Stay in cash or do something different...

[Tabaxus]

Anyone have any thoughts on the following scenario:

Backdoor IRAs are maxed out for the year
~$100k in cash wallowing at 1% interest
~$20k in CDs at 2% interest
~$20k in IBonds, with $10k redeemable in August and $10k redeemable in December
~$6-7k in investable cash flow per month (i.e., after 401k and HSA contributions, which I keep even throughout the year rather than front-loading (not optional in the case of the HSA), and expenses).  This will go up by about $800 when I hit the cap in August.

Single income household (spouse is a student).

When spouse graduates--probably next year--we'll be looking to buy a house.  We'll probably be moving to wherever the spouse finds a job, so we have basically no way to know how much the house will cost (we could end up in SF/New York, or we could end up in a midwestern college town--there's really no way to know) and, ultimately, no way to estimate.

Depending on where spouse lands us, we may need to buy a car (we don't currently have one).

Depending on where spouse lands us, my income could crater or even go away completely for a year or two while I make the adjustment, and spouse's income won't come anywhere near making up the difference.  (There are non-financial considerations here.  Spouse is passionate about field.  Part of the "deal" when we got married--I follow spouse, even if it means walking away from my much more lucrative career.)

Thinking about having a kid.

So, here's my question:

What in god's name do I do with my current firehose of cash, which, to be clear, I feel very lucky to have? 

I'm incredibly hesitant about investing it because I have no idea how much my future house is going to cost.  Depending on where we land, I could have well in excess of a 20% down payment already (if we land somewhere in the midwest), or I could be significantly short (if we land in a large city).  However, if we land in a large city, I will very likely be able to keep my current level of income (my employer has branches in most of the typical large-and-expensive places; I'm very confident that I would be allowed to switch offices), and we probably won't need a car.

The potential kid is obviously a huge wildcard (don't have great insurance, and will involve higher-than-normal expenses because of certain medical considerations).  Has immediate cost implications, and would also jack the housing requirement up to a two-bedroom (assuming that I wanted a place that we wouldn't need to do another move from).

The counterweight, of course, is that I have this pile of cash wallowing at 1% interest, rather than out making me money in the market.  Absent the potential need for the downpayment/car, I would be 100% in equities. That wallowing pile of cash is likely to be over $200k by the earliest time I need the money (~August 2016).  There is a possibility that spouse won't find a job the first year out, which exacerbates the issue.  So, sitting on this downpayment could cost me a truck of money.

Would obviously be easier if I knew where we were going to land, because I could set a target for the downpayment and invest the overage, but having 100% uncertainty about where we'll be living means even a relatively modest one-bedroom could range from $150k (midwest)-$1 million (coasts, assuming we don't want a long commute, which is an absolute requirement for us).

Thoughts?

[matchewed]

Develop a "most expensive" scenario. This scenario would probably be moving somewhere with needing to buy a car and needing to afford living (which while your spouse may make less in the future can you afford to live on her pay?). Have that amount in cash available. Invest the rest as per your investment plan.

This way you have the money to do the most expensive scenario. Any scenario outside of that boundary will be less.

[Tabaxus]

Develop a "most expensive" scenario. This scenario would probably be moving somewhere with needing to buy a car and needing to afford living (which while your spouse may make less in the future can you afford to live on her pay?). Have that amount in cash available. Invest the rest as per your investment plan.

This way you have the money to do the most expensive scenario. Any scenario outside of that boundary will be less.

Yeah, I've been trying to develop something like this.  It's interesting because we have definite countervailing factors.  Figure spouse ends up with a $40k/year job--we'd be able to live on that.  We spend about $40k a year right now (not including investments) in a moderate COL area (rent is around $1,400), but we could absolutely cut that back if we needed to, and we'd be in an appreciably lower COL area if the spouse's income was the only one we had access to.  Housing is obviously much more expensive in a high COL area, but if we land in a high COL area, I'll stay at my current income (or, at least, I'm willing to plan on that basis).  A car would be expensive, but not necessary in the higher COL areas (i.e., we won't need a car if we land in New York, DC, Chicago, SF, or, we hope, LA, though I understand it's much harder in LA), so the car is only going to be necessary in a world where our down payment is going to be lower.

Makes it seem to me that, really, the "most expensive" outcome is SF/NY/DC, i.e., potentially needing over $200k to muster a 20% down payment.  Can ignore ongoing costs in those circumstances because I will have a good income to go along with it.  In a lower COL area, if I have $200k saved, that could well be enough to buy a house and a car in cash.

[Sibley]

You could put the money in taxable accounts, then sell when you need it. With any luck the returns will compensate for the taxes.

[matchewed]

You could put the money in taxable accounts, then sell when you need it. With any luck the returns will compensate for the taxes.

Ummm, his timeframe is less than a year. You'd be paying short term capital gains which is your tax rate. Unless your returns exceed your tax rate by a large margin this is terrible advice.

Develop a "most expensive" scenario. This scenario would probably be moving somewhere with needing to buy a car and needing to afford living (which while your spouse may make less in the future can you afford to live on her pay?). Have that amount in cash available. Invest the rest as per your investment plan.

This way you have the money to do the most expensive scenario. Any scenario outside of that boundary will be less.

Yeah, I've been trying to develop something like this.  It's interesting because we have definite countervailing factors.  Figure spouse ends up with a $40k/year job--we'd be able to live on that.  We spend about $40k a year right now (not including investments) in a moderate COL area (rent is around $1,400), but we could absolutely cut that back if we needed to, and we'd be in an appreciably lower COL area if the spouse's income was the only one we had access to.  Housing is obviously much more expensive in a high COL area, but if we land in a high COL area, I'll stay at my current income (or, at least, I'm willing to plan on that basis).  A car would be expensive, but not necessary in the higher COL areas (i.e., we won't need a car if we land in New York, DC, Chicago, SF, or, we hope, LA, though I understand it's much harder in LA), so the car is only going to be necessary in a world where our down payment is going to be lower.

Makes it seem to me that, really, the "most expensive" outcome is SF/NY/DC, i.e., potentially needing over $200k to muster a 20% down payment.  Can ignore ongoing costs in those circumstances because I will have a good income to go along with it.  In a lower COL area, if I have $200k saved, that could well be enough to buy a house and a car in cash.

Okay well it's spreadsheet time. Start scoping out regions and putting prices to the various things. Also it's not a bad idea for your spouse to start looking at where the jobs are to narrow this down. And if the jobs are "anywhere" then you should both be able to land jobs quickly as you can go to a place where your field is as well. Have those categories you mentioned in the spreadsheet, transportation costs, car costs (if you need to buy), down payment on a house, mortgage/rent...etc. This will also tell you how much the living costs will be out there wherever.

You also might want to flex your mustachian muscle in terms of housing prices. Do you need a one million dollar home? 200k is way more than enough for many cars and a down payment on a house in most regions of the country.

[Retired To Win]

I think it would help you to quantify the opportunity cost problem.

That "wallowing" $100,000, by the time you are ready for that new house, will have had a net "opportunity cost" of $6000 a year (going by longterm equity returns).  The other $100,000 that will be accruing between now and then will opportunity cost another $3000.  So, the question for you to answer is whether the $11,000 (plus or minus) in lost opportunity gains (which might NOT materialize) is more of a problem to you than possibly getting to your new house buying time without enough cash to suit your down payment objective.

Good luck.

[Sibley]

Oops, you're right. Misread the timing! No, don't invest for that short a time.