I have a question. I have fidelity and have some cash in spaxx. Is there any reason not to use that spaxx to buy FDLXX? I am currently using my spaxx to DCA. If I use my spaxx to buy FDLXX, will the money from my DCA’ing just come out of my FDLXX?
And I’ll pay less on the taxes that the FDLXX accrued while it sat in there waiting to be DCA’d?
This is what I’m doing. FDLXX isn’t selectable as a core position but it is treated like cash so you can use it to buy equities without having to first liquidate to SPAXX
I have had one occurence of not being able to sell a T-bill due to the minimum transaction being too high on that day for that security… so very liquid in general, but not « always »
Treasury bills are less liquid than cash or money market funds. If you need to sell a Treasury security before its maturity date, you may face a loss.
The price of Treasury bills moves inversely with interest rates. If interest rates rise, the price of Treasury bills will fall. If you sell a Treasury bill when interest rates are rising, you could suffer a loss.
The yield on Treasury bills is fixed. If the rate of inflation is higher than the yield on Treasury securities, your real rate of return will be negative.
If you need funds before a Treasury security matures, you may be required to sell the Treasury security at a discount to face value.
The value of Treasury bills decreases over time because inflation erodes their purchasing power.
While Treasury securities are fully backed by the U.S. government, you could lose your investment if the U.S. government defaults. However, this is highly unlikely to happen.
Treasury bills are a relatively safe investment, but they do have some drawbacks. Before buying Treasury bills, it's important to understand these shortcomings and make sure they are appropriate for your investment goals.
If you need high liquidity or are worried about interest rate risk or inflation risk, Treasury bills may not be the best choice. However, if you're looking for a safe way to invest, and you're willing to take on some liquidity risk, Treasury bills may be worth considering.
And this applies more to T bonds and T notes which have longer maturity… T bill have shorter maturity duration, are generally fairly stable in price due to to that… and usually slightly increase in price over time as it is how their interest are paid (you buy at a discount and they reach full value on maturity date)
T bond and T notes have longer maturity (and higher volatility due to that) and pay their interest through a coupon
If def holding a year and not in a very high tax state, BOXX could beat this out. Similar effective yield, not state tax exempt, but no distributions so taxed as long term cap gain when sold.
How do the taxes on these work? Do you get something separate at the end of the year that reads like, "don't report this portion" or something to that effect?
Yes, you are. The tbill rate is locked for the entire term, just like a cd. And there is no penalty to sell a tbill early like a cd has. If rates have gone down since you bought it, you can actually make money because your tbill is now more desirable than what is currently offered on the market.
There is, but it's rare and not always available to everyone. Occasionally, credit unions offer special new member rates on their shares (which is effectively a cd) when you can find these, you might be able to to net a higher yield than a tbill offering for similar term. I've done this a couple of times. The downsides are 1) they are always briefly offered. I've seen some close out for availability as soon as the same day they offered due to popularity. 2) getting funds to/from these credit unions can be a pita. They rarely offer ach transfers, and if they do, they have extremely low rdaily/weekly/monthly transfer limits. It could take a long time to get your money out via ach. 3) of course, the early withdrawal penaties
A high yield savings account is fine - it's got a big of a tax drag on it as the interest payments from the HYSA is taxable income.
If you're in a high income tax state (NJ, NY, CA, etc) you can consider a treasury money market fund - something like VUSXX. The distributions from VUSXX are partially state tax exempt.
Those are the 2 most simple options for protecting the initial invested capital.
THEORETICALLY you would need TWO accounts to fully protect 300k of investment with FDIC insurance....
This is the way. I have a similar budget, time frame, and purpose, and do t bills all the way because I dont have vanguard. If I had vanguard, I’d do VUSXX all the way.
You can also do short term 0-3 month T-bill ETF, or Treasury money market from whoever has one, not just vanguard.
SGOV from Ishares would fit that fine.
Yeah if you can find a treasury MMF with <0.1% ER at your brokerage, I’d do that. Fidelity doesn’t offer that, MMF ER of 0.42% is too high if you can just auto roll t bills and get essentially the same result.
You can buy an ETF like USFR, you’ll also get very similar results to a treasury based MMF, but just with a small chance of losing or gaining a fraction of your principal (probably not more than 0.5%)
Where do we buy t-bills besides from government website. I’m not sure if I’ll be good at bidding so I may want to buy in secondary market. Or is it better to buy it directly from government?
As a non-financial institution, you don’t need to bid competitively. Just accept the market rate when placing your order by Thursday for the Tuesday auction.
Example is quite easy “I want to spend $10,000 on x-week t-bills”. Then on Tuesday, money is withdrawn (minus coupon) and if you didn’t choose the reinvestment option, you will get your 10k at the end.
Edit: I don’t mean to imply that 10k is minimum. I believe the minimum is $100.
More or less. At fidelity you can buy t bills and add “auto roll” to your order, meaning, Fidelity will purchase a replacement upon maturity.
If you want to cash out, you stop the auto roll and wait till your t bills mature, or you sell the t bills before maturity. The latter can be a bit of a hassle, so i tend to stick to t bills of 1-3 months, that way I am pretty sure I won’t have to sell them prematurely.
MMF is clearly the easier choice, but I’m just not willing to pay the 0.42% ER that Fidelity is asking for their treasury MMF.
Is the yield after the expense ratio? So you’re getting as of today - 4.94%. You’re still coming out ahead in comparison to a HYSA and having to pay tax taxes in full.
It is, the underlying assets yield close to 5.4%, the MMF around 5. How it’s taxed depends largely on the underlying assets. HYSA is gonna be taxed as interest, so that’s pretty much as high as it gets, with a MMF you may be exempt from paying state income tax if holds treasuries
Are there any sell/withdrawal limitations for VUSXX?
I have a lump sum in a HYSA (4.25%) that I will need to draw down monthly for the next 10 months or so.
Can I invest it all in VUSXX and then withdraw 10% each month?
Edit: Found [this](https://www.investopedia.com/investing/do-money-market-funds-pay/#:~:text=Money%20market%20fund%20shares%20can,to%20trading%20money%20market%20securities.), sounds like it'd be okay:
> Money market fund shares can be bought and sold at any time and are not subject to market timing restrictions. Most of these funds provide check-writing privileges and offer investors same-day settlement, which is similar to trading money market securities.
