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Given a time frame of 5 years from today, what's the best type of account to store funds for a down payment on a house? 5 years seems like a long enough time fr

Given a time frame of 5 years from today, what's the best type of account to store funds for a down payment on a house? 5 years seems like a long enough time frame to place in the market, albeit not at a 90/10 split favoring stocks. Yields are low right now, but so is inflation so on net am I losing anything by using as HYSA?

pwodhouse 7y ago
Put in a current retirement style account (60/40 stock/bond) since like a retiree you expect to spend the money soon.
- loeg 7y ago
  Retirees don't expect to spend their entire savings in one shot right after a specific time period.
lotsofpulp 7y ago
HYSA means you’re treading water. 5 years is dicey, depends on how badly you need the house. If you have a couple kids and NEED to be settled down, then keep it in HYSA. If you’re comfortable with some volatility and can afford to wait 6, 7, 8 years in worst case scenarios, then go all in on a total stock market fund in my opinions. I always bet on the government bailing out equity owners and devaluing the dollar, as long as US has military might. As you get closer to buying a house you can allocate more and more to HYSA.
loeg 7y ago
0-5 years, high yield savings or CD (optionally, CD ladder). Even bonds are too risky and low yield over this kind of timeframe. If you had 5-10 years, longer duration bonds (cash is essentially a zero-duration bond). If you had >10 years, maybe stocks. Stocks can lose value over periods of 20 years, though, so you probably wouldn't go 90:10 even for a 10 year period.
astura 7y ago
When I was saving for a down payment I wasn't comfortable keeping it anywhere else but FDIC insured savings or checking account. I don't think five years is long enough for the market. I did make that money work for me in a low interest environment by using it to churn bank account bonuses. https://www.doctorofcredit.com/a-beginners-guide-to-bank-account-bonuses/ https://www.doctorofcredit.com/a-beginners-guide-to-bank-acc...
ryandrake 7y ago
If you are in the USA look into Series I savings bonds. They both earn interest and are protected from inflation. Minimum term ownership: 1 year. No early redemption penalty after 5 years. Earnings exempt from state and local taxes but subject to fed tax. The only drawback is you can only buy $10k of them per year per SSN. Much of my E-fund is I-bonds.
- ac29 7y ago
  Not a bad idea if you are worried about runaway inflation, but otherwise yields aren't great. There aren't any i-bonds issued in the past decade that are currently earning over 2%, which is less than a savings account or money market currently yields. https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm https://www.treasurydirect.gov/indiv/research/indepth/ibonds...
  - ryandrake 7y ago
    Yea, I don’t keep I-bonds for the yield, I keep them for the inflation protection and tax advantage. High yield CDs are fine too but the interest is taxed.

pwodhouse 7y ago

Put in a current retirement style account (60/40 stock/bond) since like a retiree you expect to spend the money soon.

loeg 7y ago
Retirees don't expect to spend their entire savings in one shot right after a specific time period.

lotsofpulp 7y ago

HYSA means you’re treading water. 5 years is dicey, depends on how badly you need the house. If you have a couple kids and NEED to be settled down, then keep it in HYSA. If you’re comfortable with some volatility and can afford to wait 6, 7, 8 years in worst case scenarios, then go all in on a total stock market fund in my opinions. I always bet on the government bailing out equity owners and devaluing the dollar, as long as US has military might. As you get closer to buying a house you can allocate more and more to HYSA.

loeg 7y ago

0-5 years, high yield savings or CD (optionally, CD ladder). Even bonds are too risky and low yield over this kind of timeframe. If you had 5-10 years, longer duration bonds (cash is essentially a zero-duration bond). If you had >10 years, maybe stocks. Stocks can lose value over periods of 20 years, though, so you probably wouldn't go 90:10 even for a 10 year period.

astura 7y ago

When I was saving for a down payment I wasn't comfortable keeping it anywhere else but FDIC insured savings or checking account. I don't think five years is long enough for the market. I did make that money work for me in a low interest environment by using it to churn bank account bonuses. https://www.doctorofcredit.com/a-beginners-guide-to-bank-account-bonuses/ https://www.doctorofcredit.com/a-beginners-guide-to-bank-acc...

ryandrake 7y ago

If you are in the USA look into Series I savings bonds. They both earn interest and are protected from inflation. Minimum term ownership: 1 year. No early redemption penalty after 5 years. Earnings exempt from state and local taxes but subject to fed tax. The only drawback is you can only buy $10k of them per year per SSN. Much of my E-fund is I-bonds.

ac29 7y ago
Not a bad idea if you are worried about runaway inflation, but otherwise yields aren't great. There aren't any i-bonds issued in the past decade that are currently earning over 2%, which is less than a savings account or money market currently yields. https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm https://www.treasurydirect.gov/indiv/research/indepth/ibonds...
- ryandrake 7y ago
  Yea, I don’t keep I-bonds for the yield, I keep them for the inflation protection and tax advantage. High yield CDs are fine too but the interest is taxed.