Should I purchase VMFXX through my taxable account, Roth IRA, traditional IRA?

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  • #85459 Reply

      I am trying to transfer my emergency fund to VMFXX to take advantage of the 5.05% yield. When I go on Vanguard to purchase, it is asking me to select one of my existing brokerage accounts. Should I purchase vmfxx through my taxable account, roth IRA, traditional IRA? Does that even matter?

      Sorry if this is a basic question. I appreciate anyone willing to help.

      #85460 Reply

        If it’s your emergency fund it should go in your taxable account.

        #85461 Reply

          If you want to keep your emergency fund readily accessible, it sounds like your taxable account is the way to go. If you have not already done so, you may need to link your Ally savings account to Vanguard to make an electronic transfer from one to the other.

          Then select Transact–> Buy and Sell–> Money Movement –> Transfer from your bank to Vanguard.

          Then deposit funds into your Federal Money Market fund.

          To be on the safe side, I’d also suggest calling Vanguard when they open tomorrow.

          Don’t miss: What would be a smart alternative to help grow the funds? Should we do investment accounts? HYS, IRA?

          #85462 Reply

            Probably not in your IRAs. It’s also the default settlement fund, so just moving the money to vanguard (your taxable brokerage, for example) will get you into that fund.

            #85463 Reply

              I would create a new taxable account and use that. It should be separate from your investment accounts. It can be at the same institution (Vanguard) but should be in a separate account.

              Explore these too: We recently broke up with our financial advisor and transferred our money to Vanguard – We need to choose funds

              #85464 Reply

                If your emergency funds are not in an IRA, then set up a taxable VMFXX and transfer funds…

                #85465 Reply

                  It matters because if you transfer from Ally HYSA to a traditional or Roth IRA you are making an IRA contribution subject to annual IRA contribution limits. You may exceed the yearly contribution limit. Then if you were to attempt to withdraw the money to use in an emergency, you may be taxed and/or pay an early withdrawal penalty.

                  Some people use Roth IRA contributions which can be withdrawn without tax or penalty at any time, but I think this is rare. I suspect you want to put your emergency fund in your taxable side brokerage account.

                  #85466 Reply

                    Are you sure you want to do that? That 5%+ yield is the 7 day yield. Back up to the 3 year yield, you’re looking at about a percent and a half. Investing your emergency fund is gonna make it less accessible (if you had an emergency, you’d have to sell, the funds would have to settle and then you’d have to wait for it to transfer.) There’s plenty of banks with high yield savings accounts of 3% with whom you’d have much more immediately accessible funds. Is there a reason you wouldn’t just do that?

                    You’re likely not going to actually achieve a 5% yield on that fund, so it feel like you’re just getting less access to your money and likely significant increase in yield over a top ranked high yield savings account.

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