Poll-What is your current annual cash income from fixed investments

[haha]

I believe in a cash and carry retirement- not in automatically taking 4% in any of that plans many permutations. So I want income from my equities, my partnerships, and my cash/CDs/bonds.

Right now I have only I-bonds and insured CDs- and I only get $5560 per year from these. My longest CD is a 5 year from PenFed, but the lion's share is 2 years or less.

Ben is killing the retired saver in order to transfer our money to the banks.

I refuse to be manipulated into more equities than I want at this time, but this enire situation is annoying to me.

How much annualized cash income do you get from fixed income investments today? Count taxable, Roth, and non taxable sources.

NB- If anyone has privacy concerns, I hope you will vote anyway, since the votes are anonymous.

Ha

 

[Stevewc]

Ha,
While we are waiting for others to chime in. I have a ? for you.
I noticed your longest cd is 5 years.
Do you think we are nuts for considering the 10 year cd at penfed?
I personally was not a member when the 5% @ 10 yrs was offered but have joined now and hoping to see any new specials that may come along.
Interested in your thoughts,
Steve

 

[GregLee]

Since I don't believe in fixed income investments in an investing environment where interest rates are very low, I have none now. So I voted <$5000.

 

[Gone4Good]

Do you think we are nuts for considering the 10 year cd at penfed?

I'm not Ha, but I'll answer anyway.

I don't think you're nuts at all. The rates are far better than similar maturity treasuries for what should be nearly identical credit risk. And the "duration" on your 10-yr CD (basically your break fee / change in rates) is far, far lower than 10-yr treasuries. The higher rates go, the lower your duration. It's a great asset in the current market.

 

[Rambler]

I'm at about 60/40, with most of the 40 being in munis, and most of that tax free, and most of that in longish GO bonds. This tosses off a lot of cash, which (since I'm not FIREd) is reinvested. Since I'm working and in the 35% fed bracket, +10% state, this works out to a pretty good deal for me at about a hypothetical 10.4% taxable equivalent yield on the face amount. The market value is up a bit so the yield on the market value is a little lower, but I bought this more for cash flow than capital appreciation.

R

 

[Stevewc]

I'm at about 60/40, with most of the 40 being in munis, and most of that tax free, and most of that in longish GO bonds. This tosses off a lot of cash, which (since I'm not FIREd) is reinvested. Since I'm working and in the 35% fed bracket, +10% state, this works out to a pretty good deal for me at about a hypothetical 10.4% taxable equivalent yield on the face amount. The market value is up a bit so the yield on the market value is a little lower, but I bought this more for cash flow than capital appreciation.

R

Rambler,
Have you had any muni's called in the recent past?
I have so just wondering.
I guess they were able to do a call and get new money at a lower rate.
Not good for me but a winner for the tax payers I suppose.
Steve
(edit to change wording from recall to called.) Felt like a recall to me though

 

[Rambler]

None yet. So far so good, and last year I picked up a bunch of GOs at 6%...that's tax hypo 10.9 for me. I think the earliest call dates on those were some 10-15 years down the road, but I would have to check. Those were new issues. The rest vary quite a bit, but none have been recalled yet.

R

 

[haha]

Ha,
While we are waiting for others to chime in. I have a ? for you.
I noticed your longest cd is 5 years.
Do you think we are nuts for considering the 10 year cd at penfed?
I personally was not a member when the 5% @ 10 yrs was offered but have joined now and hoping to see any new specials that may come along.
Interested in your thoughts,
Steve

No, I don't think anyone is nuts. These very long CDs may turn out to be a good move; I just don't feel attracted to them personally.

Ha

 

[FIREd]

I have:

CDs, average 8.8 years to maturity, average yield 4.55%
TIPS, average 23 years to maturity, average real yield 1.99%
Munis, average 6.2 years to maturity, average yield 3.65%
I-bonds, average 29 years to maturity, average real yield 0.33%
Corporates, average 6.5 years to maturity, average yield 4.5%

Together, they generate enough income to pay for basic expenses.

 

[Stevewc]

No, I don't think anyone is nuts.
Ha

Are you sure about this ha ?
Have you taken a good look at this group lately?
Steve

PS. You are right, the long term cd could be a good move. But if rates start moving up fast we might be crying the blues.

 

[clifp]

Ha should we include things like ISM/OSM which are bonds but have a variable interest rate.

What about things like a Vanguard GNMA or High Yield.

