Vanguard also has a Cash Plus Account currently paying 4.5% interest. It was offered to me on a limited investor basis as apparently it's being rolled out.
I’ve been with Vanguard for over 35 years and I didn’t know about the cash account. I have 3 accounts with them. Also, I have 138.00 sitting in the old Prime Money Market Fund (now renamed) and Vanguard never asked or did anything with it.
I also enrolled in this when it was offered to me in December of 2022. I think it suppose to add additional features including bill paying however no new features have been added since I enrolled. The interest rate has increase since my enrollment to 4.5 %.
Got an invite 6 days ago for Vanguard Cash Plus 4.5% and moved some energy funds there to test the water. "We're inviting you to consider enrolling in the pilot of an exciting new savings account alternative: the Vanguard Cash Plus Account."
25 years with vanguard - no they never complain when my investment falls below the $3k starting. But I know that vanguard will sometimes downgrade your "admiral shares" down to "investor shares" if you fall below the $50k required for Admiral. I've also been automatically upgraded to admiral when my balance went above the $50k minimum.
As a retiree I have quite a significant amount of money in VMFXX (various accounts). No state income tax expose. At least right now I don't know how people with some assets won't take advantage of these very low risk products...
I have a very small amount (about $11,000) in a Vanguard IRA from my old employer. It’s just been sitting there and I haven’t looked at it really. Now I’ll have to go take a look and see if I want to keep it there and add a money market fund to it since I’m 59 1/2 I can withdraw if needed. Thx for explaining that!
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My wife's Vanguard IRA and Roth accounts have been fully invested for months if not years, so the VMFXX Settlement balance has remained far below $3000, like $100 to $300, for that entire time. Never a peep out of Vanguard about this.
Great video, I'm really impressed how quickly you can produce theses on such short notice! Thx. FYI, I've tried to buy in to Vanguard's money market funds from other institutions, to take advantage of their superior rates. Ameritrade will let you buy them, but for a $75 transaction fee. Fidelity won't even let you place an order! So it looks like it's best to open a Vanguard account if you want these rates, which I am considering.
@@peter-hr1gl Yes, REALLY! My main accounts are currently with Ameritrade, which doesn't offer a high yield core (aka "sweep", or "settlement") account. Their core account currently pays a measly 0.35%. To get a higher yield you have to buy a money market mutual fund, but then you don't have access to your money the day you need it. That wouldn't have helped me back in April of 2022 when Netflix plunged from 350 to 210 in a single day (it recently traded at 485). Because I had the funds in the sweep, I was able to take advantage to buy 100 shares that very same day! Back then interest rates were so low it didn't matter. But today you lose money if you keep 20K in a low paying core account like Ameritrade has. Ameritrade is moving over to Schwab, which has the same problem. So I am looking for an institution that has a higher yielding core account. The two that look most promising to me are Vanguard and Fidelity. The Vanguard VUSXX is paying 5.09%, while Fidelity FZFXX is paying 4.74%. So yes, I am considering opening a Vanguard account.
@DavidLitman-ph9lu I have accounts at both institutions. I thought about transferring all to Schwab because I like their app better, but I have more in my Vanguard settlement fund, (waiting for the right time to buy) and since it pays a better dividend than Schwab, I'm keeping both. Plus, it gives me the option to purchase Vanguard ETFs without the Schwab purchase fee. (Information I learned the hard way.) Good luck!
VUSXX has the tax savings feature in a taxable account. Note that if you sell VUSXX then I have observed that the proceeds are available by 8AM the following morning in the settlement fund ready for trading or withdrawal.
Another great video! Thank you! Can you make a video to explain the treasury notes' interest calculation with coupons? Why the same maturation date with deferent coupon rate? Which one is better, higher or lower coupon? Or I should just go with the higher interest rate?
Thank you for the video I received the email from Vanguard to change my settlement money to the cash deposit option but didn't know what to do. Thanks to this video, I understand that the VMFXX is a good place to park my money, for now.
I think the bank account (cash deposit) options are terrible. The money market settlement fund pays a much higher interest rate, and the risk of loss (breaking the buck) between a government money market fund and a bank account is extremely small. Maybe in the future there will be some service reasons to have a cash deposit account, like bill payment and making pulls from other institutions, but right now I don't see any advantage to it to justify the loss of interest.
So, with a low enough income there would be no tax due in states that have no income tax. Also, I assume this could be a good cash holding place within a Roth for those in states which do have income tax.
@@SpikeG571 No tax is owed on any retirement account (401k, IRA or Roth IRA) until funds are withdrawn from the account. Retirement accounts are tax-deferred meaning all interest, dividends and capital gains accrue within the account tax-fee. Withdrawals are taxed at ordinary income tax rates except for Roth withdrawals. Roth withdrawals are tax and penalty free unless you don't meet the IRS 5-year and/or age 59.5 hurdles.