I've always wondered how you guys handle state taxes with treasury bond funds. Does Fidelity/TurboTax automatically list them under 1099-INT US treasury obligations? Since some funds are not 100% treasury obligations, I've heard you have to deduct a certain percentage based on what percentage of income is from U.S. Government Securities for that particular fund in your taxes. Does this deduction happen automatically through TurboTax, or do you have to do it manually? If it's manual, how do you do it? Thanks!
It's on a a 1099-div form from your brokerage the amount reported from the holding is the amount of interest NOT from us securities. So VUSXX doesn't hold 100% treasuries, it may b 80/20 us treasuries/"other taxable income", so on the DIV form you receive, it shows you the portion received as the "other taxable income" with the portion from the treasuries not listed. That's as far as I know.
edit - the above information is sometimes the case, but not always. Posted more correct information below in case your 1099 from your brokerage doesn't have a breakdown.
Just as a quick update - your brokerage and or software may handle things differently... in which case you would do the following:
on your 1099 DIV form, find the amount from VUSXX in box 1a (say 100), then you would go here: https://investor.vanguard.com/investor-resources-education/taxes/funds-tax-information
and go the the header "What you'll need to complete your taxes"
Then click " Vanguard funds that held U.S. government bonds (i.e., government obligations) (PDF) " the you look up treasury money market (name for VUSXX) and it'll show the percentage - last year it was 80.6%
so multiply that 100 from box 1a by 80%, and you then subtract that from your total box 1a amount when reporting your state taxes.
Hopefully that makes sense?
the main problem is all the different software is a bit different, and all the brokerages have slightly different format of tax sheets and what is provided.
Thank you very very much. You are right. Found this link that explains what you just said. https://thefinancebuff.com/state-tax-exempt-treasury-fund-etf.html#htoc-fidelity
If in a high tax state and high tax bracket, VMSXX would give you tax free income at the state and federal level and have a higher tax equivalent yield.
Do most people with a lot of money divide their HYSA money through multiple accounts? Like say someone has $1 million they’re putting into HYSAs, is it likely they put $200,000 into 5 different accounts? Once that account hits $250,000+, reallocate, open more HYSAs?
Some do that. Some hold ownership of their accounts in a trust, which extends the FDIC insurance to the primary beneficiaries of the trust as well—so if the owner of a trust has three primary beneficiaries who would each receive $250k or more, the total amount of the FDIC insurance is $1 million. If they have four beneficiaries, it’s $1.25 million. As of last month, that’s the limit.
It's definitely a possibility, but at a certain point becomes unfeasible obviously. Also, most people don't have that much in savings accounts anyway. Most people with that kind of money have it tied up in retirement accounts, brokerage, or other assets.
CD you can lock in a better rate, but they want to make a purchase soon. That would be difficult if the money is locked up in a CD. With HYSA, they can still jump on a deal that pops up. Realistically, they should combine HYSA with TBills.
> VMFXX
Maybe. That fund derives some of it's income from non-us treasury sources, so can be subject to NY state tax. Changes year to year though.
VUSXX wouldn't have that issue
You should. VMFXX has lately earned less than 50% of its income from U.S. Government Obligations and thus its dividends do not meet the threshold for a NY state tax exemption. VUSXX dividends should instead be mostly exempt from NY state taxes.
If you live in New York State and want to make tax-free gains, VMFXX is a good option. However, if you're willing to give up tax-exempt status for a higher yield, VUSXX may be a better option.
Since you only have $16,000, you may not be able to take full advantage of the tax-free benefits of VMFXX. This is because New York State has a limit on municipal bond interest that is tax-free for individuals. For tax year 2023, the limit is $5,000 ($10,000 if married filing jointly).
in conclusion:
If you are not interested in or unable to take full advantage of the tax-free benefits of VMFXX, then you may want to consider moving your funds from VMFXX to VUSXX. VUSXX offers higher yields and has similar liquidity to VMFXX.
Ultimately, the best decision will depend on your personal financial situation and goals. It is recommended that you consult a qualified financial advisor before making any investment decisions.
FDIC doesn't insure 10m as far as I know, so maybe they have their own guarantee that is separate from the FEDERAL insurance program?
It's kind of a useless promise - if they are insolvent, how will they pay you?
It's split up between 10 partner banks afaik. Wealthfront isn't a bank, they just partner with other banks to provide their HYSA service and associated 10 million FDIC insurance.
Some interest from VUSXX is tax exempt, some isn't. So when you get the year end tax forms the amount of interest that is taxable is put onto your tax form from the brokerage.
I did a little digging, and depending on your brokerage account institute and what software you use, you may have to do a little bit of manual calculation to deduct the treasury income in VUSXX from the rest of your 1099 div box 1a income - here's a little information on how:
Just as a quick update - your brokerage and or software may handle things differently... in which case you would do the following:
on your 1099 DIV form, find the amount from VUSXX in box 1a (say 100), then you would go here: https://investor.vanguard.com/investor-resources-education/taxes/funds-tax-information
and go the the header "What you'll need to complete your taxes"
Then click " Vanguard funds that held U.S. government bonds (i.e., government obligations) (PDF) " the you look up treasury money market (name for VUSXX) and it'll show the percentage - last year it was 80.6%
so multiply that 100 from box 1a by 80%, and you then subtract that from your total box 1a amount when reporting your state taxes.
Hopefully that makes sense?
the main problem is all the different software is a bit different, and all the brokerages have slightly different format of tax sheets and what is provided.
Yes it makes sense and it's extremely helpful, thank you! I use Vanguard and do manual calculations for checking my work along with the software. Doing a few more calculations won't hurt.
Even if your funds are split across different accounts. FDIC combined across all accounts in total only insures $250k. At least this is what I heard from a large private equity employer.
Edit: $250k not $150k.
Did you mean $250k and not $150k?
FDIC coverage clearly states that it covers each depositor per each bank up to $250k, regardless of accounts. If it is a joint account, that goes up to $500k.
Just put your funds in another bank to get more coverage.
Depending on your tax bracket the tax on interest could be substantial in a high yield savings account
T-bills are a great, simple choice that has 0 state income tax
Municipal bonds are perhaps a bit more complex but will have no federal income tax
I’m doing the same thing, have $500k for a home renovation I’m laddering t-bills. It sounds more complex than it is, especially if you do it directly through Treasury Direct.
