What to do with $100k in excess cash?

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ReloadAg
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4:49p, 2/16/25
AG
My wife and I have been kicking this around for quite some time now regarding what to do with an extra $100k we have sitting in a high yield savings account that's over and above what we need for daily household operations or emergency fund. If we allocate this $100k, we'll have about $115k left in emergency fund and cash for household operations.

Some quick stats:
Household income $300k
Age 43
Retirement savings $450k
Total college savings for 2 kids late elementary school age $91k
No debt except mortgage ($189k mortgage balance on a home valued at $675k. 3.2% mortgage interest rate)


We have a couple of options from what I can see:

Option 1
Take the $100k and pay down mortgage balance. Use income to attack the rest of it and have a paid off house in probably 2 years. Mathematically doesn't make much sense at a current 3.2% mortgage rate but Ramsey says this is the way to go.

Option 2
Take the $100k and put it down on a rental property where we live in Austin. This would be great for long term investment growth but given current interest rates, the probable monthly rent would not cover the mortgage payment until we could hopefully refinance into a lower rate down the road.

Option 3
Invest some of it in some mutual funds and maybe some of it into mortgage paydown. Haven't thought about this one a whole lot yet.

What should we do? We've been kicking this around casually for probably at least a year but haven't done anything yet. We've only lately gotten serious about the rental property idea but the fact that it doesn't cash flow is a drawback. It'd be a very long term play.

Thanks,
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@NFLPlayerProps
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5:19p, 2/16/25
A 3.2% mortgage is an asset right now, not a liability. I wouldn't pay one cent of that early.
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BenTheGoodAg
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In reply to ReloadAg • 5:21p, 2/16/25
AG
Option 1 - May God have mercy on you for suggesting this on this board. Prepare yourself for the Dave hate. FWIW, we paid off a house and it was great. Bought a bigger one with a very low rate mortgage later, and we haven't paid it off, and it's been great. I think Dave does a lot of good for a lot of people. But for a 3.2% mortgage, I don't agree with him on this one. That 3.2% mortgage is a great inflation hedge.

Option 2 - I don't own real estate, but want to in the future and have a lot of family that does. My takeaway is that that real estate has a better potential for returns, but demands a lot more work if you want to get there. You've got to understand the right market to buy in, and every company you sub out to takes a big cut of your profit. So if you're handy and available, you can save a lot of the costs.

Option 3 - especially with some Dollar Cost Averaging, the stock market seems like the best place for buy & hold investing.

Personally, I think a mix of some Option 2 & 3 would be a good thing, but it really depends on what you have the appetite for. Just an opinion, but $115k is still a pretty huge emergency fund. Your income is high, plus (assuming) multiple income streams. A lot of that capital could be doing some work elsewhere.
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ReloadAg
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In reply to BenTheGoodAg • 5:25p, 2/16/25
AG
Yea I agree that $115k that's left over is probably still too much cash to sit on but the wife and I both have pretty variable income so having more cash on hand helps me sleep better at night.
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CS78
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6:31p, 2/16/25
I tend to live on the edge but I'd find some way to apply that $200k. Either pay cash for a rent house or pay off your house. Not like you're both going to lose your job at the same time and then both spend a year unemployed.
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Premium
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6:42p, 2/16/25
AG
Tesla stock
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kyledr04
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7:06p, 2/16/25
AG
I'd put the 100k in a few index funds and forget about it. No reason to pay off the house.
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Ragoo
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7:06p, 2/16/25
AG
$450k in retirement?

Invest the 100k in the SPY in $10k increments each month and consider this additional retirement.

Then also increase your retirement savings.
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Fitch
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7:17p, 2/16/25
AG
Agree with the above comments that a 3.2% mortgage is an asset right now. Wouldn't necessarily touch that.

Speaking strictly for myself, I'm looking at options how to deploy some dry powder into physical assets this year. I don't think inflation is done and there's been enough scuttlebutt hinting at macroeconomic moves with this administration to make me want to move cash into tangible holdings.

A rental property is work, no doubt, but if you can find a fund or LP investment offering to join in that would potentially be an easier execution.
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ReloadAg
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In reply to Ragoo • 7:36p, 2/16/25
AG
Yes. Is that $450k in retirement behind where I should be?
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Apache
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7:39p, 2/16/25
AG
Go with 3 & I own a rent house in Austin.
Taxes, upkeep & your mortgage will have you way upside down.
Only reason we have our rental property is it is paid off (bought in '99)
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Tormentos
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7:43p, 2/16/25
AG
Put $25k in BXSL, $25K in TLT with stop around 84ish, $25k in ET, remaimder in your HYSA.
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kyledr04
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In reply to ReloadAg • 7:59p, 2/16/25
AG
ReloadAg said:
Yes. Is that $450k in retirement behind where I should be?


