Thanks for the replies. If you haven't stumbled upon my other recent threads, I currently have $21k (6 months of expenses) in my EF. I was planning to add another $4k or $5k next week, so it will at leave have $25k. The thought of having that much money earning next to nothing really bothers me.
I understand the purpose of an emergency fund, but there is no reason for the entire amount to sit in an account making 1%. I don't like the idea of moving some to CDs because those rates are really low as well.
Of the $41k sitting in our Roth IRAs, $38k is from contributions. Clearly not the reason we opened Roth accounts, but I am thinking they could at least partially double as our EF. Perhaps just 2 or 3 months of expenses in the ING account?
If I were to reduce my ING account to $10k (just $800 under 3 months expenses), I would have $15k to make better use of. It would take $9200 to max out both of our Roths for 2013, but I kinda like the idea of putting the bulk or all of the $15k toward the mortgage. We are on pace to pay it off within 33 months. A $15k additional principal payment (along with our monthly additional principal payments we already make) would knock 12 months off the mortgage. Compared with earning 1%, that is very tempting.
a classic case of reaching for yield.
But, riddle me this...is your Roth IRA all in "safe" investments? I doubt it. But I could be wrong. The point is, you're comfortable falling back on that even though it is more aggressively invested, so why won't you do that with your e-fund?
At the end of the day, $25k may seem like a lot today. But, as you grow your egg, it will relatively be less significant. But, if you're going to take risks with the money, just make sure they are the "correct" risks. I would rather invest the $15k in a nice stock mutual fund (which is tax efficient) rather than paying down the mortgage (especially if you have a low rate) b/c paying down the mortgage helps none if you need the money tomorrow (if you could totally wipe out the mortgage, this would be a different conversation).
At the end of the day, here is my "oh crap" plan:
1) cash (includes e-fund)
2) taxable accounts
3) Roth IRA
4) tap equity in my house
5) kids' college accounts
I need a couple of these, but not all of them. At least one. But, as your taxable account gets bigger you can take bigger risks and still be ok. Maybe now is the time to expand your taxable account (I'd still do Roth IRA contribution first)?