@@SpikeG571it’s not bad in a Roth as it’s the automatic settlement fund, however tax is not a consideration within Roth as Roth are not taxed. VUSXX could be a good holding in your taxable brokerage if you have state taxes.
Thanks for a great video. I am confused about taxes for the VUSXX fund as you didn't specify CA & NY state details. Is it 100% exempt from California state taxes? If yes, then it is better than the remaining 5 funds as long as we can move in and move out manually. Please clarify. Thanks in advance.
Another option for a tax exempt fund is VTES, which lists a 30 day SEC yield at 3.05%. Probably not enough for many to consider it over VMFXX or VUSXX (my choice) and bypassing the tax exempt advantage.
Suppose you have a High Yield Savings account paying 5%, and FDIC insurance, plus you need to pay taxes. Suppose you have one of these Taxable Money Market Funds which pay the same 5% (let's say VUSXX, which is tax-exempt in all states, mostly), is not as liquid, has no FDIC insurance. Which is the better short-term investment?
Regarding your question on maintaining minimum investments amounts. I've had several Vanguard funds in both the investor and the admiral class, and had a few dip below the minimum investment amount (including VMRXX) and Vanguard never closed them or event informed me of any closure action except for once about 15 years ago, when the told me to add more money in the fund I had to invest it enough to bring it back to the minimum investment, but never had that happen again. However this could have been because I had been shifting the balance to another Vanguard fund.
I want to comment on the bank account options versus the money market fund options. I don't see any advantage to having a bank account as your settlement fund rather than a government money fund at the present time. The interest rate of 3.5% or 4.5% is a lot lower than the money market fund yields which are over 5%. Interest on both are state taxable (while interest in the treasury fund, which cannot be used as a settlement fund, may avoid state taxes, so there is a reason to move money to VUSXX, although you have to transfer back to the settlement fund before trading). Unless they give some service benefits, like bill pay and the ability to pull funds to pay bills, why would anyone do it? Getting FDIC insurance is pretty much worthless when compared to government mutual funds, because the underlying investments are backed by the US just like the FDIC. The only real risk in a government money fund is that interest rates will go up significantly, and there will be large redemptions that will require the fund to sell their holdings at lower prices and "break the buck." That has happened in a couple of non-government money funds during unusual times, but even then the losses were minimal. So I don't see any real advantage to FDIC insurance over government money funds in terms of safety of principal. So I don't think you're getting anything of value in return for accepting a lower interest rate. Maybe the market will change in the future and bank rates will be higher than money market rates, or maybe they will provide some compelling service advantages. But in my opinion, right now, it is just a bad move. If anyone thinks I'm missing something, I'd welcome a response.
Smart people are moving their money into money market funds. Lazy/uneducated people are keeping their money in the banks (and the banks love these people).
Two things. First is what you touched on: interest rate risk from the settlement fund. The second is the FDIC insurance amount would be higher than normal if you had a larger cash amount because they split the amounts up to the maximum FDIC amount to multiple financial institutions. Other than that I don't see a benefit.
If a fund could be exempt from a percentage of state taxes, will this show on year-end tax forms? Like how much is state taxable, and how much is exempt? Or do I have to figure this out somewhere else?
Is it that you open a roth IRA with vanguard, and say that account is under $3000, it goes into the VMFXX until you reach the $3000. Then from there you can divvy up the money into different bonds, index funds etc? Why is it that my money is automatically being put into this money market fund on vanguard? I can't find any videos that address this specific topic.
I have the VMFXX in an IRA and a ROTH IRA. Are the dividends of the fund subject to CA state taxes every year or only when a withdrawal is made at the time of retirement? I'm still learning. Thanks for your help. 😊
You're taxed on mutual fund dividends (interest) at the time it is paid (monthly). Withdrawals and sales are not relevant. If you pay state income taxes, you're likely better off in the treasury money market fund (VUSXX). Unfortunately, unlike Fidelity, Vanguard does not allow you to change your settlement fund, so you have to sell and transfer money from VUSXX into the settlement fund before trading, which is unfortunate when buying actual treasuries. Also, I don't think we can rely on the past year's tax state-tax deductions for VUSXX. VUSXX is now holding significant positions in treasury swaps, which I don't think are exempt from state taxes (maybe someone else knows more about this than I do. I know that interest earned on treasury swaps from a private entities are not state tax deductible under a Supreme Court decision; but I don't know whether interest earned on treasury swaps issued by the treasury are state taxable or not, and I don't know whether VUSXX's swaps are with the treasury or with a private entity). So 40% or so of the interest in VUSXX may not be state tax deductible for 2023 based on the current holdings if they continue. Still, VUSXX is better than the other options for anyone in a taxable state because the % of swaps is lower, and they only buy treasuries and treasury swaps. If Vanguard cared about customer service, they would allow customers in taxable states to change their settlement fund to VUSXX.
@@glgermain Did you miss that she invested in IRAs? Income from IRAs is not taxed until you withdraw it and is taxed as regular income at retirement. The ROTH IRA should be tax free. Also, I invest in VUSXX and am able to buy from it without transferring to the settlement fund first.
