Where to save money I will want in 5-7 years

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Sidneyplace
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Where to save money I will want in 5-7 years

Post by Sidneyplace »

We have monthly cash deposits going into synchrony bank getting 0.55% interest for things we won’t need for 5-7 years (savings for next cars) and general savings that we may use for Roth conversions, etc. wondering if I should put that in our Vanguard long term NY tax free bond fund or the intermediate tax free bond fund.??? Is there anywhere to park money besides a savings account?
Also, have some cash for kids college besides the 529 they will want in three years. Can I get any better than 0.55% in anything?
Thanks
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WoodSpinner
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Re: Where to save money I will want in 5-7 years

Post by WoodSpinner »

OP,

I would consider a MultiYear Guaranteed Annuity (MYGA). Perhaps one with a 5 year time frame and one with a 3 year.

See the Wiki for info.

WoodSpinner
mortfree
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Re: Where to save money I will want in 5-7 years

Post by mortfree »

What if you took the current amount and invested it now?

Could you save up the same amount again in 5 to 7 years?
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Re: Where to save money I will want in 5-7 years

Post by Hebell »

MYGAs all the way. It was meant for just this
Topic Author
Sidneyplace
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Re: Where to save money I will want in 5-7 years

Post by Sidneyplace »

Thank you! I will look up MultiYear Guaranteed Annuity.
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Sidneyplace
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Re: Where to save money I will want in 5-7 years

Post by Sidneyplace »

Mortfree, I could invest and save up more but this is something we contribute to monthly to save up for our next car purchases. I am not sure how to invest in my post tax account for something I would need in about 3-5 years. I was thinking of a tax free municipal bond fund. ??
JBTX
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Re: Where to save money I will want in 5-7 years

Post by JBTX »

Ibonds may make sense.
Trader Joe
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Re: Where to save money I will want in 5-7 years

Post by Trader Joe »

Sidneyplace wrote: Sun Aug 08, 2021 8:07 pm We have monthly cash deposits going into synchrony bank getting 0.55% interest for things we won’t need for 5-7 years (savings for next cars) and general savings that we may use for Roth conversions, etc. wondering if I should put that in our Vanguard long term NY tax free bond fund or the intermediate tax free bond fund.??? Is there anywhere to park money besides a savings account?
Also, have some cash for kids college besides the 529 they will want in three years. Can I get any better than 0.55% in anything?
Thanks
For 5-7 years out I invest that money in VFIAX or VTSAX.

Best of luck.
VVenti7401
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Re: Where to save money I will want in 5-7 years

Post by VVenti7401 »

Any suggestions on which company to use for the MYGA?
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Mel Lindauer
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Re: Where to save money I will want in 5-7 years

Post by Mel Lindauer »

JBTX wrote: Sun Aug 08, 2021 9:24 pm Ibonds may make sense.
Yes, you'd definitely want to look into I Bonds which are currently yielding 3.54% for the next six months and are guaranteed to keep up with inflation after that. They're risk-free and can be redeemed, penalty-free, after five years, which fits right in with your time horizon. They're also free from state and local taxation, so that can be important if you live in a state that taxes income.
Best Regards - Mel | | Semper Fi
S4C5
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Re: Where to save money I will want in 5-7 years

Post by S4C5 »

S&P500

IVV is the ETF to buy. Lump sum and do not look or do anything untll 5 years later. If you're where you want to be in 5 years, sell. If not and the market is depressed at that point, wait another 2 then look again.

Set up DRIP so all dividends automatically are re-invested.

Alternatively, you can buy 40% MSFT, 40% AAPL, and 20% TSLA if you want to be more aggressive and do just as well if not a lot better. These companies are not going out of business or losing a significant percentage of their stock's value any time soon. I am not a financial advisor and this is not meant to be financial advice from a financial advisor. But......

