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06-30-2013, 05:13 AM
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#1
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Thinks s/he gets paid by the post
Join Date: Sep 2010
Location: midwestern city
Posts: 4,061
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10 year. 2.75% CD
Over the last few months I have been busing a few 10-year CDs. The rates have been around 2.3% or 2.5%. However, last week I found one at 2.75%. Are the long term CD rates finally going up?
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Very conservative with investments. Not ER'd yet, 48 years old. Please do not take anything I write or imply as legal, financial or medical advice directed to you. Contact your own financial advisor, healthcare provider, or attorney for financial, medical and legal advice.
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06-30-2013, 05:45 AM
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#2
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Thinks s/he gets paid by the post
Join Date: Dec 2012
Location: Georgia
Posts: 2,240
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And if so, that begs the question as to whether locking a whole mess 'o money in at 2.75% for 10 years is a good idea if the reason why the rates are increasing is that we're on the verge of an inflationary phase.
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06-30-2013, 06:56 AM
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#3
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Recycles dryer sheets
Join Date: Jan 2013
Posts: 162
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There obviously isn't much room for them to go lower - but they might. Could they stay the same - they might. Could they go higher - they might. Hence, the laddering concept is born...
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06-30-2013, 07:04 AM
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#4
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Moderator Emeritus
Join Date: Sep 2007
Posts: 17,774
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Quote:
Originally Posted by bUU
And if so, that begs the question as to whether locking a whole mess 'o money in at 2.75% for 10 years is a good idea if the reason why the rates are increasing is that we're on the verge of an inflationary phase.
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Not really locked in--if rates rise one could sell and take the penalty (often only 3 months interest) to buy a new one at a higher rate.
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“Would you like an adventure now, or would you like to have your tea first?” J.M. Barrie, Peter Pan
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06-30-2013, 07:05 AM
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#5
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Thinks s/he gets paid by the post
Join Date: Jul 2012
Location: Mississippi
Posts: 1,894
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There was one last week at Schwab @ 3%/10yr, it sold out almost as soon as it was listed. Higher rates are seen occasionally for promotions. If rates really shot up, break the CD, take the penalty and reinvest.
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06-30-2013, 07:18 AM
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#6
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Thinks s/he gets paid by the post
Join Date: Sep 2010
Location: midwestern city
Posts: 4,061
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Or break the CDs when rates go up, and put half of the money in higher rate CDs, and the other half of the money in deferred annuities - while I am still in my 40s. My FIRE spreadsheet likes this approach very much.
Quote:
Originally Posted by rbmrtn
There was one last week at Schwab @ 3%/10yr, it sold out almost as soon as it was listed. Higher rates are seen occasionally for promotions. If rates really shot up, break the CD, take the penalty and reinvest.
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__________________
Very conservative with investments. Not ER'd yet, 48 years old. Please do not take anything I write or imply as legal, financial or medical advice directed to you. Contact your own financial advisor, healthcare provider, or attorney for financial, medical and legal advice.
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06-30-2013, 02:40 PM
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#7
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Thinks s/he gets paid by the post
Join Date: Jul 2012
Location: Mississippi
Posts: 1,894
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Quote:
Originally Posted by obgyn65
Or break the CDs when rates go up, and put half of the money in higher rate CDs, and the other half of the money in deferred annuities - while I am still in my 40s. My FIRE spreadsheet likes this approach very much.
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I think if I had the income you have , I'd take the suze orman approach. Find a muni bond specialist, buy individual munis and let it ride.
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06-30-2013, 02:43 PM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2006
Posts: 11,401
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Nobody is tying up my cash for 10 years for that kind of interest rate!
Disclaimer: My cash allocation is ~15% of NW.
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06-30-2013, 02:44 PM
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#9
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
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Everyone should be aware that brokerage-sold CDs generally cannot be surrendered early. If you want out before maturity, you have to sell on the open market for whtever you can get and possibly take your lumps.
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"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
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06-30-2013, 03:32 PM
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#10
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2011
Location: NC Triangle
Posts: 5,807
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Quote:
Originally Posted by rbmrtn
I think if I had the income you have , I'd take the suze orman approach. Find a muni bond specialist, buy individual munis and let it ride.
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I don't think anyone knows what the income is around here.
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06-30-2013, 03:50 PM
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#11
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2006
Posts: 7,733
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I'd expect to see 3% CD rates with 10 year treasuries at 2.6%
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06-30-2013, 03:53 PM
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#12
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Thinks s/he gets paid by the post
Join Date: Jul 2012
Location: Mississippi
Posts: 1,894
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Quote:
Originally Posted by brewer12345
Everyone should be aware that brokerage-sold CDs generally cannot be surrendered early. If you want out before maturity, you have to sell on the open market for whtever you can get and possibly take your lumps.