@@shy_gamer Thanks for pointing that out - yes, you are right, I did not notice the IRA part. IRA dividends and other earnings are not state or federal taxable until you withdraw (as long as you take your RMDs). Roths may not be taxable since contributions were after tax. The other vanguard money market accounts are fine for IRAs since earnings are not taxed until the money is distributed. Sorry about that, and thanks @shy-gamer. With respect to buying from VUSXX, maybe it depends on what you're buying. You can of course exchange from VUSXX to any other vanguard mutual fund. But I was unable to buy treasuries or write checks and have the money come out directly from VUSXX. I don't think you can buy stocks from it either, since settlements are always taken out of the settlement fund (and you can't enter transactions without cash in the settlement fund or using margin). So maybe you were exchanging into another mutual fund? Actually, my experience was worse than that. I bought some treasuries, and immediately put in a "sell" to transfer money from VUSXX to the settlement fund. I was charged 3 days of margin interest for some reason I can't really understand, and Vanguard's margin rates are really high. So I think to be safe you really need to sell VUSXX, wait a day (or more depending on when you entered your sale) for the sale to go through, and then buy treasuries.
Thank you for the information. Now I know that Vanguard and Fidelity have CORE money market funds that you don’t have to trade in and out of. Can you tell us why Charles Schwab and TD Ameritrade don’t have CORE mm funds and you only earn less than 1% on their fund that holds your excess cash?
I saw the CEO of Schwab on Mad Money recently and when asked, he said they "encourage" their customers to move their uninvested money into their higher yielding money market funds. But this is obviously disingenuous - they do it to make money! They collect the spread between the %5+ they make of Treasuries and the 0.45% they pay you. If they wanted their customers to have a higher yield, they would have a high yield core account, like they used to! Perhaps if they see enough people moving accounts to Vanguard or Fidelity they will change their tune.
Welcome to our SSS membership! I see you joined recently. The answer to your question is that it depends… I’m going to try to do a video with details on this because a few others have a similar question, but if I don’t get to it before our Q&A session on 9/22, please submit it via the Q&A form and I’ll be sure to cover (Q&A form goes live about a week before the Q&A).
Fidelity doesn’t let us buy these vanguard money market ticker symbols. Your videos are very knowledgeable and helpful. Thank you for sharing your knowledge and expertise.
I have put 5k in VMFXX, almost for two months, when the yield is applied to the accounts, after each month? yearly? when can i expect to see the yield in my account? thanks
@mohsenimani6652 I put 10k in VMFXX and yielded was posted to my account within that same month, but after I took the 10k out and purchased cd. If you don’t see yields posted to your account then maybe you can call and ask them about it
Great video! I invest in 6 month and 3 month treasuries which is 5.50% plus it’s a state tax free. Is that much better than vanguard? Specially 3 month or 6 month are short period of time
Thank you for the great videos. After watching your MM Fund for Schwab, I moved my money to SNSXX that had been sitting in Sweep at .45%. I'm working on another $35K in sweep in E*Trade, do you know or anyone reading this comment know of a California Tax free Treasury MM fund off hand. This will save me a lot of time reading all the prospectuses. Thank you for your help in advance.
It was 100% last year when it had minimal allocations to repos. It likely won't be that high this year due to the relatively higher allocations to repos.
Is someone had 1.4 M in the VMFXX would that be irresponsible as to being insured? And if only part of it is insured, what would be a good solution to stay in the Money Market at this time.
Hi Jennifer! this is very useful talk. I have been learning lot from you. Is there any Money Market fund with Bank of America? Kindly comment on this. Thank you.
Hi Reena. I'm sorry, but we don't have any accounts with BofA, so don't have access to this info. Your best bet is to call them & ask them directly. Let us know what you find if/ when you get the chance.
Is the Vanguard VMFXX money market fund safe ? Its paying 5.30% but I was looking at the Prospectus and wasnt sure its kind od confusing , but I do believe its safe ? I wonder what would happen if a Govt Shutdown or something ? Thanks for your videos.
Totally off topic, Now that the rollout of the beginning of FedNow has started will payments we make through the big banks get posted immediately to the vendor? I hear some changes are happening. Lynn
Question: A bit new to this. We have a sizable amount (>150K) in a High Yield Savings account getting 4.5%, I didn't really know about these funds. Does it make sense to move the money into one of these funds since it's over 5%?
Great video! Can you talk about Wealthfront? I’m getting 5.05% APY for 6mo because I joined from a referral and got a 0.5% boost for 3 months and then someone signed up from my referral so I got another .05% boost for another 3 months for a total of 6 so far. Of course if the base goes up my 0.05% boost goes up from the increased (or decreased amount). They have almost no fees for things! I know it’s very different from conventional brokerages but not really sure exactly how.
