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Old 06-19-2016, 01:17 PM   #21
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Because the CDs are guaranteed and I'm very close to retirement and if I had to I could make it ok on my income from the CDs and my rental income, after I sell my business, that will just be bonus points, I'll feel more comfortable putting that money in the market.
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Old 06-19-2016, 01:19 PM   #22
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You haven't noticed any inflation because right now inflation is pretty low, hence the low rates on cd's and savings accounts. You are in your mid 40's so I'll say 45, you want to retire in 5 years that puts you at 50.
So you have at least 35 to 40 years. stability is all well and good but losing money is never a good idea. just my take.

cars, once again you're only 50. the reality is even with taking care of the car you will need at least one more ESPECIALLY in rural America where driving is a must.

remember retirement planning is for the future. i too use to grow my own food until I got severe arthritis in my knees, lol and I'm only in my mid 50's, I can assure you at 65, no way, no how will I be able to do it (unless I get two knee replacements).

my point being that sure NOW you feel you can afford to get lousy returns 10,15, 20 years it maybe a whole different ball of wax.
Heck this is an election year, this time next year it could look totally different.

I'm with the rest of the gang, no way would i put 700K in cd's that's a lot of money that could be seriously working for you.

you didn't mention health care, will you healthcare cost rise if you take Early retirement?
So you're saying if inflation rises, Cd rates will rise, I'm ok with that.
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Old 06-19-2016, 02:28 PM   #23
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Nope, I'm saying the object is to not LOSE money. You say you want the money in cd's because it's "safe". In reality it's not safe (if we are defining safety as no lose of money) If your cd is giving you 2.1% return and inflation is currently around 3% I guess I don't see that as safe.

I think cds are great for cash that i need soon. Now I don't have rental income so my strategy is different. I need my money to make money and for me lowering my standard of living is so not an option, lol the point of me saving was so I would not have to do that in retirement.

It sounds like you really don't have a tolerance for risk, which is fine, many people don't
Would u consider a split? Put some conservatively away and a bit invested for growth?

Hey just my 3 cent opinion. If i had 700k laying around that i didnt need for at least 6 or more years, no way would I be settling for 2% returns but my tolerance for risk seems to be a bit higher so I can sleep very comfortably at night with 350K in equities.

I have a targeted fund for my 401k ytd is 5.7%
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Old 06-19-2016, 03:00 PM   #24
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I think if I had 700k coming in, I'd read a few books about asset allocation as I was being advised by folks who've been there.
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Old 06-19-2016, 03:07 PM   #25
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I think if I had 700k coming in, I'd read a few books about asset allocation as I was being advised by folks who've been there.
+1

This is a good list of investment books, many of which discuss asset allocation:

https://www.bogleheads.org/readbooks.htm
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Old 06-19-2016, 03:45 PM   #26
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Investing has so many variables both intellectually and emotionally. Is a legacy important? Will inflation be that devastating to you? Would you sell out on a downturn, not being able to take the pain? Most people here are giving unemotional facts based on historical terms. But emotions may come into play for you and that can never be discounted.
Though statistically accurate, no one citing well meaning if not correct advise here will be giving you a bailout if market drops. The only thing we know for sure with that 1.4 million in 5 years you can dig $40,000 out of mattress every year for 35 years... And that isn't including interest in a 2.1% CD now. Plus you have SS coming online in your 60s too I assume.
My only advise is this....If your first thought was putting it all in CD's, the last thing I would be doing for psychological reasons is dumping a good chunk of my money in the market now matter how many years of living I have left. If you have 40 years of life left, you have time to slowly figure it out.


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Thanks Mulligan
Old 06-19-2016, 04:04 PM   #27
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Thanks Mulligan

Quote:
Originally Posted by Mulligan View Post
Investing has so many variables both intellectually and emotionally. Is a legacy important? Will inflation be that devastating to you? Would you sell out on a downturn, not being able to take the pain? Most people here are giving unemotional facts based on historical terms. But emotions may come into play for you and that can never be discounted.
Though statistically accurate, no one citing well meaning if not correct advise here will be giving you a bailout if market drops. The only thing we know for sure with that 1.4 million in 5 years you can dig $40,000 out of mattress every year for 35 years... And that isn't including interest in a 2.1% CD now. Plus you have SS coming online in your 60s too I assume.
My only advise is this....If your first thought was putting it all in CD's, the last thing I would be doing for psychological reasons is dumping a good chunk of my money in the market now matter how many years of living I have left. If you have 40 years of life left, you have time to slowly figure it out.


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. Thanks for your response. Many here are bullish, I am not, 5 years from now I may be, but not now.
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Old 06-19-2016, 08:02 PM   #28
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Quote:
Originally Posted by Mulligan View Post
Investing has so many variables both intellectually and emotionally. Is a legacy important? Will inflation be that devastating to you? Would you sell out on a downturn, not being able to take the pain? Most people here are giving unemotional facts based on historical terms. But emotions may come into play for you and that can never be discounted.

