Post by CAsage » Sun Jan 14, 2018 2:31 pm

Is your concern that you and your primary beneficiary will die at the same time, or that you will become unable to update this (incapacity of some sort), and beneficiary dies before you? If those are unlikely, you may be thinking too hard here. Naming and updating a primary beneficiary will cover a lot of time! Above posts have said that you can then manage your charitable donations in your will - so I think that is the easiest plan. Don't let the beneficiary tail wag the investment dog (to mangle an old phrase...). Just make your will clear that your residual ("all else") estate goes to charity (though of course you can leave some specific things if you wish). While you are alive, safety and better interest rule.
Personally, I happen to like short or intermediate corporate bonds and CDs - I have a mix.
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.

sheople2
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Re: Need to move "safe" money to another place

Post by sheople2 » Tue Jan 16, 2018 10:38 pm

Extremely helpful posts, as usual. Superior board here. Two more questions and then I’ll let this post run out.

(Yes, to the last poster CAsage - that’s exactly what I was concerned about.)

1) Just so I’m clear, my primary bene will be able to bypass probate because he’s already listed in all my accounts as TOD or POD, correct? The addition of my Will won’t change that, right?

I intend to finish the Will, continue keeping the money at Ally for now and then the contingent (a charity) will get the money as I intend, but will have to go through probate to get it. …And I’m choosing not to be concerned with this, correct?

2) In plain English, how are brokered CDs (Vanguard) different from “regular” CDs at Ally?

Thanks everyone.

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AAA
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Re: Need to move "safe" money to another place

Post by AAA » Wed Jan 17, 2018 8:49 am

sheople2 wrote:
Tue Jan 16, 2018 10:38 pm
2) In plain English, how are brokered CDs (Vanguard) different from “regular” CDs at Ally?
There is no early withdrawal penalty option with a brokered CD - you would have to sell it on the secondary market with possible loss depending on how interest rates have moved since you purchased it. Also, the rating of the bank that issued the CD could come into play with determining what you would get on the secondary market as the big players that might purchase it from you are not protected by FDIC due to the large position they may have with that bank. On the positive side is the convenience of brokered CD's.

sheople2
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Re: Need to move "safe" money to another place

Post by sheople2 » Wed Jan 17, 2018 10:26 pm

Wow. I need the explanation about brokered CDs dumbed dumb several more notches. Sorry to inconvenience.
Are there simple pros and cons to both types of CDs? Still don't understand the brokered ones.
Also, If someone can answer other question that would help. Thanks so much.

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CAsage
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Re: Need to move "safe" money to another place

Post by CAsage » Wed Jan 17, 2018 11:21 pm

sheople2 wrote:
Tue Jan 16, 2018 10:38 pm
1) Just so I’m clear, my primary bene will be able to bypass probate because he’s already listed in all my accounts as TOD or POD, correct? The addition of my Will won’t change that, right? I intend to finish the Will, continue keeping the money at Ally for now and then the contingent (a charity) will get the money as I intend, but will have to go through probate to get it. …And I’m choosing not to be concerned with this, correct?
2) In plain English, how are brokered CDs (Vanguard) different from “regular” CDs at Ally?
Yes, a primary bene will bypass probate because TOD/POD on accounts (and beneficiary designations on IRAs and life insurance...) outrank your will. They take effect immediately with your demise (ok, after the death cert is issued). Leaving your primary bene as TOD/POD and then writing a will that says Primary Bene gets everything if he survives you by some # days, otherwise everything goes to charity, works fine. You will need an executor, so another good friend or relative would be good. Might want some assets left to handle final medical bills, funeral, ??? Think about how that will get paid. If you both die, you won't really care!
Regular CDs are plain old time deposit contracts = a specified rate, specified time, and some kind of penalty if break early (terms vary, but those three items are the only variables). Brokered CDs... are more like bonds - can be sold, bought, have different fees.... I've never dabbled, but here is a link:
https://www.bogleheads.org/wiki/Certifi ... okered_CDs
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.

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Tyler Aspect
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Re: Need to move "safe" money to another place

Post by Tyler Aspect » Wed Jan 17, 2018 11:34 pm

sheople2 wrote:
Wed Jan 17, 2018 10:26 pm
Wow. I need the explanation about brokered CDs dumbed dumb several more notches. Sorry to inconvenience.
Are there simple pros and cons to both types of CDs? Still don't understand the brokered ones.
Also, If someone can answer other question that would help. Thanks so much.
Brokered CD in Retirement Portfolio

https://drive.google.com/file/d/1UWtp_S ... sp=sharing
Past result does not predict future performance. Mentioned investments may lose money. Contents are presented "AS IS" and any implied suitability for a particular purpose are disclaimed.

sheople2
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Re: Need to move "safe" money to another place

Post by sheople2 » Thu Jan 18, 2018 2:30 am

CAsage wrote:
Wed Jan 17, 2018 11:21 pm
sheople2 wrote:
Tue Jan 16, 2018 10:38 pm
1) Just so I’m clear, my primary bene will be able to bypass probate because he’s already listed in all my accounts as TOD or POD, correct? The addition of my Will won’t change that, right? I intend to finish the Will, continue keeping the money at Ally for now and then the contingent (a charity) will get the money as I intend, but will have to go through probate to get it. …And I’m choosing not to be concerned with this, correct?
2) In plain English, how are brokered CDs (Vanguard) different from “regular” CDs at Ally?
Yes, a primary bene will bypass probate because TOD/POD on accounts (and beneficiary designations on IRAs and life insurance...) outrank your will. They take effect immediately with your demise (ok, after the death cert is issued). Leaving your primary bene as TOD/POD and then writing a will that says Primary Bene gets everything if he survives you by some # days, otherwise everything goes to charity, works fine. You will need an executor, so another good friend or relative would be good. Might want some assets left to handle final medical bills, funeral, ??? Think about how that will get paid. If you both die, you won't really care!
Regular CDs are plain old time deposit contracts = a specified rate, specified time, and some kind of penalty if break early (terms vary, but those three items are the only variables). Brokered CDs... are more like bonds - can be sold, bought, have different fees.... I've never dabbled, but here is a link:
https://www.bogleheads.org/wiki/Certifi ... okered_CDs
...and then the contingent (a charity) will get the money as I intend, but will have to go through probate to get it? Yes?

Also, I have a primary executor chosen who is also the primary bene - and the contingent executor will be my local bank. They'll both got a copy once it's properly completed.

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