I guess I’m close to 50/50 cash versus retirement and 529 accounts so when you put it that way it makes sense.
Yes, and just moving them to a high yield savings account
1 Like
Yeah I mean, if you take my bankroll out of it, I’m like 67% IRAs and 33% emergency fund, and like 90% of my emergency fund is in I Bonds. My IRA is currently about 65/35 equities/cash and I’m actively trying to get it to 100/0.
So in your case (assuming you have a salary that covers your expenses), what I’d suggest is no more than a few months living expenses in cash, the rest of your emergency fund in something inflation protected like I Bonds (you can get most of the emergency fund into them over time, just stagger entry for liquidity’s sake). Everything else should probably be in stocks, bonds, or other investments.
Not really enough information to say, but if the money is primarily intended to replace income 10, 20 years down the road, then it’s probably not a rational allocation.
What are the other options for you to allocate this money?
When prices go up they’re passing that on to the customer maybe?
Are I-bonds even still worth it? I thought they were down to close to the 5 percent im currently getting in a savings account? Coupled with the likelihood that they fall way below 5 percent over the next 5 years aren’t they a bad bet at this point versus a savings account?
I suppose I could purchase index funds or individual stocks and bonds? I’m already maxed out on deferred comp so there aren’t any tax-deferred options if that’s what you’re asking.
Long term they’re indexed to inflation and I think the permanent rate right now is 0.8% or something like that. If you’re going to sit in cash long term they’re probably the best or one of the best ways to do it. Short term the high yield savings are doing better.
It really comes down to what the money is for and when you’re going to use it.
Yeah, if you’re maxing out your 401k and Roth, I don’t think a high yield savings account is a bad plan. You could get a slightly higher rate if you want to invest in treasury bills instead, but I do like earning 5% on what is essentially my emergency fund while maintaining easy access to it anytime I would actually need it.
1 Like
The thing is, it sounds like he has a lot more in there than just his emergency fund.
If they have that much extra, could diversify into real estate.
I hope you’re not under the impression that a 4.65% dividend yield is in any way comparable to an investment like a bond or a CD or a savings account where actual returns are being generated.
A dividend is just a company returning part of your equity to you in cash. The value of the company (and the stock) is reduced accordingly, The result is no net gain.
In an efficient market that’s true, but if the market is fundamentally undervaluing the company then the returned capital is good for the shareholder (because usually the price isn’t going to drop by the full amount of the dividend, or it’s going to be gained back more quickly than it would in an efficient market on a fairly priced stock).
Another way I think about this is, let’s just say BSET is worth $21 because they were offered that and turned it down last year. If I’m expecting it to some day either hit $21 + or be sold for $21 + per share and my time horizon is such that the value between now and then is totally irrelevant to me, every dividend I get in the mean time is extra value for me.
Nah, maxing out my retirement contributions is a more recent phenomenon. I’m certainly under the FDIC limit lol. Disney World isn’t cheap. (Neither is two kids, day care, and all the attendant expenses).
1 Like
Ah, ok. Another tax advantaged option would be to set up 529s for the kids, if you haven’t already and want to save for their college. I think if they don’t end up needing it you can roll it into a Roth later, but I could be wrong about that. I think @Riverman knows iirc. Feel like he posts about Roth rollovers from time to time.
Also if you’re trying to play some catchup on retirement savings, if you have any self-employment income you could start a SEP-IRA and the contribution limits are higher.
I think the Roth rollover from a 529 is limited to 30k. But you can also just keep compounding and use it for the next generation too.
IIRC you’re in California or NY? The tax advantages are magnified in a high tax state. I would never just load up in a HYSA in those states, you’re paying your marginal tax rate on each incremental dollar of interest income.
This discussion reminds me again how planning saving for retirement remains such a weird thing to my mind after school/early career/etc being decades of short term goals and now suddenly it’s like one of the main life goals you don’t want to mess up is decades away and I’m supposed to have some educated opinion on if I want to work to x age or x+ 10 years or spend Y amount yearly in 30 years. Like obviously I know there all sorts of planning methods but at some level it requires making reasonable guesses about what life looks like in decades
2 Likes
Yes they are not worth it right now, it may be correct to stay in previous position due to the nature of the cash out and losing a few months interest, it really depends on when you bought them. I wouldn’t buy new ones at this point in time
1 Like