You're welcome.
Nohbdy
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Re: Where to save money I will want in 5-7 years

Post by Nohbdy »

Sidneyplace wrote: Sun Aug 08, 2021 8:07 pm Also, have some cash for kids college besides the 529 they will want in three years. Can I get any better than 0.55% in anything?
Thanks
Another vote for I-bonds.
I-bonds can be tax free gains for education if you meet certain requirements: https://www.treasurydirect.gov/indiv/pl ... cation.htm
babystep
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Re: Where to save money I will want in 5-7 years

Post by babystep »

Sidneyplace wrote: Sun Aug 08, 2021 8:07 pm We have monthly cash deposits going into synchrony bank getting 0.55% interest for things we won’t need for 5-7 years (savings for next cars) and general savings that we may use for Roth conversions, etc. wondering if I should put that in our Vanguard long term NY tax free bond fund or the intermediate tax free bond fund.??? Is there anywhere to park money besides a savings account?
Also, have some cash for kids college besides the 529 they will want in three years. Can I get any better than 0.55% in anything?
Thanks
How much monthly are we talking about?
Tax rate?
How much in 529, taxable, roth and pre-tax?
maxing 401k?
maxing Roth?
Angst
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Re: Where to save money I will want in 5-7 years

Post by Angst »

Mel Lindauer wrote: Sun Aug 08, 2021 10:21 pm
JBTX wrote: Sun Aug 08, 2021 9:24 pm Ibonds may make sense.
Yes, you'd definitely want to look into I Bonds which are currently yielding 3.54% for the next six months and are guaranteed to keep up with inflation after that. They're risk-free and can be redeemed, penalty-free, after five years, which fits right in with your time horizon. They're also free from state and local taxation, so that can be important if you live in a state that taxes income.
+1

Couldn't agree more.
https://www.bogleheads.org/wiki/I_savings_bonds
exodusNH
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Re: Where to save money I will want in 5-7 years

Post by exodusNH »

WoodSpinner wrote: Sun Aug 08, 2021 8:33 pm OP,

I would consider a MultiYear Guaranteed Annuity (MYGA). Perhaps one with a 5 year time frame and one with a 3 year.

See the Wiki for info.

WoodSpinner
Don't they have to be 59.5 at the time of withdrawal to avoid the 10% penalty?
JBTX
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Re: Where to save money I will want in 5-7 years

Post by JBTX »

Mel Lindauer wrote: Sun Aug 08, 2021 10:21 pm
JBTX wrote: Sun Aug 08, 2021 9:24 pm Ibonds may make sense.
Yes, you'd definitely want to look into I Bonds which are currently yielding 3.54% for the next six months and are guaranteed to keep up with inflation after that. They're risk-free and can be redeemed, penalty-free, after five years, which fits right in with your time horizon. They're also free from state and local taxation, so that can be important if you live in a state that taxes income.
I'm already doing ibonds. I'm doing eebonds in addition.
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fishandgolf
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Re: Where to save money I will want in 5-7 years

Post by fishandgolf »

I just stumbled on this thread and the discussion on "I Bonds" caught my attention.

I am not at all familiar with "I Bonds" or any other bonds for that matter. I did check out the wiki links but still very confused about them.

So I have a few questions and would greatly appreciate your comments:

1). Mel Lindauer mentioned that the interest rate is 3.54% for the next 6 months. What happens after that?

2). Is there a limited amount that can be purchased per year or at one time?

3). Mel also mentioned penalty free after 5 years. Is that the minimum amount of time that you have to keep your money tied up?

4). With 3.54% interest rate, why are more folks not using them vs. savings account?

Thank you in advance for your comments!
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Mel Lindauer
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Re: Where to save money I will want in 5-7 years

Post by Mel Lindauer »

fishandgolf wrote: Mon Aug 09, 2021 10:21 am I just stumbled on this thread and the discussion on "I Bonds" caught my attention.

I am not at all familiar with "I Bonds" or any other bonds for that matter. I did check out the wiki links but still very confused about them.

So I have a few questions and would greatly appreciate your comments:

1). Mel Lindauer mentioned that the interest rate is 3.54% for the next 6 months. What happens after that?

