Where to park $200K cash?

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misterno
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Where to park $200K cash?

Post by misterno » Mon Sep 18, 2017 9:26 am

Currently it is sitting in Ally Savings earning %1.20

Anywhere better?

ThriftyPhD
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Re: Where to park $200K cash?

Post by ThriftyPhD » Mon Sep 18, 2017 9:32 am

What are the goals for the money? Retirement, house, kids college, vegas trip? What timeline, and what other investments do you already have?

Jack FFR1846
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Re: Where to park $200K cash?

Post by Jack FFR1846 » Mon Sep 18, 2017 9:39 am

Move $35 to a Redneck Bank Megamoney account at 1.5%. You could also do a checking account for 1.5% but it's the typical "jump through 10 flaming hoops a month" kinda thing.
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misterno
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Re: Where to park $200K cash?

Post by misterno » Mon Sep 18, 2017 10:03 am

ThriftyPhD wrote:
Mon Sep 18, 2017 9:32 am
What are the goals for the money? Retirement, house, kids college, vegas trip? What timeline, and what other investments do you already have?
All tax advantage accounts are fully invested

I have no other investments. I dont need the money short or long term

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Kevin M
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Re: Where to park $200K cash?

Post by Kevin M » Mon Sep 18, 2017 10:27 am

Unless you need the money within six days, a no brainer is to at least move it into Ally no-penalty 11-month CDs earning 1.50% APY. After six days you can do an early withdrawal penalty free. I just bought four at $25K each--took less than 10 minutes. I do them in $25K increments because that's the minimum to get the 1.5%, and it gives me flexibility to do early withdrawals in $25k increments. This is for money I expect to be using within a couple of months. If I didn't expect to use it within a year or so, I'd be looking at longer-term CDs (you can earn 2% on a 2-year CD, and 2.5% on a 5-year CD).

Kevin
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misterno
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Re: Where to park $200K cash?

Post by misterno » Mon Sep 18, 2017 10:59 am

Kevin M wrote:
Mon Sep 18, 2017 10:27 am
Unless you need the money within six days, a no brainer is to at least move it into Ally no-penalty 11-month CDs earning 1.50% APY. After six days you can do an early withdrawal penalty free. I just bought four at $25K each--took less than 10 minutes. I do them in $25K increments because that's the minimum to get the 1.5%, and it gives me flexibility to do early withdrawals in $25k increments. This is for money I expect to be using within a couple of months. If I didn't expect to use it within a year or so, I'd be looking at longer-term CDs (you can earn 2% on a 2-year CD, and 2.5% on a 5-year CD).

Kevin
Thanks

I read somewhere that some CDs come with a penalty where you still make more money than 1 year CD

It is like investing in a 5 year CD but you withdraw in 1 year pay penalty but you are better than investing in 1 year CD in the first place

Any ideas?

BHUser27
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Re: Where to park $200K cash?

Post by BHUser27 » Mon Sep 18, 2017 11:30 am

misterno wrote:
Mon Sep 18, 2017 10:59 am
I read somewhere that some CDs come with a penalty where you still make more money than 1 year CD
It is like investing in a 5 year CD but you withdraw in 1 year pay penalty but you are better than investing in 1 year CD in the first place
The 11-month "no penalty" CD at Ally that Kevin M mentioned is just that. You get 1.5% and can withdraw the entire amount at any time without penalty. You cannot make partial withdrawals. You could open multiple CDs in smaller amounts if you wanted partial liquidity. If you are just parking it in savings at Ally, you might as well park it in 11-month no penalty CDs instead.

I also keep several 5-year CDs (2.25%) at Ally. I like to use this calculator to see what happens if I do have to make early withdrawal on a 5-year CD...
https://www.depositaccounts.com/tools/e ... lator.aspx

For the Ally 5yr CD you "break-even" at 6mos and do better than the savings account if you leave the money for at least 11 months. So if you are going to park the money for at least 11 mos, and up to 5 years untouched, this is also a good option.

chevca
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Re: Where to park $200K cash?

Post by chevca » Mon Sep 18, 2017 12:00 pm

misterno wrote:
Mon Sep 18, 2017 10:03 am
ThriftyPhD wrote:
Mon Sep 18, 2017 9:32 am
What are the goals for the money? Retirement, house, kids college, vegas trip? What timeline, and what other investments do you already have?
All tax advantage accounts are fully invested

I have no other investments. I dont need the money short or long term
Invest it according to your AA then.

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Kevin M
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Re: Where to park $200K cash?

