Money Market Funds Comeback

INTRO MUSIC But before your portfolio could crash and burn and you needed a place to put your money, well perhaps you ought to consider money market funds. Today I'll talk to Mark Biller about that. Then it's on to your questions at 800-525-7000. This is MoneyWise Live, biblical wisdom for your financial decisions. Well, Mark Biller joins us today. He's the executive editor at SoundMind Investing where they've been watching interest rates like a hawk. And Mark, always great to have you on the program. Thanks, Rob.

Good to be here. Mark, money market funds haven't been very popular in recent years and it's no wonder with Fed rates down as low as they've been, they just haven't been very attractive. But you all have an article in your latest SMI newsletter about how all that is changing, so why don't you fill us in there?

Yeah, sure, Rob. So first of all, there are a few really common reasons why people find themselves with a decent chunk of cash that's looking for a higher yielding home. So the first and I would think most common is somebody who's working on or maybe they've completed their three to six month emergency savings goal and they're looking for the best place to store that emergency fund safely.

Now another option or another reason that people are looking for a home for a decent slug of cash can happen when an investor is either taking money out of the market temporarily or they have some money to invest that they just haven't put to work yet. And regardless of the reason of why they've got this cash, one old option for safe cash that's largely been abandoned over the last decade is back in play with today's higher interest rates. And that's this money market mutual fund that we're talking about today. So what is a money market fund? Well, it's just a specific type of mutual fund. It invests in very short term, very safe debt, usually issued by either the government or in some cases, large banks and corporations, depending on which type of money market fund you're using. And in either case, the key is that this debt is so short term and issued by generally very solid sources, so the risk in a money market fund is extremely low.

The upside of money market funds is that the rates that they pay, the yields that they deliver tend to be higher than what most banks are typically paying on savings accounts. So it's good to know money market funds aren't new. They've been around for 50 years or so. And for most of that time, they've been considered a an excellent option, really, for people looking for a safe place for cash holdings.

Yeah. Over the long term, they have been popular. That did change quite a bit, though, following 2008, though, right?

Yeah, it did. And the main reason was that following the great financial crisis there in 2008, the Federal Reserve lowered short term interest rates to almost zero and then left them there for a decade. So with yields so low, taking the extra step of using a money market fund just didn't make sense for most savers.

So they quit using them. But now that short term rates are back up in that four percentage kind of range, money market funds are back in business. They're back on investors radar. And we can see that as the assets invested in money market funds is really starting to rise again. Interesting.

Well, Mark, we'll continue to unpack this just around the corner. But just clarify again, what bucket of money are we talking about here for most investors as they consider money market funds potentially an option? Yeah. Money market funds are great for one specific job, and that's storing liquid cash. So they're really an alternative to savings accounts. They're not a good choice for growing your capital over the long term. So not really an investment account type of option unless it's just for a short term stint in cash.

Yeah, that's great. When we come back, Mark will talk about why these particular funds are good when rates are climbing. He'll also compare and contrast money market mutual funds to bond funds as well as online savings accounts.

What about the safety of money market mutual funds? We'll talk about that as well. Plus your questions for Mark Biller. Anything on investing or the markets, the economy or money market mutual funds.

Let's talk about it. 800-525-7000 is the number to call in this portion of the broadcast. Questions for Mark Biller, 800-525-7000.

We're going to take a quick break and back with much more after this. Thanks for joining us today on MoneyWise Live. I'm Rob West, your host. Joining me in this segment of the broadcast, our good friend Mark Biller, executive editor at Soundmind Investing. We're talking today about a recent SMI newsletter article entitled Money Market Funds Resume Role as Solid Option for Short Term Cash. That says it all, but Mark is really expanding on that with what you should know.

You can read the article in detail at soundmindinvesting.org. In just a moment, we'll be taking your calls and questions for Mark Biller today on investing related topics, including this particular topic of how to put your short term savings to work. Mark, before we head to the phones, I mentioned that these money market mutual funds are particularly appealing when rates are rising.