2). Is there a limited amount that can be purchased per year or at one time?

3). Mel also mentioned penalty free after 5 years. Is that the minimum amount of time that you have to keep your money tied up?

4). With 3.54% interest rate, why are more folks not using them vs. savings account?

Thank you in advance for your comments!
#1 - It gets adjusted to the then current inflation rate for the previous six months. After six months at that rate, it could be higher or lower, depending on the newly-announced inflation rate. That rate will then be your new rate for the next six months. Rinse and repeat for the life of the bond.
#2 - Yes, an individual is limited to $10k per year, and you can get another $5k via your income tax refund. So a couple could get as much as $25k per year. And, if you have a trust, you can get another $10k.
#3 - You can actually redeem them after one year, but if you do, you'd lose the last three months' interest. After five years, there is no penalty.
#4 - Many Bogleheads are. However, most folks simply don't know about I Bonds or there would be a mad rush to get in while the getting was good. At the present time, risk-free I Bonds are, IMO, a no-brainer.
Best Regards - Mel | | Semper Fi
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fishandgolf
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Re: Where to save money I will want in 5-7 years

Post by fishandgolf »

Mel Lindauer wrote: Mon Aug 09, 2021 11:00 am
fishandgolf wrote: Mon Aug 09, 2021 10:21 am I just stumbled on this thread and the discussion on "I Bonds" caught my attention.

I am not at all familiar with "I Bonds" or any other bonds for that matter. I did check out the wiki links but still very confused about them.

So I have a few questions and would greatly appreciate your comments:

1). Mel Lindauer mentioned that the interest rate is 3.54% for the next 6 months. What happens after that?

2). Is there a limited amount that can be purchased per year or at one time?

3). Mel also mentioned penalty free after 5 years. Is that the minimum amount of time that you have to keep your money tied up?

4). With 3.54% interest rate, why are more folks not using them vs. savings account?

Thank you in advance for your comments!
#1 - It gets adjusted to the then current inflation rate for the previous six months. After six months at that rate, it could be higher or lower, depending on the newly-announced inflation rate. That rate will then be your new rate for the next six months. Rinse and repeat for the life of the bond.
#2 - Yes, an individual is limited to $10k per year, and you can get another $5k via your income tax refund. So a couple could get as much as $25k per year. And, if you have a trust, you can get another $10k.
#3 - You can actually redeem them after one year, but if you do, you'd lose the last three months' interest. After five years, there is no penalty.
#4 - Many Bogleheads are. However, most folks simply don't know about I Bonds or there would be a mad rush to get in while the getting was good. At the present time, risk-free I Bonds are, IMO, a no-brainer.

Thank you Mel for the detailed explanation.......one more question.

Can I bonds be purchased with money from a TIRA or must it be cold hard cash?
exodusNH
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Re: Where to save money I will want in 5-7 years

Post by exodusNH »

fishandgolf wrote: Mon Aug 09, 2021 11:31 am
Mel Lindauer wrote: Mon Aug 09, 2021 11:00 am
fishandgolf wrote: Mon Aug 09, 2021 10:21 am I just stumbled on this thread and the discussion on "I Bonds" caught my attention.

I am not at all familiar with "I Bonds" or any other bonds for that matter. I did check out the wiki links but still very confused about them.

So I have a few questions and would greatly appreciate your comments:

1). Mel Lindauer mentioned that the interest rate is 3.54% for the next 6 months. What happens after that?

2). Is there a limited amount that can be purchased per year or at one time?

3). Mel also mentioned penalty free after 5 years. Is that the minimum amount of time that you have to keep your money tied up?

4). With 3.54% interest rate, why are more folks not using them vs. savings account?