Post by Kevin M » Mon Sep 18, 2017 12:04 pm

misterno wrote:
Mon Sep 18, 2017 10:59 am
I read somewhere that some CDs come with a penalty where you still make more money than 1 year CD

It is like investing in a 5 year CD but you withdraw in 1 year pay penalty but you are better than investing in 1 year CD in the first place

Any ideas?
Yes, that can be the case, but not necessarily. As BHUser27 mentioned, you can use CD Early Withdrawal Penalty Calculator to evaluate.

For example, the Ally 5-year CD at 2.25% with an early withdrawal penalty (EWP) of five months of interest would earn 1.31% after one year. In this case, the Ally no-penalty 11-month CD at 1.50% is a better deal. After two years the Ally 5-year CD would earn 1.79%, and in this case a 2-year CD at 2.0% is a better deal.

Ally's EWP is lower than most banks or credit unions. The most common EWP for 5-year CDs these days is one year of interest, in which case you'd earn 0% for an early withdrawal after one year. Every now and then a deal will pop up where you earn a higher rate but with an EWP of only six months of interest. For example, about a year ago there was a 5-year CD earning 3% with an EWP of six months of interest, so you'd earn 1.5% if doing an early withdrawal after one year--that was a great deal, but we haven't seen anything that good in awhile.

Kevin
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ThriftyPhD
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Re: Where to park $200K cash?

Post by ThriftyPhD » Mon Sep 18, 2017 12:24 pm

misterno wrote:
Mon Sep 18, 2017 10:03 am
ThriftyPhD wrote:
Mon Sep 18, 2017 9:32 am
What are the goals for the money? Retirement, house, kids college, vegas trip? What timeline, and what other investments do you already have?
All tax advantage accounts are fully invested

I have no other investments. I dont need the money short or long term
In that case, if you don't *need* the money short or long term, you need to decide when you *want* the money, and then make a decision. CDs and savings are fine if you want to slow the loss to inflation, but if you want to use it to retire a bit earlier and that's 20 years away, equities might be a better choice. All depends on your age, goals, etc. Also, no reason why you need to keep the $200k together. You could put some in CDs, some in stocks. Again, all depending on your goals.

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DaftInvestor
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Re: Where to park $200K cash?

Post by DaftInvestor » Mon Sep 18, 2017 12:26 pm

Jack FFR1846 wrote:
Mon Sep 18, 2017 9:39 am
Move $35 to a Redneck Bank Megamoney account at 1.5%. You could also do a checking account for 1.5% but it's the typical "jump through 10 flaming hoops a month" kinda thing.
I assume you mean $35K and on $35? An extra 0.3% on $35 won't buy you a cup of coffee :happy

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Kevin M
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Re: Where to park $200K cash?

Post by Kevin M » Mon Sep 18, 2017 1:13 pm

DaftInvestor wrote:
Mon Sep 18, 2017 12:26 pm
Jack FFR1846 wrote:
Mon Sep 18, 2017 9:39 am
Move $35 to a Redneck Bank Megamoney account at 1.5%. You could also do a checking account for 1.5% but it's the typical "jump through 10 flaming hoops a month" kinda thing.
I assume you mean $35K and on $35? An extra 0.3% on $35 won't buy you a cup of coffee :happy
And, since OP already has an account at Ally, not only does opening some Ally no-penalty CDs get you 1.5% with no upper limit (other than FDIC insurance) and no monthly hoops, it doesn't require opening an account at another bank.

If you're willing to jump through the monthly hoops, you can do much better than 1.5% on limited amounts (I earn 3% on $15K, for example).

Kevin
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misterno
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Re: Where to park $200K cash?

Post by misterno » Mon Sep 18, 2017 1:20 pm

Kevin M wrote:
Mon Sep 18, 2017 1:13 pm
DaftInvestor wrote:
Mon Sep 18, 2017 12:26 pm
Jack FFR1846 wrote:
Mon Sep 18, 2017 9:39 am
Move $35 to a Redneck Bank Megamoney account at 1.5%. You could also do a checking account for 1.5% but it's the typical "jump through 10 flaming hoops a month" kinda thing.
I assume you mean $35K and on $35? An extra 0.3% on $35 won't buy you a cup of coffee :happy
And, since OP already has an account at Ally, not only does opening some Ally no-penalty CDs get you 1.5% with no upper limit (other than FDIC insurance) and no monthly hoops, it doesn't require opening an account at another bank.

If you're willing to jump through the monthly hoops, you can do much better than 1.5% on limited amounts (I earn 3% on $15K, for example).

Kevin
I know how to get 3% on 15K

But nobody knows how to get 3% on 200K

That is my problem

avalpert
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Re: Where to park $200K cash?

