Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 02-29-2008, 09:29 AM   #21
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
FinanceDude's Avatar
 
Join Date: Aug 2006
Posts: 12,484
I know a few folks who "pine" for the high CD rate days of the early 1980's. There were banks around here offering 13% CD's for 10 years, some even higher on shorter CD's

Of course, unemployment was around 9%, gas prices were high for the time, a 16-17% mortgage rate was normal, and car loans were 18-22%, but HEY, I'm getting DOUBLE digits on my CD's!!!

It's all relative...........all I know is folks who put a large portion of their money in CD's are facing huge purchasing power erosion over time.........but at least it's "safe".............
__________________

__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)


This Thread is USELESS without pics.........:)
FinanceDude is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 02-29-2008, 09:33 AM   #22
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,905
Quote:
Originally Posted by FinanceDude View Post
It's all relative...........all I know is folks who put a large portion of their money in CD's are facing huge purchasing power erosion over time.........but at least it's "safe".............
Depends on the length of the CD. The OP is talking about THIRTY YEARS... It would take one heck of a big CD rate for me to invest half my portfolio in a 30 year CD.

On the other hand, it wouldn't take anywhere near as high an interest rate to persuade me to invest in a 5- or 7- year CD, for example.
__________________

__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is offline   Reply With Quote
Old 02-29-2008, 10:43 AM   #23
Full time employment: Posting here.
 
Join Date: Sep 2007
Posts: 514
10%.

All my calculations are based on a "pessimistic" return of 8%, and an "optimistic" return of 10%. So if I could get a guarantee of my optimistic rate, I know I'd be on easy street, and I'd take it in a heartbeat.
__________________
kombat is offline   Reply With Quote
Old 02-29-2008, 10:47 AM   #24
Thinks s/he gets paid by the post
retire@40's Avatar
 
Join Date: Feb 2004
Posts: 2,670
Quote:
Originally Posted by kombat View Post
10%.

All my calculations are based on a "pessimistic" return of 8%, and an "optimistic" return of 10%. So if I could get a guarantee of my optimistic rate, I know I'd be on easy street, and I'd take it in a heartbeat.
8% is your pessimistic rate of return

That's my optimistic rate of return.
__________________
No man is free who is not master of himself. --- Epictetus
Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo
retire@40 is offline   Reply With Quote
Old 02-29-2008, 11:08 AM   #25
Thinks s/he gets paid by the post
 
Join Date: Nov 2007
Posts: 1,052
You all do know that the historical average for the stock market is around 10.8%, right? So to even have to THINK about "settling" for 10% is just plain nutty. Give me a 10% guaranteed fixed rate and I'll take my chances. My money doubling every 7.2 years! Yeah baby!
BTW, I recall when short term muni bonds were paying 16% and long term muni bonds were paying 15%. People were saying how crazy it would be to go long term, when you could get such great short term rates. Of course, those who locked in on those long term rates were quite happy. Of course, I'm sure at that time, there were people saying that they'd have to get 21% guaranteed to lock in.
Of course the funniest thing of all, is if I mentioned that I could get you 7% locked in for life, you'd balk at it?
__________________
Art G is offline   Reply With Quote
Old 02-29-2008, 11:42 AM   #26
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,386
Quote:
Originally Posted by Rich_in_Tampa View Post
I think Nords got it: so many outside factors can act on a fixed return over that long a period that flexible strategies seem less risky even at a slightly lower net return.

I might look hard at TIPs that paid 8% plus core inflation, though.
Now, that isn't asking much, is it?

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 02-29-2008, 01:34 PM   #27
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,615
Per Audrey's point: Something would have to motivate an issuer to offer 8+ % on fixed rate securities. Possible motivators:
-- Risk of default is high, and investors want to be highly compensated. Is this they type of investment in which those yearning for early retirement will likely want to invest a large portion of their nest egg?
-- Existence/risk of high inflation: If inflation is already at 10%, would many people invest in an 8% fixed security? No--better to buy material goods, commodities, etc. Sure, whatever caused the high inflation is likely to abate, but who can say when, and who can say the same root causes won't accelerate the inflation for years to come? Yes, if I saw 12% CDs or treasuries, I'd be tempted to invest a modest portion of my nest egg and hope for a reversion to the mean in inflation. But it wouldn't be a large chunk--history is full of economies that don't get healthy for decades.
__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is online now   Reply With Quote
Old 02-29-2008, 02:31 PM   #28
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,617
Quote:
Originally Posted by RockOn View Post
Good answers but there must be some rate that would flip that switch. None at all?
Quote:
Originally Posted by samclem View Post
Per Audrey's point: Something would have to motivate an issuer to offer 8+ % on fixed rate securities.
Nope. I'd rather trust in the stupidity of large groups of uninformed & emotional investors in a capitalistic society than depend on large groups of uninformed govt bureaucrats setting arbitrarily high rates just to clear the auction.