Thank you in advance for your comments!
#1 - It gets adjusted to the then current inflation rate for the previous six months. After six months at that rate, it could be higher or lower, depending on the newly-announced inflation rate. That rate will then be your new rate for the next six months. Rinse and repeat for the life of the bond.
#2 - Yes, an individual is limited to $10k per year, and you can get another $5k via your income tax refund. So a couple could get as much as $25k per year. And, if you have a trust, you can get another $10k.
#3 - You can actually redeem them after one year, but if you do, you'd lose the last three months' interest. After five years, there is no penalty.
#4 - Many Bogleheads are. However, most folks simply don't know about I Bonds or there would be a mad rush to get in while the getting was good. At the present time, risk-free I Bonds are, IMO, a no-brainer.

Thank you Mel for the detailed explanation.......one more question.

Can I bonds be purchased with money from a TIRA or must it be cold hard cash?
You have to buy them directly from the US Treasury with cash. Since they're already tax-deferred (by default, although you can choose to pay taxes as you go), there's no benefit in holding them in an IRA, except for having to pony up more money instead of rebalancing into them.
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WoodSpinner
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Re: Where to save money I will want in 5-7 years

Post by WoodSpinner »

exodusNH wrote: Mon Aug 09, 2021 9:28 am
WoodSpinner wrote: Sun Aug 08, 2021 8:33 pm OP,

I would consider a MultiYear Guaranteed Annuity (MYGA). Perhaps one with a 5 year time frame and one with a 3 year.

See the Wiki for info.

WoodSpinner
Don't they have to be 59.5 at the time of withdrawal to avoid the 10% penalty?
I believe the OP was discussing after tax money. You can purchase a MYGA that way as well.

WoodSpinner
exodusNH
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Re: Where to save money I will want in 5-7 years

Post by exodusNH »

WoodSpinner wrote: Mon Aug 09, 2021 3:46 pm
exodusNH wrote: Mon Aug 09, 2021 9:28 am
WoodSpinner wrote: Sun Aug 08, 2021 8:33 pm OP,

I would consider a MultiYear Guaranteed Annuity (MYGA). Perhaps one with a 5 year time frame and one with a 3 year.

See the Wiki for info.

WoodSpinner
Don't they have to be 59.5 at the time of withdrawal to avoid the 10% penalty?
I believe the OP was discussing after tax money. You can purchase a MYGA that way as well.

WoodSpinner
That's true, but AFAIK, you're still restricted to the 59.5 rule.

https://www.blueprintincome.com/resourc ... annuities/
A fixed annuity is probably not the right product for you if...

* You need to access your money within 3 years or before age 59½...
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fishandgolf
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Re: Where to save money I will want in 5-7 years

Post by fishandgolf »

exodusNH wrote: Mon Aug 09, 2021 12:09 pm
fishandgolf wrote: Mon Aug 09, 2021 11:31 am
Mel Lindauer wrote: Mon Aug 09, 2021 11:00 am
fishandgolf wrote: Mon Aug 09, 2021 10:21 am I just stumbled on this thread and the discussion on "I Bonds" caught my attention.

I am not at all familiar with "I Bonds" or any other bonds for that matter. I did check out the wiki links but still very confused about them.

So I have a few questions and would greatly appreciate your comments:

1). Mel Lindauer mentioned that the interest rate is 3.54% for the next 6 months. What happens after that?

2). Is there a limited amount that can be purchased per year or at one time?

3). Mel also mentioned penalty free after 5 years. Is that the minimum amount of time that you have to keep your money tied up?

4). With 3.54% interest rate, why are more folks not using them vs. savings account?

Thank you in advance for your comments!
#1 - It gets adjusted to the then current inflation rate for the previous six months. After six months at that rate, it could be higher or lower, depending on the newly-announced inflation rate. That rate will then be your new rate for the next six months. Rinse and repeat for the life of the bond.
#2 - Yes, an individual is limited to $10k per year, and you can get another $5k via your income tax refund. So a couple could get as much as $25k per year. And, if you have a trust, you can get another $10k.
#3 - You can actually redeem them after one year, but if you do, you'd lose the last three months' interest. After five years, there is no penalty.
#4 - Many Bogleheads are. However, most folks simply don't know about I Bonds or there would be a mad rush to get in while the getting was good. At the present time, risk-free I Bonds are, IMO, a no-brainer.

