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drk posted:If you have a known date you need the money, Tbills are good right now. I would just buy the 52 week and not think about it again until next year. Or even just leave it in a money market. It looks like I can get about as good a rate in a 12-month CD through Vanguard so I might do that instead. Also I'm looking at possibly moving some of my savings for long-term house projects and the like into a money market fund at Vanguard, but I'm not really familiar with MM funds or accounts and I'm a little confused about them. I'm seeing numbers like 4.35% that are listed as SEC yields, which as I understand it is basically a projection of what the annualized return would look like based on an average of the last 7 days of performance. But that doesn't mean that kind of return is remotely guaranteed, right? It looks like the actual YTD return is 0.37% and the compound yield is 4.39%. So am I right in understanding that MMs basically don't guarantee any kind of return? And what sort of return could I actually expect to see based on those numbers? I guess I'm mostly confused by the YTD return and compound yield. Is it saying that the actual yield of any money I put in the account is going to be closer to 4.39%, but I'm getting a 0.37% return on the actual value of the shares, since it's a traded instrument? Honestly I'm mostly trying to figure out what I could reasonably expect to earn in interest in this Money Market as compared to a HSYA (which mine is currently at 3.30%).
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Feb 2, 2023 18:28
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CubicalSucrose posted:Probably yeah. Today is not timing. We know that market is down at the moment. You don't know if it's going to go down or up in the future.
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Feb 2, 2023 18:43
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MockingQuantum posted:So am I right in understanding that MMs basically don't guarantee any kind of return? And what sort of return could I actually expect to see based on those numbers? I guess I'm mostly confused by the YTD return and compound yield. Is it saying that the actual yield of any money I put in the account is going to be closer to 4.39%, but I'm getting a 0.37% return on the actual value of the shares, since it's a traded instrument? Right, no guaranteed return in a money market. Using VMFXX as an example, its yield is going to track the federal funds rate pretty closely. The fund cant directly invest at the fed funds rate, but they can invest in other things like overnight repurchase agreements, treasury floating rate notes, etc that track very very close to the federal funds rate. That being said, while you cant know exactly what you will get over a period of time in a money market fund, you can see what the market thinks - rates on treasury bills are going to be representative of the risk-free return over the bill's life. So for example, today a 1 year treasury bill yields 4.66%. You could thusly assume a federal/treasury money market will yield around the same over the same period (less fees). Of course markets are not perfect and can not predict every possible future rate change, economic event, etc. This also falls apart for time frames over a year or so - you should not assume a money market held for 10 years will yield the same as a 10 year treasury bond, for example. Re: SEC yield - per Vanguard "The SEC yield for a money market fund is calculated by annualizing its daily income distributions for the previous 7 days". So, it is actual investor returns, but trailing returns. For VMFXX, the current SEC yield of 4.30% is very close to the current yield of the underlying assets of 4.39% minus the 0.11% expenses of the fund. Regarding HYSA accounts - hard to predict. Savings accounts rates are certainly influenced by the federal funds rate (the banks want to make money), but there are a lot more factors involved and which banks offer the best rates changes over time.
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Feb 2, 2023 19:32
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skipdogg posted:We're using one this year. That does sound pretty ideal. Dental and vision costs don't seem like they'd be too much, but using pre-tax money always seems like a good idea where possible. Even just having $550 pre-tax money sitting around in case you need it sounds like good peace of mind, in case of some dental emergency or whatever. We don't have one, but I'll have to ask our HR lady about getting one maybe.
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Feb 2, 2023 19:48
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MrLogan posted:Today is not timing. We know that market is down at the moment. You don't know if it's going to go down or up in the future. Down relative to this moment? Or sometime in the future/past?