I was thinking so but that wasn't your original question. Plus a lot depends on where you want to be in 20 years especially compared to making 300k per year and how long you've been at that income. That was also why I said just put it in the market.
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ReloadAg
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In reply to kyledr04 • 8:14p, 2/16/25
AG
Got it. Thanks for the clarification. We've been at this combined income level for a couple of years now. Most of our careers we've been in the $150k range combined.
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kyledr04
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8:22p, 2/16/25
AG
Cool, nice jump. We experienced a similar % increase a few years back. That definitely puts your current savings in better place. But at that income level and if you keep making good moves ending with $100k to invest, you'll be making big jumps that weren't possible before even with diligent saving.
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themissinglink
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8:20a, 2/17/25
AG
How far away from college are your children?

Generally, I would say invest in an index fund, but if you expect to need that cash in 3-5 years to pay for college, I would probably take a portion and put in a less risky investment vehicle.
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ReloadAg
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In reply to themissinglink • 8:59a, 2/17/25
AG
Kids are 12 and 9 and we have $91k saved total between the 2 of them so I feel like college savings are on track.
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Mustang1
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11:23a, 2/17/25
AG
What brokerage are you using for retirement accounts & 529?
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infinity ag
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In reply to ReloadAg • 11:25a, 2/17/25
ReloadAg said:
My wife and I have been kicking this around for quite some time now regarding what to do with an extra $100k we have sitting in a high yield savings account that's over and above what we need for daily household operations or emergency fund. If we allocate this $100k, we'll have about $115k left in emergency fund and cash for household operations.

Some quick stats:
Household income $300k
Age 43
Retirement savings $450k
Total college savings for 2 kids late elementary school age $91k
No debt except mortgage ($189k mortgage balance on a home valued at $675k. 3.2% mortgage interest rate)


We have a couple of options from what I can see:

Option 1
Take the $100k and pay down mortgage balance. Use income to attack the rest of it and have a paid off house in probably 2 years. Mathematically doesn't make much sense at a current 3.2% mortgage rate but Ramsey says this is the way to go.

Option 2
Take the $100k and put it down on a rental property where we live in Austin. This would be great for long term investment growth but given current interest rates, the probable monthly rent would not cover the mortgage payment until we could hopefully refinance into a lower rate down the road.

Option 3
Invest some of it in some mutual funds and maybe some of it into mortgage paydown. Haven't thought about this one a whole lot yet.

What should we do? We've been kicking this around casually for probably at least a year but haven't done anything yet. We've only lately gotten serious about the rental property idea but the fact that it doesn't cash flow is a drawback. It'd be a very long term play.

Thanks,

Simple.

Put the 100k in an S&P index fund like VOO or SPY and make about 20%+ in a year. That is about 20-25k. Markets will be good under Trump.

Take some of that money and slowly pay down your debt.

I am debt free. The feeling is amazing. Paid off house, cars, and paying for my son's college myself (no debt). I recommend it. The mental boost it gives is great in these uncertain times.
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AgsMyDude
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11:48a, 2/17/25
AG
Does the rental have to be in Austin? Could be in a city like Temple, Jarrell, Kileen, Georgetown, etc. that would give you a lower cost property but still close by.
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ReloadAg
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In reply to Mustang1 • 11:48a, 2/17/25
AG
I primarily use Vanguard. I have some in a John Hancock account too.
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ReloadAg
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In reply to AgsMyDude • 11:49a, 2/17/25
AG
True. Hadn't thought about that. The numbers would work better with a lower priced property I'm sure.
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Mustang1
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In reply to ReloadAg • 12:07p, 2/17/25
AG
Put majority in VTI. I would also increase retirement contributions if you haven't already
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hunter2012
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1:22p, 2/17/25
AG
Put it all in BTC, let it ride for 4 years and come back and thank me in 2029.
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IndividualFreedom
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In reply to hunter2012 • 3:06p, 2/17/25
Agreed. Purchase one single BTC.
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permabull
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4:00p, 2/17/25
AG
Are you currently maxing out your retirement accounts? Does your employer allow mega backdoor Roth?

