My wife and I anticipate these short- and medium-term expenses before kids go to college and we retire in ~20 years:
1. Buy a new car when mine dies or we need something bigger (in 2-5 years?)
2. Supplement my income until my wife goes back to work (~$10-15k/year for at least the next 5 years, maybe 10)
We're in the 12% tax bracket, and currently have money set aside in Vanguard's Treasury Money Market (VUSXX) and Intermediate-Term Treasury Index (VSIGX). There's probably more money/liquidity in VUSXX than we'll need over the next 2-3 years. I chose VSIGX partly to reach for yield and partly because I expect rates to drop before I need that money.
I have several Term Deposit Plus add-on CDs at Mountain America Credit Union, maturing in 2.5 to 5 years and with rates of 3.35% and 3.51% APY. I'm also a federal employee, so I have access to the G fund - though I suspect its rates won't be that great for the next several years.
Questions:
1. Should I move some VUSXX to I bonds? I figure they could have different purposes over the time I hold them: second-tier emergency fund, additional tax-free educational savings (if needed), and retirement bonds. They also provide inflation & deflation protection, which I don't have much of in fixed income right now. I know the limit is $10k/person/year (+$5k tax refund, if applicable), but if I think ahead, I could build up a sizable amount (for us) over several years. My hesitations: the current yields aren't that high, despite possibly being at business cycle peak, and the tax deferral probably wouldn't benefit me much unless my income goes up and I hold them into retirement.
2. I'm thinking I can increase my yield somewhat by adding conservative amounts to the Mountain America CDs, primarily to help with supplementing my income. Any downsides to this, besides the added complexity of having funds at another financial institution?
3. Are there other good options I'm missing?
(I also posted a little more detail in this thread: http://www.bogleheads.org/forum/viewtopic.php?t=277164)