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Feb 2, 2023 20:10
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drk posted:Right, no guaranteed return in a money market. Using VMFXX as an example, its yield is going to track the federal funds rate pretty closely. The fund cant directly invest at the fed funds rate, but they can invest in other things like overnight repurchase agreements, treasury floating rate notes, etc that track very very close to the federal funds rate. Great, that helps me understand it better. So it would seem to me that if I have some funds that I need relatively liquid but don't need to access instantly, I may be better off moving that money to VMFXX, with the understanding that the rates could change and I should keep an eye on them and how they compare to HYSA rates. Is that fair to say? edit: also since this is a fund and not a Money Market Account, how is interest taxed? Is it subject to short-term capital gains tax since it's effectively a mutual fund? I did a search but can't really find a clear answer. I guess it doesn't matter since STCG are taxed the same as income (someone correct me if I'm wrong there please!) MockingQuantum fucked around with this message at 20:14 on Feb 2, 2023 |
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Feb 2, 2023 20:11
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Considering doing a similar thing with my money in Ally. Presumably Ally's keeping their interest rates lovely because they've had enough money deposited/people are lazy?
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Feb 2, 2023 20:17
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MockingQuantum posted:Great, that helps me understand it better. So it would seem to me that if I have some funds that I need relatively liquid but don't need to access instantly, I may be better off moving that money to VMFXX, with the understanding that the rates could change and I should keep an eye on them and how they compare to HYSA rates. Is that fair to say? Sure, there's no reason you couldn't move between a money market and a savings accounts based on available rates. You can probably even do so directly via ACH. The tax treatment of money market funds/accounts should be purely interest based (aka, your normal tax rates, the same as a savings account). Share price is intended to always be $1, so there shouldn't be capital gains taxes. Federal money markets may also be partially exempt from state taxes (phone posting so I will omit the details and I'm not a tax person anyways).
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Feb 3, 2023 01:01
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Residency Evil posted:Considering doing a similar thing with my money in Ally. Presumably Ally's keeping their interest rates lovely because they've had enough money deposited/people are lazy? Banks want to make money, so one should assume over time the rate is going to be less than the risk free rate (overnight repo, Tbills, etc). That doesn't mean you can never find savings account rates better than money markets - a year ago or so they were better by 50 bp or so if I recall correctly. 3.3% isn't exactly bad (my otherwise good credit union still pays 0.03% on savings accounts), but you can understand why banks wouldn't increase rates if they didn't think doing so would increase deposits by a compensating amount. Especially since the market seems to think rate cuts are coming. I personally gave up on chasing savings account rates a couple years ago. I don't have enough cash on hand for it to matter.
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Feb 3, 2023 01:20
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I’ve never really chased rates before but now that I’m in the process of moving to a fidelity cash management account as my new banking account I’ve noticed you can get like 4.something % for short term (3 - 6 month) treasuries, which seem like a good substitute for CDs. I don’t really see a downside. Well unless Republicans decide not to pay back the debt or something.
nelson fucked around with this message at 04:58 on Feb 3, 2023 |
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Feb 3, 2023 03:29
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Treasuries are good right now. Better than CDs since you don't pay federal tax on them.
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Feb 3, 2023 04:37
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Mu Zeta posted:Treasuries are good right now. Better than CDs since you don't pay federal tax on them. I believe you do pay federal tax, but not state and local? Which might still be pretty big if you live in California or similar.
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Feb 3, 2023 05:04
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Mu Zeta posted:Treasuries are good right now. Better than CDs since you don't pay federal tax on them. Treasuries are subject to federal tax, but not state/local. Municipal bonds are not subject to federal tax (sometimes also state tax free). And this also requires that you do your taxes correctly, the tax forms don't always point out the source of interest f you are holding them through an ETF or something.
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Feb 3, 2023 05:07
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esquilax posted:And this also requires that you do your taxes correctly, the tax forms don't always point out the source of interest f you are holding them through an ETF or something. Yes, do not expect a box on your tax forms that says "state tax exempt interest" or something. You will have to figure it out yourself. I overpaid state taxes (by a little) for many years because of this. Bonus points if you live in a state like California that requires at least 50% of the interest to be exempt (in a bond fund for example) in order to take the deduction drk fucked around with this message at 05:25 on Feb 3, 2023 |
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Feb 3, 2023 05:23
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Bremen posted:I believe you do pay federal tax, but not state and local? Which might still be pretty big if you live in California or similar. Yeah I mixed that up.
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Feb 3, 2023 05:24
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Someone in this thread some time back pointed out that tax-exempt bonds effectively trade at a premium equal to the maximum tax exemption, so if you're not in the top tax bracket you're actually paying a small premium for them, all else being equal.