I already have my military pension and my putative SS benefits indexed to inflation. I don't think it'd be very smart to give the govt the responsibility for paying me the rest of my money. Sure, they can run the Treasury's presses at full speed... but as that would implode the dollar, wouldn't that cause international investments to be worth more than U.S. debt?

As for the "govt securities at xx% above inflation" crowd-- are you the same people who are arguing that the CPI does not reflect reality and is used to punish both consumers & SS recipients?

Quote:
Originally Posted by RockOn View Post
P.S. I believe it is Bernstein (among some others) who says the return one should reasonably expect from bonds is 6% and 6.5% in stocks over the next 10 years or so. How can that be reconciled with not being willing to take a 6% pretty sure thing?
Like I said, most of my income is already annuitized and there's no reason to "settle" for a "pretty sure thing". I can take risks with the remainder of the portfolio, knowing that if I'm horribly wrong then I can cut spending or (*clench*) get a job. If the govt annuities collapse, well, I'll have bigger problems than worrying about pension checks.

I'm a fan of Bernstein but I'm no apostle. Bernstein may also have been talking about total market returns, too, which leaves out niches like international & small-cap value assets. And let's not forget that while he does a great job of explaining asset allocation, a decade ago he was also substantially outperformed by a momentum investor and has yet to adequately address the debacle.
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Old 02-29-2008, 03:16 PM   #29
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Dawg52's Avatar
 
Join Date: Feb 2005
Location: Central MS/Orange Beach, AL
Posts: 7,438
I would be hard pressed to pass on a 7% cd for 10+ years. I jumped all over Pen Fed's 6.25% rate a year ago, why not 7% for a few years longer? I wouldn't have all my money in it, but a good chunk.
__________________
Retired 3/31/2007@52
Full time wuss.......
Dawg52 is offline   Reply With Quote
Old 02-29-2008, 03:29 PM   #30
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,117
Quote:
Originally Posted by FinanceDude View Post
I know a few folks who "pine" for the high CD rate days of the early 1980's. There were banks around here offering 13% CD's for 10 years, some even higher on shorter CD's

Of course, unemployment was around 9%, gas prices were high for the time, a 16-17% mortgage rate was normal, and car loans were 18-22%, but HEY, I'm getting DOUBLE digits on my CD's!!!
My dad loved to talk about his 3 year CD's paying 17% back in "the good old days"...
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 02-29-2008, 04:22 PM   #31
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
FinanceDude's Avatar
 
Join Date: Aug 2006
Posts: 12,484
Quote:
Originally Posted by REWahoo View Post
My dad loved to talk about his 3 year CD's paying 17% back in "the good old days"...
My dad still talks about it...........and THAT'S funny from a guy that thought the world was coming to an end when gas was 45 cents a gallon.........
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)


This Thread is USELESS without pics.........:)
FinanceDude is offline   Reply With Quote
Old 02-29-2008, 04:25 PM   #32
Recycles dryer sheets
 
Join Date: Jun 2007
Posts: 377
I would take 7% the rest of my life with no problem.

i save a good chunk of my monthly income from CD's and reinvest already, so it would just be more cash.

I think it depends on ones assets and situation also, but for me that would provide a nice standard of living, while allowing me to save retirement income every month (my way of fighting inflation).

Frankly if Inflation ever really hits, or hyperinflation I should say, we are all screwed anyway.
__________________
No Soup for you! Come back 1 year!
Bigritchie is offline   Reply With Quote
Old 02-29-2008, 05:57 PM   #33
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 798
Quote:
Originally Posted by kombat View Post
10%.

All my calculations are based on a "pessimistic" return of 8%, and an "optimistic" return of 10%. So if I could get a guarantee of my optimistic rate, I know I'd be on easy street, and I'd take it in a heartbeat.
10% is an answer I would have expected. Above that? I see there are some bulls on this board. Nothing wrong with that but I'm surprised at those looking for a higher return than 10%. I'd grab 8% for sure, probably 7%, maybe even 6.5%. I'd deal with inflation, I know it is rising now and could get out of control for a period, but locking in for a long time would smooth that out. Same for the weak dollar.

I read a few books and articles lately based upon recommendations from the forum, Bernstein, Swedroe, Clyatt, Ferri and Bogle. I don't remember exactly who said what but there was pretty much agreement that that returns on stocks and bonds will not be as high in the coming years for various reasons.