My 401K plan at work only has VUSXX as the "safe" "cash" option. tdameritrade won't let me purchase it in my personal account, they force everyone into the schwab funds. I think vanguard seems to offer the lowest expense ratios and near the best performance. Unfortunately my 401K negates much of the benefit by taking fees.
Maybe you touched on this and I missed it, but another difference of VMRXX is that it is an Admiral Class fund, which is only available to customers with holdings over a certain dollar amount. Usually it is fund specific, but in this case since it's a settlement fund, apparently it's based on whether a customer has any investment in the Admiral Class.
Hi Laurie. They made changes to VMRXX a few years ago - the name still has "Admiral Shares" in it, but the minimum investment now is $3,000. Here's more info: investor.vanguard.com/investor-resources-education/news/changes-to-our-taxable-money-market-fund-lineup
If you can do an example of the tax difference for 1) any residents who live outside of NY/CA, 2) CA residents, 3) NY residents, that'll be really nice and easy to understand! Plus, IRA, 401k, or taxable accounts differences.
I’ve been getting a 5.7% APR based on the dividends in the last few months. They just go back into your settlement fun or get reinvested into VMFXX which is basically the same thing
Am I correct that Vanguard really has only one “Settlement Account” option, VMFXX? None of the others mentioned really function as settlement or sweep accounts? Or am I missing one or another that does function similarly? Al the others must be manually bought or sold, ordinarily using the VMFXX settlement fund to do those transactions, if I have this right. I cant find this explicitly on Vanguard or the web. And I have had VMFXX for years but - now I realize I could have saved CA state taxes with VUSXX! But not sure I want the hassle … thinking about it. Thanks for your great vids and expertise!
The only money market fund that Vanguard uses as a settlement account is VMFXX. Funds in VMFXX are used to buy or invest in other funds or ETFs, including the Vanguard's other money market funds. Vanguards transfers between its mutual funds, including VMFXX to the other money market accounts are easily accomplished online.
Hello, thanks for this informative video, it is very helpful to me. I have funds in the VMFXX and l live and pay taxes in Maryland. Based on your video, I did a little research on tax-exempt dividends on MMMF in Maryland to confirm the information I consumed from this platform and it seems in Maryland, the MMMF dividends are exempt from state taxes. Do you know if that is accurate? Here is the source of my information. www.marylandtaxes.gov/forms/Tax_Publications/Administrative_Releases/Income_and_Estate_Tax_Releases/ar_it11.pdf
Vanguard also has a Cash Plus Account currently paying 4.5% interest. It was offered to me on a limited investor basis as apparently it's being rolled out.
Thanks for this - good to know. Seems we are not as loved by Vanguard currently :-)
I’ve been with Vanguard for over 35 years and I didn’t know about the cash account. I have 3 accounts with them. Also, I have 138.00 sitting in the old Prime Money Market Fund (now renamed) and Vanguard never asked or did anything with it.
I also enrolled in this when it was offered to me in December of 2022. I think it suppose to add additional features including bill paying however no new features have been added since I enrolled. The interest rate has increase since my enrollment to 4.5 %.
Got an invite 6 days ago for Vanguard Cash Plus 4.5% and moved some energy funds there to test the water.
"We're inviting you to consider enrolling in the pilot of an exciting new savings account alternative: the Vanguard Cash Plus Account."
It says there are some low fees for some transactions on the Cash Plus Acct. Does anyone know what transactions have fees?
25 years with vanguard - no they never complain when my investment falls below the $3k starting. But I know that vanguard will sometimes downgrade your "admiral shares" down to "investor shares" if you fall below the $50k required for Admiral. I've also been automatically upgraded to admiral when my balance went above the $50k minimum.
Thanks for sharing
What is the benefit of Admiral?
As a retiree I have quite a significant amount of money in VMFXX (various accounts). No state income tax expose.
At least right now I don't know how people with some assets won't take advantage of these very low risk products...
What do you mean various accounts? I’m 19 trying to get into investing. Is it like different banks ?
@@chariegethers978if at 19 you already have this mentality you will be a millionaire really young. I envy you kid. Keep up that mind set
I have a very small amount (about $11,000) in a Vanguard IRA from my old employer. It’s just been sitting there and I haven’t looked at it really. Now I’ll have to go take a look and see if I want to keep it there and add a money market fund to it since I’m 59 1/2 I can withdraw if needed. Thx for explaining that!
That's awesome. Good luck! Hope it has increased greatly.
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Thanks for visiting our personal finance channel! We hope this content will help fast-track your financial journey! Everyone's financial journey is different. Please note that: 1) there are questions/ comments which I will not be able to answer without fully understanding your financial, personal & other circumstances & 2) we will not ask you to call us or send us money in the comments on this channel or any of our other social media accounts, so if you see comment(s) along those lines, it is most likely spam - PLEASE DO NOT ENGAGE WITH SPAMMERS OR GIVE OUT YOUR PERSONAL INFORMATION FOR YOUR OWN SAFETY.
