Money market fund vs money market account

My niece is rebalancing her IRA. She plans to move money out of a Vanguard stock fund, and into their money market fund. She’s decided to keep a small percentage of her IRA more-or-less permanently in cash.

Would it be better to put this cash in a money market deposit account instead of a money market fund? My understanding is that money market deposit **accounts **are FDIC-insured to $250k; money market **funds **are not insured.

The only advantage I see in keeping cash in a money market fund is the ease of purchasing shares in other funds in the Vanguard family–online exchanges are simple.

But for holding cash long-term in IRA, why not take advantage of an FDIC-insured money market account?

Note: she is aware that holding cash in IRA is not recommended generally; but she’s of an age where she wants to be ultra-conservative in a portion of her IRA.

These are completely different things, despite the similarity in name.

A money market fund is a type of mutual fund. A money market account is a type of bank (savings) account.

Generally you can write a few (3-6) checks a month on a money market account. Interest tends to be extremely low (right now I think I’m getting 0.10% on mine) but the principal is secured.

On a money market fund you wouldn’t be able to write checks and your principal is not guaranteed. But your return is likely to be slightly higher. (They tend to invest in short-term low-risk debt.)

In addition to the FDIC insurance, typical money market fund yields are in the 0.10 to 0.30% range. The Vanguard Prime MMF is beating the competition at 0.55%. But online bank money market yields are around 1.00%.

But if you just want to hold FDIC insured cash investments in your IRA, why limit yourself to money market accounts? The only really difference between a money market account and a savings account is the check-writing and ATM options, neither of which you can have in an IRA. For example, the IRA savings account at Ally Bank is at 1.00% right now. And if she is just looking for a safe place to store cash and doesn’t need to be making frequent withdrawals, why not a CD at a bank or credit union?