Is it ok to park some Emergency Fund in Vanguard VMFXX?

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LmG7119
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Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by LmG7119 »

As the title says. I'm wondering if it is ok to park cash that is designated for cash reserve in Vanguard VMFXX as I may need them in a couple of months.
My Emergency Fund should be between 20K-30K and now I have about 40K. I may have some expenses coming in the next couple of months for property tax for rentals. That would be between 10K -15K. So I was thinking to park it in Vanguard VMFXX and earn some extra money by parking it there.
Is it ok to put maybe 30K? Not really investing but when need it then pull it out.
Some general questions. As interest is higher than my back. Should I keep a portion of the Emergency Funds in VMFXX in the current market?
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by Normchad »

I think it’s okay. I personally do it.
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by jebmke »

lepa71 wrote: Tue Mar 21, 2023 9:18 am As the title says. I'm wondering if it is ok to park cash that is designated for cash reserve in Vanguard VMFXX as I may need them in a couple of months.
My Emergency Fund should be between 20K-30K and now I have about 40K. I may have some expenses coming in the next couple of months for property tax for rentals. That would be between 10K -15K. So I was thinking to park it in Vanguard VMFXX and earn some extra money by parking it there.
Is it ok to put maybe 30K? Not really investing but when need it then pull it out.
Some general questions. As interest is higher than my back. Should I keep a portion of the Emergency Funds in VMFXX in the current market?
Yes, it is OK.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by marti038 »

I hope so, because I have about half of our emergency fund in VMFXX.
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

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This topic is now in the Personal Investments forum.
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by nisiprius »

I certainly think so. Subject to the proviso that if you have a need for something done immediately, and the person says they "take cash, check, or Venmo," or a teller's check from a bank, you can probably get the money available faster if it's in a bank checking account. (Not sure exactly what the current story is on checkwriting features on Vanguard accounts, there was a recent change).
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by mhc »

I think VMFXX is a good choice. VUSXX may be a better choice. You have to decide what is better for you.
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by goodenyou »

I sure hope so. I have 7-figures in VMFXX waiting for a house purchase.
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by Wiggums »

Yes, that strategy makes sense
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by LmG7119 »

mhc wrote: Tue Mar 21, 2023 9:58 am I think VMFXX is a good choice. VUSXX may be a better choice. You have to decide what is better for you.
I feel like I can get money from VMFXX faster than from VUSXX if need to.
Is it right?
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by goodenyou »

lepa71 wrote: Tue Mar 21, 2023 10:15 am
mhc wrote: Tue Mar 21, 2023 9:58 am I think VMFXX is a good choice. VUSXX may be a better choice. You have to decide what is better for you.
I feel like I can get money from VMFXX faster than from VUSXX if need to.
Is it right?
Yes. It is a settlement fund that can be linked to a checking account.
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by LmG7119 »

Another question.
How often does the interest get applied?
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by Mike Scott »

There should be no difference in access. Plan on a minimum of two-three business days for transfers to your linked bank account which is pretty standard timing for transfers between any linked accounts.
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by goodenyou »

lepa71 wrote: Tue Mar 21, 2023 10:18 am Another question.
How often does the interest get applied?
Once a month.
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by DaveTH »

lepa71 wrote: Tue Mar 21, 2023 10:18 am Another question.
How often does the interest get applied?
Dividends accrue daily and are distributed monthly.
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by evelynmanley »

lepa71 wrote: Tue Mar 21, 2023 10:15 am
mhc wrote: Tue Mar 21, 2023 9:58 am I think VMFXX is a good choice. VUSXX may be a better choice. You have to decide what is better for you.
I feel like I can get money from VMFXX faster than from VUSXX if need to.
Is it right?
If we sign up for checkwriting, VMFXX is the default account for withdrawal, but we are given the option to choose a backup account from which to withdraw if sufficient funds aren't in VMFXX. I chose VUSXX as my backup account. The minimum amount for each check is $250. It took three weeks for the checks to be mailed to my house.
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by LmG7119 »

