Put money in a Roth IRA too. You can withdraw the money you contributed (but not any capital gains) after the money has been in there for 5 years.
I think you have too much cash sitting around and you should invest more. Regarding the market, there is no such thing as risk-free returns. If there was, everyone would do that. So when you invest in the total market, by nature it's going to go up and down. Historically people have seen high positive returns, but past results don't guarantee future results. It sounds like you are not comfortable with that risk, but on the flip-side, if you keep all your money in <1% saving accounts or bonds, you are literally signing up for a guaranteed loss! So ask yourself if you want to make guaranteed -3% a year or a likely +7% per year. Hope that helps put things in perspective.