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Feb 3, 2023 07:05
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Does anyone have an experience using a Commuter Benefits program? Seems like a good deal if you have to pay for transit or parking for work with pre-tax money (and reduce taxable income), though I'm having a hard time coming up with any use cases for myself. I'm wondering how flexible the program is.
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Feb 3, 2023 08:56
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Leperflesh posted:Someone in this thread some time back pointed out that tax-exempt bonds effectively trade at a premium equal to the maximum tax exemption, so if you're not in the top tax bracket you're actually paying a small premium for them, all else being equal. that was probably me there's actually a very timely article by factset about pricing models regarding this very subject: https://insight.factset.com/taxes-done-right-new-analytics-for-municipal-securities tl;dr -- as a retail buyer, don't expect a free lunch based on muni tax status
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Feb 3, 2023 15:10
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literally this big posted:Does anyone have an experience using a Commuter Benefits program? Seems like a good deal if you have to pay for transit or parking for work with pre-tax money (and reduce taxable income), though I'm having a hard time coming up with any use cases for myself. I'm wondering how flexible the program is. Depending on how your employer has it set up, it can either be braindead easy as an autoload to a commuter account, or what I got, which amounted to "for every paycheck I need to go to the physical MVA office to pick up a voucher which I can then apply toward reloading my EZPass"
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Feb 3, 2023 15:32
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literally this big posted:Does anyone have an experience using a Commuter Benefits program? Seems like a good deal if you have to pay for transit or parking for work with pre-tax money (and reduce taxable income), though I'm having a hard time coming up with any use cases for myself. I'm wondering how flexible the program is. I used to get a subsidized monthly bus pass. I guess there were two main benefits. The first was it was paid for with pre-tax dollars the second was the company paid for half of the cost. So basically I paid $30 pre-tax with the program instead of $60 after-tax without. I got a 30 day pass in the mail every 30 days. It came unvalidated so the timer didn’t start until the first transit ride. I ended up with one or two extra passes when I later moved because I didn’t use the bus all the time. nelson fucked around with this message at 15:40 on Feb 3, 2023 |
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Feb 3, 2023 15:34
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literally this big posted:Does anyone have an experience using a Commuter Benefits program? Seems like a good deal if you have to pay for transit or parking for work with pre-tax money (and reduce taxable income), though I'm having a hard time coming up with any use cases for myself. I'm wondering how flexible the program is. As others mentioned, some programs will give you a debit card which is supposed to be used toward transit expenses but can be pretty flexible - I have colleagues in NYC who get cards that they use for commuter rail travel, parking, tolls, etc. I don't have a car so do what someone else mentioned which is just have a pretax paid for card that gets delivered to me monthly. I have run into the scenario where sometimes because of travel or whatever I have a couple extra, but my work is flexible and will let me pause my participation in the program to use the cards I've accumulated then restart when I run out. In short, they can be a pretty nice benefit - not huge cash but could potentially save you a couple hundred of bucks a year for pretty minimal effort on your part, as long as you research how the program works and how to most maximize it to your benefit.
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Feb 3, 2023 16:42
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Thanks for the info, everyone. Like I said, I'm more struggling to find a use case for Commuter Benefits than anything else. I pretty much exclusively drive my car for work (tools in the trunk), park on-site at each work location, and have a company card to pay for any expenses. Are you able to use benefits outside of work at all? How flexible as are they, and what counts as 'work related'? Could I use them to get a bus pass in my hometown, even though the vast majority of my work sites are all around the state? It looks like the benefits provider is Wage Works.
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Feb 3, 2023 18:52
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literally this big posted:Thanks for the info, everyone. Like I said, I'm more struggling to find a use case for Commuter Benefits than anything else. I pretty much exclusively drive my car for work (tools in the trunk), park on-site at each work location, and have a company card to pay for any expenses. You have to read your specific plan. It does whatever it does. Generally it will include things like parking or bus pass, regardless of whether your use of those things is work related. Think of it more like a benefit than a reimbursement - your health insurance doesn't care if you get injured at work or home [I mean, you're hosed either way]. Don't think of it as something like workmans comp, which only really functions when on the job.
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Feb 3, 2023 18:58
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A bus pass is a bus pass. The driver doesn’t care whether you’re going to work or the mall. I seriously doubt your benefit would include a transit system other than the one that serves your workplace though.
