HI folks - Thanks to all of your great advice 2+ years ago, my investments (and those of my fiance!) are in great shape and we're starting to consider our first home purchase in the next 2-4ish years. Figured it was time to come back and ask for another round of advice
We live in the Bay Area where the average price of a starter home is in the $1.1M -$1.3M range (if you can find one... but that's another topic) and rising. We're both in Tech and love the area so this is the world we're dealing with
. We're hoping to have $350k-$400k for our down-payment to escape PMI, and another $50k or so in anticipation of having children in the 3-4 year time frame and me taking some time off.
We currently have $100K saved in various bonds (details below), and approximately $150K more in cash that we can invest now.
Current Allocations of $100K:
VCAIX Vanguard California Intermediate-Term Tax-Exempt Fund Investor Shares - 33%
VWITX Vanguard Intermediate-Term Tax-Exempt Fund Investor Shares - 50%
VMLTX Vanguard Limited-Term Tax-Exempt Fund Investor Shares - 17%
(each has an ER of .2%)
So my main question is, where to invest the existing $100k, the new $150k and the $150k that comes after it?
(FWIW: $150k-$200k over next 3-4 years is after all retirement contributions (below). Given current salaries / stock this is probably close to the limit of what extra we can save, but is achievable.)
Seems our options are:
-> Continue with the above bond funds, in some %. I started with those percentages when the house was more like 6 years away, so maybe it is too risky for a 2-3yr time horizon? I know there's also a lot of talk of a Bond Bubble, which I admit to being rather ignorant about...
-> Invest in some CDs - Ally looks to have some of the best rates at around 1.5% which aren't particularly exciting but obviously very low risk.
-> IBonds? As far as I can tell this would be only $10k (for both of us) per year - are these advisable? Either way would need to do something with the rest.
-> ??? Anything I'm missing?
Thanks for the help - have tried to read up on the rest of the posts similar, but curious on thoughts on our current situation. (Some more details below, if those are relevant). Any thoughts, advice, corrections, etc very much appreciated
Other Investment details (happy to provide more if it would be useful).
Emergency Fund: 9 months
Tax Brackets: 35% Federal, 10.3% state (CA)
Filing Status: Currently single, but will be married in June so Married for 2014-filing year tax purposes.
Age: both 27
401K - $150K (about 75% traditional, 25% roth via in-plan rollovers and some earlier Roth contributions)
Roth IRA - $25K
Taxable - $75K
401K - $130k
Roth IRA - $23k
Taxable - $55k
All invested in Vanguard standard funds (TSM, TBM, etc) with low ERs.
- Domestic equities: 58%
- International equities: 22%
- TBM: 15%
- REIT: 5%
Currently each contributing about $65K each to Retirement each year ($17.5K to 401k (+50% match), 5.5K Roth IRA (via conversion), about 8-10K to Roth 401K via after-tax contributions + in-plan roth conversations, and $25k each in contributions to Taxable account (this year will be about half of that though due to Wedding + honeymoon + Car purchase - all accounted for outside of these calcs)). Recognize this won't continue forever (hopefully kids + college, etc will come into the picture in a few years), but very thankful we can put this much in now.
If anyone has read this far, would be curious if you think we're over-saving (or if there is such a thing at this age!) and whether you'd allocate differently to long-term retirement vs shorter-term house, or even in-plan Roth 401k via after-tax vs taxable accounts.
Phew, that was a lot - thanks so much for reading!