Mike Scott wrote: Tue Mar 21, 2023 10:19 am There should be no difference in access. Plan on a minimum of two-three business days for transfers to your linked bank account which is pretty standard timing for transfers between any linked accounts.
I thought you would have to sell VUSXX and settle it in VMFXX before transfer into my bank's account. Which could take more time.
I'm not trying to chase all pennies.
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by evelynmanley »

lepa71 wrote: Tue Mar 21, 2023 11:07 am
Mike Scott wrote: Tue Mar 21, 2023 10:19 am There should be no difference in access. Plan on a minimum of two-three business days for transfers to your linked bank account which is pretty standard timing for transfers between any linked accounts.
I thought you would have to sell VUSXX and settle it in VMFXX before transfer into my bank's account. Which could take more time.
I'm not trying to chase all pennies.
I had similar concerns and checked with a rep about this before I did it recently, and it's true you can transfer directly from VUSXX into your checking account.
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by LmG7119 »

evelynmanley wrote: Tue Mar 21, 2023 11:29 am
lepa71 wrote: Tue Mar 21, 2023 11:07 am
Mike Scott wrote: Tue Mar 21, 2023 10:19 am There should be no difference in access. Plan on a minimum of two-three business days for transfers to your linked bank account which is pretty standard timing for transfers between any linked accounts.
I thought you would have to sell VUSXX and settle it in VMFXX before transfer into my bank's account. Which could take more time.
I'm not trying to chase all pennies.
I had similar concerns and checked with a rep about this before I did it recently, and it's true you can transfer directly from VUSXX into your checking account.
So without settling?

Does VUSXX still have tax-free from a state tax perspective? Where do I find the list of the states where it is tax-free? I thought I saw it somewhere.
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by jebmke »

Mike Scott wrote: Tue Mar 21, 2023 10:19 am There should be no difference in access. Plan on a minimum of two-three business days for transfers to your linked bank account which is pretty standard timing for transfers between any linked accounts.
I've seen a lot of reports with much faster ACH. I know if I issue instructions in the morning, it will hit my USAA account the next business day. From what I've seen in anecdotal reports, it seems to depend on the destination bank. That said, I wouldn't cut it close if the timing was really an issue. I can't imagine a scenario where I would need cash in the bank within one day but who knows.
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by bookworm »

I think you have to think through some specific scenario's for an emergency fund, but most of them involve loss of employment, big medical bills, etc. For all of those scenarios you have the time to move money around to get it in the right place to pay a bill. I would think even things like CD's, where you potentially could lose 3 months of interest but could access the funds would be fair game.
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by LmG7119 »

Does VUSXX still have tax-free from a state tax perspective? Where do I find the list of the states where it is tax-free? I thought I saw it somewhere.
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by peteyboy »

lepa71 wrote: Tue Mar 21, 2023 1:01 pm Does VUSXX still have tax-free from a state tax perspective? Where do I find the list of the states where it is tax-free? I thought I saw it somewhere.
Typically it is, however, the earnings from repurchase agreements are subject to state and local tax. Currently the fund holds about 25% in repurchase agreements. Early 2024 Vanguard will publish exactly how much of the 2023 dividend is a result of US obligations, as a percentage of the total dividend for the year. Below is a link to the 2022 version as an example - look at the bottom of pages two/three for some state specific comments.

https://www.vanguard.com/pdf/USGOIN_2023.pdf
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by LmG7119 »

peteyboy wrote: Tue Mar 21, 2023 1:40 pm
lepa71 wrote: Tue Mar 21, 2023 1:01 pm Does VUSXX still have tax-free from a state tax perspective? Where do I find the list of the states where it is tax-free? I thought I saw it somewhere.
Typically it is, however, the earnings from repurchase agreements are subject to state and local tax. Currently the fund holds about 25% in repurchase agreements. Early 2024 Vanguard will publish exactly how much of the 2023 dividend is a result of US obligations, as a percentage of the total dividend for the year. Below is a link to the 2022 version as an example - look at the bottom of pages two/three for some state specific comments.

https://www.vanguard.com/pdf/USGOIN_2023.pdf
I'm wondering if I even want to bother with VUSXX vs VMFXX. I'm in the 22% tax bracket.
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by retired@50 »

lepa71 wrote: Tue Mar 21, 2023 2:27 pm
peteyboy wrote: Tue Mar 21, 2023 1:40 pm
lepa71 wrote: Tue Mar 21, 2023 1:01 pm Does VUSXX still have tax-free from a state tax perspective? Where do I find the list of the states where it is tax-free? I thought I saw it somewhere.
Typically it is, however, the earnings from repurchase agreements are subject to state and local tax. Currently the fund holds about 25% in repurchase agreements. Early 2024 Vanguard will publish exactly how much of the 2023 dividend is a result of US obligations, as a percentage of the total dividend for the year. Below is a link to the 2022 version as an example - look at the bottom of pages two/three for some state specific comments.