If you have those options, I would start trying to max out those and use this extra cash to offset your reduced paycheck while you stash money in these tax advantages accounts.
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OldArmyCT
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4:01p, 2/17/25
AG
I have very little emergency fund cash, it's all invested in stock. Single stocks and VOO. If the market dips 20% that's no big deal because I'm way ahead of anything I would have had in a high yield savings account. The only cash I keep is daily expense money and perhaps something big upcoming. I'm partial to round lots of big name stocks and I'm a holder. But don't listen to me, and don't expect to get any mind blowing revelations on this board either.
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PA24
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4:37p, 2/17/25
AG
Chinchilla business will be booming next year when Canada becomes a state.
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Petrino1
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5:08p, 2/17/25
Most of your net worth is in your net worth is in non liquid assets like your home and your 401k. I would DCA $80k into VTI or an S&P 500 fund, and keep $20k in a HYSA.
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double aught
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5:31p, 2/17/25
AG
Since you've already paid taxes on the 100k, I would google Laser Fund and see if that is right for you.
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abram97
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In reply to double aught • 6:47p, 2/17/25
AG
double aught said:
Since you've already paid taxes on the 100k, I would google Laser Fund and see if that is right for you.
Thoughts on the Laser?
No material on this site is intended to be a substitute for professional medical advice, diagnosis or treatment. See full Medical Disclaimer.
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double aught
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In reply to abram97 • 6:57p, 2/17/25
AG
I've been looking into it lately, and it looks really promising as a supplement to a 401k. Lots of tax advantages. But it can be a bit complicated, and you need the right people helping you set it up. And for some people, it may not be a good fit.

Tax Free Retirement by Patrick Kelly is a good starting point.

Edit: BTW, that book has a chapter specific to physicians.
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Ag13
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In reply to infinity ag • 11:11p, 2/17/25
AG
infinity ag said:
ReloadAg said:
My wife and I have been kicking this around for quite some time now regarding what to do with an extra $100k we have sitting in a high yield savings account that's over and above what we need for daily household operations or emergency fund. If we allocate this $100k, we'll have about $115k left in emergency fund and cash for household operations.

Some quick stats:
Household income $300k
Age 43
Retirement savings $450k
Total college savings for 2 kids late elementary school age $91k
No debt except mortgage ($189k mortgage balance on a home valued at $675k. 3.2% mortgage interest rate)


We have a couple of options from what I can see:

Option 1
Take the $100k and pay down mortgage balance. Use income to attack the rest of it and have a paid off house in probably 2 years. Mathematically doesn't make much sense at a current 3.2% mortgage rate but Ramsey says this is the way to go.

Option 2
Take the $100k and put it down on a rental property where we live in Austin. This would be great for long term investment growth but given current interest rates, the probable monthly rent would not cover the mortgage payment until we could hopefully refinance into a lower rate down the road.

Option 3
Invest some of it in some mutual funds and maybe some of it into mortgage paydown. Haven't thought about this one a whole lot yet.

What should we do? We've been kicking this around casually for probably at least a year but haven't done anything yet. We've only lately gotten serious about the rental property idea but the fact that it doesn't cash flow is a drawback. It'd be a very long term play.

Thanks,

Simple.

Put the 100k in an S&P index fund like VOO or SPY and make about 20%+ in a year. That is about 20-25k. Markets will be good under Trump.

Take some of that money and slowly pay down your debt.

I am debt free. The feeling is amazing. Paid off house, cars, and paying for my son's college myself (no debt). I recommend it. The mental boost it gives is great in these uncertain times.


Sounds like you should be taking on significantly more debt if you're confident in your ability to consistently earn 20% a year
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AgsMyDude
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In reply to ReloadAg • 6:27a, 2/18/25
AG
ReloadAg said:
True. Hadn't thought about that. The numbers would work better with a lower priced property I'm sure.


I went through that numbers exercise recently and it's much more doable there rather than inside Austin proper. Difficult to cash flow unless you get into MFH.
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10andBOUNCE
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In reply to @NFLPlayerProps • 12:35p, 2/18/25
AG
@NFLPlayerProps said:
A 3.2% mortgage is an asset right now, not a liability. I wouldn't pay one cent of that early.
I don't necessarily disagree with the sentiment, but those calling a low interest mortgage an asset would be wrong.
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