I’ve been sitting in quite a bit of cash for a year, largely in my brokerage account. I have 3 brokerages all 3 pay bupkus on the money market accounts. I think it how they generate those “free” mutual funds. They shave points off the money market returns to pay for the mutual funds. Individual investors are notorious fo leaving money un-invested and therefore un-risked and all that un-invested money just keeps the light on plus a tidy profit for the brokerage. With the FED taking it’s boot off the banks you can actually get a tiny bit of interest income these days. I considered putting the dough into a CD ladder but CD ladders tie up the money and create taxes. I did put the money in a short term muni bond fund which “should” have paid me a little tax free while waiting to spend down the balance over the next 4 years, but with interest rates backing up the Muni fund went down and I promptly lost 5K so I decided to take the loss and make another plan.
I could ladder a CD for about 3% average yearly return having trounces of the ladder come due across the period in time to pay for hamburgers and taxes, but the non-liquidity about that plan bugged me. It tied up the money in a way that would generate a penalty if I needed some cash fast for some reason. It turns out there is now online banking which pays pretty high interest, compounded daily, perfectly liquid, FDIC insured to 250K. So I decided to stuff that money into a couple high interest savings accounts. The account yields 2.45% annually, compounded daily paid monthly. The interest is taxable, so given my Roth conversion at the 24% bracket for every dollar of interest I make I have to send Sam 24 cents, but keeping 76 cents ain’t such a bad deal seeing as how presently I’m making 0.1%. If I had a CD ladder I would have a similar tax drag.
The logistics were easy. I have my accounts linked so I merely validated the internal and external accounts and started transferring money. Accounting for the transfer was virtually over night but I’m sure setting the account will take a couple days. The savings account does not have checking or any other “features”. It houses money, compounds money and allows transfer in and out. Unlimited transfer, limited transfer out is limited to 6 electronic transfers per period, or by check PRN. I generally transfer twice a year, enough to cover hamburgers and taxes and pay bills through a checking account. Should generate enough over the next 4 years for 3 free trips to Europe or maybe 2 to Asia, after taxes.