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Zero Debt, Max IRA and 401K, Own Home...What to do With $10,000
05-11-2009, 05:46 AM
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#1
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Recycles dryer sheets
Join Date: Nov 2007
Posts: 54
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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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05-11-2009, 08:41 AM
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#2
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Moderator Emeritus
Join Date: Dec 2002
Location: Oahu
Posts: 26,633
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Quote:
Originally Posted by LeBlanc
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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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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05-11-2009, 08:52 AM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
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Less than 3 years, NO Mr. Market. Only CDs or short-term Treasurys.........
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05-11-2009, 08:58 AM
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#4
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Full time employment: Posting here.
Join Date: Jan 2006
Location: Boston
Posts: 620
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Quote:
Originally Posted by LeBlanc
I'd like the money to be available in about 2 years to use for a downpayment on another home.
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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.
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05-11-2009, 09:00 AM
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#5
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Moderator
Join Date: Oct 2005
Location: Texas
Posts: 15,624
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Quote:
Originally Posted by Lusitan
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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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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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
RIP to Reemy, my avatar dog (2003 - 9/16/2017)
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05-12-2009, 04:08 PM
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#6
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Recycles dryer sheets
Join Date: Nov 2007
Posts: 54
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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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05-12-2009, 06:30 PM
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#7
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Thinks s/he gets paid by the post
Join Date: Oct 2008
Location: Naples
Posts: 2,174
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Quote:
Originally Posted by LeBlanc
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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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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05-12-2009, 06:36 PM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2007
Location: Independence
Posts: 5,570
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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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05-15-2009, 10:51 AM
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#9
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Recycles dryer sheets
Join Date: Dec 2006
Posts: 154
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Try a credit union. They can usually give better rates on term deposits than others.
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05-15-2009, 11:12 AM
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#10
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2008
Location: East Nowhere, 43N Latitude, NY
Posts: 9,017
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Option 1 - send it my way and make a new friend
Option 2 - FDIC insured money market or CD
Not an option - stock market
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"All our dreams can come true, if we have the courage to pursue them." - Walt Disney
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05-16-2009, 07:27 AM
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#11
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Confused about dryer sheets
Join Date: May 2009
Posts: 3
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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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05-16-2009, 07:36 AM
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#12
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Full time employment: Posting here.
Join Date: Oct 2007
Location: New York
Posts: 898
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Quote:
Originally Posted by LeBlanc
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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Sounds to me like you're already overweight in real estate. Maybe consider diversifying a bit?
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Money's just something you need in case you don't die tomorrow.
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05-16-2009, 05:38 PM
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#13
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Recycles dryer sheets
Join Date: Jan 2006
Posts: 103
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PenFed usually has really good CD rates.
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05-17-2009, 01:36 PM
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#14
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Dryer sheet wannabe
Join Date: May 2009
Posts: 14
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Quote:
Originally Posted by LeBlanc
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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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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...Pat
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25% retired
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05-19-2009, 02:34 AM
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#15
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Recycles dryer sheets
Join Date: Apr 2008
Posts: 157
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Quote:
Originally Posted by Patsweb
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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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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Instead of getting angry I just LOL. Can't waste time with stupid people.
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05-28-2009, 03:30 PM
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#16
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Dryer sheet wannabe
Join Date: May 2009
Posts: 24
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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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