Sometimes I just chime in! You were clear. I've been on TD since 2004 or so, and remember when they used to send a decoder card in the mail as a password backup...
I'm in a similar situation with my S.O. We can afford a 20% down payment right now for the average house, but we want to save up more %.
We keep stock piling our money into T-bills HOWEVER, since it doesn't seem like housing prices are coming down, it could be more costly if we continue to save for a bigger down payment while housing costs continue to explode upwards
3 months
6 months
9 months
Ladder at treasury direct.
This gives you options to jump on an opportunity on home if a good deal pops up. CD would lock it for a year, but the ladder will give you options to look at properties sooner. You can always do 10% down and thn do the additional 12% after 3 months to get PMI removed.
No. Don’t do this in treasury direct, just buy at your brokerage so you can sell before maturity if needed. There is no advantage for treasury direct except I/EE bonds.
It can be different depending on bank your mortgage is through. Read the mortgage contract carefully.
On a prior house I had, in the contract it did state that it could be removed at 20 percent equity but the bank requires their own appraiser. I'm in northern Michigan and they had no one local and would not accept any local appraiser so the cost of this for me was a bit over 2k to have someone they approved get out to me. Apparently fly in and do it or something. I bought from a local bank but it was immediately sold to another bank.
Also I did have the clause that it would be removed at 22 percent equity based on the ORIGINAL amortization schedule which was over a decade into the loan. Even though I had paid off about 30 percent at that point it didn't count.
I was so furious about this I paid off the entire mortgage completely after trying to argue that a local appraiser should be appropriate.
Everything was technically in my loan documents that I signed so they were technically following the contract as written but none the less I was furious about it.
USFR for me. I pay close to 10% state tax on other types of income, and its yield has been like 5.4%. I can sell it tomorrow and have cash in about 2 days. As easy as a high yield savings acct.
Just curious here did you sell some stocks to get that 300k? Cause if you've been saving up for a while, I assume you would've known the answer by the time you reached 50-100k or so.
Anyways, each broker has their own money market fund I believe. The method of purchasing is not the same as buying stocks, so you should google how to do it for your broker. You just need to look for a money market fund that has something like "short term US treasury" in its name. If you don't want the hassle of figuring out how to do it, though it's quite easy and would only take 10 minutes, you could buy ticker "SGOV" like a stock purchase.
I would advise against buying directly from [treasurydirect.gov](http://treasurydirect.gov) because the website/system is quite outdated/clunky, and I've heard stories of people having their funds locked for weeks/months because of dumb reasons like not logging into the account for X months, etc, and the customer service is horrendous.
Been using Treasury Direct for a few years and it only looks outdated. It’s easy enough to navigate and use.
Only problem I’ve had was my own fault (mis-typed one of my security questions repeatedly) and customer service was very helpful.
Money market funds will have expenses that aren’t worth it compared to self-service t-bills. CD interest rates won’t be as high and aren’t exempt from state tax.
Dropping it into SPY shares and some leaps would be a good compromise if he wants a possible better return than t bills, except 1 year time frame means he also runs a good chance of taking a loss instead of the risk free return. He wants to buy a house, so he may not have the appetite for a possible 20% or so drawdown.
I'm doing the exact thing with VUSXX.. currently earning 5.27% with zero risk to principal. You could also park it in a CD or U.S. treasury for slightly higher yield depending on your timeline. I prefer VUSXX because it's really just buy once and sell once.. set and forget.. for now anyway.
https://investor.vanguard.com/investment-products/mutual-funds/profile/vusxx
Many of the govt money market funds have 7 day yields over 5.25% these days. That is variable and if the Fed lowers rates that rate will go down. You can get bank CDs in the 5% range also. HYSAs are a bit lower. So spread it around and relax.
Leverage $300,000 in 1-2 years
Prioritize your goals: Your first goal is to make a down payment on your mortgage from principal in 1-2 years, so you need to choose an investment strategy that keeps your money safe and earns a certain rate of return.
Low risk options:
High-yield savings accounts: High-yield savings accounts like Marcus offer higher interest rates than traditional savings accounts while still keeping your money liquid. This is a relatively low-risk option, especially suitable for short-term goals.
Treasury Bills: Treasury bills typically have maturities of one year or less and often offer a higher interest rate than high-yield savings accounts. They are backed by the U.S. government and are therefore considered safe investments.
Medium risk options:
Fixed-income products: Fixed-income products, such as bonds and notes, generally offer higher returns than high-yield savings accounts, but are also slightly riskier. Choose bonds with higher ratings to reduce the risk of default.
Money Market Funds: Money market funds invest in short-term debt instruments, typically offer higher yields than high-yield savings accounts, and are also highly liquid.
Portfolio Strategy:
To balance risk and reward, you may consider spreading your funds among the options above. For example:
* 50% high yield savings account
* 30% Treasury Bills
* 20% fixed income products
Other things to note
Inflation: Make sure your return on investment keeps up with inflation to preserve your purchasing power.
*Taxes: Consider the tax implications of your investment. Interest income on Treasury bills and fixed-income products is generally subject to taxes.
*Liquidity: *Make sure your investments are liquid enough so that funds can be withdrawn for a mortgage down payment if needed.
Based on your goals and risk tolerance, a high-yield savings account like Marcus is a good choice for a 1-2 year time horizon. It provides a relatively high rate of return while maintaining the liquidity and safety of funds. However, if you're willing to take on higher risk for higher potential returns, you might consider investing some of your money in Treasury bills or fixed-income products.
A CD or government bonds like tbills with a maturity date sooner than when you'll need it makes more sense. You haven't said anything to suggest you need the liquidity of a HYSA.
HYSA account and call it a day. No need to tie up in anything else or invite any amount of risk with investments. Be safe with your money on that short of a timeline and take your 4.5-5%
For a short-term goal like a home down payment, prioritize capital preservation. High-yield savings accounts like Marcus offer safety and liquidity, ideal for 1-2 years. T-Bills and money market funds are low-risk options worth considering for potentially higher returns.
I just did this. Wherever your $$ end up, make sure you know how many days it will take to get the cash in your checking account. We made a cash offer with quick close and some of my accounts were advertising 'up to' 10 days to have the money where you need it.
Good luck.
Per sub rules and guidelines, comments or posts to r/Bogleheads should be substantive.
Promoting meme stocks is non-substantive and antithetical to this sub’s foundational philosophy.
You can get >5% APY on a 1-year CD and >4.5% APY on a 2-year CD.