Though statistically accurate, no one citing well meaning if not correct advise here will be giving you a bailout if market drops. The only thing we know for sure with that 1.4 million in 5 years you can dig $40,000 out of mattress every year for 35 years... And that isn't including interest in a 2.1% CD now. Plus you have SS coming online in your 60s too I assume.

My only advise is this....If your first thought was putting it all in CD's, the last thing I would be doing for psychological reasons is dumping a good chunk of my money in the market now matter how many years of living I have left. If you have 40 years of life left, you have time to slowly figure it out.





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. Thanks for your response. Many here are bullish, I am not, 5 years from now I may be, but not now.


One Day, my bias admittedly is toward your viewpoint. I do not own CDs anymore, but up until a few years ago that was where my money was at. It is now not in common stocks either, but preferred utility stocks that yield 6% or so. Not recommending that to you, just admitting by bias leans your way.
I suspect some people glanced over your key points you mentioned later.... 1) Rental Income (mostly inflation protected income) 2) Frugality 3) Limited needs 4) Flexibility to cut spending.
Any decision has upsides and downsides to choices... But being a low cost of living rural person myself, and being around people like you I would make a substantial wager with anyone I could that the next 40 years you would do just fine doing what your initial thoughts are.
That doesn't mean of course that maybe you should not consider equities at some point. Its just I know "your type", been around them my entire life. And none of them are heading for homelessness under a bridge.
Its the ones that head into retirement NEEDING 7% market returns the rest of their life to make their retirement work are the ones I worry about.


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Old 06-19-2016, 08:26 PM   #29
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Oneday, Since this is the money received from sale of property, do make sure you have figured out how much you will need to pay in taxes for the capital gains. You may realize you don't really have $700K after all.

For whatever amount you have left over after accounting for income taxes, I would suggest you pick an asset allocation that you are comfortable with in the long term and invest it for growth & income appropriately.

Best Wishes,
Rick
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Old 06-20-2016, 05:08 AM   #30
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Because the CDs are guaranteed and I'm very close to retirement and if I had to I could make it ok on my income from the CDs and my rental income, after I sell my business, that will just be bonus points, I'll feel more comfortable putting that money in the market.
Seems like you had made your mind If your comfort level is put it into CDs then you should do that. That is better then placing it into VTI and then panic selling if VTI drops 30%.


People were just trying to answer "What would you do with $700k ?".
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Old 06-20-2016, 05:32 AM   #31
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Stocks are too high, interest rates too low to get excited about investing it.

I'd hold cash/CDs or spend it on something rather than risk losing it.
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Old 06-20-2016, 10:04 AM   #32
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One Day, my bias admittedly is toward your viewpoint. I do not own CDs anymore, but up until a few years ago that was where my money was at. It is now not in common stocks either, but preferred utility stocks that yield 6% or so. Not recommending that to you, just admitting by bias leans your way.
I suspect some people glanced over your key points you mentioned later.... 1) Rental Income (mostly inflation protected income) 2) Frugality 3) Limited needs 4) Flexibility to cut spending.
Any decision has upsides and downsides to choices... But being a low cost of living rural person myself, and being around people like you I would make a substantial wager with anyone I could that the next 40 years you would do just fine doing what your initial thoughts are.
That doesn't mean of course that maybe you should not consider equities at some point. Its just I know "your type", been around them my entire life. And none of them are heading for homelessness under a bridge.
Its the ones that head into retirement NEEDING 7% market returns the rest of their life to make their retirement work are the ones I worry about.


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Thanks Mulligan and everyone else for their input, I appreciate all of it. I may have changed my mind somewhat, seriously considering putting 500k in to cds, another 100k in to VTEB " Vanguard bond "and the other 100k in to a VUIAX " vanguard utility ", or similar funds.
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Old 06-20-2016, 01:18 PM   #33
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Regarding CD's keeping up with inflation, here is a good and simple article about whether CD's maintain your spending power.

http://www.investopedia.com/articles...ey-keeping.asp

Conclusion
No matter which method you use to measure inflation, the after-tax return of traditional CDs is no match for the rate of inflation. If you're intent on investing in CDs due to a low tolerance for risk, consider some CD products that can potentially boost your returns without sacrificing safety.



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Old 06-20-2016, 01:45 PM   #34
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Seems like you had made your mind If your comfort level is put it into CDs then you should do that. That is better then placing it into VTI and then panic selling if VTI drops 30%.


