Advice - investment of funds needed to build retirement home in 3 years

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Advice - investment of funds needed to build retirement home in 3 years

Post by sdrilling »

Questions about - Investment of funds needed within 3 years

In December 2020 we sold our home in Georgia. We had hoped to buy a replacement home in our home state of Missouri to retire in summer of 2023 and my husband would work remote his remaining two years.

Unfortunately were unable to find the home we want to retire in. We decided to buy a much less expensive home here in Georgia with very little down payment and use the bulk of the proceeds from the sale of our home to build the perfect house back in Missouri. We found a builder we like and are currently looking for land to build on. Given the builder backlog, the new home will be finished right about when we retire summer 2023.

The question we have is what to do with bulk of the proceeds ($400K) from the sale of our last home. It is currently sitting in my taxable brokerage account as cash earning no interest.There is an additional $188K in the account in these funds [VDADX $84K] [VTTVX $44K] [VTWNX $60K.] The total in the taxable brokerage account is $688K. Our retirement funds are in traditional IRA accounts, also with Vanguard. Our IRA accounts are invested primarily in stocks and have done very well – especially the past few years.

We are trying to determine the most efficient way (returns and tax impact) to invest the $688K
We will need about $150 within 6 months to buy the land on which to build.
We will need to begin drawing down funds for the construction costs beginning winter 2022/2023.

Any recommendations? BTW - We currently average about $140,000 in adjusted gross income.
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Re: Advice - investment of funds needed to build retirement home in 3 years

Post by RickBoglehead »

You should immediately open No Penalty CDs at Ally. They pay 0.5% currently. You've already given up over $650 in interest by having the funds sit in a no interest account. You can open multiple CDs of varying denominations, so that IF you need funds at some point, you can cash in only the CD(s) you need.

For example, you could do sixteen 25 CDs.

You should do this TODAY.

Then you can review other options to possibly get a higher return with a small risk on your principal. You don't want to lose principal on funds you need in a few years.

Why are you so worried about taxes at your income level? And if you're spending $400K of the $688K soon, it's even less of any issue.
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