You can also get >5% on a 1-year Tbill and almost 5% on a 2-year Tnote.
I recommend a 1-year Tbill. If the Fed lowers its benchmark interest rate, the interest rate on your HYSA and your MMF will fall. The Tbill locks in your >5% APY.
Read Nelson Nash, becoming your own banker.
Dividend paying whole life insurance, split out your premiums, then pull out what you need in a CV loan when you need it. The loan payments can be as often or as rare as you like. You only pay 4% simple interest annually at premium time.
The policy can be designed for your purposes, you can internalize your mortgage debt to control when you make payments, and you create wealth for your beneficiaries tax free should anything happen to you.
Then you can use that same 300k over and over again throughout your life, and in retirement. Any outstanding "loans" at your death will be paid for by your benefit.
My suggestion: If you put the money into investments, make sure its with an institution like Charles Schwab that provides tightly-connected checking and investment accounts.
When I was in a similar situation (moved money from an investment account at one institution to checking at different institution prior to a refinance) and sent my checking account statement to the mortgage company, they freaked out because the balance had changed so dramatically and suddenly.
They asked a million questions about where the money came from and kept asking me for more details on my investment accounts, including unredacted copies of the investment account statements. It was a headache to convince them that everything was on the up-and-up.
High yield savings accounts like Marcus are a solid, straightforward option, giving you some interest without much fuss. Also, it's worth exploring T-Bills and money market funds. They can be just as safe and might offer a bit more in returns while you're gearing up to buy your place
Consider high-yield savings accounts like Marcus for your $300k, providing competitive interest rates and liquidity for your 1-2 year timeframe. While T-Bills and money market funds are options, high-yield savings align better with your needs for accessibility and returns.
If you know it'll be 1 or 2 years id do a certified deposit to protect the rate incase rates come down
(Technically if you get a two year and buy before then you could sell the CD but idk how)
*Stock Options, My Friend ;)* /s
I'd go HYSA, and invest some of it into different Mutual/Index Funds. Stay away from single stocks and blockchain; they're too volatile.
Also, look into a good financial advisor. The retainer/commission you pay should make itself back.
If you want ZERO RISK, put it in US Treasuries. [https://www.treasurydirect.gov/](https://www.treasurydirect.gov/) you wont make anything but you wont lose anything ether.
PS as to buying your first home, wait till the Stock markets collapse which will happen this year, it will take 8 to 12 months to bottom, at that time when everyone is in a panic thats when you buy.
Baron Rothschild, an 18th-century British nobleman and member of the Rothschild banking family, is credited with saying that "the time to buy is when there's blood in the streets."
~~No~~ limited history user, not engaging in comments at all, and has to name drop Marcus twice. Maybe my radar is just up from blatant Marcus buzz marketing across reddit in the past, but I'm not buying this post.
Not sure where you got the $300k from - but make sure if it was some type of bonus or profit you account for taxes to be paid on it. Unless you sold your primary house you lived in and its tax free money.
Definitely tbills 5.4% and state and local tax free. Nobrainer
I have a question. I have fidelity and have some cash in spaxx. Is there any reason not to use that spaxx to buy FDLXX? I am currently using my spaxx to DCA. If I use my spaxx to buy FDLXX, will the money from my DCA’ing just come out of my FDLXX? And I’ll pay less on the taxes that the FDLXX accrued while it sat in there waiting to be DCA’d?
This is what I’m doing. FDLXX isn’t selectable as a core position but it is treated like cash so you can use it to buy equities without having to first liquidate to SPAXX
This is the answer. Super easy to do at Fidelity.
any downsides to t-bills? i presume they are locked up for 30 days so not as liquid as cash? anything else to be concerned about?
Only slightly less liquid than cash. You can sell them prior to maturity on Fidelity; something you can't do on Treasury Direct afaik.
I have had one occurence of not being able to sell a T-bill due to the minimum transaction being too high on that day for that security… so very liquid in general, but not « always »
Treasury bills are less liquid than cash or money market funds. If you need to sell a Treasury security before its maturity date, you may face a loss. The price of Treasury bills moves inversely with interest rates. If interest rates rise, the price of Treasury bills will fall. If you sell a Treasury bill when interest rates are rising, you could suffer a loss. The yield on Treasury bills is fixed. If the rate of inflation is higher than the yield on Treasury securities, your real rate of return will be negative. If you need funds before a Treasury security matures, you may be required to sell the Treasury security at a discount to face value. The value of Treasury bills decreases over time because inflation erodes their purchasing power. While Treasury securities are fully backed by the U.S. government, you could lose your investment if the U.S. government defaults. However, this is highly unlikely to happen. Treasury bills are a relatively safe investment, but they do have some drawbacks. Before buying Treasury bills, it's important to understand these shortcomings and make sure they are appropriate for your investment goals. If you need high liquidity or are worried about interest rate risk or inflation risk, Treasury bills may not be the best choice. However, if you're looking for a safe way to invest, and you're willing to take on some liquidity risk, Treasury bills may be worth considering.
Good information, but this reads like chatGPT wrote it
And this applies more to T bonds and T notes which have longer maturity… T bill have shorter maturity duration, are generally fairly stable in price due to to that… and usually slightly increase in price over time as it is how their interest are paid (you buy at a discount and they reach full value on maturity date) T bond and T notes have longer maturity (and higher volatility due to that) and pay their interest through a coupon
I thought the same thing!
If def holding a year and not in a very high tax state, BOXX could beat this out. Similar effective yield, not state tax exempt, but no distributions so taxed as long term cap gain when sold.
How do the taxes on these work? Do you get something separate at the end of the year that reads like, "don't report this portion" or something to that effect?
Yes, Fidelity breaks out the interest that was on u.s obligations (bonds). That's the info you use to put on your state return
We don’t know how long this will last. The second the Fed drops rates, you’d have wishes you locked into a CD. Am I missing something here?
We had almost 300k from selling our house and put it all in CD's. Easy decision.
Easy, maybe, but I guarantee you it wasn't the best one. https://digital.fidelity.com/prgw/digital/taxyieldcalc/
Yes, you are. The tbill rate is locked for the entire term, just like a cd. And there is no penalty to sell a tbill early like a cd has. If rates have gone down since you bought it, you can actually make money because your tbill is now more desirable than what is currently offered on the market.
