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Old 09-18-2013, 12:55 PM   #61
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Rich, I'm still confused. The CD is a 10 year term. How do you get income from it in the meantime?
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Old 09-18-2013, 01:01 PM   #62
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Rich, I'm still confused. The CD is a 10 year term. How do you get income from it in the meantime?
Step 1: Underpants.
Step 3: Profit.
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Old 09-18-2013, 02:05 PM   #63
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Rich, I'm still confused. The CD is a 10 year term. How do you get income from it in the meantime?
Yes, we're back to the original situation. The CD pays 3.25% and grows $72,629 to $100,000 only if all the interest is left to accrue inside the CD.
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Old 09-18-2013, 04:17 PM   #64
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Rich, I'm still confused. The CD is a 10 year term. How do you get income from it in the meantime?
I said "CD" but should have said "Treasury Note."

From Treasury Direct: "Treasury notes are government securities that are issued with maturities of 2, 3, 5, 7, and 10 years and pay interest every six months."

Question from me: are the 6-month interest pmts in a Treasury note restricted to paying off the note, or can they be distributed externally?
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Old 09-18-2013, 04:21 PM   #65
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Rich, you might save yourself a lot wheel spinning by just looking at this as asset allocation.

Ha
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Old 09-18-2013, 04:31 PM   #66
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I said "CD" but should have said "Treasury Note."

If you wanted to get regular periodic payments say every 6 months, a treasury note would be a better choice (at least as I see it here) paying interest every 6 months. If you just want accumulation a CD would seem to be suitable.

From Treasury Direct: "Treasury notes are government securities that are issued with maturities of 2, 3, 5, 7, and 10 years and pay interest every six months."

Hope that helps and that my facts are right.
Rich, I believe you are still missing the point of everyone's questions. If you purchase 73K of 10-yr Treasury notes and 27K of stock AND spend the interest payments, the Treasury notes will have a value of 73K at maturity. If the stocks are worth less than 27K when the Treasury notes mature, you will have less than 100K, and will have violated your floor.
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Old 09-18-2013, 04:32 PM   #67
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Rich, you might save yourself a lot wheel spinning by just looking at this as asset allocation.
+1
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Old 09-18-2013, 04:35 PM   #68
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Rich, you might save yourself a lot wheel spinning by just looking at this as asset allocation.

Ha
That wouldn't be nearly as much fun. But in the end, it's all AA, or so it seems.

As usual, the board is educating me fast.
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Old 09-18-2013, 04:44 PM   #69
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Stay with me, I'm slowly starting to recover. Still have questions which I'll post after a refreshing beverage or two.
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Old 09-18-2013, 04:45 PM   #70
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Stay with me, I'm slowly starting to recover. Still have questions which I'll post after a refreshing beverage or two.
Aha! So that is the problem.
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Old 09-18-2013, 04:46 PM   #71
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Rich, I think you want to have your cake and eat it, too!
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Old 09-18-2013, 04:50 PM   #72
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I have nothing to offer to this discussion but I also couldn't help notice that despite being an engineer I know squat about the various investment vehicles- besides the usual 401k, IRAs and CDs.

REITs, SPIAs, EIAs, KIAs, Hyundais...my head's spinning lol
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Old 09-18-2013, 05:41 PM   #73
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Stay with me, I'm slowly starting to recover. Still have questions which I'll post after a refreshing beverage or two.
Here you go. Invest in this and enjoy their products while you refresh. A win win for your portfolio and you.

TAP: Summary for Molson Coors Brewing Company Cl- Yahoo! Finance
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Old 09-18-2013, 06:08 PM   #74
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I don't see the equivalent of an annuity payment.

All the interest from the CDs needs to be left to compile in the CD so you have your guaranteed nest egg if the market blows up.

Taking living expenses from the much smaller stock investment is a pretty good way to blow up that portion of the investment pool.

With an annuity, you get a payout, monthly or annually.
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Old 09-18-2013, 06:14 PM   #75
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... To me it's a specialized set of rules for investing in SPIA-like goals with little or no obscene commissions, low cost, withdrawal penalties, tax efficiency etc.

If you had SPIA type goals would you purchase a commercial policy or create a DYI alternative such as the above?
The more I read through this thread, the more confused I am about how this would act like an SPIA, or even what the goals are. I went to immediateannuities.com and a 58 YO male can get a 6.26% payment (no payment to any beneficiaries), or 5.69% joint for a wife of same age.


1) An SPIA provides a (generally) non-inflation adjusted payment for life. So that leaves inflation as a wildcard. The payments from the plan in the OP would vary with CD rates, and also have some market volatility, so that aspect is less predictable. I guess I don't really see how this is like an SPIA?

2) As others have said, an individual can't really replicate the longevity risk pooling that an annuity company can. But that is offset to a degree by their costs and profits.


But look at what you can do with a simple DIY plan:

A 3.23% WR taken over 45 years, adjusted for inflation (so eliminating that wildcard) has been 100% successful in the past, with any AA between 50/50 and 75/20. So if 45 years is close enough to "for life" for you, that's a reasonably comparable comparison basis to an annuity.

No games with compartmentalizing of funds, just an annual rebalance (which probably doesn't matter either). And a very good chance of having enough near the end to raise the spending level, and/or leave money to heirs.

I fail to see why some variable AA plan that may be very high in allocation to CDs would be expected to outperform that? I wonder how the market component would perform when this plan has you buying stocks as CD rates went up, and selling them as CD rates go down? Seems like an odd form of market timing that would take some work to model. I'd sure like to at least understand how it performed historically before committing any $ to it.

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Old 09-18-2013, 07:15 PM   #76
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From the author of the article cited in the OP:
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Because some banks and credit unions don't allow partial withdrawals, it is prudent for clients to open several smaller CDs in case they need some funds at some point during the 10 years.
Oh. Never mind.
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Old 09-23-2013, 02:23 PM   #77
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So I'm very intrigued by this concept- any thoughts if this would work based on 5-year CDs rather than 10? One could build a ladder with opportunity for more than the paltry yields on the CDs themselves. Any thoughts?
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Old 09-23-2013, 02:54 PM   #78
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You could do it with a 5 year CD, a treasury, a junk bond (eeks), or a venezuelan gubmint bond. I'd do it this way if you like this silly strategy: Life, Investments & Everything: Rolling Your Own
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Old 09-23-2013, 03:19 PM   #79
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You could do it with a 5 year CD, a treasury, a junk bond (eeks), or a venezuelan gubmint bond.
This is just repackaging AA, just like "buckets" was.
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Old 09-23-2013, 04:06 PM   #80
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This is just repackaging AA, just like "buckets" was.
Not really. This is a way to convert bond interest to "spin the wheel" on equities.
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