My wife's Vanguard IRA and Roth accounts have been fully invested for months if not years, so the VMFXX Settlement balance has remained far below $3000, like $100 to $300, for that entire time. Never a peep out of Vanguard about this.
Great video, I'm really impressed how quickly you can produce theses on such short notice! Thx. FYI, I've tried to buy in to Vanguard's money market funds from other institutions, to take advantage of their superior rates. Ameritrade will let you buy them, but for a $75 transaction fee. Fidelity won't even let you place an order! So it looks like it's best to open a Vanguard account if you want these rates, which I am considering.
@@peter-hr1gl Yes, REALLY! My main accounts are currently with Ameritrade, which doesn't offer a high yield core (aka "sweep", or "settlement") account. Their core account currently pays a measly 0.35%. To get a higher yield you have to buy a money market mutual fund, but then you don't have access to your money the day you need it. That wouldn't have helped me back in April of 2022 when Netflix plunged from 350 to 210 in a single day (it recently traded at 485). Because I had the funds in the sweep, I was able to take advantage to buy 100 shares that very same day! Back then interest rates were so low it didn't matter. But today you lose money if you keep 20K in a low paying core account like Ameritrade has. Ameritrade is moving over to Schwab, which has the same problem. So I am looking for an institution that has a higher yielding core account. The two that look most promising to me are Vanguard and Fidelity. The Vanguard VUSXX is paying 5.09%, while Fidelity FZFXX is paying 4.74%. So yes, I am considering opening a Vanguard account.
@DavidLitman-ph9lu I have accounts at both institutions. I thought about transferring all to Schwab because I like their app better, but I have more in my Vanguard settlement fund, (waiting for the right time to buy) and since it pays a better dividend than Schwab, I'm keeping both. Plus, it gives me the option to purchase Vanguard ETFs without the Schwab purchase fee. (Information I learned the hard way.) Good luck!
Every broker has essentially the same funds
VUSXX is my choice of best money market account. does anyone agree?
> 5% yield
low expense
state/local tax exempt
Do you still feel this way?
@@2fly4thedrama yup. and I’m not biased. I can’t use VUSXX because I’m on Fidelity
VUSXX has the tax savings feature in a taxable account. Note that if you sell VUSXX then I have observed that the proceeds are available by 8AM the following morning in the settlement fund ready for trading or withdrawal.
This seems like the best deal.
Another great video! Thank you! Can you make a video to explain the treasury notes' interest calculation with coupons? Why the same maturation date with deferent coupon rate? Which one is better, higher or lower coupon? Or I should just go with the higher interest rate?
My son has a Roth IRA account and he has the VMFXX. He did drop below $3000 and they did not kick him out
Thanks for sharing Jim
He should switch to a target date fund! 😎
Thank you for the video
I received the email from Vanguard to change my settlement money to the cash deposit option but didn't know what to do. Thanks to this video, I understand that the VMFXX is a good place to park my money, for now.
I think the bank account (cash deposit) options are terrible. The money market settlement fund pays a much higher interest rate, and the risk of loss (breaking the buck) between a government money market fund and a bank account is extremely small. Maybe in the future there will be some service reasons to have a cash deposit account, like bill payment and making pulls from other institutions, but right now I don't see any advantage to it to justify the loss of interest.
@@glgermainagreed
I've been using VUSXX instead of VMFXX because my income is low enough that I don't pay federal tax but I do owe state tax.
smart move
So, with a low enough income there would be no tax due in states that have no income tax. Also, I assume this could be a good cash holding place within a Roth for those in states which do have income tax.
@@SpikeG571 No tax is owed on any retirement account (401k, IRA or Roth IRA) until funds are withdrawn from the account. Retirement accounts are tax-deferred meaning all interest, dividends and capital gains accrue within the account tax-fee. Withdrawals are taxed at ordinary income tax rates except for Roth withdrawals. Roth withdrawals are tax and penalty free unless you don't meet the IRS 5-year and/or age 59.5 hurdles.
@@SpikeG571it’s not bad in a Roth as it’s the automatic settlement fund, however tax is not a consideration within Roth as Roth are not taxed.
VUSXX could be a good holding in your taxable brokerage if you have state taxes.
Thanks for a great video. I am confused about taxes for the VUSXX fund as you didn't specify CA & NY state details. Is it 100% exempt from California state taxes? If yes, then it is better than the remaining 5 funds as long as we can move in and move out manually. Please clarify. Thanks in advance.
Another option for a tax exempt fund is VTES, which lists a 30 day SEC yield at 3.05%. Probably not enough for many to consider it over VMFXX or VUSXX (my choice) and bypassing the tax exempt advantage.
I have on many occasions opened a vanguard fund for 3k then removed a large portion of the funds with no issue
I know the current yields on money market funds including VMFXX, earning 5%+ is wonderful and really helpful to my plan.
Thanks Jen! I agree, VUSXX is a better deal for NYS residents than their NYS muni money market fund.