Why is that? Yeah, it's because money market funds are investing in such short term debt instruments as interest rates are climbing rapidly, their debt is maturing very quickly and they're able to replace those loans with new higher paying loans. So the 3% loan that they took out two weeks ago, they're able to now replace with a 3.5% and then two weeks from now they can replace that with a 4% and so on and so forth.

It means that they can track higher interest rates very quickly and those are reflected in their fund very quickly as opposed to like a bond fund that maybe has three to five year debt and it takes a long time for interest rate changes to really make a big impact on the portfolio. Yeah, very good. All right, let's head to the phones today. Questions for Mark Biller at 800-525-7000. That's the number to call to Buffalo. Louise, thanks for your call today. How can we help? I was calling because I've been getting information that the new administration or the administration of the people that are taking place, that there is a plan to take money out of the 401ks and any type of saving entities that we have in our later stages of life.

Can you give me some information? And so I'm wondering if I need to invest in silver and gold and how safe is it or how should I circumvent the situation? Yeah, well here's my take on it.

I can get Mark to weigh in as well. We have a long way to go, Louise, before we would, in my view, need to worry about the government confiscating retirement accounts. It would require an act of Congress and a signature by the president, both of whom would be committing political suicide. The government has plenty of ways to take our money largely through taxation. It doesn't need to confiscate retirement accounts. And if we ever got to that point, the constitutionality of it would be promptly challenged in the courts.

And with the present makeup of the Supreme Court, it'd be highly unlikely that it would be upheld. So I don't think you need to be worrying about any confiscation of retirement accounts. As to the merits of gold and silver, Mark, any additional thoughts on the initial question? And then secondly, I'd love your thoughts on specifically the place for the precious metals in a properly diversified portfolio.

Sure. So I think that there is a place for precious metals in a portfolio. Certainly would not overdo that. I think that for most people, you know, maybe 5% to 10% is an appropriate allocation. I've always tended to look at precious metals as central bank insurance. In other words, insurance against them doing things that are going to devalue my money over time. So that's kind of how I look at that more as a safety thing. And if there's ever a big shakeup in the value of the currency, obviously having some gold or silver would be a good thing in a portfolio.

As to the initial concern, I'm right there with you, Rob. I have a lot of concerns about things the government is doing. But I agree with you that I think they tend to be a lot more stealthy in how they appropriate our savings. And, you know, 401K assets are a private asset.

They're something that you own. So it would be a really big deal for them to try to dip their hand into that in some way other than the tax code, which is how they normally go after that type of savings. So I wouldn't be overly concerned about that one at this point. Yeah, I think, Louise, what you're going to see more and more of is you'll occasionally see mentions of this on social media.

At the end of the day, a lot of that's just what they call clickbait to get ads for gold in front of you as a sales opportunity. So I would really see it more there. But again, I think there is a place for gold and silver as a hedge against the devalued currency, uncertainty, unrest. But just that, even as of late, the performance of gold over the long haul is not as good as a properly diversified stock and bond portfolio. And you're going to have more volatility.

So for that reason, I wouldn't overweight there. We appreciate your call, though. Thanks for being a part of the program to West Palm Beach, Florida. Jennifer, how can we help you? Oh, yes.

Thank you. My question is around $500,000, possibly $600,000 worth of cash that I am starting a business adventure for the next seven months. I need to secure that money, have it in savings right now. Would a money market benefit me to put that money there for just to gain interest off of it while we're waiting to invest it? And is it FDIC secured? Because in a savings account, you have to kind of split the money up to where you have $250,000 in one savings and $250,000 in another for it to be insured. Is that the same for a money market account?

It's not the same. I'll get Mark to weigh in on that. But just to clarify, Jennifer, what's the time horizon on this money, this $500,000 plus? Yeah, the timing meaning when you would need to deploy it? Yes. So I would like to keep it up until probably May of 2023, maybe April 2023, before it's invested. Very good.

So a little more than a year. Mark, your thoughts on both questions? Yeah, Jennifer, this is exactly in the wheelhouse of the conversation that we're having today. You know, you've got a big chunk of cash, you're looking for yield on that, you want to keep it very, very safe.

And that is exactly where the issue that we're talking about today is hitting. So the money market account, savings account that you were mentioning with the FDIC insurance is a good option. The money market fund could be an appealing place for at least part of that, partly because you may be able to get a slightly higher yield. We're going to compare and contrast online savings accounts with money market funds with bond funds here in a moment.

We may need to take a break before we do that. Rob, you can steer me on that. But this definitely is right in the scope of what we're talking about today, Jennifer.

Now, money market funds are not FDIC insured, so that does make them slightly more risky. And we'll go into that in a little more detail here in just a minute. Rob, your thoughts here? Yeah, I think you're exactly right.

I think this could be a great option for you. It is going to get you slightly more yield to Mark's point. And as rates go up, it will continue to go up with the rates as well the online savings accounts. You're not going to get that full faith and credit backing by the United States government that you'll get with FDIC insurance, but it's still on the risk spectrum at the very low end. And we'll talk specifically about what that means and who is backing this money market fund, which is intended to always stay set at $1. There have been a few very limited cases where that dollar is broken, so to speak, and it has dipped below that.

And so that is what adds that slight element of risk. And we'll talk about that here in just a moment. Jennifer, thanks for your call. We'll be right back with Mark Biller. Stay with us. Great to have you with us today on MoneyWise Live.

I'm Rob West, your host. Joining me today, our good friend Mark Biller, executive editor at Soundmind Investing. You can learn more at soundmindinvesting.org.

We're talking about money market mutual funds, which have been out of favor since basically 2008 when interest rates have been incredibly low, but now a viable option as a cash alternative for your short-term money, as we now can enjoy some higher yields. Although, Mark, with inflation where it is, it's all relative, right? Yeah, absolutely.

And that's an important thing to keep in mind. So the reason that rates are higher is because inflation is higher. So a 4% yield in a money market fund or something similar is really only keeping pace with inflation right now, which means your purchasing power isn't falling, but it's not rising either. And that's exactly why we started out the program saying these are great savings options, but they're not long-term investment options because with a long-term investment account like your 401k or IRA, you want to be increasing and compounding your earnings power, your purchasing power over time. And so you need something that's going to appreciate over the long term at a rate that's faster than the rate of inflation. These money market funds are really just, your best hope really is that they're going to keep pace with inflation. So very key distinction there, and we want to make sure we're using the right tool for the right job. And this is a savings job, not an investing job. That's helpful. Mark, we said we would compare and contrast the three very various vehicles for cash type assets, online savings accounts versus these money market mutual funds we've been talking about today versus, let's say, a short term bond fund.

Yes, yes. And this is really where I hope Jennifer is still listening because this hopefully will help her with her question because it really was right to this point. So why would somebody use an online savings account? Well, the main thing is they're really easy. So let's take somebody who's getting their paycheck direct deposited into their checking account with their local bank. They have some extra, so they want to put it in a savings account, but they see that their local bank is paying next to nothing on their savings accounts. So with a few very easy setup process and a few mouse clicks, they can set up an online savings account with somebody like Capital One or many, many options online that you could use. And they can very easily transfer money from their checking account to this online savings account. Now I went ahead and looked for the purposes of this program today at what some of the leading online savings accounts are paying. And it looked like you could pretty easily get 3% or so on some of the better online savings accounts. And so that's a much better rate than your local bank, 3%, nothing to sneeze at. Well, when we look out one step further on that risk curve to the money market mutual fund that we've been talking about, I also went and looked at some of the bigger online brokers that everybody would recognize from the television ads and their house-branded money market funds are yielding about 3.7 to 3.8. So that's a little better than the 3% that you could get in the online savings account. So that's one reason why somebody might take the extra step to move that to a money market fund. The other reason, Rob, that it can be very appealing is, again, if you're in an investment account and you can't move that money away from that account very easily, you can just buy a money market mutual fund just like any other fund.

So if you have money in an investment account, either you're getting ready to invest that or you've temporarily taken that out and moved that into cash, that can be a very easy way to invest that at a little bit higher yield. Now when we take the final step, the next step out into a bond fund, things change quite a bit and the reason for that is bond funds actually are a wide universe of products. They can range from the very safe types of things that we're talking about here today but they can also range all the way out to having quite a bit of risk. People don't necessarily think about that with bonds because they think bonds are safe but not all bonds are safe.

It can be a really wide range. So it's very important when you use a bond fund to know exactly what type of bonds you're investing in. Are they short term?

Are they long term? Are they government bonds which tend to be very safe or are they more risky corporate bonds or junk bonds which are the riskiest of all? So there's a lot of variety there. You have to be careful.

It's not a bad thing. It means that bond funds can serve a lot of different purposes for us. You just have to know exactly what you're getting and get the right type of bond fund for the specific purpose that you need and of course that's the type of detail that we talk about a lot in our SoundMind Investing newsletter. But for somebody like Jennifer or just for somebody who's looking for a little more yield in their emergency fund, an online savings account can be a great choice or moving out a little bit into a money market fund for a little more yield can be a good choice as long as you understand there is a very small step up in risk. And you had mentioned, Rob, right before the last break that we have seen very, very few but a couple of examples when money market funds were not able to return the full amount of the investor's principal. We had one of those happen in the global financial crisis in 2008 and in that case that money market fund actually ended up returning 99 cents on every dollar. So the losses were very minimal but there were tiny losses involved in a money market fund in that one specific case. Now at SMI we've long said that you can further mitigate that risk by choosing a very strong financial sponsor that won't want to let their funds lose any money like that and are willing to backstop them.

Yeah, and that's a key point there. If you're going with a major firm that the last thing they want is any kind of headlines that involve their money market fund dropping below a dollar that would offset that risk but at the end of the day if you're just looking for ultimate safety you're going to want to scan those online savings account and to Jennifer's point you may need to use more than one because the cap is $250,000 per account type per individual. We're going to take a quick break and back with more and your questions with Mark Biller. Stay with us. Great to have you with us today on Money Wise Live.

Mark Biller with us today from Sound Mind Investing talking about money market mutual funds, perhaps a tool in your investing toolbox that's gone by the wayside that you should take another look at. Let's head to the phones Mark. We've got some folks waiting that have some questions for you related to their investments and perhaps even a few on this topic of money markets.

Let's go to Chicago next. Sig, thanks for calling. Go right ahead. Hi, thanks for taking my call.

I really appreciate it. So here's my story in a nutshell. So I'm managing my mom. I'm helping my mom with her money. So she's a widow.

She's 84. Her bills are paid for with annuities and Social Security. So she had like a million won that we had to do something with. So we put, um, or whatever it was, a million, whatever we put 500 into a managed, a fully managed bond fund with one of the big brokerage houses. The rest we put in equities. Equities are down.

No problem. I have no problem with that. But the bond fund, obviously we, we, and this was about a year and a quarter ago that we did this. Um, the bond fund is down 10%, which maybe not be too bad, but of course that is not great.

Um, so here's the question. So with CD rates, for example, you know, paying say 5% for a five year CD, should I cut my losses at a $50,000 loss? So, you know, we had 500, it's down to four 50. If we put that four 50 into a five year CD, um, you know, she could start drawing that, that 5% every year and, and the four 50 would still be there. And that would be that, or leave it in the fully managed bond fund.

Um, and, and, you know, have it come back, you know, w you know, she's 84, she'll, she's got longevity on her side for sure. Um, and like we said, she doesn't need the money, but it'd be nice if I could just, you know, give her an extra 25 grand a year just to go in and throw away if you will. Yeah.

So just to clarify, so apart from this million dollars, it's today worth less than that because both the bonds and the stocks are down. Her income that covers her monthly bills is there and it's separate from this, correct? Yes.

Yeah. So she has some annuities and she's got social security and that is more than paying her bills. Um, she may tap into, um, you know, some of her money market account that she's got like a hundred and a money market accounts.

So she may tap into that a little bit, um, for vacations or whatever, a little extra, but it'd be nice if I could just give her, I would like to give her another 25 or even 50 a year just to, just to be, you know, silly with, if you will. Yeah, I see. Okay, very good. Uh, yeah. Mark, your thoughts on how to approach this portfolio at this point? Yeah, it's a great question. Um, so this year has been by many accounts the worst year for bond funds, for bonds in general.

Um, some people would say all the way back to the founding of the United States. That's how dramatic it's been. Um, now the thing that's really important to understand is the reason that this year has been so bad for bonds and bond investors is we started the year with very, very low interest rates. So there was almost no income being generated by bonds at the beginning of the year. So as rates rose, the capital losses that were created by those rising rates didn't really have much of any income to offset those capital losses.

That's why you're looking at a 10% loss in this bond fund, which actually isn't all that bad compared to, uh, the overall US bond market, which is down around 15% at the end of October for the year. So that's why 2022 has been so bad for bonds. I think that 2023 is set up to be much better and that's simply because rates have come up so much that today those bonds are generating a significant amount of income. So even if rates were to continue to creep a little bit higher, today's situation is totally different than the beginning of the year because now you have income being generated to offset any additional capital losses from further rate hikes. The other piece of that, of course, is if we do head into more of a recessionary type environment next year, you would expect those interest rate increases to stop or at least slow down dramatically and for rates to level out, which if that happens, you don't have any capital losses going against that higher income from your bonds. So I expect that next year is going to be a much better year for bond investors than this year has been. Now to your specific question of CDs versus bond funds, you know, we don't know what's going to happen with interest rates. Are you still with me? We are. Okay.

Sorry. So you know, you could take a portion of that money and do CDs with that, maybe a short term CD ladder where you're buying at a couple of different maturities in case rates continue to tick higher a little bit and then leave some of that money in the bond fund, hoping that rates either level out or even start to fall because if rates start to come down at all next year, which they usually do in an economic recession, then what has been a headwind for bond investors this year, which is rising rates cutting into their bond returns, actually becomes a tailwind for bond investors. Falling rates actually boosts the returns in that bond fund. So I would, I would be a little bit hesitant to take all of it out for CDs, but you certainly could take some of it out and lock that in. So you know exactly what you're getting while leaving some of it in the bond fund and hoping for a little bit more upside from that product, that part of the portfolio, then you would be getting from the CD part of the portfolio. Rob, your thoughts? Well, I like that a lot because as you said, Mark, you know, as we head into next year, if a recession is likely, and that's the base case for most economists, as rates head down, as you said, we'll see the, the bond, the value of these bond funds and prices go up even though we're still enjoying some pretty attractive rates.

And I think we will for some time because inflation isn't going away anytime soon. So the lion's share of this money should probably stay right where it is as opposed to locking in any of these losses and trying to pivot to CDs, unless to your point, you wanted a portion of it kind of fixed or guaranteed and that's what you'd get with the CDs. Sig, your thoughts? No, I like that.

I like the splitting it. I guess my one question would be, so what, if we had an incredible next 12 months with bonds, what could that percentage be? Like would it be a 10% year or is that just way out of, out of the question? Yeah, that's a, it's a tricky question to answer without knowing specifically what the mix of bonds is in the bond fund that you're looking at. And that's where what I was saying earlier about, you know, if these are mostly short term bonds, but more short term rate type return, whereas if you have more of a mix of intermediate to long term, then you could expect a little bit more upside. Now, given that it's down 10% this year, I would guess that you've got kind of an intermediate term mix in there. So 10% would be an aggressive return.

I wouldn't expect that, but I wouldn't be all that surprised if we do have the type of recessionary economy that we, that Rob was just describing. You know, it's certainly something in the six, 7% range would be pretty reasonable, maybe eight. Yeah, very good. Well, we're going to take another quick break. When we come back, our final segment, we'll ask Mark Biller to stay over with us because we've got a lot more great questions on investing, both money market mutual funds, a few questions on the liquidity of the funds and just some general investing questions as well. Sig, appreciate your call today. Maria Nitsa coming your way and perhaps your question.

