UnThreaded | Threaded | Whole Thread (5) | Ignore Thread Prev Thread | Prev | Next | Next Thread
Author: Mark0Young Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76396  
Subject: Re: Newbie Advice & IRA Dividends/Gains Question Date: 3/29/2002 5:10 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 1
I am going to put my short term savings into a Money Market Account which is currently paying 3.1% (the best I could find).

Right now that is a good rate for a Money Market Account. My credit union is paying only 1.61%APY on money market accounts with at least $10,000 in that account. (My credit union pays different interest rates for different amounts in the account, and $10K gives the top rate.)

I use my money market account for short-term savings for saving up for the annual property tax bill, my annual Roth IRA contribution, and the more liquid half of my emergency fund. I also have my credit union automatically divert part of each payroll direct deposit into this account so, if I do withdraw from the account (e.g., to pay the property tax bill, or handle a major car repair), the account will automatically be rebuilt.

I'm also considering putting some funds into a 5 year cd with ING direct (5%). I don't see much talk about CDs are they a worthwhile investment or should I put that money somewhere else?

Can you redeem the 5-year CD before maturity? (Some issuers will allow it with penalty, some won't allow it.)

I generally have mixed feelings about CDs--one one hand they do usually give better yields than a money market account or a money market fund. On the other end, CDs generally tend to be inflexable. I used to keep some long-term money and the less liquid half of my emergency fund in CDs, but I have since moved the less liquid half of my emergency fund to I-Bonds (http://www.publicdebt.treas.gov/sav/sbiinvst.htm) and I have moved longer-term money into stock funds and (ahem) bond funds. I still use CDs where I want the money available on a specific date (e.g., I have a couple CDs that mature near January 1 that I can use for a Roth IRA contribution if need be, and in the recent past I have used CDs to boost yields of money I have set aside for property taxes but made sure they would mature just before I expect the property tax statement to arrive).

Right now the FOMC has the overnight rate pretty low and many people expect those rates to rise sometime in the next few months to a year, and when they do, it is expected that money market rates and CD rates would rise. Unfortunately, most 5-year CDs don't give you the benefit of the increased rates, pretty much locking you into the lower rate.

You can get more opinions about CDs, I-Bonds, and other fixed-rate instruments over in The "Bonds & Fixed Income Investments" board (http://boards.fool.com/Messages.asp?bid=100135).
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (5) | Ignore Thread Prev Thread | Prev | Next | Next Thread

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
Foolanthropy 2014!
By working with young, first-time moms, Nurse-Family Partnership is able to truly change lives – for generations to come.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Macro Economics

Economic Implications of Cuba
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement