Liquid holding - tax free vs taxable?

[stephenson]

Hi All,

24% federal bracket and Florida resident - could easily creep up, though.

Have most of core liquid in SPAXX and another chunk is CDs to obtain a bit more interest - although a bit more work.

Current FTEXX is 3.3% and SPAXX is 4.95%. One year CDs around 5.2-5.4%.

This still seems like I should be in SPAXX (of the two) vs FTEXX, right? At 32% might make sense?

 

[imjustawarrior]

Do you really need to hold your liquid assets in a taxable account? It can be more tax efficient to hold interest paying funds in an IRA or 401k and put equities in the taxable account. A lot of equities pay qualified dividends that get taxed at a better rate.

When you need money, sell the equities with long term capital gains (better tax treatment over interest) and then exchange the liquid asset for equities in the IRA/401k.

Holding equities in a taxable account also provides the opportunity to Tax Loss Harvest.

SPAXX looks better than FTEXX for yield with your taxes.

 

[TheWizard]

Not everyone is willing to look up the funds in the OP to find out what they are...

 

[TheWizard]

I'm also in 24% Federal bracket but not looking for lots of additional interest taxed as ordinary income.

I put excess income into my Vanguard taxable account most months. I target keeping that account 95% stock funds with 5% in my settlement fund, which obviously pays interest, but I'm okay with that...