800-525-7000 is the number to call. Mark Biller with us today. Hey, check out this article we've been talking about today at soundmindinvesting.org on money market mutual funds. We'll be right back on Money Wise Live. Thanks for joining us today on Money Wise Live. I'm Rob West. We're taking your calls and questions today for Mark Biller on anything investing.

We've been talking about money market mutual funds, but let's see what's on your mind. Back to the phones. Clearwater, Florida. Maria, thanks for calling and for your patience. Go right ahead with your question for Mark Biller.

Okay, thank you for taking my call. First of all, I've never done online banking, so I guess I'm just wondering how safe and accessible it is. And my second question is, where do you find the highest rate for the money market? And the third question is, can you open just a money market account in a large company like Vanguard?

Very good. Let's talk about the first question. You asked about the safety of online banking just in general. Are you thinking about investing or just transacting business online generally?

What specifically is your question? Well, I've never, I guess, felt safe banking online, having my account online. And so I know that online banks generally offer a higher rate than credit unions or other banks, but I'm just wondering, I know you said they have a little bit of a risk, the money markets, just like anything, but can you access the money market fund?

Is there, do you have a check or do you just have it transferred into your savings account and then you're able to access it or how does that work? Sure. Yeah. Mark, you want to start there? Yeah, absolutely.

So Maria, it's very easy. The way that you normally do that is you set up the account with the new online bank that you want to use, and then you typically can link that very easily using the information from your printed checks to link your bank account to the online savings account. And from there, it's very easy to move money back and forth from your checking account to your online savings account back and forth in both directions, which makes it very easy to use. You asked about where are the best rates? Those change quite often, but one way that you can figure out at least where to start looking, if you go to the soundmindinvesting.org website and just type the word cash in the search box there, we have some articles about where the best yielding accounts are at any given point in time and some good resources that keep those up to date all the time.

We don't get any money from those. It's just a way for us to keep our readers able to find easily where the best deals are among these online banks. And you had mentioned Vanguard.

They're a great source for a lot of products. They don't have the online savings accounts that we've been talking about to this point, but Vanguard is a long time great provider of some of the money market funds that we've been discussing during this program. So they won't be an online savings account provider, but if you wanted to look at some money market funds, Vanguard has always been a good choice. There are many other good choices as well, but Vanguard has a very good reputation for having low cost, good service, all those things that you would be looking for in a money market fund. Also, the very strong financial backing that you want to have behind a money market fund like Rob was talking about earlier to really make sure that they would never, you know, if there's any way for them to avoid taking a black mark against their name by having a problem with their money market fund, they're going to do it because they have so much reputational risk to having anything go wrong with one of their money market funds.

So that would be a good choice for a money market fund. Any other? Did I hit all the questions there, Maria? I think you did. Yeah. Okay.

You did. Was there any follow up? The only thing is you said there was a low cost. So is there a fee to have a money market fund? Yeah, they do charge a very, very small fee just like any mutual fund does to manage that. But again, with money market funds, those fees are very, very low. And the returns that you see are always net of those fees. So it's already baked into the numbers you're looking at. So like when I was giving those those sample rates earlier in the program, those were already net of those fees.

It's not something that comes out after the fact. Very good. Maria, thank you for your call today to Chicago needs. Thank you for calling go right ahead.

Hello. My question is, I have $50,000 that I want to use for home repairs, but it's in a savings account. And I was wondering if I could put it into a money market and how how long would I have to keep it there?

Yeah. When do you plan on doing those repairs needs? In about four months. Okay, four months. So, Mark, I guess the question is, you can obviously address the liquidity, but is four months enough time to go ahead and set up a brokerage account, make the transfer would be better off just to stay in that high yield savings account.

But what are your thoughts? Yeah, you know, I think that if it's something needs that you could see using that savings account for other things in the future, then it might be worth setting up that online savings account with another online bank and getting a little bit more interest. If not, then like Rob is saying, it might be, you know, a decent amount of work there just for a very, very small amount of interest that you would benefit from.

