House sale money, use it again in 2-3 years?

[BarbWire]

In October 2016, I sold my house and netted several $100K. I knew I wanted to travel for a couple of years, and the market had been bouncing around 18000 for quite some time, so I put it in VMMXX until I had a solid plan.

Then...the Trump Bump. And I didn't know where I wanted to settle/buy. And I kept traveling. And now, 3.5 years later, I still have the cash in VMMXX and have finally made an almost-completely-firm decision that I will NOT buy a house until June 2022 at the earliest: I first want to test the waters renting somewhere (unknown) before buying or moving on.

So now that I have a firm-ish horizon of at least 2.5 years, I'd like something better than VMMXX. So... a CD ladder? I've never bought CDs so I'll need to learn about CDs and ladders, and how to structure one for potential liquidation in 2.5-3 years.

What else should I consider? I suppose I could split the funds up and scatter them in savings accounts/mmf to get 1.6% and falling (my 2-year living cash reserves are at CapOne getting 1.6% today, and falling.)

Ideas? I have never "invested" with such a short time line. I have always been a buy and hold investor of stock and bond funds as I saved toward ER. But learning how to hold a larger "cash" equivalent position is a new skill I need.

 

[jkern]

With such a short time horizon I don't see the point in a CD ladder. Just invest in a two year CD then MM thereafter.

 

[statsman]

With such a short time horizon I don't see the point in a CD ladder. Just invest in a two year CD then MM thereafter.

We had a substantial amount from a house sale in late 2018 (after capital gains taxes) and a planned short timeline to repurchase, less than a year, so we opted for a MM. If it had been for 2+ years, then I think the suggested CD route would have worked for us.

 

[deserat]

Had the same issue last year....will probably use the funds in 2-3 years...timing missed out on 3% CD...is sitting in VG MM....is fine as is earmarked to purchase another house for cash...

 

[Bamaman]

I just put $ into Ally Bank's no penalty CD that allows you to withdraw it early without penalty. Sure beats having IRA withdrawals at this point in the market.

 

[BarbWire]

Thanks, all. This forum is so very good at hand-holding, teaching, and sensibly advising.

I assume that VMMXX (or the equivalent at Fidelity, where I may move the money if I keep it in a MM) will keep falling. Gone are the days -- not too long ago -- when I was earning nearly enough on my earmarked "house money"-- to cover my accommodation traveling!

Guess this may be my introduction to CDs. I tried logging into ally.com but couldn't connect ... spun and spun and spun ... they may be very busy! Edited to add: no, the problem was that I was running Express VPN via Denver, which was blocked by Ally. Without the VPN the website loaded immediatey.

Nonetheless, I need to learn about CD ladders for my non-house "safe" position as I age. I will put that on the "learning" list as well as finally trying to understand bonds (thank goodness for Total Bond funds!)

 

[freedomatlast]

I had the same situation over the last several years. I knew we would be buying a house soon so I had some in a MM at the credit union, but most was split between VMMXX and an Ally no penalty CD. We will be closing on the new house next week. Now we have to sell the existing house to restore our cash reserves.

 

[BarbWire]

I had the same situation over the last several years. I knew we would be buying a house soon so I had some in a MM at the credit union, but most was split between VMMXX and an Ally no penalty CD. We will be closing on the new house next week. Now we have to sell the existing house to restore our cash reserves.

So the Ally no penalty CDis for 11 months with (today) 1.9%. And then the rate resets? (Sorry, CD newb here).

Or I can have their savings account at 1.60% (today) but it could change .... tomorrow?

Am I following that right?

 

[ATX78701]

So the Ally no penalty CDis for 11 months with (today) 1.9%. And then the rate resets? (Sorry, CD newb here).

Or I can have their savings account at 1.60% (today) but it could change .... tomorrow?

Am I following that right?

You are correct.

For the CD, once you open the CD you will have a 1.9% rate for the term of the CD. As it is a no-penalty CD, you can withdraw before the end of term without penalty. You have the option at renewal to cash it out or roll into another CD and can change your term at that point plus add or subtract funds for the CD.

The savings account can change rates anytime down or up. Although with the current rates I don’t see an upward trend happening anytime soon.