https://www.vanguard.com/pdf/USGOIN_2023.pdf
I'm wondering if I even want to bother with VUSXX vs VMFXX. I'm in the 22% tax bracket.
You'll pay Federal (22%) tax on either fund. Using VUSXX will only help with avoiding state taxes. What's your state income tax rate?

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by MathWizard »

Yes, I do that too.

If I could get more into tax advantaged I would, but we
ended up with extra because we couldn't spend as much
during the pandemic.
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by peteyboy »

lepa71 wrote: Tue Mar 21, 2023 2:27 pm
peteyboy wrote: Tue Mar 21, 2023 1:40 pm
lepa71 wrote: Tue Mar 21, 2023 1:01 pm Does VUSXX still have tax-free from a state tax perspective? Where do I find the list of the states where it is tax-free? I thought I saw it somewhere.
Typically it is, however, the earnings from repurchase agreements are subject to state and local tax. Currently the fund holds about 25% in repurchase agreements. Early 2024 Vanguard will publish exactly how much of the 2023 dividend is a result of US obligations, as a percentage of the total dividend for the year. Below is a link to the 2022 version as an example - look at the bottom of pages two/three for some state specific comments.

https://www.vanguard.com/pdf/USGOIN_2023.pdf
I'm wondering if I even want to bother with VUSXX vs VMFXX. I'm in the 22% tax bracket.

It's really about the state tax. Personally, I see no reason to not put into VUSXX but the easiest is to just open a Vanguard account and transfer the funds into it - the settlement account uses VMFXX.
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by LmG7119 »

peteyboy wrote: Tue Mar 21, 2023 2:50 pm
lepa71 wrote: Tue Mar 21, 2023 2:27 pm
peteyboy wrote: Tue Mar 21, 2023 1:40 pm
lepa71 wrote: Tue Mar 21, 2023 1:01 pm Does VUSXX still have tax-free from a state tax perspective? Where do I find the list of the states where it is tax-free? I thought I saw it somewhere.
Typically it is, however, the earnings from repurchase agreements are subject to state and local tax. Currently the fund holds about 25% in repurchase agreements. Early 2024 Vanguard will publish exactly how much of the 2023 dividend is a result of US obligations, as a percentage of the total dividend for the year. Below is a link to the 2022 version as an example - look at the bottom of pages two/three for some state specific comments.

https://www.vanguard.com/pdf/USGOIN_2023.pdf
I'm wondering if I even want to bother with VUSXX vs VMFXX. I'm in the 22% tax bracket.

It's really about the state tax. Personally, I see no reason to not put into VUSXX but the easiest is to just open a Vanguard account and transfer the funds into it - the settlement account uses VMFXX.
I already have vanguard accounts. I will need some money in a couple of months. I just wanted to park it there for a couple of months with 4.5%ish.
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by peteyboy »

lepa71 wrote: Tue Mar 21, 2023 2:55 pm
peteyboy wrote: Tue Mar 21, 2023 2:50 pm
lepa71 wrote: Tue Mar 21, 2023 2:27 pm
peteyboy wrote: Tue Mar 21, 2023 1:40 pm
lepa71 wrote: Tue Mar 21, 2023 1:01 pm Does VUSXX still have tax-free from a state tax perspective? Where do I find the list of the states where it is tax-free? I thought I saw it somewhere.
Typically it is, however, the earnings from repurchase agreements are subject to state and local tax. Currently the fund holds about 25% in repurchase agreements. Early 2024 Vanguard will publish exactly how much of the 2023 dividend is a result of US obligations, as a percentage of the total dividend for the year. Below is a link to the 2022 version as an example - look at the bottom of pages two/three for some state specific comments.

https://www.vanguard.com/pdf/USGOIN_2023.pdf
I'm wondering if I even want to bother with VUSXX vs VMFXX. I'm in the 22% tax bracket.

