Author Topic: Where to park $1500 month  (Read 965 times)

Shwaa

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Where to park $1500 month
« on: October 15, 2019, 12:55:38 PM »
44 years old, $110k salary, monthly expenses approx $2200

After maxing out 401k, Roth and HSA I have $1500 a month to save...

Currently I am putting $1000 into my Capital One MM account (balance 55k, earning 1.9% interest) and $500 into a taxable account at Vanguard (VTSAX - 0.04 ER, balance 20k).

The purpose of the Capital One account is all around Savings (emergency fund, "maybe" a house down payment sometime down the road etc..).  The thing is I have no idea when or if I will even purchase a home.  I live in a HCOL area, and renting makes more sense at this point.

My question is should I swap the distribution and put $1000 into the taxable account and $500 into the MM account?  Or ignore the MM account entirely for now and do $1500 into taxable each month?   I don't know a lot about taxable accts but I think I could use the funds from there someday to help with the house down payment as well.  Maybe I am wrong.

Basically, how would you split the $1500?  Thanks
« Last Edit: October 15, 2019, 01:27:33 PM by Shwaa »

terran

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Re: Where to park $1500 month
« Reply #1 on: October 15, 2019, 01:29:08 PM »
Personally I would keep a 6 month emergency fund (3-12 months would be reasonable, and many, but not me would argue for less) and not think about a someday maybe house purchase. Anything you need cash for in the next five years shouldn't be invested, but to me a someday maybe downpayment isn't a need. If/when you commit to definitely buying a house no matter what you can decide at that point to sell investments to for the downpayment. Until then you can always not buy or delay buying if we're in a stock market slump at the time.

35andFI

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Re: Where to park $1500 month
« Reply #2 on: October 15, 2019, 01:32:40 PM »
After maxing out 401k, Roth and HSA I have $1500 a month to save...
I am in this EXACT investing scenario (except I use traditional instead of Roth).

Quote
Basically, how would you split the $1500?
I only keep $3,000 in cash ($1,000 in checking and $2,000 in a high yield savings account @ 2.07%).
I have automatic investments set up to contribute $1,500/mo to VTSAX in my taxable account at Vanguard.

I am currently renting but will be buying eventually. I have no idea when that will be... 5 years? 10 years? No clue.

I am assuming that the market will return more than 2% on average for the time that I keep my money in it so I chose to keep as little cash as I am comfortable with.

Also, I'm single and my expenses are only ~$1,000/mo so I (believe that I) can afford to be fairly aggressive with holding as little cash as I am.
« Last Edit: October 15, 2019, 01:34:54 PM by 35andFI »

Shwaa

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Re: Where to park $1500 month
« Reply #3 on: October 15, 2019, 01:42:33 PM »
Thank you both!  Looks like the clear message is to stop MM monthly deposits and just put the $1500 into taxable every month for now.

I am hesitant to move existing funds from MM to taxable, but at the very least I should stop contributing to it for now.

kenmoremmm

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Re: Where to park $1500 month
« Reply #4 on: October 15, 2019, 02:17:02 PM »
also in a similar spot (less cash reserves) and just started dumping money here:
https://investor.vanguard.com/mutual-funds/profile/VWITX (edited... ignore the next few posts in this thread)

it seemed to have a good balance of returns with limited negative years. investing timeframe is likely 3-5 years, but could be much longer.
« Last Edit: October 15, 2019, 03:21:06 PM by kenmoremmm »

Another Reader

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Re: Where to park $1500 month
« Reply #5 on: October 15, 2019, 02:39:50 PM »
I would not put taxable money into bonds.  My guess is you are a fairly high tax bracket, given your income and lack of deductions.  Bond interest is subject to income tax at ordinary income tax rates.

I would invest the $1,500 in stocks through mutual funds or ETF's.  I would also consider moving some of the funds at Capital One into the Vanguard treasury money market fund, VUSXX, especially if your state income tax is high.  Treasuries are exempt from state income tax.

Shwaa

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Re: Where to park $1500 month
« Reply #6 on: October 15, 2019, 02:48:30 PM »
I would not put taxable money into bonds.  My guess is you are a fairly high tax bracket, given your income and lack of deductions.  Bond interest is subject to income tax at ordinary income tax rates.

I would invest the $1,500 in stocks through mutual funds or ETF's.  I would also consider moving some of the funds at Capital One into the Vanguard treasury money market fund, VUSXX, especially if your state income tax is high.  Treasuries are exempt from state income tax.

Sorry, maybe I am missing something.  Where did I say I was putting it into Bonds?  VTSAX = Vangard Total Stock Market Index Fund. 

Another Reader

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Re: Where to park $1500 month
« Reply #7 on: October 15, 2019, 02:51:30 PM »
Sorry, the previous poster suggested a bond fund.  I would not do that if your combined income tax rate is high.

Shwaa

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Re: Where to park $1500 month
« Reply #8 on: October 15, 2019, 02:52:37 PM »
Sorry, the previous poster suggested a bond fund.  I would not do that if your combined income tax rate is high.

ahhh gotcha, I see it now.  Sorry for the confusion

kenmoremmm

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Re: Where to park $1500 month
« Reply #9 on: October 15, 2019, 03:20:34 PM »
sorry, i linked to the wrong fund:
https://investor.vanguard.com/mutual-funds/profile/VWITX

tax exempt.

Buffalo Chip

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Re: Where to park $1500 month
« Reply #10 on: October 15, 2019, 07:09:18 PM »
Curious. Where is the HSA, Roth, and 401k(k) being invested? All in stock funds?

Shwaa

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Re: Where to park $1500 month
« Reply #11 on: October 16, 2019, 11:57:46 AM »
Curious. Where is the HSA, Roth, and 401k(k) being invested? All in stock funds?

Roth is a Vanguard Target Retirement fund ($52k)
401k is 77/23.  5 low cost index fund mix (lg, mid, sm, int, bond) ($330k) Merrill Lynch
HSA is 80/20.  Vanguard 500 Index/Vanguard Total Bond ($20k) BofA