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+1 on that. If thru a broker account they are sold on the market and the rules are different. There should be a disclosure when you purchase.
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07-01-2013, 08:19 AM
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#13
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2011
Location: West of the Mississippi
Posts: 17,263
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I bought a 5 year CD about 2 years ago yielding 2.25%. I swallowed hard at such a long commitment for such low interest. Today, it makes me look like a sharp investor.
I look at it this way, if I had to borrow money and could get it at less than 3% for 10 years would I take it? In a New York minute! Going the other way, I think it puts too much of the risk on the investor. But, hey, what do I know about predicting interest rates?
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Comparison is the thief of joy
The worst decisions are usually made in times of anger and impatience.
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07-01-2013, 09:07 AM
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#14
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2006
Location: west coast, hi there!
Posts: 8,809
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Quote:
Originally Posted by brewer12345
Everyone should be aware that brokerage-sold CDs generally cannot be surrendered early. If you want out before maturity, you have to sell on the open market for whtever you can get and possibly take your lumps.
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That's what I was told a few years back when I enquired about Vanguard's VBS available CD from some banks. Makes it sound like you are really buying a bond that reflects the forward expected interest rates.
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07-01-2013, 02:28 PM
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#15
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Thinks s/he gets paid by the post
Join Date: Mar 2011
Location: North TX
Posts: 1,833
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I laddered some 5 yr CD's 4 years ago and got:
2.87%
3.06%
2.67%
2.518%
2.48%
2.274%
1.6% (3 months ago)
My first is maturing in April...not likely to re-new. Glad I gradually got in now, didn't think so at the onset.
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07-01-2013, 02:53 PM
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#16
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Thinks s/he gets paid by the post
Join Date: Oct 2010
Location: irradiated - too close to the nuclear furnace
Posts: 1,294
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Wow, you'd be willing to lock up money for 10 years? TEN? You'd have to be able to bail anytime after 1 year without giving up any earned interest or I wouldn't do this. Do you think that rates will be 2.75% in say 3 or 5 or 7 or 9 years from now? I don't. 3 or 4 years from now this could look like a lousy interest rate just like the rates of today look lousy.
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07-02-2013, 02:55 AM
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#17
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Full time employment: Posting here.
Join Date: Feb 2012
Posts: 648
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My assumption for planning purposes is that inflation will be in the 4-5% range for half of the next 10 years... I suppose you could always break the CD when that happens.
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07-02-2013, 03:20 AM
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#18
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Recycles dryer sheets
Join Date: May 2012
Posts: 99
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Quote:
Originally Posted by rbmrtn
I think if I had the income you have , I'd take the suze orman approach. Find a muni bond specialist, buy individual munis and let it ride.
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I agree, without the Suze or income part.
But I fully agree otherwise !!
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07-02-2013, 07:30 PM
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#19
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Thinks s/he gets paid by the post
Join Date: Sep 2010
Location: midwestern city
Posts: 4,061
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It's much less than you think. Plus, I used to work in Europe, where salaries are much lower than they are here. I remember making a huge $40,000-50,000 per year in my late 20s in Europe about 25 years ago. I am aware that big accounting or law firms partners lurk around here, as well as very senior bankers, and I am sure that my pay slip pales in comparison to theirs. And that's ok, I am not racing against anyone. I would spend the same amount of money even if I earned twice as much of what I am making now.
Quote:
Originally Posted by rbmrtn
I think if I had the income you have , I'd take the suze orman approach. Find a muni bond specialist, buy individual munis and let it ride.
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__________________
Very conservative with investments. Not ER'd yet, 48 years old. Please do not take anything I write or imply as legal, financial or medical advice directed to you. Contact your own financial advisor, healthcare provider, or attorney for financial, medical and legal advice.
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07-02-2013, 07:32 PM
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#20
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Thinks s/he gets paid by the post
Join Date: Sep 2010
Location: midwestern city
Posts: 4,061
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My CDs average 2.8% for the next 10 years. Worry free. Can you say the same about your investments? :-)
Quote:
Originally Posted by Meadbh
Nobody is tying up my cash for 10 years for that kind of interest rate!
Disclaimer: My cash allocation is ~15% of NW.
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__________________
Very conservative with investments. Not ER'd yet, 48 years old. Please do not take anything I write or imply as legal, financial or medical advice directed to you. Contact your own financial advisor, healthcare provider, or attorney for financial, medical and legal advice.
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