It's really about the state tax. Personally, I see no reason to not put into VUSXX but the easiest is to just open a Vanguard account and transfer the funds into it - the settlement account uses VMFXX.
I already have vanguard accounts. I will need some money in a couple of months. I just wanted to park it there for a couple of months with 4.5%ish.
Sounds like a plan to me.

FYI, come next tax season take a look at that Vanguard US Obligations document for 2023. Even in VMFXX there will be some of the dividend that is not taxed at the state level that may apply to your situation. In 2022 it was about 38% that was state tax exempt (depending on your state of residence).
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by LmG7119 »

retired@50 wrote: Tue Mar 21, 2023 2:31 pm
lepa71 wrote: Tue Mar 21, 2023 2:27 pm
peteyboy wrote: Tue Mar 21, 2023 1:40 pm
lepa71 wrote: Tue Mar 21, 2023 1:01 pm Does VUSXX still have tax-free from a state tax perspective? Where do I find the list of the states where it is tax-free? I thought I saw it somewhere.
Typically it is, however, the earnings from repurchase agreements are subject to state and local tax. Currently the fund holds about 25% in repurchase agreements. Early 2024 Vanguard will publish exactly how much of the 2023 dividend is a result of US obligations, as a percentage of the total dividend for the year. Below is a link to the 2022 version as an example - look at the bottom of pages two/three for some state specific comments.

https://www.vanguard.com/pdf/USGOIN_2023.pdf
I'm wondering if I even want to bother with VUSXX vs VMFXX. I'm in the 22% tax bracket.
You'll pay Federal (22%) tax on either fund. Using VUSXX will only help with avoiding state taxes. What's your state income tax rate?

Regards,
Mine is 6.8% in MN.
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by retired@50 »

lepa71 wrote: Tue Mar 21, 2023 3:54 pm
retired@50 wrote: Tue Mar 21, 2023 2:31 pm
lepa71 wrote: Tue Mar 21, 2023 2:27 pm
peteyboy wrote: Tue Mar 21, 2023 1:40 pm
lepa71 wrote: Tue Mar 21, 2023 1:01 pm Does VUSXX still have tax-free from a state tax perspective? Where do I find the list of the states where it is tax-free? I thought I saw it somewhere.
Typically it is, however, the earnings from repurchase agreements are subject to state and local tax. Currently the fund holds about 25% in repurchase agreements. Early 2024 Vanguard will publish exactly how much of the 2023 dividend is a result of US obligations, as a percentage of the total dividend for the year. Below is a link to the 2022 version as an example - look at the bottom of pages two/three for some state specific comments.

https://www.vanguard.com/pdf/USGOIN_2023.pdf
I'm wondering if I even want to bother with VUSXX vs VMFXX. I'm in the 22% tax bracket.
You'll pay Federal (22%) tax on either fund. Using VUSXX will only help with avoiding state taxes. What's your state income tax rate?

Regards,
Mine is 6.8% in MN.
Given that, and the current yields on the two funds, you'd be better off using VUSXX. More of the interest earned in VUSXX will be exempt from MN taxes.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by mhc »

lepa71 wrote: Tue Mar 21, 2023 10:15 am
mhc wrote: Tue Mar 21, 2023 9:58 am I think VMFXX is a good choice. VUSXX may be a better choice. You have to decide what is better for you.
I feel like I can get money from VMFXX faster than from VUSXX if need to.
Is it right?
I can sell VUSXX and have it go directly to my linked checking account at my local bank.
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by Future Earnings »

I recently did a test with this the vmfxx paid approximately 19.96 for the month on 10k to give you an idea on rate of return as far as tax implications I really can't say I do know that it is better than having it in a bank account. I am in the 22% bracket, and I live in Ny which is a HIGH COLA I believe 8% state tax rate. I am currently looking into starting a tbill ladder but it is a little confusing with my crappy chase account. The downfall with tbill ladder is less liquidity but better tax advantage it is a double edge sword
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by evelynmanley »

lepa71 wrote: Tue Mar 21, 2023 11:37 am
evelynmanley wrote: Tue Mar 21, 2023 11:29 am
lepa71 wrote: Tue Mar 21, 2023 11:07 am
Mike Scott wrote: Tue Mar 21, 2023 10:19 am There should be no difference in access. Plan on a minimum of two-three business days for transfers to your linked bank account which is pretty standard timing for transfers between any linked accounts.
I thought you would have to sell VUSXX and settle it in VMFXX before transfer into my bank's account. Which could take more time.
I'm not trying to chase all pennies.
I had similar concerns and checked with a rep about this before I did it recently, and it's true you can transfer directly from VUSXX into your checking account.
So without settling?

