Best place to "save"?

[Anonymous]

My husband and I each have a 401K and an IRA (probably about $500k when you add them all up). Beyond that, we just have a savings account with about $50k in it.

Is this the wisest way to keep things?

We set a goal this year to focus on growing our savings bucket, but I'm thinking that it's probably not super smart to do that just in a regular saving account.

Should we keep some of that money in the savings account and move the rest somewhere else? If so where?

Should we then be moving "savings" money into that new account instead of to the bank savings account?

What would you do?

Thanks!

[Anonymous]

bogleheads. They will get you straightened out.

https://bogleheads.org/

[Anonymous]

I'd be interested in people's thoughts on this too. We're in a similar boat.

[Anonymous]

I'm curious too. We currently use an Ally account and get .85% back on it, which adds up somewhat. We have no immediate plans for this money though. Our stock accounts have lost tons of money.

[Anonymous]

Bogleheads was solid advice. I'll bite though. The problem is that there aren't many vehicles (really any) left where you can get a decent return with no risk and maintain liquidity (since you mention this is savings money I'll assume you don't want it tied up in the market). The days of the 3-4% online savings accounts are gone so short of equity investments you are really left with CDs, P2P lending, Ibonds, etc. Here's a good article on it - https://www.bogleheads.org/wiki/Emergency_fund

Here are a few other relevant threads that should help you decide what to do:

https://www.bogleheads.org/forum/viewtopic.php?t=161720

https://www.bogleheads.org/forum/viewtopic.php?t=157685

[Anonymous]

+1. Will be curious what others think, but we have stuck with CapitalOne 360. We looked at Ally and CDs from several places, but the interest rates are so low that it didn't make sense to bother with moving it around or setting up a CD ladder. I think the difference between an Ally online savings account and a 12 month CD is like .05%. You can bump it up to 2% if you go for a 5 year CD, but we call it an emergency fund for a reason and don't want it tied up for 5 years. If I wanted to go that illiquid I would just throw it in Vanguard and deal with cap gains/losses/tax issues if I needed the money.

[Anonymous]

The way i would approach this is to think about what your time horizon is and what's your risk tolerance. If you might use this within the next 5 years (for home repair/remodeling/new car) then you probably don't want to be in the market, but if you see this as longer term savings (college/retirement/etc) then you probably want to have at least some equity exposure.

I will say that when we first start saving outside our 401k we were much more conservative than in our 401k-- we didn't want to lose capital both psychologically and because it was partly emergency funds. So we started saving with ibonds, which preserve principal, generally offer better interest rates than the bank, plus it's tax-deferred (possibly tax exempt for college) and inflation indexed (can't access it for the first year and small penalty for the first 5 years). Once we had those savings established we started adding mutual funds. We did use "balanced funds" for a while, which have both stocks and bonds in them, but I started getting annoyed that they weren't very tax efficient (the dividends on which we were taxed were greater than the increase in value of the fund). I think Vanguard's stock index funds are very tax efficient, but ETFs can also be tax efficient. Our investments outside retirement accounts are still a bit more conservative (as far as asset allocation/% of stocks vs bonds) than our retirement accounts which may in theory not make sense but works for us psychologically.

So basically, I would probably use some combination of online savings accounts/i-bonds for money you want to be safe, adding Vanguard index funds (S&P 500 or Total Stock Market) if you see this as money which you want to invest long term.

[Anonymous]

PS I would stay away from P2P lending, or at least treat it as risky, not as the equivalent of CDs and bonds.