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Where to Park $400K for a Year?
Old 01-17-2017, 01:36 PM   #1
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Where to Park $400K for a Year?

I think I know the answer to this, but before I do something stupid, like put it all on red, I thought I'd ask.

We just sold our house and have a check for about $400K. Plan is to rent for the next 12 to 16 months*, then buy a new home for cash.

The obvious answer is to park it in a CD at some place like Ally. Any other creative alternatives? It kills me to be paying $1700 a month for rent and earning 1% on my money.



* We'll be buying in a new state and want to try it out before buying
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Old 01-17-2017, 01:57 PM   #2
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Originally Posted by travelover View Post
I think I know the answer to this, but before I do something stupid, like put it all on red, I thought I'd ask.

We just sold our house and have a check for about $400K. Plan is to rent for the next 12 to 16 months*, then buy a new home for cash.

The obvious answer is to park it in a CD at some place like Ally. Any other creative alternatives? It kills me to be paying $1700 a month for rent and earning 1% on my money.



* We'll be buying in a new state and want to try it out before buying
You are creating optionality, which is often much more important than we realize. Nothing makes sense other than a CD or (relatively) high interest savings account.

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Old 01-17-2017, 02:02 PM   #3
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May I also suggest you place it in multiple institutions? This eliminates the 250,000 cap on FDIC insurance and also the hassle factor (delay) if there were to be a limit. In addition, if you did have to break a CD for some reason (e.g. you find a buy that you can't resist so you decide to cash out enough for a down payment), you won't be penalized on the entire investment.
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Old 01-17-2017, 02:05 PM   #4
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If it was me I'd do as Ha suggests. For me I'd want the liquidity more than profits for when I bought a new place.
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Old 01-17-2017, 02:12 PM   #5
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What Ha said. The best you can do is a CD(s) or Hi interest savings account(s). I say multiples because federal insurance only covers you up to $250k, so you'd likely want to split this into two different accounts with two different banks.

Because of the amount you have, you'd likely get a better rate (@+0.25%)in one year CDs than internet High Yield Savings account. Use an aggregator web site like bankrate.com, or depositaccounts.com to research banks, credit unions, etc.

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Old 01-17-2017, 02:13 PM   #6
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If it was me I'd do as Ha suggests. For me I'd want the liquidity more than profits for when I bought a new place.
+1
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Old 01-17-2017, 02:27 PM   #7
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You don't have to put it into different institutions if you don't want to. FDIC will cover multiple accounts in the same institution if you title them right. You could put half in your name and half in your spouse's name. Other options include adding a payable on death, joint accounts, etc. A married couple could use various combinations to put well over a million into one institution FDIC insured.

https://www.fdic.gov/deposit/deposit...s-english.html
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Old 01-17-2017, 02:37 PM   #8
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Synchrony Bank has an online savings account that yields 1.05%. Don't think a 1 year CD will be too much higher and you would have the flexibility to withdraw whenever you decide/find your new house.
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Old 01-17-2017, 02:48 PM   #9
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May not be available to you but you could put it in stocks and then transfer the same amount from stocks to a stable value fund in 401k. Might get 2% or something.

You might find you like the freedom of not owning (so renting might not be so painful).
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Old 01-17-2017, 03:09 PM   #10
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If it was me I'd do as Ha suggests. For me I'd want the liquidity more than profits for when I bought a new place.
+2 - I'm not usually that conservative and don't mind some risk, but this particular purpose I would go with a high-yield savings account (well, split it into two for FDIC purposes).
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Old 01-17-2017, 04:05 PM   #11
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A joint account has $500K of coverage. No need to put it in multiple institutions.

:O)
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Old 01-17-2017, 04:18 PM   #12
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A joint account has $500K of coverage. No need to put it in multiple institutions.

:O)
I don't think that is correct - those funds will need to be spread over two or more separate "types" of accounts. So you can have a joint savings and a joint checking (or joint CD, etc) which can give you a total of 500K, but not ONE joint account for 500K.
Or each of the spouses can have a savings in their respective names, or one spouse can have a savings, and then an additional joint savings - all for a total of 500K.
That's MY understanding of it anyway.
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Old 01-17-2017, 04:44 PM   #13
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Originally Posted by travelover View Post
I think I know the answer to this, but before I do something stupid, like put it all on red, I thought I'd ask.

We just sold our house and have a check for about $400K. Plan is to rent for the next 12 to 16 months*, then buy a new home for cash.

The obvious answer is to park it in a CD at some place like Ally. Any other creative alternatives? It kills me to be paying $1700 a month for rent and earning 1% on my money.



* We'll be buying in a new state and want to try it out before buying
You could park it in a trading account and sell Cash-secured Berkshire Hathaway January 2018 puts for $130. You'll make 2.65%. Berkshire has an aggressive buy back in place to repurchase stock when it sells for less than 1.2x book value. Current book value is 109.19, so Berkshire would repurchase stock at $131 which is above your put price.
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Old 01-17-2017, 04:45 PM   #14
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Check the FDIC info - https://www.fdic.gov/deposit/deposit...s-english.html

A husband and wife could put in $1.5 million and be covered without bringing in other parties.

$250K each = $500K
$250K each POD to the other = $500K
$500K in a joint account

Total = $1.5 million
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Old 01-17-2017, 05:03 PM   #15
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Check the FDIC info - https://www.fdic.gov/deposit/deposit...s-english.html

A husband and wife could put in $1.5 million and be covered without bringing in other parties.

$250K each = $500K
$250K each POD to the other = $500K
$500K in a joint account

Total = $1.5 million
Thanks Hyperborea - you are right and I stand corrected!

Only a single joint account would be required for 400K, according to the FDIC website. I was told differently by an employee at SACU, but maybe they didn't have it right, or maybe each bank can have more restrictive rules than the FDIC itself?

PS: the FDIC link you provided is dead for some reason
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Old 01-17-2017, 05:34 PM   #16
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You can get 1YR CDs for 1.25% to 1.36% APR. Is it worth the extra 0.20-0.31% to buy CDs? Or just leaving it in a high yield account at 1.05% for a year.

I do usually buy CDs when I know the money is going to be sitting around for 1 year to 18 months.

I believe that if the accounts, and as long as the FDIC member bank has a signature card with both your signatures, your joint accounts are insured up to $500K per institution as each account holder is insured up to $250K. I believe that if you have additional separately titled accounts, then half you joint accounts as well as your individual accounts are added together to determine your coverage. The FDIC link above did not work.

https://www.fdic.gov/deposit/deposit...s-english.html
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Old 01-17-2017, 07:00 PM   #17
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mattress in 20's. Nothing better then sleeping knowing you have plenty of cash supporting you so you can rest easy.

Seriously though you know if you need it you need it, and there are no high yielding liquid investments without tons of risk.
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Old 01-17-2017, 07:48 PM   #18
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OP here. Looks like PenFed at 1.41 % APR for 15 months would be perfect. Not much, but better than losing it to inflation.
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Old 01-17-2017, 07:54 PM   #19
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PS: the FDIC link you provided is dead for some reason
Fixed the link. I had copied it from my first post in the thread and the board had shortened it for display.

The page linked gives an example similar to the one that I used near the bottom of the page.

I had been looking at this issue myself late last year as I was planning for where and how to hold the proceeds from the sale of my own house.
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Old 01-17-2017, 08:00 PM   #20
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When it gets close to "buy" time, like when you are looking and well before you make any offers transfer the funds to a large national bank.

Real estate deals can get financially "funky" and a big bank with lots of branches will be an asset.
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