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Feb 3, 2023 19:10
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literally this big posted:Thanks for the info, everyone. Like I said, I'm more struggling to find a use case for Commuter Benefits than anything else. I pretty much exclusively drive my car for work (tools in the trunk), park on-site at each work location, and have a company card to pay for any expenses. Would you actually use a transit pass enough for it to matter? For example, where I live the cost of a monthly train pass into the nearest major city costs about the same as 10 round trips. This is a great deal for commuters, but if you were just taking the train once a week you'd be better off paying cash for the individual trips (even with post-tax money at a 50% tax rate).
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Feb 3, 2023 19:14
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pseudanonymous posted:You have to read your specific plan. It does whatever it does. Generally it will include things like parking or bus pass, regardless of whether your use of those things is work related. Think of it more like a benefit than a reimbursement - your health insurance doesn't care if you get injured at work or home [I mean, you're hosed either way]. This. I had WageWorks at an old job. I'm sure they have different plans for different employers. For my plan, they just put $X (i forget how much, maybe 120?) a month onto my transit pass for the train. And I did whatever I wanted with it.
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Feb 3, 2023 19:17
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IANAL or accountant but what I was told by my employer was that if in theory you were audited and you were using the transit benefit exclusively for non-work-related stuff you could have an issue. For example, my company was fully remote for most of 2020 and 2021, so everyone's benefit was paused as no one was allowed to come into the office, much less required to. If we had kept getting the benefit and just used it for non-work transit like taking kids to school, going to get groceries (all stuff I do on subway or bus), and we got audited, it could have been an issue. But, on the other hand, I am now in the office four days a week mandatory, so fired the benefit back up, and also happen to use my unlimited metrocard that I get via the benefit to do my errands because that's in addition to my commute to the office.
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Feb 3, 2023 19:54
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butros posted:IANAL or accountant but what I was told by my employer was that if in theory you were audited and you were using the transit benefit exclusively for non-work-related stuff you could have an issue. For example, my company was fully remote for most of 2020 and 2021, so everyone's benefit was paused as no one was allowed to come into the office, much less required to. If we had kept getting the benefit and just used it for non-work transit like taking kids to school, going to get groceries (all stuff I do on subway or bus), and we got audited, it could have been an issue. But, on the other hand, I am now in the office four days a week mandatory, so fired the benefit back up, and also happen to use my unlimited metrocard that I get via the benefit to do my errands because that's in addition to my commute to the office. I am an accountant, and I negotiate benefit plans, and you just have to read your plan. Some plans specifically say things like "to defray the cost of commuting to the office" or "for work related..." and other's don't. In general they do not, I've had a Wageworks commuter benefit before and last year I set up a commuter FSA and this year canceled it.
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Feb 3, 2023 20:00
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I'd definitely have a legitimate reason to use the benefit for work.. maybe 5% of the time. Between having a way to get around if my car breaks down, and paying the occasional work-related parking fee, I could see a valid use to pre-pay maybe $100 onto my account, just to have it handy. But if you're not communicating daily on public transit, or paying for parking often, it seems like a very fringe benefit indeed. Could I use it to pay non-work parking fees after work hours, while I'm in a different city on a work trip? Does that count as work-related?  Being able to pay any parking fee pre-tax would be nice, but mostly for non-work social occasions. I'll have to read my plan to see if it's work-only, or more of a general transit benefit.
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Feb 3, 2023 20:21
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I decided to experiment with T-Bills. I've got a big hunk of cash sitting in a CapOne HYSA at 3.3% that's waiting to be used as a down payment on a house. It needs to stay liquid because if we found the right place tomorrow, we need to be able to jump immediately. That rules out I Bonds and most CDs, but I decided to try a 4-week T-Bill, just to see how the process works. If I'm understanding correctly, the "auction" will happen next thursday (2/9) and the actual purchase will happen on 2/14. I won't know what the actual interest rate will be until sometime between 2/9 and 2/14, but the last several rounds for 4-week bills have been around 4.5%. Now, suppose I entered $1000 in the "Purchase Amount" field on the website... does that mean on 2/14 my savings account will be debited by $1000, or will it be debited by the discounted rate (around $996.50)? If this all works as I think it does, it means every week I could cycle a quarter of my down payment fund through 4-week T-Bills to get (usually) a slightly better interest rate than on my HYSA and all my $ could be back to cash within 4 weeks if I found the right house at any given time. That all sound about right?
