What to do with house proceeds?

[Fizgig]

I'm selling a house next week and will clear about $45,000. I'm deciding what to do with the money, and just where to focus financially. Would love some thoughts.

35, single, renting in Washington DC
Liquid/Emergency fund: $36k
401k/Trad IRA: $136
Roth IRA: $21k

Other details:
$100k/year income
Maxing my 401k and Roth IRA contributions ($27k/year with employer match, ramped up last year)
Monthly expenses are $3k/mo when I let myself have some fun
No debts except the soon to be gone mortgage

My retirement investments are pretty simple, about 40% are in a total stock market index fund, 18% bond index, 17% International stock funds, and the other 25% are in other moderately aggressive mutual funds.

I recently moved and don't know how many years I'll stay in DC, so buying doesn't make sense right now. Still, it'd be nice to have access to a solid down payment once it does, maybe in a few years. ($60-80k? I'll probably continue to live in high COLA areas, so though I choke at the money, I wanna be prepared for up to a $300k-ish home.) I also think sometimes about building a dividend bearing portfolio that could be extra income if I need it. I'm not sure where to focus.

After the sale I'll have $81k liquid. I'd like to keep a 12 month EF of $36k since I'm single and in an up-down industry. I'd also like to put $15k in a car fund for repairs and eventual replacement, and I'll kick in a few hundred a month. These will just earn 0.5% in a savings account.

That leaves $30k to mess with, and $1500/mo of extra income to save. What would you do if you were me? Thanks!

[feh]

If you think you'll need the money in less than 5 years, I'd put it in CDs. You'll likely get better rates than a short-term bond fund, and you'll avoid the risk of loss.

[Freddy McFrugal]

I'm pretty sure if you use the money to buy another property that you live in, you won't be taxed on the capital gains. That could be a smart investment move, provided you're ok with investing in more real estate.

[feh]

I'm pretty sure if you use the money to buy another property that you live in, you won't be taxed on the capital gains. That could be a smart investment move, provided you're ok with investing in more real estate.

He wouldn't need to pay tax on the gains regardless - at $45K he's a long way from the maximum allowance.

[bUU]

For some reason I thought the exclusion was a one-time thing or an aggregate/lifetime thing, but it isn't: It's an every two years thing.

[feh]

For some reason I thought the exclusion was a one-time thing or an aggregate/lifetime thing, but it isn't: It's an every two years thing.

It used to be a one-time exclusion; they changed the law a few years ago.

[bUU]

Thanks! I was beginning to wonder about my memory a bit, there.

[snafu]

I think capital you wish to 'invest' needs to be available for a 5 yr. plan. Given the information you've outlined and the current economy, I'd DCA into a low fee, well managed Dividend Fund or ETF. The government says it won't raise interest rates. If conditions change, you can re-examine your percentage mix. If you leave significant sums in cash, savings a/c, laddered CDs, Bond instruments you are losing buying power to inflation. All your different holdings whether Emergency Fund, Retirement Fund, Roth, or this new sum resulting from the sale of a home must mesh together as your portfolio

Only you can decide how much Risk you can tolerate and sleep at night.

[feh]

I think capital you wish to 'invest' needs to be available for a 5 yr. plan. Given the information you've outlined and the current economy, I'd DCA into a low fee, well managed Dividend Fund or ETF.

Can you explain what you mean by "Dividend Fund or ETF"?

If you leave significant sums in cash, savings a/c, laddered CDs, Bond instruments you are losing buying power to inflation.

Not necessarily. CDs may beat inflation. I would not invest in bond funds with money that is needed in less than 5 years at this time; there's a very real chance of principle loss.

[bUU]

While folks should not invest in bond funds with money that is needed in less than 5 years, right now, I don't know of an FDIC-insured CD out there that is beating inflation.

Incidentally, I read "Dividend Fund or ETF" to mean a mutual fund or ETF that is categorized as a "value" fund by Morningstar, i.e., with one of the boxes in the first column of Morningstar's 3 by 3 box filled-in.