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Short Term Places for a Downpayment (lemm.ee)

submitted 1 year ago by [email protected] to c/[email protected]

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Hi all -

I need reassurance that having 60-80k in cash isn't wild if we plan to buy/look at buying a home in the next 2-3 years. We're in a DINK lifestyle in a LCOL area and are easily saving $2k+ towards specifically a down payment per month.

Currently: 8k is in a Vanguard account and has been invested in index funds for about 2-3 years now 10k is in treasury funds 5k is abroad in a high interest account that's locked for about another year from a grandparents inheritance 5k is in a CD making ~5% APY

I'm thinking that as we start building up more I'll be trying to keep opening 3-12 month CDs on a regular basis as long as rates stay at 5%

But I'm super risk tolerant and part of me sees all the cash laying around as a waste when I could add to the Vanguard account with more stocks. Mostly because until now I haven't had a real timeline for buying and it always seemed so far in the future that keeping it in stocks made sense.

Can someone help me think through what I'm giving up with both options? 5% isn't bad for now but I don't think rates are going to stay so high forever either.

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[–] [email protected] 3 points 1 year ago* (last edited 1 year ago)

The best options are Treasuries or CDs since they lock in rates for the term of the bond/CD. You should be able to do a little better than 5% though, I see brokered CDs at 5-5.5%, and t-bills are ~5.4% for 1-year.

If your state taxes are high, consider t-bills since they avoid state taxes. Check out this site to directly compare fixed income rates based on your tax rate.

RE risk tolerance, you really shouldn't be doing anything risky with a timeline of 2 years. The potential gains will be absolutely dwarfed by your contributions, and any losses will delay your purchase date, especially if they happen at the end of the 2 years. 5-6% is pretty much the limit these days for risk free or low risk returns, so pick something and get to saving.