Saving for downpayment

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Ace77
Posts: 20
Joined: Mon Jan 02, 2017 12:14 pm

Saving for downpayment

Post by Ace77 »

Looking to save around $60k over the next 2 years or so and have $10k to get started. I max out retirement accounts, HSA, and all that. I want to send excess money each month into an account to save for this. Trying to determine what that account will be. I was considering the 1.15% savings account at Ally Bank. I'd prefer something at Vanguard since that's where just about all of my money is at. Is there any other account/instrument out there (Vanguard or otherwise) that's better than Ally that I can start with $10k and contribute money to each month?

Not really looking at equities given the short time horizon, and figure CD's are out because I want to continually add money each month.

Thank you for any suggestions!
Andy
aristotelian
Posts: 8942
Joined: Wed Jan 11, 2017 8:05 pm

Re: Saving for downpayment

Post by aristotelian »

You are pretty much looking at Prime MM, which is about 1%, or Vanguard Short Term Corporate Bond (VCSH), which yields about 2% but entails some risk. For 2+ year horizon I wouldn't hesitate to do VCSH, but some might. I Bonds are also a good choice but you are limited to $10K and they are not redeemable for a year, plus you would have to go outside Vanguard.
PFInterest
Posts: 2684
Joined: Sun Jan 08, 2017 12:25 pm

Re: Saving for downpayment

Post by PFInterest »

i dont get why it matters to have a separate account at ally?
would also be ok with a short term bond fund. you might lose some, and pay more in taxes.
Topic Author
Ace77
Posts: 20
Joined: Mon Jan 02, 2017 12:14 pm

Re: Saving for downpayment

Post by Ace77 »

PFInterest wrote:i dont get why it matters to have a separate account at ally?
It doesn't, it's just if there was something basically equivalent I could get at Vanguard I'd just prefer it since I have multiple different accounts at Vanguard and can manage them a little more conveniently. But I'd have zero hesitation about opening a separate account with Ally, so just looking for opinions if there are things out there I'm not aware of. Thanks for the reply.
mega317
Posts: 4582
Joined: Tue Apr 19, 2016 10:55 am

Re: Saving for downpayment

Post by mega317 »

There are a million choices and plenty of ways to (slightly) top 1.15% if you add (slightly) more risk. Lots of short-term bond funds like VCSH mentioned above that will get you an extra <=1% with some mild principle risk. A 5 year CD could beat 1.15%, even with the early withdrawal penalty, if you hold it long enough (I think the math is 11 months at Ally currently). I think 1 year treasuries are ahead of 1.15% and state-tax free.

It depends on your need to stretch for more, risk tolerance to losing some principle, certainty of your time frame, and especially on your values, but ultimately doesn't matter. It seems like you value simplicity so I'd probably just use Prime Money Market at Vanguard. In my opinion it satisfies your criterion of "basically equivalent" although it's important to understand FDIC insurance.
https://www.bogleheads.org/forum/viewtopic.php?t=6212
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