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Zero Debt, Max IRA and 401K, Own Home...What to do With $10,000
Old 05-11-2009, 06:46 AM   #1
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Zero Debt, Max IRA and 401K, Own Home...What to do With $10,000

I'm currently stationed in Okinawa Japan living the dream of serving my country abroad...again.

I'm 30 yrs old and think I've positioned myself fairly well over the years living off of Uncle Sam in return for my services.

I have absolutely no debt, save for the mortgage (30 yr, 6.125% opened Oct 2008) on a 3br/2ba home in North Las Vegas that rents. I max my annual Roth IRA and 401K (TSP) contributions and I save an additional $2,000 per month in an ING savings account that earns peanuts.

I have about $15,000 saved and would like to do something with $10,000 of it.

I'd like the money to be available in about 2 years to use for a downpayment on another home.

What would you folks suggest? Thanks.
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Old 05-11-2009, 09:41 AM   #2
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Originally Posted by LeBlanc View Post
I have about $15,000 saved and would like to do something with $10,000 of it.
I'd like the money to be available in about 2 years to use for a downpayment on another home.
What would you folks suggest? Thanks.
Trick question, right?

The default long-term answer would be to put it into a taxable account according to your asset allocation. Maybe juggle accounts around so that all the dividend-paying assets are in tax-deferred accounts and all the growth (cap gains) assets are in taxable accounts.

But for this $10K, you're planning to have as much money in two years as when you started, and I'm having a hard time thinking of an asset class that hasn't been hammered by the last two years. The conventional wisdom for short-term money is to put it into a two-year credit union CD and to stop chasing yield.

That's what we did in early 2008 with our kid's college fund when she was finishing her high-school sophomore year. Over the last 16 months it's turned out to be our best-performing asset class. And unfortunately that sucky 3.6% APY has turned out to be pretty studly recently.
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Old 05-11-2009, 09:52 AM   #3
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Old 05-11-2009, 09:58 AM   #4
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I'd like the money to be available in about 2 years to use for a downpayment on another home.
If you want to use it within the next 2 years (or even 5 years) I wouldn't put it into anything other than money market or CD accounts. Really the most important thing is having the money there when you plan to use it.
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Old 05-11-2009, 10:00 AM   #5
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If you want to use it within the next 2 years (or even 5 years) I wouldn't put it into anything other than money market or CD accounts. Really the most important thing is having the money there when you plan to use it.
In such a short term, as Will Rogers once famously remarked, return OF your money is more important than return ON your money. The shorter the time horizon, the more putting money in the market resembles letting it ride in Vegas.
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Old 05-12-2009, 05:08 PM   #6
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Thank you all for your inputs. I kind of figured that would be the result.

Looking at bankrate.com, I have to admit the CD rates are quite depressing:
6mo: 1.74%
1yr: 2.33%
5yr: 3.12%
1yr jumbo: 2.10%
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Old 05-12-2009, 07:30 PM   #7
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Originally Posted by LeBlanc View Post
Thank you all for your inputs. I kind of figured that would be the result.

Looking at bankrate.com, I have to admit the CD rates are quite depressing:
6mo: 1.74%
1yr: 2.33%
5yr: 3.12%
1yr jumbo: 2.10%
I know you're kind of in a tough spot being in Okinawa and not able to shop around for CD rates, etc. but you're just wasting your time with bankrate.com. They never have the best CD rates. They just post rates that banks pay them to post. Ex: my local bank (Urban Trust Bank with home office in Orlando) has the following rates: 1 yr=2.75, 2 yr=2.85, 39 mo=4.00, 48 mo=4.25 and 60 mo=4.50%. Same rates apply for IRA CD's.
I'd shop all over the internet and the heck with bankrate.com.
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Old 05-12-2009, 07:36 PM   #8
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First the not-serious answer: PARTEE!

Then try this site in your search for short term rates:
Bank Deals - Best Rates and Deals
If you are lazy like me and have a Costco account and join Capitol One through Costco the savings account is paying about 2%. No CD frozen money hangups.
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Old 05-15-2009, 11:51 AM   #9
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Try a credit union. They can usually give better rates on term deposits than others.
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Old 05-15-2009, 12:12 PM   #10
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Old 05-16-2009, 08:27 AM   #11
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What about a bond fund? I am in a similar situation, and currently have my cash in an ING high yield savings account (1.5% currently) I was looking at 2 vanguard funds to split it between vwitx and vfiix It looks like I could expect around 3.5% with this strategy?
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Old 05-16-2009, 08:36 AM   #12
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Originally Posted by LeBlanc View Post
I'm currently stationed in Okinawa Japan living the dream of serving my country abroad...again.

I'm 30 yrs old and think I've positioned myself fairly well over the years living off of Uncle Sam in return for my services.

I have absolutely no debt, save for the mortgage (30 yr, 6.125% opened Oct 2008) on a 3br/2ba home in North Las Vegas that rents. I max my annual Roth IRA and 401K (TSP) contributions and I save an additional $2,000 per month in an ING savings account that earns peanuts.

I have about $15,000 saved and would like to do something with $10,000 of it.

I'd like the money to be available in about 2 years to use for a downpayment on another home.

What would you folks suggest? Thanks.

Sounds to me like you're already overweight in real estate. Maybe consider diversifying a bit?
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Old 05-16-2009, 06:38 PM   #13
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PenFed usually has really good CD rates.
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Old 05-17-2009, 02:36 PM   #14
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Quote:
Originally Posted by LeBlanc View Post
I'm currently stationed in Okinawa Japan living the dream of serving my country abroad...again.

I'm 30 yrs old and think I've positioned myself fairly well over the years living off of Uncle Sam in return for my services.

I have absolutely no debt, save for the mortgage (30 yr, 6.125% opened Oct 2008) on a 3br/2ba home in North Las Vegas that rents. I max my annual Roth IRA and 401K (TSP) contributions and I save an additional $2,000 per month in an ING savings account that earns peanuts.

I have about $15,000 saved and would like to do something with $10,000 of it.

I'd like the money to be available in about 2 years to use for a downpayment on another home.

What would you folks suggest? Thanks.
Like all the others who have given you good advice, I say stay safe in short term CD's/MM combo. If this is all the money that you have available, you don't want to risk losing it and may want to have some readily available for "emergency"...the typical amt. to have set aside is 6 mo. of living expenses. Since you are military, you may not have to worry about being laid off like us civilian folks, but it is good to have on hand for unexpected expenses. I think that you are doing really well for your age, but I assume from your being on this board that your eventual goal is to retire early...which I think that most of us consider being "mortage free" is essential...something to think about. If the house you bought in NLV is next to Las Vegas, Nv-the foreclosure capital of the US at present, it may be a while before you see a return on that investment.
By the way, I lived on Okinawa briefly as a teen while my father was stationed there in the 60's...sure hope that the living conditions have improved!
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Old 05-19-2009, 03:34 AM   #15
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By the way, I lived on Okinawa briefly as a teen while my father was stationed there in the 60's...sure hope that the living conditions have improved!
I live here, and I like it! Humidity is creeping up on us really fast though, but I'm from Houston so I'm familiar with it.
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Old 05-28-2009, 04:30 PM   #16
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In order:

1) Mattress (I'm serious)
2) Short term T-bills through treasurydirect.com
3) FDIC insured CD
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