Post by avalpert » Mon Sep 18, 2017 1:20 pm

misterno wrote:
Mon Sep 18, 2017 10:03 am
ThriftyPhD wrote:
Mon Sep 18, 2017 9:32 am
What are the goals for the money? Retirement, house, kids college, vegas trip? What timeline, and what other investments do you already have?
All tax advantage accounts are fully invested

I have no other investments. I dont need the money short or long term
If you don't need it it doesn't matter what you do with it and you shouldn't spend any time thinking about it.

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JMacDonald
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Re: Where to park $200K cash?

Post by JMacDonald » Mon Sep 18, 2017 2:57 pm

avalpert wrote:
Mon Sep 18, 2017 1:20 pm
misterno wrote:
Mon Sep 18, 2017 10:03 am
ThriftyPhD wrote:
Mon Sep 18, 2017 9:32 am
What are the goals for the money? Retirement, house, kids college, vegas trip? What timeline, and what other investments do you already have?
All tax advantage accounts are fully invested

I have no other investments. I dont need the money short or long term
If you don't need it it doesn't matter what you do with it and you shouldn't spend any time thinking about it.
Since you don't need it, why not the Total Stock Market Fund?
Best Wishes, | Joe

misterno
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Re: Where to park $200K cash?

Post by misterno » Mon Sep 18, 2017 3:11 pm

JMacDonald wrote:
Mon Sep 18, 2017 2:57 pm
avalpert wrote:
Mon Sep 18, 2017 1:20 pm
misterno wrote:
Mon Sep 18, 2017 10:03 am
ThriftyPhD wrote:
Mon Sep 18, 2017 9:32 am
What are the goals for the money? Retirement, house, kids college, vegas trip? What timeline, and what other investments do you already have?
All tax advantage accounts are fully invested

I have no other investments. I dont need the money short or long term
If you don't need it it doesn't matter what you do with it and you shouldn't spend any time thinking about it.
Since you don't need it, why not the Total Stock Market Fund?
I dont need does not mean I want to take risk

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Kevin M
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Re: Where to park $200K cash?

Post by Kevin M » Mon Sep 18, 2017 3:11 pm

misterno wrote:
Mon Sep 18, 2017 1:20 pm
I know how to get 3% on 15K

But nobody knows how to get 3% on 200K

That is my problem
Which is why I did not bother recommending a reward checking account to you.

Another 3% deal may pop up at any time, but the best rate I see on a 5-year CD is 2.60% APY, and even extending maturity to 10 years you can't even do that well with a direct CD (2.50% is the best I see). I see a 10-year brokered CD at 2.60%, but I wouldn't do that when I can get a 5-year direct at 2.60% with less term risk (due to the early withdrawal option in addition to the much shorter term).

If you really just want to "park cash" at the $200K level, then the Ally no-penalty CD at 1.5% is the best deal I know of without taking any term risk at all--that's where I'm parking my cash.

As others have said, you might want to step back and look at your entire portfolio, as opposed to putting this in a different bucket than your retirement accounts. Unless you want the liquidity for some reason, or have a shorter-term goal than retirement for this money, I'd just include it in your portfolio, and invest it according to your AA.

If you do that, depending on your view of asset location (e.g., bonds in tax-advantaged or taxable), you might do something like put most of the $200K into stock funds in a taxable account, and shift more of your tax-advantaged assets to fixed income, whether that be bond funds, CDs, or some combination.

At any rate, given what you've shared so far, I would count this $200K as part of the fixed-income allocation for your portfolio, which means that your portfolio probably is more conservative than you would think if you don't do this.

Kevin
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bloom2708
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Re: Where to park $200K cash?

Post by bloom2708 » Mon Sep 18, 2017 3:42 pm

After checking, an Emergency Fund and cash for near term spending (cars, taxes, vacations, etc), invest it at an asset allocation you can live with.

Are you a 90/10 person with $200k cash set aside? Then you are not a 90/10 person.

Invest the $200k at 60/40 and ride the waves up and down over the long haul.
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

mega317
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Re: Where to park $200K cash?

Post by mega317 » Mon Sep 18, 2017 4:25 pm

Type "park" in the search box at the upper right for more ideas.

It's hard to give advice if the money has literally no short- or long-term purpose.

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pjshen
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Re: Where to park $200K cash?

Post by pjshen » Mon Sep 18, 2017 5:29 pm

This could be another option: one-year CD at 1.51% at amboydirect.com using offer code 601602.

BigLaw Survivor
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Re: Where to park $200K cash?

Post by BigLaw Survivor » Tue Sep 19, 2017 10:32 am

Why not a tax free municipal bond fund?

malabargold
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Re: Where to park $200K cash?

