NYC Tax Advantages: Cash Management and IRAs

Based on the most helpful WSO content, here are some insights and strategies for managing cash and investments while living in NYC:

Cash Management:

1. High Yield Savings Accounts (HYSA) and Money Market Funds (MMF):

   • HYSA: These accounts offer higher interest rates compared to traditional savings accounts. They are a good option for parking your savings while earning a decent yield.
   • Money Market Funds (MMF): Fidelity's MMF options like SPAXX or FDLXX can be considered. The choice between them depends on your tax situation. SPAXX is a government money market fund, while FDLXX is a municipal money market fund, which might offer tax advantages.

2. Short-Term Treasuries/Municipal Bonds:

   • Treasuries: These are generally exempt from state and local taxes, which can be beneficial in a high-tax city like NYC.
   • Municipal Bonds: These are often exempt from federal, state, and local taxes, making them a potentially better option despite their lower yield.

IRAs:

1. Traditional IRA vs. Roth IRA:
   • Traditional IRA: Given that you are living in a high-tax city and state and plan to retire in a low-tax city, a Traditional IRA might be more advantageous. Contributions to a Traditional IRA are tax-deductible, which can reduce your taxable income now.
   • Roth IRA: While contributions are made with after-tax dollars, withdrawals in retirement are tax-free. This might be less beneficial if you expect to be in a lower tax bracket in retirement.

Investment Strategy:

1. Brokerage Account:
   • SPY (S&P 500 ETF): Allocating 100% of your investments in SPY can be a solid strategy for long-term growth. However, consider diversifying to manage risk better.

Additional Tips:

• Maximize Tax-Advantaged Accounts: Ensure you are maximizing contributions to tax-advantaged accounts like 401(k) and IRAs.
• Consider Tax-Efficient Funds: Look into funds that are designed to minimize tax liabilities, such as index funds and ETFs.
• Stay Informed: Keep up with changes in tax laws and investment options that might affect your strategy.

For more detailed discussions and personal experiences, you might find it helpful to explore threads on Wall Street Oasis related to cash management, tax strategies, and investment planning.

Sources: How Many of You Are Actually Happy?, Millionaire by 30, Can someone help me with budgeting? 170k as a 22 year old is absurd to me., Why would anyone willingly choose to live in NYC / SF / CHI?, I cant save money