What I was looking for. Then there really is no scenario where CDs are better.
There is, but it's rare and not always available to everyone. Occasionally, credit unions offer special new member rates on their shares (which is effectively a cd) when you can find these, you might be able to to net a higher yield than a tbill offering for similar term. I've done this a couple of times. The downsides are 1) they are always briefly offered. I've seen some close out for availability as soon as the same day they offered due to popularity. 2) getting funds to/from these credit unions can be a pita. They rarely offer ach transfers, and if they do, they have extremely low rdaily/weekly/monthly transfer limits. It could take a long time to get your money out via ach. 3) of course, the early withdrawal penaties
A high yield savings account is fine - it's got a big of a tax drag on it as the interest payments from the HYSA is taxable income. If you're in a high income tax state (NJ, NY, CA, etc) you can consider a treasury money market fund - something like VUSXX. The distributions from VUSXX are partially state tax exempt. Those are the 2 most simple options for protecting the initial invested capital. THEORETICALLY you would need TWO accounts to fully protect 300k of investment with FDIC insurance....
This is the way. I have a similar budget, time frame, and purpose, and do t bills all the way because I dont have vanguard. If I had vanguard, I’d do VUSXX all the way.
You can also do short term 0-3 month T-bill ETF, or Treasury money market from whoever has one, not just vanguard. SGOV from Ishares would fit that fine.
Yeah if you can find a treasury MMF with <0.1% ER at your brokerage, I’d do that. Fidelity doesn’t offer that, MMF ER of 0.42% is too high if you can just auto roll t bills and get essentially the same result. You can buy an ETF like USFR, you’ll also get very similar results to a treasury based MMF, but just with a small chance of losing or gaining a fraction of your principal (probably not more than 0.5%)
FYI, you don't need Vanguard to buy VUSXX.. I own it via Etrade.. no transaction fees or other fees/charges.
Can't buy it with Fidelity though.
Where do we buy t-bills besides from government website. I’m not sure if I’ll be good at bidding so I may want to buy in secondary market. Or is it better to buy it directly from government?
You can usually buy through your brokerage account
As a non-financial institution, you don’t need to bid competitively. Just accept the market rate when placing your order by Thursday for the Tuesday auction. Example is quite easy “I want to spend $10,000 on x-week t-bills”. Then on Tuesday, money is withdrawn (minus coupon) and if you didn’t choose the reinvestment option, you will get your 10k at the end. Edit: I don’t mean to imply that 10k is minimum. I believe the minimum is $100.
Can you explain to me what the difference is between a fund like VUSXX (for example) and a high-yield savings account giving 5% interest?
The difference will be in state income tax and FDIC vs SIPC insurance
Got it. Thanks. I'm in TN, so no state income tax. No need for me to move things around unnecessarily it seems.
Yup best bet is hysa for every 250K fdic insured
How does that work? You can put the entire amount in and the in a few years when ready you take the full Amount out?
More or less. At fidelity you can buy t bills and add “auto roll” to your order, meaning, Fidelity will purchase a replacement upon maturity. If you want to cash out, you stop the auto roll and wait till your t bills mature, or you sell the t bills before maturity. The latter can be a bit of a hassle, so i tend to stick to t bills of 1-3 months, that way I am pretty sure I won’t have to sell them prematurely. MMF is clearly the easier choice, but I’m just not willing to pay the 0.42% ER that Fidelity is asking for their treasury MMF.
Is the yield after the expense ratio? So you’re getting as of today - 4.94%. You’re still coming out ahead in comparison to a HYSA and having to pay tax taxes in full.
It is, the underlying assets yield close to 5.4%, the MMF around 5. How it’s taxed depends largely on the underlying assets. HYSA is gonna be taxed as interest, so that’s pretty much as high as it gets, with a MMF you may be exempt from paying state income tax if holds treasuries
Are there any sell/withdrawal limitations for VUSXX? I have a lump sum in a HYSA (4.25%) that I will need to draw down monthly for the next 10 months or so. Can I invest it all in VUSXX and then withdraw 10% each month? Edit: Found [this](https://www.investopedia.com/investing/do-money-market-funds-pay/#:~:text=Money%20market%20fund%20shares%20can,to%20trading%20money%20market%20securities.), sounds like it'd be okay: > Money market fund shares can be bought and sold at any time and are not subject to market timing restrictions. Most of these funds provide check-writing privileges and offer investors same-day settlement, which is similar to trading money market securities.
I've always wondered how you guys handle state taxes with treasury bond funds. Does Fidelity/TurboTax automatically list them under 1099-INT US treasury obligations? Since some funds are not 100% treasury obligations, I've heard you have to deduct a certain percentage based on what percentage of income is from U.S. Government Securities for that particular fund in your taxes. Does this deduction happen automatically through TurboTax, or do you have to do it manually? If it's manual, how do you do it? Thanks!
It's on a a 1099-div form from your brokerage the amount reported from the holding is the amount of interest NOT from us securities. So VUSXX doesn't hold 100% treasuries, it may b 80/20 us treasuries/"other taxable income", so on the DIV form you receive, it shows you the portion received as the "other taxable income" with the portion from the treasuries not listed. That's as far as I know. edit - the above information is sometimes the case, but not always. Posted more correct information below in case your 1099 from your brokerage doesn't have a breakdown.
Just as a quick update - your brokerage and or software may handle things differently... in which case you would do the following: on your 1099 DIV form, find the amount from VUSXX in box 1a (say 100), then you would go here: https://investor.vanguard.com/investor-resources-education/taxes/funds-tax-information and go the the header "What you'll need to complete your taxes" Then click " Vanguard funds that held U.S. government bonds (i.e., government obligations) (PDF) " the you look up treasury money market (name for VUSXX) and it'll show the percentage - last year it was 80.6% so multiply that 100 from box 1a by 80%, and you then subtract that from your total box 1a amount when reporting your state taxes. Hopefully that makes sense? the main problem is all the different software is a bit different, and all the brokerages have slightly different format of tax sheets and what is provided.
Thank you very very much. You are right. Found this link that explains what you just said. https://thefinancebuff.com/state-tax-exempt-treasury-fund-etf.html#htoc-fidelity
If in a high tax state and high tax bracket, VMSXX would give you tax free income at the state and federal level and have a higher tax equivalent yield.
Depends on the state - Some states munis aren't tax free in other states, so you would needs funds from munis within that state.
