Where to put saving for retirement house?

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Topic Author
Tayskiing
Posts: 48
Joined: Tue Oct 06, 2015 7:47 pm

Where to put saving for retirement house?

Post by Tayskiing » Sun Sep 16, 2018 3:31 pm

Hello Bogleheads!
I could use some advise on where to put my saving for a retirement home. I am 2.5 yrs (30 months) from retirement and plan on moving to CO from CA and buying my retirement home. In the next 2.5 years, I plan on saving $255,000 and wasn't sure if I should just put it in a savings/MMMF or if I should put it into my Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) or something that would give more return than a savings/MMMF.

In addition, I will be selling my 2 rental houses and current home to buy the retirement home. Wondering if there's a way to keep from paying the capital gains tax on the rentals.

Monthly savings approx $8500

Appreciate any advise.
Thank you.

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welderwannabe
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Joined: Fri Jun 16, 2017 8:32 am

Re: Where to put saving for retirement house?

Post by welderwannabe » Sun Sep 16, 2018 3:38 pm

Tayskiing wrote:
Sun Sep 16, 2018 3:31 pm
Hello Bogleheads!
I could use some advise on where to put my saving for a retirement home. I am 2.5 yrs (30 months) from retirement and plan on moving to CO from CA and buying my retirement home. In the next 2.5 years, I plan on saving $255,000 and wasn't sure if I should just put it in a savings/MMMF or if I should put it into my Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) or something that would give more return than a savings/MMMF.

In addition, I will be selling my 2 rental houses and current home to buy the retirement home. Wondering if there's a way to keep from paying the capital gains tax on the rentals.

Monthly savings approx $8500

Appreciate any advise.
Thank you.
Sure, you can stick it in VTSAX or an S&P500 fund but I wouldn't do it if I was in your shoes. Money with a 2.5 year time horizon shouldn't be in equities.

I would put it in a MMF or possibly roll 6 month or 1 Year treasury bills (especially with CA's income tax rate). You could stick it in a 2 year treasury note, currently paying about 2.7% and it is also state tax free.

I wouldn't get any more fancy than that if I was in your shoes.
I am not an investment professional, but I did stay at a Holiday Inn Express last night.

delamer
Posts: 9484
Joined: Tue Feb 08, 2011 6:13 pm

Re: Where to put saving for retirement house?

Post by delamer » Sun Sep 16, 2018 3:39 pm

Money that you need in 2.5 years should not be in stocks.

Generally, stocks should only be used if you are at least 5 years out from spending the money.

Topic Author
Tayskiing
Posts: 48
Joined: Tue Oct 06, 2015 7:47 pm

Re: Where to put saving for retirement house?

Post by Tayskiing » Sun Sep 16, 2018 4:49 pm

Thanks for the inputs! I do not have any state tax since I'm in the military stationed in CA. So, still only put it into MMMF or possibly treasury note?

momvesting
Posts: 104
Joined: Tue Apr 12, 2016 9:18 pm

Re: Where to put saving for retirement house?

Post by momvesting » Sun Sep 16, 2018 5:09 pm

Talk to an accountant, but you may be able to sell the rental properties now and do a 1031 exchange in to your retirement home if that home is purchased and used as a rental for 2+ years. This can be a path to avoid capital gains on the rental properties but you need the advice of a qualified accountant to not mess it up, I just know that yes, there is a way.

GeoffD
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Joined: Tue Mar 20, 2018 1:31 pm

Re: Where to put saving for retirement house?

Post by GeoffD » Sun Sep 16, 2018 5:52 pm

You can get 2.50% on a 1 year CD. I have my emergency fund parked at Ally Bank in a 1.85% savings account and laddered 1 year CDs. 1 year treasuries are a smidge more than Ally Bank is paying for 1 year CDs. 2.562%. 2 year Treasuries are 2.786% at the moment.

Topic Author
Tayskiing
Posts: 48
Joined: Tue Oct 06, 2015 7:47 pm

Re: Where to put saving for retirement house?

Post by Tayskiing » Mon Sep 17, 2018 12:17 am

Again, thanks for the inputs.
I have read up on 1031 and not sure if that's the way for me since I don't want our retirement to be a rental and not sure if we want to take out a rental investment loan (I think that would be a higher rate than a primary home loan). I think the capital gains tax would not be too much - if I'm not mistaken, the amount taxed is the selling price - purchase price - cost of selling the house. Plus the tax is 15-20% based upon your income? Not to sure... will have to read more up on that when I'm ready to sell in 2 year, 8 months, and 15 days... not that I'm counting to when I retire.

As for CD's, that maybe a way to go since then I won't be tempted to touch the $ until I'm ready to buy. The problem is, is that the $ will be a monthly savings of about $8,000-$8,500 and so didn't want to take out a CD each month.

Maybe in a year when I have $100,000 then maybe get a 1 year CD.

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