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Cash for Taxable Accumulator

Posted: Sun Nov 07, 2010 9:27 am
by mbh
I'm getting ready to make my first PP contributions.  For now, I've decided that my existing tax advantaged accounts will remain more "traditional".  However, I plan on making new SEP-IRA and taxable contributions to the PP each year starting this year.

For PP purposes, my tax advantaged space is limited to my new SEP contributions.  I'm planning on using that space mostly for bonds.  Also, I'm planning on keeping a portion of stocks and gold ETFs in tax deferred for rebalancing (but 80-90% of stocks and physical gold will be outside). 

My question is about cash.  For most of the year, I've been assuming that I would purchase i bonds each year.  Between my wife and me, current i bond purchase limits are probably high enough to accomodate the cash portion of planned contributions each year.

Given that the fixed i bond rate is currently 0%, I've started to have minor doubts about this approach.  What would you do in my situation?  Would you use i bonds for new cash contributions?  Or would you use other vehicles (e.g.,  MM or SHY in taxable)?

Re: Cash for Taxable Accumulator

Posted: Sun Nov 07, 2010 9:45 am
by craigr
I use money market funds for my cash personally along with short term Treasuries. Others have had good luck with I-Bonds. Clearly though the current interest rates are not very good for anything on the shorter end of the maturity scale. There are limited options unless you want to start chasing yield with your money which I don't recommend.

Re: Cash for Taxable Accumulator

Posted: Mon Nov 08, 2010 10:53 am
by Storm
Rate is currently 0.74%, which seems better than most other cash vehicles like savings accounts, money market, or CDs.  A few days ago it was 1.74% so it has dropped significantly - this is probably Bernanke's way of telling us to quit saving money and go out and stimulate the economy...  ::)