 

[haha]

Ha should we include things like ISM/OSM which are bonds but have a variable interest rate.

What about things like a Vanguard GNMA or High Yield.

Yes, I would include all of those things. Thanks for asking.

Ha

 

[chinaco]

Still in accumulation mode so I did not take the poll, but I am working on my solution.

A few comments.

Yes the Fed is doing a number on retirees that invested for retirement income. Not much that we can do about it but complain. However, I believe it will be temporary... The economy will turn around or they will cave in under political pressure. As the old saying goes "Don't fight the Fed"! One thing I am not doing is chasing yield on fixed (right now). While we cannot predict the timing of it... there is little doubt where interest rates are headed. Since I am not relying on income from my investments yet... I shortened our aggregate duration on bond funds. I will reallocate fixed once the artificial interest rate manipulation ends. Inflation appears to be low so I for now I am content riding it out for 6 months or so to see what happens.


I am working on our approach to managing income during FIRE.

I see the wisdom in your approach to income.

Bottom line, DW and I have achieved our goal... my job now is to maintain our wealth... not take excessive risk to try to maximize growth of our wealth. By that I mean... what we did at 30 is not the best approach for a couple at 55 planning for FIRE.

 

[Gone4Good]

Ben is killing the retired saver in order to transfer our money to the banks.

As an aside, I'm not so sure low rates are entirely Ben's fault. Even with QE2, he doesn't control the term structure. It's highly likely if he tried to raise short rates, long rates would go lower still.

 

[smjsl]

CDs, average 8.8 years to maturity, average yield 4.55%

This is amazing to me. FD, if you don't mind telling us, how did you get this high yield on CDs - even if you were buying CDs a year ago for 10 year terms, I did not think there were CDs with that high of a yield. So do these include 20-/30- year CDs? Are these US CDs?

Also, for TIPs - do you buy individual ones (not a fund), and is there some way to ensure a minimal real yield on TIPs when you buy them (or you have to accept whatever the auction happens to give you). In other words, can you place kind of a "limit" order on TIPS?

 

[HFWR]

Answered the poll...

Currently, bonds are about 40% of the portfolio, leaving aside the TIPs exposure I get with PCRIX. Yield from "bonds/cash" is about 5%.

Mix of HYG, LQD, BSV, IEI, and TIP.

REIT (IGR) is another 5% of the portfolio, and is yielding around 7%.

Total portfolio yield is guesstimated to be 3.2%.

 

[FIREd]

This is amazing to me. FD, if you don't mind telling us, how did you get this high yield on CDs - even if you were buying CDs a year ago for 10 year terms, I did not think there were CDs with that high of a yield. So do these include 20-/30- year CDs? Are these US CDs?

Also, for TIPs - do you buy individual ones (not a fund), and is there some way to ensure a minimal real yield on TIPs when you buy them (or you have to accept whatever the auction happens to give you). In other words, can you place kind of a "limit" order on TIPS?

CDs: pretty much all my CDs are 7-10 year CDs paying 3.55%-5% (some USAA but mostly PenFed). All bought over the past year (Note: my reserved PenFed 10 year CD @ 5% for 01/2011 are already included in my spreadsheet).

TIPs: all individual bonds bought on the secondary market (that way I know in advance what yield I am accepting).

 

[Rustward]

Had not looked for a while. It is more than I thought.

 

[calmloki]

lots of loans and a chunk of PenFed 4% CDs have our "fixed income" up around a 1/3 of our total income. Well, it's fixed income except for when people default. The rest of our income is from the rentals. It's fixed as well, except when people move out or fail to pay. Is fixed income some sort of guaranteed income? What's that?

 

[haha]

lots of loans and a chunk of PenFed 4% CDs have our "fixed income" up around a 1/3 of our total income. Well, it's fixed income except for when people default. The rest of our income is from the rentals. It's fixed as well, except when people move out or fail to pay. Is fixed income some sort of guaranteed income? What's that?

I would say that your loans and CDs are fixed income, but your rental business is more akin to equities- though in my opinion likely much more solid than stock income, and more responsive to inflation too.

Ha

 

[Danmar]

I only get interest on my savings account currently at 1.15% I agree with your approach to retirement-ie live off the portfolio yield. This reduces the chance of running out of money (almost to zero I think). Also don't have to decide what to sell etc. Blue chip equities paying divs around 3% currently look pretty good to me. Especially if you have a pension to assume the role of fixed income. May result in quite a legacy but I can always adjust to that later.