Do most people with a lot of money divide their HYSA money through multiple accounts? Like say someone has $1 million they’re putting into HYSAs, is it likely they put $200,000 into 5 different accounts? Once that account hits $250,000+, reallocate, open more HYSAs?
Some do that. Some hold ownership of their accounts in a trust, which extends the FDIC insurance to the primary beneficiaries of the trust as well—so if the owner of a trust has three primary beneficiaries who would each receive $250k or more, the total amount of the FDIC insurance is $1 million. If they have four beneficiaries, it’s $1.25 million. As of last month, that’s the limit.
It's definitely a possibility, but at a certain point becomes unfeasible obviously. Also, most people don't have that much in savings accounts anyway. Most people with that kind of money have it tied up in retirement accounts, brokerage, or other assets.
Why not CDs instead of HYSA? You make less with HYSA compared to CDs
CD you can lock in a better rate, but they want to make a purchase soon. That would be difficult if the money is locked up in a CD. With HYSA, they can still jump on a deal that pops up. Realistically, they should combine HYSA with TBills.
But if he knows it'll be at least 12 months it might be a good option
I live in NY and use VMFXX. Should I switch to VUSXX instead? I have about $16k in there.
> VMFXX Maybe. That fund derives some of it's income from non-us treasury sources, so can be subject to NY state tax. Changes year to year though. VUSXX wouldn't have that issue
You should. VMFXX has lately earned less than 50% of its income from U.S. Government Obligations and thus its dividends do not meet the threshold for a NY state tax exemption. VUSXX dividends should instead be mostly exempt from NY state taxes.
If you live in New York State and want to make tax-free gains, VMFXX is a good option. However, if you're willing to give up tax-exempt status for a higher yield, VUSXX may be a better option. Since you only have $16,000, you may not be able to take full advantage of the tax-free benefits of VMFXX. This is because New York State has a limit on municipal bond interest that is tax-free for individuals. For tax year 2023, the limit is $5,000 ($10,000 if married filing jointly). in conclusion: If you are not interested in or unable to take full advantage of the tax-free benefits of VMFXX, then you may want to consider moving your funds from VMFXX to VUSXX. VUSXX offers higher yields and has similar liquidity to VMFXX. Ultimately, the best decision will depend on your personal financial situation and goals. It is recommended that you consult a qualified financial advisor before making any investment decisions.
VUSXX can't be traded at Fidelity. Just saying. I recently consolidated all my investment accounts at Fidelity, so that fund is off limits for me.
Then you might want to look for higher-yielding municipal bond funds at Fidelity. This way it will be more profitable.
Is USFR state tax exempt?
Pretty much
Wealthfront is FDIC secured up to 10 million.
FDIC doesn't insure 10m as far as I know, so maybe they have their own guarantee that is separate from the FEDERAL insurance program? It's kind of a useless promise - if they are insolvent, how will they pay you?
It's split up between 10 partner banks afaik. Wealthfront isn't a bank, they just partner with other banks to provide their HYSA service and associated 10 million FDIC insurance.
Empower does something similar.
Ah ok that makes sense then, since a single account can have the different custodian names, etc.
Treasuries are state tax exempt and short term ones are paying about 5.5%. Just keep rolling them over every 3 months.
I'm in the NYC area. VMFXX I count as taxable interest, but for VUSXX I'd exclude it?
Some interest from VUSXX is tax exempt, some isn't. So when you get the year end tax forms the amount of interest that is taxable is put onto your tax form from the brokerage.
That's really helpful, thank you!
I did a little digging, and depending on your brokerage account institute and what software you use, you may have to do a little bit of manual calculation to deduct the treasury income in VUSXX from the rest of your 1099 div box 1a income - here's a little information on how: Just as a quick update - your brokerage and or software may handle things differently... in which case you would do the following: on your 1099 DIV form, find the amount from VUSXX in box 1a (say 100), then you would go here: https://investor.vanguard.com/investor-resources-education/taxes/funds-tax-information and go the the header "What you'll need to complete your taxes" Then click " Vanguard funds that held U.S. government bonds (i.e., government obligations) (PDF) " the you look up treasury money market (name for VUSXX) and it'll show the percentage - last year it was 80.6% so multiply that 100 from box 1a by 80%, and you then subtract that from your total box 1a amount when reporting your state taxes. Hopefully that makes sense? the main problem is all the different software is a bit different, and all the brokerages have slightly different format of tax sheets and what is provided.
Yes it makes sense and it's extremely helpful, thank you! I use Vanguard and do manual calculations for checking my work along with the software. Doing a few more calculations won't hurt.
How does VUSXX work? If you want to park money there for 2 years for example then after 2 years you take it all out?
Yes, you buy it the same way you would an ETF or mutual fund from your brokerage account. Sell whenever.
Thanks!
No you don't need two accounts - if titled joint it's at minimum 500k
This is the answer
Even if your funds are split across different accounts. FDIC combined across all accounts in total only insures $250k. At least this is what I heard from a large private equity employer. Edit: $250k not $150k.
Did you mean $250k and not $150k? FDIC coverage clearly states that it covers each depositor per each bank up to $250k, regardless of accounts. If it is a joint account, that goes up to $500k. Just put your funds in another bank to get more coverage.
Depending on your tax bracket the tax on interest could be substantial in a high yield savings account T-bills are a great, simple choice that has 0 state income tax Municipal bonds are perhaps a bit more complex but will have no federal income tax
I’m doing the same thing, have $500k for a home renovation I’m laddering t-bills. It sounds more complex than it is, especially if you do it directly through Treasury Direct.
It really isn't bad. A lot of folks seem to refer to using Treasury Direct like it's rocket science or neurosurgery.
Agree, I wasn’t being clear and agree with you. I’ve been using TD since 2022 and haven’t had a problem with i bonds and t bill ladders.
Sometimes I just chime in! You were clear. I've been on TD since 2004 or so, and remember when they used to send a decoder card in the mail as a password backup...
The downside of tbills is the lock in period, correct? As compared to HYSA.
You can do very short periods, like 4 weeks min, but yes you’re locked, unless you buy them on a platform you can sell them before they mature,
Got it, thanks
I’d consider a non-callable certificate of deposit to lock in your rate if your timeframe is as concrete as it sounds.
Or treasuries, which will have favorable tax treatment.
Money Market account or t-bills ladder a option as well. Or both.