Post by malabargold » Tue Sep 19, 2017 10:40 am

The risk, of course,that you will be taking on by not taking risk,
is the corrosive power of inflation

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bengal22
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Re: Where to park $200K cash?

Post by bengal22 » Tue Sep 19, 2017 12:15 pm

Jack FFR1846 wrote:
Mon Sep 18, 2017 9:39 am
Move $35 to a Redneck Bank Megamoney account at 1.5%. You could also do a checking account for 1.5% but it's the typical "jump through 10 flaming hoops a month" kinda thing.
Never would have guessed a RedNeck Bank actually existed.

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Earl Lemongrab
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Re: Where to park $200K cash?

Post by Earl Lemongrab » Tue Sep 19, 2017 2:50 pm

Without a plan for the money, it's difficult to give advice. If it were me, I'd transfer to Merrill Edge and get a $1000 bonus, then invest in whatever manner made the most sense. For me that would ETFs to fit my investment plan, but you could look into brokered CDs if you want to stay super conservative.
This week's fortune cookie: "You will do well to expand your horizons." Ow. Passive-aggressive and vaguely ominous.

chicagoan23
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Re: Where to park $200K cash?

Post by chicagoan23 » Tue Sep 19, 2017 4:50 pm

misterno wrote:
Mon Sep 18, 2017 1:20 pm
I know how to get 3% on 15K

But nobody knows how to get 3% on 200K

That is my problem
That's not a problem, that's just reality. You're not going to get more than one percent or so on cash, anywhere. You might get a few basis points here and there if you spend some time looking and setting up multiple new accounts that you have to keep track of, but to what end? On the amount of money we're talking about, you get at most a few hundred extra dollars per year?

If you want this money to be risk free, just leave it where it is and accept that it is risk free, so you are not earning much of a return.

solobuildingblogs
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Re: Where to park $200K cash?

Post by solobuildingblogs » Thu Sep 21, 2017 10:18 pm

If you like to travel and it's easy to fly American or OneWorld airline partners, Bank Direct has a mileage interest checking account. If you deposit 50K you get 60,000 American miles per year but there's a $12/month or $144 annual fee. 60K miles valued at 1.5 cents per mile is $900 subtract the $144 fee is $756. That's a 1.5% return- but the interesting thing here is your tax bracket. If you live a state like CA and are in the highest federal bracket (39.5%), add the state tax of 11% or so and the Obamacare investment tax of 3.8% you're well over 50%. Since miles aren't taxed this gets you 3%.

The drawbacks are that you need to be pretty flexible in order to get good redemptions on American or its partners (use the BA website to search OneWorld airlines). I love using my miles to fly Cathay Pacific or JAL in business class to Asia, so this is a great deal for me, but YMMV!

denovo
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Re: Where to park $200K cash?

Post by denovo » Thu Sep 21, 2017 10:54 pm

solobuildingblogs wrote:
Thu Sep 21, 2017 10:18 pm
If you like to travel and it's easy to fly American or OneWorld airline partners, Bank Direct has a mileage interest checking account. If you deposit 50K you get 60,000 American miles per year but there's a $12/month or $144 annual fee. 60K miles valued at 1.5 cents per mile is $900 subtract the $144 fee is $756. That's a 1.5% return- but the interesting thing here is your tax bracket. If you live a state like CA and are in the highest federal bracket (39.5%), add the state tax of 11% or so and the Obamacare investment tax of 3.8% you're well over 50%. Since miles aren't taxed this gets you 3%.

The drawbacks are that you need to be pretty flexible in order to get good redemptions on American or its partners (use the BA website to search OneWorld airlines). I love using my miles to fly Cathay Pacific or JAL in business class to Asia, so this is a great deal for me, but YMMV!
Seems pretty risky to me. They can devalue miles any time they want.

Coachrhino11
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Re: Where to park $200K cash?

Post by Coachrhino11 » Fri Sep 22, 2017 6:59 am

bloom2708 wrote:
Mon Sep 18, 2017 3:42 pm
After checking, an Emergency Fund and cash for near term spending (cars, taxes, vacations, etc), invest it at an asset allocation you can live with.

Are you a 90/10 person with $200k cash set aside? Then you are not a 90/10 person.

Invest the $200k at 60/40 and ride the waves up and down over the long haul.
+1. If I had a million with all tax advantaged accounts maxed I wouldn't be ok with parking 200k getting 1-1.5%, garbage. Why not grow the money instead of getting eaten up with inflation? Risk? Your not losing 200k investing 60/40 or 60/30/10. But hey, you asked for others opinions so don't be shocked when many recommend putting money to work.

When CDs go back to paying 5% or above I'm in, but not 1%.

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