Yes, in part, I am in VUSXX for this reason along with the decent annual return for parked cash.
How so?
@@MoparDen why only in part?
Suppose you have a High Yield Savings account paying 5%, and FDIC insurance, plus you need to pay taxes.
Suppose you have one of these Taxable Money Market Funds which pay the same 5% (let's say VUSXX, which is tax-exempt in all states, mostly), is not as liquid, has no FDIC insurance. Which is the better short-term investment?
Thank you for showing us the different money market funds
Regarding your question on maintaining minimum investments amounts. I've had several Vanguard funds in both the investor and the admiral class, and had a few dip below the minimum investment amount (including VMRXX) and Vanguard never closed them or event informed me of any closure action except for once about 15 years ago, when the told me to add more money in the fund I had to invest it enough to bring it back to the minimum investment, but never had that happen again. However this could have been because I had been shifting the balance to another Vanguard fund.
I want to comment on the bank account options versus the money market fund options. I don't see any advantage to having a bank account as your settlement fund rather than a government money fund at the present time. The interest rate of 3.5% or 4.5% is a lot lower than the money market fund yields which are over 5%. Interest on both are state taxable (while interest in the treasury fund, which cannot be used as a settlement fund, may avoid state taxes, so there is a reason to move money to VUSXX, although you have to transfer back to the settlement fund before trading). Unless they give some service benefits, like bill pay and the ability to pull funds to pay bills, why would anyone do it? Getting FDIC insurance is pretty much worthless when compared to government mutual funds, because the underlying investments are backed by the US just like the FDIC. The only real risk in a government money fund is that interest rates will go up significantly, and there will be large redemptions that will require the fund to sell their holdings at lower prices and "break the buck." That has happened in a couple of non-government money funds during unusual times, but even then the losses were minimal. So I don't see any real advantage to FDIC insurance over government money funds in terms of safety of principal. So I don't think you're getting anything of value in return for accepting a lower interest rate. Maybe the market will change in the future and bank rates will be higher than money market rates, or maybe they will provide some compelling service advantages. But in my opinion, right now, it is just a bad move. If anyone thinks I'm missing something, I'd welcome a response.
Smart people are moving their money into money market funds. Lazy/uneducated people are keeping their money in the banks (and the banks love these people).
Two things. First is what you touched on: interest rate risk from the settlement fund. The second is the FDIC insurance amount would be higher than normal if you had a larger cash amount because they split the amounts up to the maximum FDIC amount to multiple financial institutions. Other than that I don't see a benefit.
The bank account, you can pay your groceries, with vanguard account, you can't
@@SidekickEmporium Use a credit card to pay the groceries, then pay the credit card from Vanguard.
The insurance on the Cash account is much more than all the others. Less yield more safety.
If we live in NY, what is your favorite place to store cash with Vanguard? VNFXX is nice but no state tax exemption.
Would you argue that these are almost as good as just buying treasury bills? Provides more flexibility and yield is within a half percent.
If a fund could be exempt from a percentage of state taxes, will this show on year-end tax forms? Like how much is state taxable, and how much is exempt? Or do I have to figure this out somewhere else?
Yea, on the year end form they have a table showing the portion exempt from taxes in each state.
It seems like 5% on a money market fund is beating the stock market lately
Can any of these money markets be added under a Roth IRA umbrella with Vanguard?
Thank you for your great videos! Do Vanguard 529 accounts also have the same VMFXX for core position?
Is it that you open a roth IRA with vanguard, and say that account is under $3000, it goes into the VMFXX until you reach the $3000. Then from there you can divvy up the money into different bonds, index funds etc? Why is it that my money is automatically being put into this money market fund on vanguard? I can't find any videos that address this specific topic.
thank you for your videos!
why wouldn't a CA resident choose VUSXX over VMFXX if it saves them on fed and state taxes for the same yield?
I was wondering this as well
How is VUSXX with all those Treasurys now !!!!! still safe ? Let us Know
What are the risks of parking your money in VMFXX?
There’s pretty much no risk, I don’t think it’s ever dropped below $1/share
I have the VMFXX in an IRA and a ROTH IRA. Are the dividends of the fund subject to CA state taxes every year or only when a withdrawal is made at the time of retirement? I'm still learning. Thanks for your help. 😊
You're taxed on mutual fund dividends (interest) at the time it is paid (monthly). Withdrawals and sales are not relevant. If you pay state income taxes, you're likely better off in the treasury money market fund (VUSXX). Unfortunately, unlike Fidelity, Vanguard does not allow you to change your settlement fund, so you have to sell and transfer money from VUSXX into the settlement fund before trading, which is unfortunate when buying actual treasuries. Also, I don't think we can rely on the past year's tax state-tax deductions for VUSXX. VUSXX is now holding significant positions in treasury swaps, which I don't think are exempt from state taxes (maybe someone else knows more about this than I do. I know that interest earned on treasury swaps from a private entities are not state tax deductible under a Supreme Court decision; but I don't know whether interest earned on treasury swaps issued by the treasury are state taxable or not, and I don't know whether VUSXX's swaps are with the treasury or with a private entity). So 40% or so of the interest in VUSXX may not be state tax deductible for 2023 based on the current holdings if they continue. Still, VUSXX is better than the other options for anyone in a taxable state because the % of swaps is lower, and they only buy treasuries and treasury swaps. If Vanguard cared about customer service, they would allow customers in taxable states to change their settlement fund to VUSXX.