Does VUSXX still have tax-free from a state tax perspective? Where do I find the list of the states where it is tax-free? I thought I saw it somewhere.
Yes, without settling back into VMFXX. Directly from VUSXX.

Here's a recent thread about state tax and VUSXX:

Title of the thread: "VUSXX taxable for state and local now"
viewtopic.php?t=399695&start=50
Last edited by evelynmanley on Wed Mar 22, 2023 12:27 pm, edited 1 time in total.
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by barreg »

evelynmanley wrote: Wed Mar 22, 2023 6:48 am
VUSXX taxable for state and local now
viewtopic.php?t=399695&start=50
Not necessarily. VUSXX might be partially or fully taxable for state and local, depending on your state's income tax laws. For example, in WI, any "Obligations of the United States government and its instrumentalities" are tax-free, but some states like CA require that at least 50% of the fund's assets come from US Gov't obligations, so for states like that, it won't be known for sure until the end of the year
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by evelynmanley »

barreg wrote: Wed Mar 22, 2023 11:46 am
evelynmanley wrote: Wed Mar 22, 2023 6:48 am
VUSXX taxable for state and local now
viewtopic.php?t=399695&start=50
Not necessarily. VUSXX might be partially or fully taxable for state and local, depending on your state's income tax laws. For example, in WI, any "Obligations of the United States government and its instrumentalities" are tax-free, but some states like CA require that at least 50% of the fund's assets come from US Gov't obligations, so for states like that, it won't be known for sure until the end of the year
That wasn't my statement; that was the title of the thread. I'll amend it. Sorry for any confusion!
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by Bbddl »

Why not consider a T-bill ladder? You would have the option of 4 week maturities if the funds were needed relatively quickly.
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by enad »

Perfectly okay
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by ruralavalon »

lepa71 wrote: Tue Mar 21, 2023 9:18 am As the title says. I'm wondering if it is ok to park cash that is designated for cash reserve in Vanguard VMFXX as I may need them in a couple of months.
My Emergency Fund should be between 20K-30K and now I have about 40K. I may have some expenses coming in the next couple of months for property tax for rentals. That would be between 10K -15K. So I was thinking to park it in Vanguard VMFXX and earn some extra money by parking it there.
Is it ok to put maybe 30K? Not really investing but when need it then pull it out.
Some general questions. As interest is higher than my back. Should I keep a portion of the Emergency Funds in VMFXX in the current market?
In my opinion that is a good idea.
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by LmG7119 »

Bbddl wrote: Wed Mar 22, 2023 1:06 pm Why not consider a T-bill ladder? You would have the option of 4 week maturities if the funds were needed relatively quickly.
You have to have time to build a ladder. Mine is a somewhat short-term thing.

I'm thinking to start a ladder but have not put too much thought into it.
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LmG7119
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by LmG7119 »

ruralavalon wrote: Wed Mar 22, 2023 2:34 pm
lepa71 wrote: Tue Mar 21, 2023 9:18 am As the title says. I'm wondering if it is ok to park cash that is designated for cash reserve in Vanguard VMFXX as I may need them in a couple of months.
My Emergency Fund should be between 20K-30K and now I have about 40K. I may have some expenses coming in the next couple of months for property tax for rentals. That would be between 10K -15K. So I was thinking to park it in Vanguard VMFXX and earn some extra money by parking it there.
Is it ok to put maybe 30K? Not really investing but when need it then pull it out.
Some general questions. As interest is higher than my back. Should I keep a portion of the Emergency Funds in VMFXX in the current market?
In my opinion that is a good idea.
I'm wondering if it is a good idea to use either fund as bonds allocation right now until the rates could go down.
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ruralavalon
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by ruralavalon »

