Mid-to-Long-Term Savings Advice

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narnceredir
Posts: 10
Joined: Tue Oct 08, 2013 8:45 am

Mid-to-Long-Term Savings Advice

Post by narnceredir » Thu Jul 12, 2018 5:20 pm

Good day, wise Bogleheads!

I am currently a "bucket" saver, with my major savings buckets being travel, auto, and general savings. I also currently have a fully-funded six-month emergency fund in a 5-year CD. I have reached the point where my buckets have a decent excess, and I am considering investing some or all of the excess and moving away from savings buckets for the sake of simplicity. I would consider these savings (which, again, are above and beyond my yearly spending on, say, travel, which is generally cash-flowed) as mid- to long-term, as they are not currently earmarked for any specific purpose. Maybe a new roof or kitchen in 15 years (though I don't currently own a home!)? Maybe an extended honeymoon in 5 years (though I currently am single!)? I don't know. But I feel that at this point, with a decent excess, I can balance short-term needs and wants with some elevated risk beyond a MM or savings account.

As far as savings, practices on the forum seem to run the gamut from the more conservative cash in a checking account to high-yield savings accounts to 100 percent of savings invested in equities in a taxable account. These are the options that I'm considering, and I'd appreciate thoughts on pros and cons or your own practices:

1. Maintain my high-yield money market account, currently yielding 1.85%.

2. Move some, perhaps 50 percent, of the savings to a Vanguard taxable account, investing 50 percent in Total Stock Market Index and 50 percent in Intermediate-Term Tax Exempt. The other 50 percent would remain in the MMA.

3. Move all of the savings to Vanguard, investing in the same funds.

Related, for those of you who do save in and spend from equities and bonds in your taxable account, I do have a fairly simply logistical question. Say that I do move my savings to Vanguard and invest in these two funds. I decide that I want to purchase a new bike costing $800. Do you simply sell $800 worth of stock or bonds (and from which fund?) and then move the funds to your checking account just like a savings account transfer?

As always, I'm appreciative of your wisdom and advice.

-Narn Ceredir

21&lewis
Posts: 17
Joined: Sun Nov 06, 2016 8:42 pm

Re: Mid-to-Long-Term Savings Advice

Post by 21&lewis » Thu Jul 12, 2018 6:23 pm

I haven't looked at your older posts. What are your savings for retirement? Mid to (especially) long term savings should be geared toward retirement if they don't have a specific other purpose.

narnceredir
Posts: 10
Joined: Tue Oct 08, 2013 8:45 am

Re: Mid-to-Long-Term Savings Advice

Post by narnceredir » Thu Jul 12, 2018 6:39 pm

21&lewis wrote:
Thu Jul 12, 2018 6:23 pm
I haven't looked at your older posts. What are your savings for retirement? Mid to (especially) long term savings should be geared toward retirement if they don't have a specific other purpose.
I should have added a bit more detail about myself. I am 38, single, and currently save 20 percent of my pre-tax salary, and have three times my current salary saved, for retirement.

21&lewis
Posts: 17
Joined: Sun Nov 06, 2016 8:42 pm

Re: Mid-to-Long-Term Savings Advice

Post by 21&lewis » Thu Jul 12, 2018 7:53 pm

Congrats on saving 20% of your pre-tax salary @ 38. Continue that until retirement, and the rest may be "gravy".

You have 3 buckets outside your retirement savings and e-fund: travel, auto, and general savings. As I read this, all are overflowing. This is a good problem. I would not favor viewing these funds as "mid-term" savings as they do not have a specific goal. Saving for a roof without a house or a honeymoon without a spouse takes valuable $ out of the market and places it unnecessarily in a "safe" (eg: short-term) investment vehicle. If it were my pot of gold, I would chose option #3 and put it all in a Vanguard taxable account. This assumes you have fully funded your Roth IRA (or backdoor Roth if above the income limits), and possibly as a young single, a HSA. You still have access to these dollars and accept a bit more risk for (potentially) a bit more return...compounded, this makes this biggest difference 30+ years from now.

If you chose option #3, I would invest 100% in Vanguard TSM (mutual funds or ETF). Doesn't matter much in my opinion, though others may feel otherwise.

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