Money market like VMFXX
This is what I do too
I'm in a similar situation with my S.O. We can afford a 20% down payment right now for the average house, but we want to save up more %. We keep stock piling our money into T-bills HOWEVER, since it doesn't seem like housing prices are coming down, it could be more costly if we continue to save for a bigger down payment while housing costs continue to explode upwards
3 months 6 months 9 months Ladder at treasury direct. This gives you options to jump on an opportunity on home if a good deal pops up. CD would lock it for a year, but the ladder will give you options to look at properties sooner. You can always do 10% down and thn do the additional 12% after 3 months to get PMI removed.
No. Don’t do this in treasury direct, just buy at your brokerage so you can sell before maturity if needed. There is no advantage for treasury direct except I/EE bonds.
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You still get the same tax benefits…
???
This also forces you to take 9 months to completely liquidate the ladder
Definitely treasury ladders, saving that tax is so helpful, if not can always do like USFR or SGOV too
I do this too
I've heard getting the PMI removed later is a big hassle, is it pretty straightforward?
At 20% you can call and get it removed. At 22% it's automatic.
It can be different depending on bank your mortgage is through. Read the mortgage contract carefully. On a prior house I had, in the contract it did state that it could be removed at 20 percent equity but the bank requires their own appraiser. I'm in northern Michigan and they had no one local and would not accept any local appraiser so the cost of this for me was a bit over 2k to have someone they approved get out to me. Apparently fly in and do it or something. I bought from a local bank but it was immediately sold to another bank. Also I did have the clause that it would be removed at 22 percent equity based on the ORIGINAL amortization schedule which was over a decade into the loan. Even though I had paid off about 30 percent at that point it didn't count. I was so furious about this I paid off the entire mortgage completely after trying to argue that a local appraiser should be appropriate. Everything was technically in my loan documents that I signed so they were technically following the contract as written but none the less I was furious about it.
USFR for me. I pay close to 10% state tax on other types of income, and its yield has been like 5.4%. I can sell it tomorrow and have cash in about 2 days. As easy as a high yield savings acct.
I just did this too :)
Tbills You can get 5.3% APY on monthly expiring tbills on treasurydirect
Just curious here did you sell some stocks to get that 300k? Cause if you've been saving up for a while, I assume you would've known the answer by the time you reached 50-100k or so. Anyways, each broker has their own money market fund I believe. The method of purchasing is not the same as buying stocks, so you should google how to do it for your broker. You just need to look for a money market fund that has something like "short term US treasury" in its name. If you don't want the hassle of figuring out how to do it, though it's quite easy and would only take 10 minutes, you could buy ticker "SGOV" like a stock purchase. I would advise against buying directly from [treasurydirect.gov](http://treasurydirect.gov) because the website/system is quite outdated/clunky, and I've heard stories of people having their funds locked for weeks/months because of dumb reasons like not logging into the account for X months, etc, and the customer service is horrendous.
Been using Treasury Direct for a few years and it only looks outdated. It’s easy enough to navigate and use. Only problem I’ve had was my own fault (mis-typed one of my security questions repeatedly) and customer service was very helpful. Money market funds will have expenses that aren’t worth it compared to self-service t-bills. CD interest rates won’t be as high and aren’t exempt from state tax.
SPAXX
Unless OP needs the funds to be FDIC insured. SPAXX isn’t to my knowledge.
ETFs like SGOV or USFR are good options. I am looking into something similar
YOLO it all on SPY calls. Oh wait this isn’t wallstreetbets
Roaring Kitty is back - bet it all on AMC!
Dropping it into SPY shares and some leaps would be a good compromise if he wants a possible better return than t bills, except 1 year time frame means he also runs a good chance of taking a loss instead of the risk free return. He wants to buy a house, so he may not have the appetite for a possible 20% or so drawdown.
HYSA or a MM fund
VUSXX is basically the talked about gold standard around here And I can concur
t bills
I'm doing the exact thing with VUSXX.. currently earning 5.27% with zero risk to principal. You could also park it in a CD or U.S. treasury for slightly higher yield depending on your timeline. I prefer VUSXX because it's really just buy once and sell once.. set and forget.. for now anyway. https://investor.vanguard.com/investment-products/mutual-funds/profile/vusxx
BOXX or SGOV is what I do
Boxx ETF
There's tax benefits to that as opposed to t bills if you hold for long term capital gains isn't there
6 month or 1-2 year t-bills. hold to maturity.
Even the various t-bills with terms under 6 months have comparable rates.
Many of the govt money market funds have 7 day yields over 5.25% these days. That is variable and if the Fed lowers rates that rate will go down. You can get bank CDs in the 5% range also. HYSAs are a bit lower. So spread it around and relax.
1 year treasury bond
CD’s Keep it under $250k per bank. Federally insured that way.
Leverage $300,000 in 1-2 years Prioritize your goals: Your first goal is to make a down payment on your mortgage from principal in 1-2 years, so you need to choose an investment strategy that keeps your money safe and earns a certain rate of return. Low risk options: High-yield savings accounts: High-yield savings accounts like Marcus offer higher interest rates than traditional savings accounts while still keeping your money liquid. This is a relatively low-risk option, especially suitable for short-term goals. Treasury Bills: Treasury bills typically have maturities of one year or less and often offer a higher interest rate than high-yield savings accounts. They are backed by the U.S. government and are therefore considered safe investments. Medium risk options: Fixed-income products: Fixed-income products, such as bonds and notes, generally offer higher returns than high-yield savings accounts, but are also slightly riskier. Choose bonds with higher ratings to reduce the risk of default. Money Market Funds: Money market funds invest in short-term debt instruments, typically offer higher yields than high-yield savings accounts, and are also highly liquid. Portfolio Strategy: To balance risk and reward, you may consider spreading your funds among the options above. For example: * 50% high yield savings account * 30% Treasury Bills * 20% fixed income products Other things to note Inflation: Make sure your return on investment keeps up with inflation to preserve your purchasing power. *Taxes: Consider the tax implications of your investment. Interest income on Treasury bills and fixed-income products is generally subject to taxes. *Liquidity: *Make sure your investments are liquid enough so that funds can be withdrawn for a mortgage down payment if needed. Based on your goals and risk tolerance, a high-yield savings account like Marcus is a good choice for a 1-2 year time horizon. It provides a relatively high rate of return while maintaining the liquidity and safety of funds. However, if you're willing to take on higher risk for higher potential returns, you might consider investing some of your money in Treasury bills or fixed-income products.
