Ok, I'm not panicked yet, though I was freaked out a few weeks ago about Lehman Brothers and then I was all weirded out when Wachovia died because I remember that bank being huge AND because I had considered going over to Wachovia because of their dollar-matching-saving program, compared to Bank of America's Keep the Change program.
I stayed with Bank of America... but only because I was too lazy to do any additional research and then to open new accounts and move my money if that's what I decided to do.
But, after a long discussion this week in my company with our CEO, I started to really seriously consider some small, but, I think, significant, moves with my cash as we head into this financial tailspin (FYI, while I'm not worried too much yet, I do think this going to get much, much worse before we see anything that look even close to "better").
First, I was thinking about cutting my 401k contributions in half.
Right now, I have both a traditional IRA and a Roth IRA with my company. I split my contributions between them. (For those who don't know, with a traditional IRA, your contributions are tax deductible, but you pay taxes on the money you take out when you turn 65. With a Roth IRA, you pay the taxes now, and none when you take the money out.)
The good news is, my company matches 3% of my salary for my 401k even if I don't contribute, so it's not like absolutley NOTHING will be going in there.
I want liquid, but interest bearing, cash on hand. I was thinking of continuing my contributions to my traditional IRA, but diverting what I was putting into the Roth into my emergency fund, which is in an HSBC hi-yield savings account.
Hi-yield is kind of a joke these days though. I think at the peak, I was getting as much as 6% on my money in that account, but now, I get about 3% and if the Fed cuts rates as I saw in this morning's Wall Street Journal, I may wind up earning even less. Because the money in my Roth is not FDIC insured AND it's losing money right now, I thought it would be wiser, for the time being, to save the cash in my emergency fund.
In short, here are the two things I am pondering:
1. Should I put the money I had been contributing to my Roth IRA into my emergency fund instead?
2. Should I find a higher-yield, but conservative, liquid account to stash my emergency fund instead of the HSBC account? If so, any suggestions?
FYI, I really don't think now is the time to start moving a whole lot of money around, but I also think there's no reason to forego a better deal.