Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I am thinking of moving my savings (which is earning .91% right now ) into a money market so that I can avoid paying ordinary income tax which for me is a ridiculous 38% (28% fed marginal rate + 10% CA state income tax).
If I move it into a money market fund I just pay the 15% capital gains right? The question is this...I do know a money market can go under but the risk is very very low, has this been known to happen? What are the risks of money markets?
There are money market ACCOUNTS, which are a type of bank savings account and pay interest, and there are money market FUNDS, which are offered by fund families, their share price remains at $1/share (they're supposed to, anyway) and all income comes from short-term money instruments. Two different things, often confused, but neither pays capital gains.
thanks for the clarification, is there any very low risk investment that pays the same rate as savings but that I can pay the capital gains on?
With the savings rate at 1% (that's the highest I found with American Express savings) and in addition paying 38% tax that nets an effective savings rate of 0.62%, with inflation at least 3% in my opinion the actual rate is -2.38% Trying to see what I can do to resolve this at at least stay in pace with inflation.
First of all, unless you have a ton of money, even at 1% interest, your tax savings will be pretty minimal at best. Also 28% tax
Regardless, there is no low risk investment that pays capital gains. The best and safest option to avoid tax is to buy individual municipal bonds. You will avoid federal tax and if you buy California muni bonds than it is tax free in California. However, there are small risks of default especially California bonds. Also, if you buy and hold through maturity then you won't lose principal, but if you need to sell it, you may lose some money depending on the market.
Thanks Chunky. So how are you guys protecting the value of your savings due to the currency debasing policies of the current administration? My concern is that there may be serious levels of inflation and what I've saved will not be worth the paper it's printed on...
You might take a look at I-bonds, which are currently paying 4.6% (it changes every 6 months). Unfortunately, though, you're limited to a max purchase of $5k in a calendar year.
I haven't found any money market accounts, or money market funds that are paying enough to even bother right now.
If you shop around, there are some decent savings account rates, and CD rates. I check Deposit Accounts (www.depositaccounts.com) for the best rates. It can take some searching tho.
If you don't want to pay taxes, what about a tax-free bond mutual fund? That can be pretty much as safe as cash.
I haven't found any money market accounts, or money market funds that are paying enough to even bother right now.
If you shop around, there are some decent savings account rates, and CD rates. I check Deposit Accounts (www.depositaccounts.com) for the best rates. It can take some searching tho.
If you don't want to pay taxes, what about a tax-free bond mutual fund? That can be pretty much as safe as cash.
What he said. My portfolio is a mix of equities and bonds including Munis. Most of the equities are high quality companies that pay an average dividend of around 3%. It isn't risk free but you mitigate the risk through diversification.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
) into a money market so that I can avoid paying ordinary income tax which for me is a ridiculous 38% (28% fed marginal rate + 10% CA state income tax).
Trying to see what I can do to resolve this at at least stay in pace with inflation.
