How would you handle a large future house down payment fund with a 2-5 year timeline?
My partner and I are trying to think through a pretty major asset allocation decision and would love some outside perspectives.
We live in a very HCOL area in California and eventually want to buy here, but realistically the timing is probably somewhere in the 2-5 year range depending on career progression, rates, and whether we can actually afford what we’d want.
A family member recently gifted us a large amount intended for a future house purchase. The amount is almost as large as the rest of our non-retirement assets combined, so it materially changes our overall allocation.
Before the new inflow, excluding retirement accounts/pensions, we were roughly:
- ~40% cash/cash equivalents
- ~60% invested in diversified low-cost index ETFs
Combined household income is around the level where we’re in a pretty high tax bracket, which I assume matters for the cash management side of this.
The new funds are currently sitting in cash because we didn’t want to make a rushed decision.
I keep going back and forth between:
- investing at least part of it into the market since 2-5 years isn’t that short, especially if we ended up pushing out the home-buying timeline
- keeping most of it in safer instruments like Treasuries/T-bills
- doing some split between cash + etfs
A few questions:
- If you were in this position, how would you think about allocating it?
- At what point before a potential home purchase would you start moving money out of equities?
- For people using Treasuries/T-bills for medium-term goals, what maturities or ladder setups have you found practical?
- Any tax-efficient approaches worth considering for California specifically?