People were just trying to answer "What would you do with $700k ?".
Your right for the most part, I had my mind made up but I've changed it, lol. Thanks for your input.
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Old 06-20-2016, 02:14 PM   #35
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I am one of the "Stock Market" Avoidance team. While we will not make more money than some. We have been very lucky with the "right" CDs. In 1991/2 I invested ALL our retirement money in 7 - 9% CDs for 10 Years. I was poo poo'd by all the "smart" money I knew at the time. (A SoCAL Special at the time forgot where, I think it was OC Credit union). That virtually set up us up for our retirement. Unfortunately when they matured in 2001/2 Interest rates were only ~5% I slung it all in at between 4-5% for 5 years. After that I flopped about in short term money vehicles convinced the rates would go up, they did not. Then in around 2013/4 I jumped on a PenFed 3% 5 Year Special which is where ALL our non essential After Tax Money lives now. Currently Both DW and My IRA's are currently making 3.1% average. We have not regretted it one bit. Honestly, we have not noticed any significant inflation causing us to re-think things. We totally missed all the market crashes (and jumps, that in some cases only made folk back what they lost in the crashes)

We sleep very soundly and do not worry about a thing (Except Healthcare, but that is another story)

We keep 4 years living expenses in cash. We both retired once in 2003 for 5 years to go sailing, and then finally again in 2012. While we worked we saved as much as possible.

The moral of this story is you do what fits your own lifestyle and tolerance, and as long as you get a good nights sleep and do not want for anything, you Won!
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Old 06-20-2016, 03:56 PM   #36
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I am one of the "Stock Market" Avoidance team. While we will not make more money than some. We have been very lucky with the "right" CDs. In 1991/2 I invested ALL our retirement money in 7 - 9% CDs for 10 Years. I was poo poo'd by all the "smart" money I knew at the time. (A SoCAL Special at the time forgot where, I think it was OC Credit union). That virtually set up us up for our retirement. Unfortunately when they matured in 2001/2 Interest rates were only ~5% I slung it all in at between 4-5% for 5 years. After that I flopped about in short term money vehicles convinced the rates would go up, they did not. Then in around 2013/4 I jumped on a PenFed 3% 5 Year Special which is where ALL our non essential After Tax Money lives now. Currently Both DW and My IRA's are currently making 3.1% average. We have not regretted it one bit. Honestly, we have not noticed any significant inflation causing us to re-think things. We totally missed all the market crashes (and jumps, that in some cases only made folk back what they lost in the crashes)

We sleep very soundly and do not worry about a thing (Except Healthcare, but that is another story)

We keep 4 years living expenses in cash. We both retired once in 2003 for 5 years to go sailing, and then finally again in 2012. While we worked we saved as much as possible.

The moral of this story is you do what fits your own lifestyle and tolerance, and as long as you get a good nights sleep and do not want for anything, you Won!
https://dqydj.com/wilshire-5000-return-calculator/

I am not sure about "lucky" part of this. But I do agree you should do what you are comfortable with.

VTI would make annualy 10% plus over that entire 25 year period while resulting in significantly lower taxes since qualified dividends on up to 92k income are tax free.

BTW I hear Stock Market is overpriced for last 30 years. (from some people)

I am an Engineer so arguing with me is a bad idea
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Old 06-20-2016, 04:13 PM   #37
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The stock market was around 18,200 or so last year, and a year later it is 17,800, so after you figure in inflation, it is quite a bit cheaper now, not overpriced.

It might be overpriced next year when it is 19,000.
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Old 06-20-2016, 04:21 PM   #38
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If your plan is to have half in CDs and half in the market, why not put half in 5 year CDs and half in VTI?
Hindsight is always 20:20. I know a lot more folk who did not do as well also. You are assuming one had blinkers on, and did not change anything in the time period. Not all of us are that disciplined. I guess it would be different if we were skimping and scraping to get by I suppose. We have more than enough for what we need, so sleeping well is more important... to us that is.
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Old 06-20-2016, 04:33 PM   #39
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Hindsight is always 20:20. I know a lot more folk who did not do as well also. You are assuming one had blinkers on, and did not change anything in the time period. Not all of us are that disciplined. I guess it would be different if we were skimping and scraping to get by I suppose. We have more than enough for what we need, so sleeping well is more important... to us that is.
So for example myself... I am not assuming at all.

I bought things and made 0 changes in 2001 or 2008.

I am sleeping fine collecting 80k in dividends knowing that most likely next year I will collect more. Knowing that my investment is not eroded by inflation. Knowing that most likely next year my investment income will be up.
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Old 06-20-2016, 06:53 PM   #40
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I would invest it in some very simple investment vehicle (CDs are not investment)
Like put 100% into VTI

I'm along those lines too. The yield will give you about 12k per year pretax ... Fairly reasonable inflation hedge. Being in your mis 40s you can ride out market downturns still collecting the dividend and plan to have this money last for 40+ years.
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