lepa71 wrote: Wed Mar 22, 2023 5:42 pm
ruralavalon wrote: Wed Mar 22, 2023 2:34 pm
lepa71 wrote: Tue Mar 21, 2023 9:18 am As the title says. I'm wondering if it is ok to park cash that is designated for cash reserve in Vanguard VMFXX as I may need them in a couple of months.
My Emergency Fund should be between 20K-30K and now I have about 40K. I may have some expenses coming in the next couple of months for property tax for rentals. That would be between 10K -15K. So I was thinking to park it in Vanguard VMFXX and earn some extra money by parking it there.
Is it ok to put maybe 30K? Not really investing but when need it then pull it out.
Some general questions. As interest is higher than my back. Should I keep a portion of the Emergency Funds in VMFXX in the current market?
In my opinion that is a good idea.
I'm wondering if it is a good idea to use either fund as bonds allocation right now until the rates could go down.
What do you currently use in your fixed income allocation?

I generally prefer an intermediate-term bond fund with good credit quality, and stick with it regardless of the yield on money market funds or current market conditions.

But in my opinion it's reasonable to include a very safe money market fund as part of a fixed income allocation.

I would not change the fixed income funds used based on changes in rates.

Wiki article "Bogleheads® investment philosophy", Never try to time the market.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by White Coat Investor »

lepa71 wrote: Tue Mar 21, 2023 9:18 am As the title says. I'm wondering if it is ok to park cash that is designated for cash reserve in Vanguard VMFXX as I may need them in a couple of months.
My Emergency Fund should be between 20K-30K and now I have about 40K. I may have some expenses coming in the next couple of months for property tax for rentals. That would be between 10K -15K. So I was thinking to park it in Vanguard VMFXX and earn some extra money by parking it there.
Is it ok to put maybe 30K? Not really investing but when need it then pull it out.
Some general questions. As interest is higher than my back. Should I keep a portion of the Emergency Funds in VMFXX in the current market?
Is it okay if I park my car in my garage? Parking money is exactly what a money market fund is for.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
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LmG7119
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by LmG7119 »

ruralavalon wrote: Thu Mar 23, 2023 2:16 pm
lepa71 wrote: Wed Mar 22, 2023 5:42 pm
ruralavalon wrote: Wed Mar 22, 2023 2:34 pm
lepa71 wrote: Tue Mar 21, 2023 9:18 am As the title says. I'm wondering if it is ok to park cash that is designated for cash reserve in Vanguard VMFXX as I may need them in a couple of months.
My Emergency Fund should be between 20K-30K and now I have about 40K. I may have some expenses coming in the next couple of months for property tax for rentals. That would be between 10K -15K. So I was thinking to park it in Vanguard VMFXX and earn some extra money by parking it there.
Is it ok to put maybe 30K? Not really investing but when need it then pull it out.
Some general questions. As interest is higher than my back. Should I keep a portion of the Emergency Funds in VMFXX in the current market?
In my opinion that is a good idea.
I'm wondering if it is a good idea to use either fund as bonds allocation right now until the rates could go down.
What do you currently use in your fixed income allocation?

I generally prefer an intermediate-term bond fund with good credit quality, and stick with it regardless of the yield on money market funds or current market conditions.

But in my opinion it's reasonable to include a very safe money market fund as part of a fixed income allocation.

I would not change the fixed income funds used based on changes in rates.

Wiki article "Bogleheads® investment philosophy", Never try to time the market.
in 401k I have Fidelity® U.S. Bond Index Fund (FXNAX)
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ruralavalon
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by ruralavalon »

lepa71 wrote: Thu Mar 23, 2023 6:06 pm
ruralavalon wrote: Thu Mar 23, 2023 2:16 pm
lepa71 wrote: Wed Mar 22, 2023 5:42 pm
ruralavalon wrote: Wed Mar 22, 2023 2:34 pm
lepa71 wrote: Tue Mar 21, 2023 9:18 am As the title says. I'm wondering if it is ok to park cash that is designated for cash reserve in Vanguard VMFXX as I may need them in a couple of months.
My Emergency Fund should be between 20K-30K and now I have about 40K. I may have some expenses coming in the next couple of months for property tax for rentals. That would be between 10K -15K. So I was thinking to park it in Vanguard VMFXX and earn some extra money by parking it there.
Is it ok to put maybe 30K? Not really investing but when need it then pull it out.
Some general questions. As interest is higher than my back. Should I keep a portion of the Emergency Funds in VMFXX in the current market?
In my opinion that is a good idea.
I'm wondering if it is a good idea to use either fund as bonds allocation right now until the rates could go down.
What do you currently use in your fixed income allocation?

