Where to put 100k

[Anonymous]

We have approximately $100k in a savings account, earning %.85 APY. We both have retirement accounts, but this is our only true savings account. My husband wants to put all of this into an investment account, but that makes me nervous because it is both an emergency fund and at least a portion of a potential down payment on a new home (would also use money from sale of current home. No immediate plans to sell/move but in my mind its in the next few years). Even if we could fairly easily access the money if needed, it makes me nervous that the money could get wiped out or significantly reduced in an investment account if we need it in the short term. What would you do? Keep some in savings (how much?) and invest the rest? Invest it all? Keep it all in savings? Something else?

[Anonymous]

Don't invest it -- you want to use it too soon.

Look into online money market accounts. You may be able to do a little better rate wise.

But bottom line -- this is money you want to protect, not try to grow.

[Anonymous]

Wait for the S&P to drop 10%, then put half of it in an S&P 500 index fund.

[Anonymous]

Anonymous wrote:Wait for the S&P to drop 10%, then put half of it in an S&P 500 index fund.

Because the market will bounce right back?

If the market drops 10%, the conservatives on this board will assume the knife is falling.

[Anonymous]

You really need to figure out with your partner what the timeframe you might need the money is, and your joint comfort level with the possibility that an investment might go up and down-- so try to identify some of it as emergency fund, and some of it as 3-5 year money, and then see if any of it is more than that.

For the emergency fund I would keep it where it is, except that money that you did not expect to need within 12 months I'd put into i-bonds (you can each buy $10k/year, so $20k immediately and then think about doing it again next year). For the 3-5 year money, I think you could leave it where it is, roll it to i-bonds gradually, or set up a CD ladder for it. Alternatively you could consider a conservative balanced fund (meaning stocks and bonds), like Vanguard Wellington-- that is a fairly conservative investment but it certainly can lose money so you'd need to consider whether it would worry you having it exposed to the market. A short term bond would also be a option for conservative investment, but again there is risk of loss with a bond fund.

[Anonymous]

I would start to max out your retirement at work, both of you, and then use some of the 100K to backfill that amount. For example, if you need to up your contribution by $300 then replace that with $300 if you need to. You will get an immediate return of about 25%, or your tax rate, because that amount will be a deduction for taxes. It's a sure investment just based on the tax deduction, but also you will get compounding interest over time. You'll be surprised how soon you will be 50 and looking at your retirement accounts and wishing you'd put more in while you could...

Then I would open a Roth IRA in your name and in your husband's name. That's a great vehicle to both investment in and have it be somewhat liquid. Put the max in monthly (around $500 each). It's somewhat flexible and also tax advantageous.

Do you have kids? Then do a 529 for the state tax advantage up to the $ amount (in DC it's $4000 per year). So about $320 a month per kid. Again, the State tax deduction alone makes it a good investment.

Beyond that, I would save 6 times your monthly expenses in a fairly cash/liquid place (maybe an on-line bank in a money market). That way it's liquid but not tempting to just blow on a vacation or something like that. That's for emergencies only -- medical tragedy, one of you losing a job, etc.

If there's anything else, invest it systematically over time in ETF funds in a wide variety of sectors using a low-load broker like Vanguard (www.bogleheads.org). Don't touch it.

Good luck!

[Anonymous]

Go with what 8:19 said.

Open the accounts at Vanguard. Your accounts will be:
IRA
529
Brokerage - money market for 3-6 months of expenses, rest in Wellington fund.

[Anonymous]

Anonymous wrote:I would start to max out your retirement at work, both of you, and then use some of the 100K to backfill that amount. For example, if you need to up your contribution by $300 then replace that with $300 if you need to. You will get an immediate return of about 25%, or your tax rate, because that amount will be a deduction for taxes. It's a sure investment just based on the tax deduction, but also you will get compounding interest over time. You'll be surprised how soon you will be 50 and looking at your retirement accounts and wishing you'd put more in while you could...

Then I would open a Roth IRA in your name and in your husband's name. That's a great vehicle to both investment in and have it be somewhat liquid. Put the max in monthly (around $500 each). It's somewhat flexible and also tax advantageous.

Do you have kids? Then do a 529 for the state tax advantage up to the $ amount (in DC it's $4000 per year). So about $320 a month per kid. Again, the State tax deduction alone makes it a good investment.

Beyond that, I would save 6 times your monthly expenses in a fairly cash/liquid place (maybe an on-line bank in a money market). That way it's liquid but not tempting to just blow on a vacation or something like that. That's for emergencies only -- medical tragedy, one of you losing a job, etc.

If there's anything else, invest it systematically over time in ETF funds in a wide variety of sectors using a low-load broker like Vanguard (www.bogleheads.org). Don't touch it.

Good luck!

Except did you actually read the OP? She said a large chunk of it is emergency fund and down payment for use in a few years. You don't want to put that money in a 401k, IRA, or 529.

[Anonymous]

I am for the bonds