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Old 01-19-2009, 10:05 PM   #41
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The title of this thread is "Can you get rich with CDs?" The answer, obviously, is no.

If the question is recast as "Can you survive with CDs, given plenty of money, or one or two or more COLA pensions, and/or an age that would not be commonly thought of as early retired, the answer is just as clearly "yes".

Ha
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Old 01-20-2009, 06:35 AM   #42
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Originally Posted by ziggy29 View Post
Do you normally try to argue with people who are agreeing with you?

I'll try this one more time.

The *perception* of annuities is that they are inefficient, have high fees (and corresponding commissions), and are aggressively sold to people for whom they aren't too appropriate. And for a long time, that was mostly true. Old perceptions die hard.

I was trying to build on your example to show that these perceptions don't NEED to be reality, and yet you keep responding as if I'm perpetuating that perception. I'm agreeing that it doesn't have to be reality with a good fixed annuity purchased for the right financial circumstances, and you don't seem to get that. I'm just saying that some kinds of annuities are definitely worth looking at for the right people, and that some people might want to look past their preconceived notions.

Color me puzzled and confused. I thought my point was blatantly obvious.
It was not my intent to affront or to “argue” with Ziggy29. I was trying to take issue with those who “here” bash fixed annuities for perhaps reasons that might not be applicable or clear to the OP.
If Ziggy29 felt I was intentionally confronting his knowledge/opinions, I sincerely apologize to you.
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Old 01-21-2009, 12:12 AM   #43
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"OAG". I agree with you. My retirement plan was very similar. Currently, I also search for the best CD rates. Penfed, USAA, Capital 1 (poor CS), etc.

In the past, Penfed had some 7% CD's. Currently I have their 6 1/4 CD's. 5yr and 7 yr terms.

I also have funds in my local Credit union (former employer), I always ask if they give customer's with large balances better CD rates.

One day I was surprised when they said they would match other Credit Unions rates up to 1% over their current rates. (they have recently change it to 1/2%). Always ask!!!!!

Since retiring, at 55, I've kept about 18% in stock. The balance in CD's. 7 years later, We are still in pretty good shape.

Much more to say, Don't want to bore anyone.

But one last thought, ALL of the highly paid experts, who promote equity, warn us about inflation, were all wrong! The worst stock market drop in 50 years, and they all missed the call.

If the experts cannot predict or make the right call, why do so many people base their investments on their advice?

Sometime's it best to use common sense, don't be greedy, and sometimes dont't follow the crowd.
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Old 01-21-2009, 06:24 AM   #44
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My question is: I like the security of CDs despite the modest returns and I'm wondering if anyone has accumulated a sizeable portfolio ($1 million+) by just investing with CDs over the course of their lives?
No - the return of CDs will not provide enough income to support our expenses. However, if one can live off the income from CDs forever, the answer is yes.
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Old 01-21-2009, 06:59 AM   #45
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However, if one can live off the income from CDs forever, the answer is yes.
Perhaps, but the principal is usable too. In simple terms, one could draw down $360k in CDs over thirty years at $1k a month. Obviously inflation and interest earned both play a role in the amount you can realistically withdraw, but to not use the principal means leaving cash on the table at the end.

Granted, the time frame is an unknown, but one can reasonably use a plan that includes other investment strategies (pensions, Social Security) to ensure that running out of CD cash at 90 years old will not be the cause of a pet food diet. I don't think my need/desire for cash will be as great 40 years hence, and while the CDs may not last the term, not only will other sources of income pick up the slack but many expenses will cease.

CDs are for risk averse investors who can stomach NOT making a ton of money when it's good, and who can't stomach losing a ton (even on paper) when it's ugly.
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Old 01-21-2009, 08:51 AM   #46
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Can You Get Rich With CDs? You could over time if you were a great saver. The thing is you don't go 40 percent in the negitive in one year.
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Old 01-21-2009, 06:24 PM   #47
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My dads retirement savings thru his work were all in CDs. Had about 400K when he passed back in 2004. Wasn't even drawing any of the money. Both he and my mom were tightwads and always were super conservative with money.
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Old 01-21-2009, 10:30 PM   #48
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This discussion has surprised the heck out of me. I thought I was the only one on the board who was so risk averse as to to stay mainly in cash equivalents for most of my saving career (mostly GICs, AKA Stable Value funds in 401(k))

Having said that, my best move and the reason I could retire is that I left money in Megacorp's stock in my 401(k) and watched it explode (no, that's a good thing!). Sold most of it before bottom fell out in 2000s. Sooooooo Did all the "wrong" things for (probably) all the wrong reasons and still came out pretty well. Still, if I'd stayed in all equities back in 74/75 instead of going to cash (with MY 401(k) money, that is), I would, indeed, be rich now instead of just "very comfortable" - whatever that means.

