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~5 year investment options

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  • Avatar Txanesthesia 
    Participant
    Status: Physician
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    Joined: 07/01/2019

    Hi all,
    I’m a new reader to the forum and would appreciate some advice. I’m 34 years old, annual income pre tax ~$465k, fully contribute to my employers 403b and 457b (around $60k in total saved per year with match), $55k in high interest savings account and my only debt is my mortgage paying at 15 year rate. I’m looking to save some money for a pool/new car that I won’t need for maybe 5+ years and wanted to know if it would be better to stash it in a high interest savings account or maybe a taxable account. I’m pretty conservative and prefer stability over risky but higher returns. I’d probably put about $3-5k a month into this account. I’m also starting a 529 for my kids this year as they’re both now reaching school age. Thanks for your help!

    #226690 Reply
    Avatar Peds 
    Moderator
    Status: Physician
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    Joined: 01/08/2016
    pool/new car

    Click to expand…

    taxable as neither of these are emergencies.

    #226799 Reply
    Liked by Tim
    CordMcNally CordMcNally 
    Participant
    Status: Physician
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    Joined: 01/03/2017

    Depends on what the + represents in 5+. Around 5 years, I probably wouldn’t put it in a taxable account because then you may not have as much as you thought you might. It also depends on how much the pool and car are going to cost you. I’m guessing you could cash flow that car pretty easy. The pool is another story as you can get one for $20 at Wal-Mart or you can spend over $1M on a custom built pool.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #226804 Reply
    Liked by Vagabond MD
    Avatar Kamban 
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    Joined: 08/01/2016

    What are the costs going to be for the car and the pool? If they are not expensive or you can pay cash for both with your salary at the 5 year mark I would rather invest the money you have now in equities in order to have a 5 year lead in compounding.

    Worst case scenario – at 5 years there is a market crash and the stocks are less valuable. You can always hold them, buy a $20K Honda and delay the pool till the market recovers. But if you really want to play it safe, invest in bonds.

     

    #226812 Reply
    Lordosis Lordosis 
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    Status: Physician
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    Joined: 02/11/2019

    I am more concerned if you are making 465K and only saving 60K a year.  Hopefully you have other savings you did not mention.

     

    Saving up to for something keeps you in cash for a long time.  I would rather over invest in my retirement now and under invest in 4-5 years to cash flow the expense.  This only works if you have a decent cash flow and the expense is not extreme.

    “Never let your sense of morals prevent you from doing what is right.”

    #226816 Reply
    Avatar JBME 
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    Status: Spouse
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    Joined: 03/26/2018

    I’d just use that $55 you already have in savings, presumably as an emergency fund. If you fully deplete it with these items then just work to refill it then. I’d continue saving in taxable/backdoor Roth/mega backdoor Roth for the next 5 years so you are putting at least 20% away for retirement

    #226851 Reply
    The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
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    Joined: 05/13/2011

    It’s not just about the time frame, but also about the consequences of not having the money on the exact date the time frame ends. If those are no big deal (I’ll just save another year or I’ll tap another source of funds) than you can take more risk.

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #226860 Reply
    Liked by Txanesthesia
    Avatar Tim 
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    Status: Accountant
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    Joined: 09/18/2018
    I am more concerned if you are making 465K and only saving 60K a year. Hopefully you have other savings you did not mention.

    Click to expand…

    Retirement savings that happened to be omitted. Folks are mentioning “cash flowing a car” and your question is a 5 year plan for a car.

    One approach is to invest in a taxable account to move you retirement savings rate to at least 20% ($93k).

    I’d probably put about $3-5k a month into this account.

    Click to expand…

    For 36 month’s that’s $108-$180k. Is that the car or pool budget you are looking for? That’s not 5 years ($180k-$300k). That’s a lot of car or pool. I would suggest you can spend whatever you want after funding your retirement accounts.

    With $465k, I think you can choose to invest in a taxable. If your fix spending is high, that is simply a different issue. Just keep funding the taxable and you will be fine (separate than the taxable for your retirement portion). You don’t have any emergency so you might as well shoot for market returns.

    #226866 Reply
    wonka31 wonka31 
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    Status: Physician
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    Joined: 03/24/2018
    I am more concerned if you are making 465K and only saving 60K a year. Hopefully you have other savings you did not mention. 

    Click to expand…

    Retirement savings that happened to be omitted. Folks are mentioning “cash flowing a car” and your question is a 5 year plan for a car.

    One approach is to invest in a taxable account to move you retirement savings rate to at least 20% ($93k).

    I’d probably put about $3-5k a month into this account. 

    Click to expand…

    For 36 month’s that’s $108-$180k. Is that the car or pool budget you are looking for? That’s not 5 years ($180k-$300k). That’s a lot of car or pool. I would suggest you can spend whatever you want after funding your retirement accounts.

    With $465k, I think you can choose to invest in a taxable. If your fix spending is high, that is simply a different issue. Just keep funding the taxable and you will be fine (separate than the taxable for your retirement portion). You don’t have any emergency so you might as well shoot for market returns.

    Click to expand…

    I like a lot of pool, especially when it’s not wonka’s pool.

    #227037 Reply
    Liked by Tim, PhotonsRGR8
    Avatar Infinity 
    Participant
    Status: Physician
    Posts: 92
    Joined: 05/25/2019

    You already have 55K as emergency funds in high interest savings account.  I would not put more in that account.  Five years is long enough for me to put money in taxable index funds.  Worse comes to worse, you just have to postpone the new car or pool for a few more years.  Beware, pool is quite expensive to maintain.

    #227075 Reply
    Avatar Txanesthesia 
    Participant
    Status: Physician
    Posts: 4
    Joined: 07/01/2019

    Thanks for the feedback.  We generally have a low cost of living and donate a lot of our income to our church and charity. Most of our money is spent on vacations to spend time with friends and family. I hadn’t funded our retirement more because currently we’re projected to be at $200k+/yr at retirement and that’s more than we’d probably need having no debt.  I was using our extra income to pay off our loans and that’s where the $3-5k is from.  The $55k is just an emergency fund and we generally cash flow everything else. I was thinking probably around $70k for a pool when we put one in.  I guess one thought is just to continue put all that money into a taxable account and then just pull out what I need when major expenses come along and let that account continue to grow. I was initially thinking just to put money in a safe venue that would be there when I need it and then just take it all out, but listening to the responses the smarter thing might be just to keep adding to it.  As far as taxable accounts, does anyone have a good recommendation for what type of funds I should look at? I’m fairly new to this stuff and understand the basic concepts but when it comes to choosing a fund all the options are pretty intimidating.  I’ve looked at Vanguard some and hear people talking about them on this site a lot. I appreciate the input!

    #227076 Reply
    Avatar Infinity 
    Participant
    Status: Physician
    Posts: 92
    Joined: 05/25/2019

    I also use Vanguard, and put:

    80% in Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)

    20% in Vanguard Emerging Markets Stock Index Fund Admiral Shares (VEMAX).

    I set up automatic monthly investment so I don’t have to log on to transfer funds every month.

    #227311 Reply

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