@@glgermain Did you miss that she invested in IRAs? Income from IRAs is not taxed until you withdraw it and is taxed as regular income at retirement. The ROTH IRA should be tax free. Also, I invest in VUSXX and am able to buy from it without transferring to the settlement fund first.
@@glgermain For a regular IRA, you are only taxed on withdrawals upon retirement. For Roth's, my understanding is that withdrawals are tax free.
@@shy_gamer Thanks for pointing that out - yes, you are right, I did not notice the IRA part. IRA dividends and other earnings are not state or federal taxable until you withdraw (as long as you take your RMDs). Roths may not be taxable since contributions were after tax. The other vanguard money market accounts are fine for IRAs since earnings are not taxed until the money is distributed. Sorry about that, and thanks @shy-gamer.
With respect to buying from VUSXX, maybe it depends on what you're buying. You can of course exchange from VUSXX to any other vanguard mutual fund. But I was unable to buy treasuries or write checks and have the money come out directly from VUSXX. I don't think you can buy stocks from it either, since settlements are always taken out of the settlement fund (and you can't enter transactions without cash in the settlement fund or using margin). So maybe you were exchanging into another mutual fund? Actually, my experience was worse than that. I bought some treasuries, and immediately put in a "sell" to transfer money from VUSXX to the settlement fund. I was charged 3 days of margin interest for some reason I can't really understand, and Vanguard's margin rates are really high. So I think to be safe you really need to sell VUSXX, wait a day (or more depending on when you entered your sale) for the sale to go through, and then buy treasuries.
@@DavidLitman-ph9lu Yes, David. I didn't notice that the question was about IRAs. You're right. Sorry about that.
Thank you for the information. Now I know that Vanguard and Fidelity have CORE money market funds that you don’t have to trade in and out of. Can you tell us why Charles Schwab and TD Ameritrade don’t have CORE mm funds and you only earn less than 1% on their fund that holds your excess cash?
I saw the CEO of Schwab on Mad Money recently and when asked, he said they "encourage" their customers to move their uninvested money into their higher yielding money market funds. But this is obviously disingenuous - they do it to make money! They collect the spread between the %5+ they make of Treasuries and the 0.45% they pay you. If they wanted their customers to have a higher yield, they would have a high yield core account, like they used to! Perhaps if they see enough people moving accounts to Vanguard or Fidelity they will change their tune.
How to compare 7-day yield, YTD for money market funds and APY for bank saving, in a apple to apple way?
4.7% in Cash Plus vs. 5.27% 7-day yield in the settlement fund (VMFXX) which is best? thanks!
Welcome to our SSS membership! I see you joined recently. The answer to your question is that it depends… I’m going to try to do a video with details on this because a few others have a similar question, but if I don’t get to it before our Q&A session on 9/22, please submit it via the Q&A form and I’ll be sure to cover (Q&A form goes live about a week before the Q&A).
From what im hearing, these funds are good for $s i may need soon but dont want to park then w/ zero return, rigth?
CIT Savings- solid ...
Which is best for return and safety VUSXX or VMFXX?
Fidelity doesn’t let us buy these vanguard money market ticker symbols. Your videos are very knowledgeable and helpful. Thank you for sharing your knowledge and expertise.
I have put 5k in VMFXX, almost for two months, when the yield is applied to the accounts, after each month? yearly? when can i expect to see the yield in my account? thanks
@mohsenimani6652
I put 10k in VMFXX and yielded was posted to my account within that same month, but after I took the 10k out and purchased cd. If you don’t see yields posted to your account then maybe you can call and ask them about it
Great video! I invest in 6 month and 3 month treasuries which is 5.50% plus it’s a state tax free. Is that much better than vanguard? Specially 3 month or 6 month are short period of time
Good one!👍very informative.
Thank you for the great videos. After watching your MM Fund for Schwab, I moved my money to SNSXX that had been sitting in Sweep at .45%. I'm working on another $35K in sweep in E*Trade, do you know or anyone reading this comment know of a California Tax free Treasury MM fund off hand. This will save me a lot of time reading all the prospectuses. Thank you for your help in advance.
Thank you for what you do
How can VUSXX be 100% state tax dividends exempt when it only invests 63% in Treasuries? Please explain. Thanks
It was 100% last year when it had minimal allocations to repos. It likely won't be that high this year due to the relatively higher allocations to repos.
VMFXX is almost too good to be true. 5% interest for cash that can be pulled out anytime!