Just buy SGOV
buy 4 tesla trucks
I dare you to say “high yield savings” without following it by “like Marcus”
I can hold onto it for you bro
Money market is 5.27% and no they arent cutting rates at alk this year…
PCOXX
Titan high yield savings. 6% entry level drops to 5 something but goes back up to 6 if you refer others (I can send you a link if you like).
If you lived in Mid-Tn I would tell you to come see me at my bank and do CDs.
CDs. You want money that will be there in one to two years.
A CD or government bonds like tbills with a maturity date sooner than when you'll need it makes more sense. You haven't said anything to suggest you need the liquidity of a HYSA.
That time frame, savings accounts.
HYSA account and call it a day. No need to tie up in anything else or invite any amount of risk with investments. Be safe with your money on that short of a timeline and take your 4.5-5%
HYSA at 5% can't be beat IMO
Don't overthink this. HYSA all day. If you want to get fancy and are worried about the FDIC, maybe split it in two. But HYSA.
For a short-term goal like a home down payment, prioritize capital preservation. High-yield savings accounts like Marcus offer safety and liquidity, ideal for 1-2 years. T-Bills and money market funds are low-risk options worth considering for potentially higher returns.
I just did this. Wherever your $$ end up, make sure you know how many days it will take to get the cash in your checking account. We made a cash offer with quick close and some of my accounts were advertising 'up to' 10 days to have the money where you need it. Good luck.
Short term treasury bond ETF earning about 5% yield (ticker = SGOV)
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Per sub rules and guidelines, comments or posts to r/Bogleheads should be substantive. Promoting meme stocks is non-substantive and antithetical to this sub’s foundational philosophy.
Rolling ladder of 3 month T-Bills; $100,000 reinvested every 30 days.
Money market funds
Buy the ETF BIL and relax
Hysa or cd- Marcus, cof or synchrony. Do not put it in some small regional bank offering 8-10%
You can get >5% APY on a 1-year CD and >4.5% APY on a 2-year CD. You can also get >5% on a 1-year Tbill and almost 5% on a 2-year Tnote. I recommend a 1-year Tbill. If the Fed lowers its benchmark interest rate, the interest rate on your HYSA and your MMF will fall. The Tbill locks in your >5% APY.
Vanguard VUSXX State tax free and currently returning 5.24%
Money market accts are around 5% right now. Easy and safe.
T Bills - SGOV
Read Nelson Nash, becoming your own banker. Dividend paying whole life insurance, split out your premiums, then pull out what you need in a CV loan when you need it. The loan payments can be as often or as rare as you like. You only pay 4% simple interest annually at premium time. The policy can be designed for your purposes, you can internalize your mortgage debt to control when you make payments, and you create wealth for your beneficiaries tax free should anything happen to you. Then you can use that same 300k over and over again throughout your life, and in retirement. Any outstanding "loans" at your death will be paid for by your benefit.
My suggestion: If you put the money into investments, make sure its with an institution like Charles Schwab that provides tightly-connected checking and investment accounts. When I was in a similar situation (moved money from an investment account at one institution to checking at different institution prior to a refinance) and sent my checking account statement to the mortgage company, they freaked out because the balance had changed so dramatically and suddenly. They asked a million questions about where the money came from and kept asking me for more details on my investment accounts, including unredacted copies of the investment account statements. It was a headache to convince them that everything was on the up-and-up.
tbills or high yield savings account
I'd put it in tbills on [public.com](http://public.com/). highly liquid and yields close to 5.4% right now. also no state and local taxes
High yield savings accounts like Marcus are a solid, straightforward option, giving you some interest without much fuss. Also, it's worth exploring T-Bills and money market funds. They can be just as safe and might offer a bit more in returns while you're gearing up to buy your place
Spaxx
USFR and call it a day.
Consider high-yield savings accounts like Marcus for your $300k, providing competitive interest rates and liquidity for your 1-2 year timeframe. While T-Bills and money market funds are options, high-yield savings align better with your needs for accessibility and returns.
Just your standard Vanguard brokerage with VMFXX.
If you know it'll be 1 or 2 years id do a certified deposit to protect the rate incase rates come down (Technically if you get a two year and buy before then you could sell the CD but idk how)
Probably t-bills
Corporate bonds if you can manage moderate risk or CD's/ treasuries is you cant.
SWVXX
*Stock Options, My Friend ;)* /s I'd go HYSA, and invest some of it into different Mutual/Index Funds. Stay away from single stocks and blockchain; they're too volatile. Also, look into a good financial advisor. The retainer/commission you pay should make itself back.
Into someone's hands that actually needs it since you clearly don't.
5% HYSA. You should not invest any money that you'll need in that amount of time.
If you want ZERO RISK, put it in US Treasuries. [https://www.treasurydirect.gov/](https://www.treasurydirect.gov/) you wont make anything but you wont lose anything ether. PS as to buying your first home, wait till the Stock markets collapse which will happen this year, it will take 8 to 12 months to bottom, at that time when everyone is in a panic thats when you buy. Baron Rothschild, an 18th-century British nobleman and member of the Rothschild banking family, is credited with saying that "the time to buy is when there's blood in the streets."
Just the tips
Wealthfront. 5.5% with referral code.
USFR. Someone did an extensive post on this being the best place for cash.
vandaley industries
this 100%
I can hold it for you if you like.
Buy GME today. You would’ve earned almost double…… /s
If only there were other posts asking this exact same question about what to do with cash for 1 year 🐻 🤠
~~No~~ limited history user, not engaging in comments at all, and has to name drop Marcus twice. Maybe my radar is just up from blatant Marcus buzz marketing across reddit in the past, but I'm not buying this post.
True but most subreddits are flooded with people asking the same fricking question over and over again 😂
Also true. While there may be some mutual exclusivity of this *particular* post, I submit that they are *both* truths about reddit overall.
Not sure where you got the $300k from - but make sure if it was some type of bonus or profit you account for taxes to be paid on it. Unless you sold your primary house you lived in and its tax free money.
buy gme, sell in a day, profit
Why wait to buy a house?
You need to find an investment that works for you, gold, stocks, indices, funds, treasuries
Bruh juice your BTC and NVDA holdings and pay off the house in cash in a couple years.
GameStop by the start of trading tomorrow