Placing savings in money market fund (SWVXX).

Submitted by throwawayforme194 t3_10pee5p in personalfinance

Can someone tell me if this is an awful idea?

I’m sitting on a sizable savings account. I want to put 50k to work and keep 10-15k available in my savings for general life expenses.

I am maxing my 403B/contributing to a 457B, and have maxed my roth IRA for this year.

This 50k is my down payment money on a home (timeline 3-5 years [I hope]). I opened a taxable brokerage account at Schwab and am not trying to figure out if putting all of it in a money market fund (SWVXX) is a good idea.

I am not hugely concerned about it being the most efficient use of my money but want to put it somewhere that will allow me to make some extra change. I figure if it earns 3% annually and I have to pay a bit of taxes on the few thousand in gains after withdrawing for home buying I’d be a happy camper.

Other info:

24M, 75k salary, no debt except student (17k in fed loans)

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Comments

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shadracko t1_j6k2g3v wrote

Sure. SWVXX is a perfectly safe place for cash. You wouldn't really do any better than a HYSA, but probably no worse, either.

I'll second u/Loutro-Fift's idea that CDs or T-bills are perhaps marginally better (depending on what happens to rates).

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throwawayforme194 OP t1_j6k5do1 wrote

Gotcha, yes that is the conclusion that i’m coming to as well.

I considered a HYSA but it seemed like SWVXX might’ve been better but I’m not sure what the tax differences are between the two.

Dumping this into a CD account offering ~4.2% over 11 months at my bank is feeling pretty attractive as well.

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harrisc42 t1_j6kjnmf wrote

There's nothing different about the taxes. Taxes are taxes. If you earn interest or dividends by putting this cash into anything, you'll pay taxes on that income.

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throwawayforme194 OP t1_j6kpaqk wrote

Great, that’s what I had imagined. Wasn’t sure if there were any nuances dependent on the avenue of income generation.

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Loutro-Fift t1_j6jyppd wrote

If you won’t need the money for 3-5 years you can buy CDs and t bills which are currently above 4%. Split the money amongst those 3 investments (including SWVXX) and you should be good. If and when we move out of a recession, those rates will drop.

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throwawayforme194 OP t1_j6k30l3 wrote

That sounds good. A CD account at my bank might be the best/simplest route actually now that i’m exploring it. Thanks for the help!

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