Thank you for very clear explanation 👍
how do you know what your State tax % of dividends will be when you do your taxes?
Vanguard publishes an annual list at tax-time identifying the state holding percentages in its different funds.
So, will VMFXX interest rate stay high as long as the Fed interest rates stay high?
Is someone had 1.4 M in the VMFXX would that be irresponsible as to being insured? And if only part of it is insured, what would be a good solution to stay in the Money Market at this time.
Hi Jennifer! this is very useful talk. I have been learning lot from you. Is there any Money Market fund with Bank of America?
Kindly comment on this. Thank you.
Hi Reena. I'm sorry, but we don't have any accounts with BofA, so don't have access to this info. Your best bet is to call them & ask them directly. Let us know what you find if/ when you get the chance.
Is the Vanguard VMFXX money market fund safe ? Its paying 5.30% but I was looking at the Prospectus and wasnt sure its kind od confusing , but I do believe its safe ? I wonder what would happen if a Govt Shutdown or something ? Thanks for your videos.
Totally off topic, Now that the rollout of the beginning of FedNow has started will payments we make through the big banks get posted immediately to the vendor? I hear some changes are happening. Lynn
Question: A bit new to this. We have a sizable amount (>150K) in a High Yield Savings account getting 4.5%, I didn't really know about these funds. Does it make sense to move the money into one of these funds since it's over 5%?
all I know is that it can change. Good luck with your decision.
Great video! Can you talk about Wealthfront? I’m getting 5.05% APY for 6mo because I joined from a referral and got a 0.5% boost for 3 months and then someone signed up from my referral so I got another .05% boost for another 3 months for a total of 6 so far. Of course if the base goes up my 0.05% boost goes up from the increased (or decreased amount). They have almost no fees for things! I know it’s very different from conventional brokerages but not really sure exactly how.
I'll add Wealthfront to our video list!
My 401K plan at work only has VUSXX as the "safe" "cash" option.
tdameritrade won't let me purchase it in my personal account, they force everyone into the schwab funds.
I think vanguard seems to offer the lowest expense ratios and near the best performance. Unfortunately my 401K negates much of the benefit by taking fees.
Maybe you touched on this and I missed it, but another difference of VMRXX is that it is an Admiral Class fund, which is only available to customers with holdings over a certain dollar amount. Usually it is fund specific, but in this case since it's a settlement fund, apparently it's based on whether a customer has any investment in the Admiral Class.
Hi Laurie. They made changes to VMRXX a few years ago - the name still has "Admiral Shares" in it, but the minimum investment now is $3,000. Here's more info: investor.vanguard.com/investor-resources-education/news/changes-to-our-taxable-money-market-fund-lineup
VFMXX isn't taxable if you hold it in a Roth IRA is it?
If you can do an example of the tax difference for 1) any residents who live outside of NY/CA, 2) CA residents, 3) NY residents, that'll be really nice and easy to understand! Plus, IRA, 401k, or taxable accounts differences.
Would you say vmfxx is safe for capital preservation
How is interest or dividends paid in these money market if I just left cash in them ?
I’ve been getting a 5.7% APR based on the dividends in the last few months. They just go back into your settlement fun or get reinvested into VMFXX which is basically the same thing
Am I correct that Vanguard really has only one “Settlement Account” option, VMFXX? None of the others mentioned really function as settlement or sweep accounts? Or am I missing one or another that does function similarly? Al the others must be manually bought or sold, ordinarily using the VMFXX settlement fund to do those transactions, if I have this right. I cant find this explicitly on Vanguard or the web. And I have had VMFXX for years but - now I realize I could have saved CA state taxes with VUSXX! But not sure I want the hassle … thinking about it. Thanks for your great vids and expertise!
The only money market fund that Vanguard uses as a settlement account is VMFXX. Funds in VMFXX are used to buy or invest in other funds or ETFs, including the Vanguard's other money market funds. Vanguards transfers between its mutual funds, including VMFXX to the other money market accounts are easily accomplished online.
Did you end up switching over?
good video
No money market fund can beat treasury's 4 month bill, it pays almost 5.5%, no state taxes and is 100% guaranteed by Uncle Sam.
etrade will let you buy vusxx, gabxx pays more 5.17
is GABXX 100% state tax exempt? My understanding is that VUSXX is not currently (around 60% state tax exempt)
My VUSXX balance dropped to $45 for a few months after I transferred funds to another investment. Vanguard did not drop me from VUSXX
Hello, thanks for this informative video, it is very helpful to me.
I have funds in the VMFXX and l live and pay taxes in Maryland. Based on your video, I did a little research on tax-exempt dividends on MMMF in Maryland to confirm the information I consumed from this platform and it seems in Maryland, the MMMF dividends are exempt from state taxes.
Do you know if that is accurate? Here is the source of my information. www.marylandtaxes.gov/forms/Tax_Publications/Administrative_Releases/Income_and_Estate_Tax_Releases/ar_it11.pdf