I do worry constantly about inflation, so I'm still convincing myself I need to get more into equities if I really do plan to live another 30 years.

I need to get off the pot (no, the other kind) and get going on my "plan". This discussion has NOT helped!!! But thanks for letting me know I'm not alone in staying mostly in cash.
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Old 01-21-2009, 11:51 PM   #49
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This discussion has surprised the heck out of me. I thought I was the only one on the board who was so risk averse as to to stay mainly in cash equivalents for most of my saving career (mostly GICs, AKA Stable Value funds in 401(k))
Check again when the market has doubled. Won't be many risk averse people around then, instead we'll all be deriding those whose equity allocation seems too small.

Ha
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Old 01-22-2009, 01:50 AM   #50
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Check again when the market has doubled. Won't be many risk averse people around then, instead we'll all be deriding those whose equity allocation seems too small.

Ha
I hope you're right, Ha. I hope I'm one of those who has "seen the light" by then. I've missed a lot of possible gains over the years by being so risk averse. Of course, I've never suffered much in the way of losses either. You pays yer money and takes yer choice, I suppose. I know there is a balance and I hope I can find the best balance for me. I'm workin' on it!
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Old 01-22-2009, 03:42 AM   #51
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It is comforting, in a strange sort of way, to find that there are so many others who are nearly as risk adverse as I. I've never been able to stomach losses and have kept over 95% of my assets in cd's, government savings bonds and the Thrift Savings "G-Fund." Consequently, I've slept well and at present still have a nestegg in the neighborhood of $1.6M. The "secret" has been good 'ol fashion frugality -- LBYM. Looking forward, I hope I'll build up enough courage to someday have a light exposure in equities, perhaps 25 percent. But, I don't expect I will ever have the stomach for the asset allocations many count on. My plan is to continue to live modestly. I expect that my nestegg will spin off enough income (at a conservative 2 percent WD rate) to keep me going until the grim reaper arrives. I do have a small cola'd pension of about $20k and social security to fill things out a bit. The bottom line is that I believe it is still possible to achieve finanical security in retirement without exposing oneself to very much risk. Bottom Line: you can become financially secure without much exposure to risk, and more importantly you can stay that way.
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Old 01-22-2009, 07:40 AM   #52
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Check again when the market has doubled. Won't be many risk averse people around then, instead we'll all be deriding those whose equity allocation seems too small.

Ha
And I'll refer back to this thread if I need motivation to hold to what has worked: Adios & thanks for ALL!

Granted this guy's asset allocation was skewed, but how many folks here have had their retirement pushed back years or cancelled due to this downturn?

Can't buy that back.
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Old 01-22-2009, 07:46 AM   #53
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Maybe some stock gurus can do a little figuring and we can make a comparison of different investing paths over the last 24 years.

Here's the numbers. In November 1985 DW quit working and took her pension benefit in a lump sum of $4700. It was rolled into an IRA (cd) and has been compounding ever since. The current value (1-1-09) is $23818.

So with a starting value of $4700 on November 1, 1985 what would you have today if it had been invested in the market (maybe something that follows the DOW or S&P) for same time period? I have no idea how to figure in dividends and espenses.

UH
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Old 01-22-2009, 10:04 AM   #54
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Maybe some stock gurus can do a little figuring and we can make a comparison of different investing paths over the last 24 years.

Here's the numbers. In November 1985 DW quit working and took her pension benefit in a lump sum of $4700. It was rolled into an IRA (cd) and has been compounding ever since. The current value (1-1-09) is $23818.

So with a starting value of $4700 on November 1, 1985 what would you have today if it had been invested in the market (maybe something that follows the DOW or S&P) for same time period? I have no idea how to figure in dividends and espenses.

UH
Somebody posted a neat link a few months ago that provided this calculation for any two dates. But I've lost the link.

I use Robert Shiller's data at: http://www.econ.yale.edu/~shiller/data/ie_data.xls

He just provides prices and dividends, so I have to do my own compound returns. I get the total (nominal) increase in the S&P 500 from 11-85 through 12-08 as converting $1.00 into $7.55. That means your $4,700 would have grown to $35,485. Note that Shiller's Dec 2008 price is $877, today's price is lower. Note also that this calculation doesn't deduct anything for investment expenses.

[If you want to check my math, I calculate a monthly return as (next month's price + dividend/12)/(this month's price). Then I multiply the 277 monthly returns.]
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Old 01-22-2009, 11:16 AM   #55
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Threads like this seem to miss the question of who wants to be rich anyway? Seems a whole lot easier to be poor. And I don't have to mention that the government will take care of you anyway. Am i wrong again or what?
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Old 01-22-2009, 12:19 PM   #56
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And I'll refer back to this thread if I need motivation to hold to what has worked: Adios & thanks for ALL!

