Retirement Accounts Cash Parking: What's the Best Strategy?

Thanks for explaining! Do stable value funds have any downside risk at all? I always assumed they were like money market funds with slightly better yields. Also, between TIPS and I-bonds, which do you think makes more sense in the current environment?

Stable value funds do have some potential downsides, though they're generally considered very low risk. Unlike money market funds which maintain a stable $1 NAV through accounting methods, stable value funds use insurance contracts to provide principal protection, which means there's some counterparty risk from the insurance providers. In extreme economic conditions, this could theoretically be an issue, but it's rare. Between TIPS and I-bonds, I-bonds currently offer better inflation protection for individual investors, but you can't hold them in retirement accounts - they must be purchased directly from Treasury. TIPS can be held in retirement accounts through funds, but they've been quite volatile lately as real rates have fluctuated. If you're primarily looking for stability, I-bonds would be better, but since you're specifically asking about retirement accounts, a TIPS fund might work if you can tolerate some NAV fluctuation.

Wait this seems interesting. Does it work with all types of retirement accounts or just 401ks? I have a SEP IRA through my small business and finding good places to park cash has been a nightmare.

Sounds like a paid advertisement tbh. How much does this service cost? And what exactly does it tell you that you couldn't figure out by just looking at your own statements and calculating expense ratios?

It definitely works with all types of retirement accounts including SEP IRAs. It's especially helpful with self-employed accounts since there are often more investment options but also more complex fee structures. The analysis looks at all your holdings and can identify optimization opportunities across your entire retirement portfolio. I get the skepticism - I was too at first. It's not just about finding expense ratios though. It analyzes the historical performance patterns of available funds relative to their benchmarks, identifies tax efficiency opportunities, and suggests specific allocation adjustments. For my situation, it showed that my plan's stable value fund had hidden transaction costs not included in the expense ratio. The ultra short-term bond fund actually had a higher stated expense ratio but fewer hidden costs, making a combination approach more efficient.

How does this actually work though? The IRS just accepts some random service calling on your behalf? Seems like it would violate their security protocols or something. I've been trying to get through about a similar question on my 401k to Roth conversion and temporarily holding cash.

Yeah right. I find it hard to believe the notoriously difficult IRS has some magical backdoor for a service to skip their phone queues. Sounds too good to be true. And even if you get through, the IRS agents often give conflicting advice anyway - I wouldn't trust critical retirement decisions to whatever random agent picks up.

They don't skip the queue - they actually wait in it for you. The service uses some automated system to stay in the IRS phone queue (dealing with all the transfers and menu options correctly) and then when a human agent finally answers, that's when they call you to connect. So you're still talking directly to the IRS, the service just handles the hours of waiting and menu navigation. The IRS security protocols still apply - you still need to verify your identity directly with the agent. The service just bridges the call once an agent is on the line. For my 401k to Roth conversion questions, getting accurate information directly from the IRS was crucial since different types of accounts have different rules about how long funds need to remain in cash before being reinvested to avoid step transaction issues.

In my 401k I've been using a treasury fund for cash parking and it's currently yielding about 3.8% which beats most stable value funds I've seen. The advantage of treasuries in the current environment is they respond faster to rate changes. The downside is there can be some minor NAV fluctuation vs stable value funds which maintain stable principal.

Thanks for that insight! Do you see much day-to-day fluctuation in the NAV with your treasury fund? I'm pretty conservative with this portion of my savings so stability is important, but that extra 0.7% yield is pretty significant too. I'm guessing the stable value fund will eventually catch up to current rates, but seems like they lag quite a bit based on what you're saying.

Money market funds are solid for cash parking in retirement accounts. The 4.2% yield is quite good actually. The main thing to check is the expense ratio - some 401k plans offer money market funds with ridiculous fees that eat into that headline yield. Also, if you don't mind sharing, which fund is offering 4.2%? Most I've seen are in the 3.5-3.8% range.