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Feb 3, 2023 20:49
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truavatar posted:I decided to experiment with T-Bills. I've got a big hunk of cash sitting in a CapOne HYSA at 3.3% that's waiting to be used as a down payment on a house. It needs to stay liquid because if we found the right place tomorrow, we need to be able to jump immediately. That rules out I Bonds and most CDs, but I decided to try a 4-week T-Bill, just to see how the process works. I'm not an expert here but on Fidelity at the time when the T-Bill is finally bought is when your account gets debited. Fidelity "holds" the money so you can't be short the money needed to buy the T-Bill. You initially buy at the "full price" and when it goes to resolve it only deducts the discounted rate. So I think to answer your question. You need $1000 for 1 share but they're eventually only going to take the $996.50 or whatever the rate ends up being. BTW, my own question: why doesn't Fidelity tell me the rate for purchased T-Bills when it has the cost basis for it? I have to manually calculate it everytime.
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Feb 3, 2023 21:27
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Is there any rule of thumb to how much bank interest rate increases tend to trail behind fed rate hikes? I have a bunch of money I'm going to put into some CDs but I don't want to do it now if there's going to be a rate bump in a week or two due to the hike on Tuesday. Does it count as "timing the market" if I'm asking about bank rates? lol
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Feb 3, 2023 21:38
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truavatar posted:I decided to experiment with T-Bills. I've got a big hunk of cash sitting in a CapOne HYSA at 3.3% that's waiting to be used as a down payment on a house. It needs to stay liquid because if we found the right place tomorrow, we need to be able to jump immediately. That rules out I Bonds and most CDs, but I decided to try a 4-week T-Bill, just to see how the process works. There's an ETF that invests in short-term Treasurys. For the cost of 5bps you can skip managing your own ladder and get your cash out when you want it, rather than 4 weeks later.
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Feb 3, 2023 21:49
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raminasi posted:There's an ETF that invests in short-term Treasurys. For the cost of 5bps you can skip managing your own ladder and get your cash out when you want it, rather than 4 weeks later. Is VGSH essentially the Vanguard version? Looks like that's 1-3 years equivalents?
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Feb 3, 2023 22:03
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Residency Evil posted:Is VGSH essentially the Vanguard version? Looks like that's 1-3 years equivalents? there is no equivalent vanguard ETF. the closest you can get in duration is VUSB which is ~1 year and not limited to treasuries
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Feb 3, 2023 22:12
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What about VUSXX, ie the Vanguard MMF? Presumably it's investing in similar short term treasuries?
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Feb 3, 2023 22:14
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The 7 day yields are so similar with Vanguard's default settlement fund (VMFXX) I would just leave your treasury money in there.
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Feb 3, 2023 23:05
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Residency Evil posted:What about VUSXX, ie the Vanguard MMF? Presumably it's investing in similar short term treasuries? yes, federal money market funds are typically backed by t-bills or fed reverse repo and would have a closer duration to sgov or bil than vgsh or vusb. I was limiting my answer above to etfs
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Feb 3, 2023 23:59
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Strong Sauce posted:\BTW, my own question: why doesn't Fidelity tell me the rate for purchased T-Bills when it has the cost basis for it? I have to manually calculate it everytime. Vanguard doesnt either. Treasury auction results are all here though: https://www.treasurydirect.gov/auctions/announcements-data-results/announcement-results-press-releases/auction-results/ Confusingly, even though small buyers are noncompetitive, you have to click the competitive results link to see the investment rate.
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Feb 4, 2023 02:07
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drk posted:Vanguard doesnt either. Treasury auction results are all here though: https://www.treasurydirect.gov/auctions/announcements-data-results/announcement-results-press-releases/auction-results/ thanks. this seems unnecessary to have to dig through this when the investment rate and high rate are calculable numbers. i may write a small greasemonkey script (or whatever its called now) to add it to m fidelity portfolio.
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Feb 4, 2023 03:55
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