I generally prefer an intermediate-term bond fund with good credit quality, and stick with it regardless of the yield on money market funds or current market conditions.

But in my opinion it's reasonable to include a very safe money market fund as part of a fixed income allocation.

I would not change the fixed income funds used based on changes in rates.

Wiki article "Bogleheads® investment philosophy", Never try to time the market.
in 401k I have Fidelity® U.S. Bond Index Fund (FXNAX)
I suggest sticking with that fund, a total bond market index fund which uses the Bloomberg Barclays U.S. Aggregate Bond Index, for your fixed income allocation.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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LmG7119
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by LmG7119 »

Bbddl wrote: Wed Mar 22, 2023 1:06 pm Why not consider a T-bill ladder? You would have the option of 4 week maturities if the funds were needed relatively quickly.
I'm wondering how much more interest someone could get from building a ladder vs just putting money into VMFFX or VUSXX
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by trirunner »

lepa71 wrote: Fri Mar 24, 2023 4:51 pm
Bbddl wrote: Wed Mar 22, 2023 1:06 pm Why not consider a T-bill ladder? You would have the option of 4 week maturities if the funds were needed relatively quickly.
I'm wondering how much more interest someone could get from building a ladder vs just putting money into VMFFX or VUSXX
Isn't the current 4 weeks/8 weeks yield less than VMFXX?
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LmG7119
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by LmG7119 »

trirunner wrote: Fri Mar 24, 2023 10:50 pm
lepa71 wrote: Fri Mar 24, 2023 4:51 pm
Bbddl wrote: Wed Mar 22, 2023 1:06 pm Why not consider a T-bill ladder? You would have the option of 4 week maturities if the funds were needed relatively quickly.
I'm wondering how much more interest someone could get from building a ladder vs just putting money into VMFFX or VUSXX
Isn't the current 4 weeks/8 weeks yield less than VMFXX?
Yes, but I think the actual ladder would be on 17 weeks' t-bills. 100% state tax-free.
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by Northern Flicker »

lepa71 wrote: Tue Mar 21, 2023 10:15 am
mhc wrote: Tue Mar 21, 2023 9:58 am I think VMFXX is a good choice. VUSXX may be a better choice. You have to decide what is better for you.
I feel like I can get money from VMFXX faster than from VUSXX if need to.
Is it right?
If you mean how long will it take to transfer funds to a bank account or exchange into a mutual fund, I think they are equivalent. If you mean to have the funds available for say an ETF purchase, then funds in VMFXX are ready to invest.

For an emergency fund or larger asset amount, I would prefer VUSXX on general principles.
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Re: Is it ok to park some Emergency Fund in Vanguard VMFXX?

Post by bhjjk19 »

I'm strongly considering doing this as my current emergency fund is housed at Ally Bank. While Ally now pays 4% interest, the Federal MM Fund pays more. I have several questions to ask based on my below assumptions and would appreciate any comments and/or suggestions.

My wife and I both have tax-advantaged IRAs at Vanguard. Her IRA is on the Brokerage platform and mine on the old legacy Mutual Fund platform.
We each gave each other trading authority on our respective IRA's.

I believe it would be in our best interest to create a Taxable Brokerage Account and fund it initially from Ally to a Federal MM Fund for the following reasons:
1) we currently do not own Taxable Accounts but will most likely need one down the road for unused RMD distributions.
2) we need to be prepared how to manage Taxable Accounts; by taking this small step now accomplishes both current and future needs
3) as mentioned above, my IRA portfolio is on the old Mutual Fund platform. Now might be the best time to migrate over to Brokerage not only to satisfy Vanguard's pressure to move, but also have all of our holdings on the same platform.
4) Moving to the Brokerage platform may ease transition to another Brokerage should we decide to do so down the road.

Question(s):
1) I assume I can link both my Ally Bank account and my local checking account to this Taxable account. Correct?
2) Can our respective TIRA's be linked to this Taxable account for the purpose of RMD distributions and/or withdrawals (sells) of funds?
3) I am NOT considering creating this Taxable account as a JOINT account, but rather setting it up just like our TIRAs where I would make my wife a primary beneficiary with trading authority. Is this feasible?

Is there anything else I should consider?
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