Thank you Mel for the detailed explanation.......one more question.

Can I bonds be purchased with money from a TIRA or must it be cold hard cash?
You have to buy them directly from the US Treasury with cash. Since they're already tax-deferred (by default, although you can choose to pay taxes as you go), there's no benefit in holding them in an IRA, except for having to pony up more money instead of rebalancing into them.


Thanks again Mel and thank you exodusNH. I have started looking further into this opportunity. My wife and I do have a trust so we might take advantage of the extra $10k. Very thankful that I joined the Boglehead community......I have learned so much from this group in the past and today was another day of continued learning!! Thank you Bogleheads for all you do.....very grateful for your wisdom!
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WoodSpinner
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Re: Where to save money I will want in 5-7 years

Post by WoodSpinner »

exodusNH wrote: Mon Aug 09, 2021 3:59 pm
WoodSpinner wrote: Mon Aug 09, 2021 3:46 pm
exodusNH wrote: Mon Aug 09, 2021 9:28 am
WoodSpinner wrote: Sun Aug 08, 2021 8:33 pm OP,

I would consider a MultiYear Guaranteed Annuity (MYGA). Perhaps one with a 5 year time frame and one with a 3 year.

See the Wiki for info.

WoodSpinner
Don't they have to be 59.5 at the time of withdrawal to avoid the 10% penalty?
I believe the OP was discussing after tax money. You can purchase a MYGA that way as well.

WoodSpinner
That's true, but AFAIK, you're still restricted to the 59.5 rule.

https://www.blueprintincome.com/resourc ... annuities/
A fixed annuity is probably not the right product for you if...

* You need to access your money within 3 years or before age 59½...
I think the link provided isn’t clearly written. It is confusing purchasing MYGAs through Tax Deferred (e.g. IRA/401K) which do have an age requirement for a no penalty withdrawal and Taxable funds.

See https://www.annuity.org/annuities/types/fixed/myga/ for a clearer explanation.

WoodSpinner
SailorJack02
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Re: Where to save money I will want in 5-7 years

Post by SailorJack02 »

Does anyone know if you can purchase a MYGA inside a 529? Seems like the perfect way to protect the 529 nest egg when 5-7 years out from college. 4.8% "guaranteed" is nothing to sneeze at.
stocknoob4111
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Re: Where to save money I will want in 5-7 years

Post by stocknoob4111 »

5 year note is yielding almost 4%, may go higher by end of year

https://www.marketwatch.com/investing/b ... trycode=bx
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whodidntante
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Re: Where to save money I will want in 5-7 years

Post by whodidntante »

S4C5 wrote: Sun Aug 08, 2021 10:24 pm S&P500

IVV is the ETF to buy. Lump sum and do not look or do anything untll 5 years later. If you're where you want to be in 5 years, sell. If not and the market is depressed at that point, wait another 2 then look again.

Set up DRIP so all dividends automatically are re-invested.

Alternatively, you can buy 40% MSFT, 40% AAPL, and 20% TSLA if you want to be more aggressive and do just as well if not a lot better. These companies are not going out of business or losing a significant percentage of their stock's value any time soon. I am not a financial advisor and this is not meant to be financial advice from a financial advisor. But......

You're welcome.
Well, that didn't age well.
thedaybeforetoday
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Re: Where to save money I will want in 5-7 years

Post by thedaybeforetoday »

I bonds
"When I was a kid my parents moved a lot, but I always found them." R. Dangerfield
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retired@50
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Re: Where to save money I will want in 5-7 years

Post by retired@50 »

SailorJack02 wrote: Thu Sep 22, 2022 4:44 pm Does anyone know if you can purchase a MYGA inside a 529? Seems like the perfect way to protect the 529 nest egg when 5-7 years out from college. 4.8% "guaranteed" is nothing to sneeze at.
You might have better luck if you ask your MYGA / 529 question in the MYGA mega-thread here: viewtopic.php?t=334589

Regards,
This is one person's opinion. Nothing more.
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