Money questions, interest, etc
- Thread starter Kristi2k
- Start date
What is the highest money market youve seen? ive noticed that ing or emigrant seems to have most money markets beat down w/ FDIC insured
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No Lifer
- Sep 29, 2000
- 70,150
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Honestly I don't know, because I've never had one.
I just know that they are better than a normal savings account, though certainly one would want at least 1% premium over emigrant/ing, to offset the minimal risk.Personally I think if you have enough money in savings that you're annoyed at the lack of return, you should put it into the stock market with an index fund or something. Who really needs QUICK super easy access to $10k? Even if you have it in the market you can get at it quite quickly, if you really need to.
If you probably won't need it (it's true "real emergency" money) you might take Skoorb's suggestion in another thread and put it into mutual fund shares.
I'd suggest a Roth IRA at Vanguard.com (and buy VFINX) if you have earned income. If you earned over $3K last year but less than around $100K you can put in $3K for 2004 plus $4K for 2005. Hurry though, you only have until 4-15 to contribute for 2004.
Roth IRA grows tax free (no interest being taxed every year) and you can withdraw the principal without any tax penalties if you ever do have an emergency.
If you never have the emergency you've saved on taxes and made a start on having more money when you retire.
If you already have a maxed-out Roth, just put it into an ordinary non-sheltered brokerage account at Vanguard. A fund like VFINX will return 8-10% a year if held for years and right now the capital gains the fund earns are taxed much lower than simple interest from savings or money market.
I'd suggest a Roth IRA at Vanguard.com (and buy VFINX) if you have earned income. If you earned over $3K last year but less than around $100K you can put in $3K for 2004 plus $4K for 2005. Hurry though, you only have until 4-15 to contribute for 2004.
Roth IRA grows tax free (no interest being taxed every year) and you can withdraw the principal without any tax penalties if you ever do have an emergency.
If you never have the emergency you've saved on taxes and made a start on having more money when you retire.
If you already have a maxed-out Roth, just put it into an ordinary non-sheltered brokerage account at Vanguard. A fund like VFINX will return 8-10% a year if held for years and right now the capital gains the fund earns are taxed much lower than simple interest from savings or money market.
VFINX is an S&P 500 index fund, so you're investing in the 500 largest US corporations as a set, not gambling on trading and timing individual stocks.
You buy fund shares and hold them for years or even decades. It's a "passive" fund that just follows the S&P 500 index rather than an "active" fund that uses stock-pickers to gamble on specific stocks (see the paper or the rightmost column of CNN.com to see the S&P 500 under the DJIA and Nasdaq).
The S&P 500 goes up and down a little in the short run, but over decades is the safest stock investment you can make.
actually that's not a good idea for emeregency fund.
what if the emergency happen during the downturn?
for any immediate cash, you should go with savings, or at least money market. the best one I have seen is ING/emmigrant. their savings interest is bigger than your local bank can give in the money market.
It's not a good idea for your first month or two of emergency money, but if you have a lot more (6 months or more) earning 3% a year (2.1% after taxes) instead of 8% (6.8% after taxes) on the extra 4+ months is hurting yourself over time.
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No Lifer
- Sep 29, 2000
- 70,150
- 5
- 0
It's not a good idea for your first month or two of emergency money, but if you have a lot more (6 months or more) earning 3% a year (2.1% after taxes) instead of 8% (6.8% after taxes) on the extra 4+ months is hurting yourself over time.[/quote]Further, if it does happen during a down turn it won't take long of pre-emergency growth to pad the principal such that even if it takes a hit and THEN you need the money, it will have grown so much over the negligible savings account that you'll still likely be in good shape.
Interest gets taxed as straight income, so it's at the highest bracket you've reached.
Mutual funds pay out a combination of dividends and capital gains (short- and long-term). In a Roth IRA none is taxable, in a regular unsheltered brokerage account some of the capital gains are taxed at 15% and tha rest are taxed at the same rate as interest.
You pay the same tax rate for a savings account and CD so if the CD APY is higher then you do come out ahead.
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