A theory I have is we'll not see 12-14% on Treauries again in our lifetimes, probably not even 8 or 9%. The boomer bubble is all looking for income and there is huge demand for fixed income if a good long term rate should appear.
__________________
RockOn is offline   Reply With Quote
Old 02-29-2008, 06:46 PM   #34
Thinks s/he gets paid by the post
DblDoc's Avatar
 
Join Date: Aug 2007
Posts: 1,224
Quote:
Originally Posted by mjarzoms View Post
Well the fed is stuck in a bind now. Lower rates and watch inflation and the dollar roar out of control.

Here is a good summary by Professor Roubini of the mess we are in:
That is a scary document to read. 1-2 trillion dollar loss just in mortgages...

DD
__________________
DblDoc is offline   Reply With Quote
Old 02-29-2008, 07:02 PM   #35
Thinks s/he gets paid by the post
free4now's Avatar
 
Join Date: Dec 2005
Posts: 1,225
I think I'd take something around 9-10%. It'd have to be close to what the stock market returns, but I'd take a little less because a truly fixed rate eliminates most sources of risk other than inflation. But whether I would trust any entity (other than the Gov) to guarantee anything for that long is up for debate.
__________________
free4now is offline   Reply With Quote
Old 02-29-2008, 07:15 PM   #36
Recycles dryer sheets
 
Join Date: Apr 2006
Posts: 397
Without knowing future inflation and tax rates locking in any fixed rate would be risky business. I might be tempted at 12% for half my portfolio. I always want a backup plan so half is all I would commit.

2soon
__________________
2soon2tell is offline   Reply With Quote
Old 02-29-2008, 07:44 PM   #37
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2003
Location: Kansas City
Posts: 7,409
Hmmm - after two yrs out - took a temp job for jobshopper $ at the old rocket plant. The guy who hired me made three mistakes:

1. By then I figured out that my balanced index funds and my reduced expenses had me set for ER - which I explained to him.

2. Turns out he had a very huge chunk of early 80's 30 yr Treasuries in the 12-14% range and enough years in for a nice pension.

3. After I finished my temp stint - within a few months - he took 55 and out. I went to his retirement dinner.

heh heh heh - I'm just a bad influence. Myself - I'll stick with ying and yang - balanced index. I didn't overload Treasuries in 1982 nor would I now at some X rate. Would I buy 'some extra' if yield got tempting yes - bet the farm? - er ah no.
__________________
unclemick is offline   Reply With Quote
Old 02-29-2008, 08:37 PM   #38
Thinks s/he gets paid by the post
free4now's Avatar
 
Join Date: Dec 2005
Posts: 1,225
For those who need more than the stock market's historical 10-11%, why? That return has historically been more than enough to cover inflation and still return 4% minimum. At 11% fixed you could still get 4% even if inflation were 7% for all 30 years. Periods of inflation higher than 7% have always historically been much shorter than 30 years, so you would have to be preparing for some much worse than historical inflation to require more than 11%.
__________________
free4now is offline   Reply With Quote
Old 02-29-2008, 09:07 PM   #39
Thinks s/he gets paid by the post
 
Join Date: Jan 2008
Posts: 2,020
My spreadsheet calls for a long-term return of CPI-P + 3%.

No Art, sorry, I don't trust the solvency of any insurer to back a contract for my time horizon. Maybe my view is poisoned from being on the inside, but it'd feel too much like putting all of my eggs in one basket.
__________________
Marquette is offline   Reply With Quote
Old 02-29-2008, 09:52 PM   #40
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,617
Quote:
Originally Posted by Marquette View Post
No Art, sorry, I don't trust the solvency of any insurer to back a contract for my time horizon. Maybe my view is poisoned from being on the inside, but it'd feel too much like putting all of my eggs in one basket.
They lose a little on each client, but they make it up on volume!
__________________

__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Explanation of Mortgage Rate & Interest Rate Enuff2Eat FIRE and Money 8 10-04-2007 03:25 PM
How often do you give... perinova Other topics 18 12-07-2006 09:01 AM
CPI Rate in Advvanced FireCalc - Inflation Rate al4trade FIRECalc support 7 10-04-2006 01:40 AM
I-Bond Fixed Rate Percentage modhatter FIRE and Money 10 11-01-2005 10:19 AM
EE Savings bonds to become fixed rate on May 1 soupcxan FIRE and Money 10 04-05-2005 08:54 AM

 

 
All times are GMT -6. The time now is 03:39 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.