Granted this guy's asset allocation was skewed, but how many folks here have had their retirement pushed back years or cancelled due to this downturn?

Can't buy that back.
This is true, but very slanted. This guy in effect jumped into the tiger cage.

The board is full of people who have little or no pension and high stock allocations, and have not been particularly bothered by the downturn, although for the most part we would have preferred that it not happen. As for well diversified retirees who have had to go back to work, there have been a few who chose that and mentioned it. Many more are continuing as before.

However, my intention was not to argue for high stock allocations. My meaning was that the cautious attitudes being expressed mostly are due to recent market events, and with time will change as the market regains ground, and finally breaks new ground. Then the board once more will be home to many vocal equity fans.

People in general are not rational enough to invest important money in risk assets. I actually agree with the CD fans, if they are consistent. If CD fans don't like equity prices now, when will they like them? CDs will give absolute safety from what seems to be most feared- nominal volatility expressed in USD.

Ha
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Old 01-22-2009, 03:18 PM   #57
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And I'll refer back to this thread if I need motivation to hold to what has worked: Adios & thanks for ALL!

Granted this guy's asset allocation was skewed, ...
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This is true, but very slanted. This guy in effect jumped into the tiger cage.

Ha
skewed?

I didn't find an exact number, but it sounded like over half ( I got the impression it was much more than that) his portfolio was in a single stock. And this is after he sold his business, making alternative income difficult. I've often heard the 5% number thrown out for a single stock, and I think that is reasonable. I've stretched that from time to time, but I've always asked myself - "are you prepared for the possibility that this thing goes to zero?". And sometimes I bought puts when doing that.

In some ways, I think I was lucky ( sure didn't feel "lucky" at the time). I made a major misjudgment *before* I retired. That helped me to look at things that way - what if this goes to zero (or thereabouts for a diversified fund)?


CDs might be the right ticket for some, but I don't think you should use the example of someone who took extreme specific stock risk and lost as a justification for that decision. Any more that I would point out a winner, and say that justifies equity investing. Or a 100 year old, pack-a-day guy as an OK to pick up the smoking habit.

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Old 01-22-2009, 03:31 PM   #58
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I'm talking about the kind of fees that come with annuities pushed by salescritters that come with high commissions. The good news is that there are a growing number of these fixed annuities available now -- but there aren't any sales fees so you won't hear insurance salespeople pushing them.
Insurance salespeople get PAID on fixed annuities, they just get paid LESS than on VAs, and WAY LESS than on EIAs.......
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Old 01-22-2009, 03:42 PM   #59
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skewed?

I didn't find an exact number, but it sounded like over half ( I got the impression it was much more than that) his portfolio was in a single stock. And this is after he sold his business, making alternative income difficult. I've often heard the 5% number thrown out for a single stock, and I think that is reasonable. I've stretched that from time to time, but I've always asked myself - "are you prepared for the possibility that this thing goes to zero?". And sometimes I bought puts when doing that.

In some ways, I think I was lucky ( sure didn't feel "lucky" at the time). I made a major misjudgment *before* I retired. That helped me to look at things that way - what if this goes to zero (or thereabouts for a diversified fund)?


CDs might be the right ticket for some, but I don't think you should use the example of someone who took extreme specific stock risk and lost as a justification for that decision. Any more that I would point out a winner, and say that justifies equity investing. Or a 100 year old, pack-a-day guy as an OK to pick up the smoking habit.

-ERD50

Could you expand on this a little? At what age is it ok to "stick a toe, foot, or leg" into the tiger's cage. (metephore for 20-30% of your portfollio).

Seems that if you are making a good income in your early-mid 30s (and LBYM) that putting 30% of your portfollio into a large cap equity and watching it closely may be an acceptable risk.

Hell, if it hits big it could put your kids through college. If it tanks, you have time to recover.
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Old 01-22-2009, 04:04 PM   #60
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Seems that if you are making a good income in your early-mid 30s (and LBYM) that putting 30% of your portfollio into a large cap equity and watching it closely may be an acceptable risk.
Yes, it is probably better to do this kind of gambling early in your investing experience rather than when you are near/in retirement, but it is still poor practice in my opinion. Concentrating your assets exposes you to uncompensated risk (that is, risk that is not rewarded by better returns, so it doesn't make good investment sense at any age). Also, the losses that are taken early don't get the benefit of decades of compounding growth: that $10k lost while speculating on the fantastic stock of your employer would have grown to $100k over the course of 30 years (8% annual growth). And, if a young investor gets burned by investing in a single stock and "watching it closely" (?), it could be very costly if he learns that he shouldn't invest any more, or if he chooses assets that are so "safe" that the anemic growth doesn't allow him to achieve his goals.
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