So you'll have to kind of weigh that. I would not probably go beyond the online savings account into like the money market fund world, simply because you do have such a short time frame here. I'd probably keep it simple and go with the online savings account. Rob, your thoughts? I totally agree.

I think you want to get as much yield as you can. But we want to keep it simple, too, because we've got just a matter of a few months here needs before you're going to need this money. So I'd probably stay right where you are. We appreciate your call today. Let's finish with our final call, and then we'll wrap up with Mark Biller.

Schomburg, Illinois. Hey, Ken, how can we help you, sir? Yes. Hi.

Thank you for taking my call. I have some investments in some annuities. They matured and I was told about the government I bonds and I was thinking what the disadvantages or advantages are. If you could just tell me briefly, I know it sounded like you guys were talking about it in past callers, but your thoughts or is just curious, Ken, about the tax situation on this annuity. Is there did it go in pre-tax? It went in pre-tax.

Yes. OK. And it's still in the annuity. It's up for a maturity in December.

So in the next few weeks. And I'm not sure what I should do with it. Somebody told me do the maximum of ten thousand dollars with the government I bond.

But I don't know what your thoughts are on it. If you think about the purpose of this money longer term, what kind of bucket does this fall in? Is this retirement money? Is this money you're going to need in the next five or ten years? Give me a sense of how this fits into your overall investment plan. Yes. Long term retirement, definitely. OK. And what is your age? Fifty three.

OK, so he's got quite a bit of time here. This is in a qualified account, Mark. So what are your thoughts on the possibility of I bonds? Yeah, the tricky thing with I bonds is they you have to buy them directly from the Treasury. So they need to be in a taxable account, which in this situation would mean taking money out of the qualified account, putting it in a taxable account and paying taxes in order to do that. So that's a pretty big disadvantage if as an alternative you could just roll that to another type of qualified account. And when we say that, we just mean that you wouldn't have to pay taxes on the gains that you've already accumulated in that account. As you as you alluded to, Ken, you're limited to the ten thousand dollars with an I bond per year. So depending on the amount here, this may not even be a real good solution if you've got a lot more than that. Now, if you were planning to take that money out of the annuity anyway and pay taxes on it, that would be a different story. But that would be that would be the main consideration I would be thinking about there.

Rob? Yeah, I totally agree that the best place for the I bond money is taxable money where you've got a time horizon of, let's say, less than five years. So you're you're in the same kind of short term cash bucket that we've been talking about today where you'd have it in a savings account or a money market. You've got at least a one year time horizon because you're not gonna be able to touch it for a year. But it's not money that would be better served in a stock and bond portfolio with the longer view. And therefore, the attractive rates that are temporary, they're not going to be around forever in the I bonds make sense. This sounds like this is long term money. So I'd rather roll it to, you know, another qualified account or keep it in that tax deferred environment and keep it in investments that are going to appreciate over the long haul as opposed to chasing a temporary spike in these I bonds as attractive as they are.

So I don't think this is perhaps the best use for that money can unless you had some other money in another bucket, so to speak, that had at least a one year time horizon that made sense to go ahead and move into this type of account. We appreciate you checking with us today, sir. God bless you. Mark, we're about out of time. Any final thoughts to wrap up what we've been discussing today?

Now, this has been a lot of fun. I think the main thing is, you know, the right tool for the right job really has kind of been the theme today. You want to make sure that you're talking about savings relatively short term.

And if that's the case and this really is a cash alternative kind of a situation, money market accounts, money market funds can be a great choice. Yeah, very good. Mark, we appreciate you stopping by, my friend. God bless you. Thanks, Rob. All right.

Enjoyed it. Mark Biller, executive editor at Soundmind Investing. You can learn more at soundmindinvesting.org. Be sure to check out this article we've been discussing today.

Money market funds resume roll as solid option for short term cash. We're delighted you stopped by today. I'm so thankful for my team today managing our phones, Gabby T, Dan Anderson Engineering, Amy Rios Producing, and Mr. Robert Sutherland providing great research today.

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