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I've been looking at the possibility of moving a good chunk of my e-fund to Vanguard's Tax-Exempt MMF (VMSXX). My wife and I are in the 28% Federal Tax Bracket, so this seems like it will provide a much better after-tax return than the online banks (ING, Emigrant, etc.).

Am I missing anything? Are there pitfalls I need to watch out for? Is the tax-exempt fund generally better than places like ING for people in my tax bracket? Or is this just a current phenomenon?

I understand that I am giving up some protections (FDIC insurance), but I trust Vanguard to do everything possible to protect their share price on the MMF.

Any thoughts are appreciated.

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