Advice on how to get best interest on "safe" part of retirement funds?

[Homeby5]

Any idea on where to park your part of your retirement portfolio that is supposed to be "safe" during a stock crash? Anyone getting a decent interest rate?
Thanks

 

[OldShooter]

IMO TIPS are about as safe as it gets.

 

[MRG]

Here's a thread you might be interested in. I think there is a 2019 version as well. Probably in the fire and money sub.


http://www.early-retirement.org/forums/showthread.php?t=101376

 

[LRDave]

Nothing is exactly "safe". We use TIAA Traditional as our "safe" bucket, in that principle is not at risk and it at least earns 3%. But it has withdrawal complications and inflation is also a risk.

 

[Katsmeow]

I don't have anything like that. Pretty much everything is either in equity mutual funds or total bond funds. If there was a stock "crash" then I would sell from the bond funds.

 

[Aerides]

We keep about 3 years expenses in cash/cd's/banks as a hedge against having to sell equities in a down market. The MM accounts at VG/Fido pay pretty well, as do CD's at Ally, including their no-penalty one.

 

[BeachOrCity]

IMO TIPS are about as safe as it gets.

You still recommend TIPS now even with real yields so low or even negative at the short end?

 

[calmloki]

Currently I'm sticking cash in CIT and EBSB banks. Something like 1.8% but heading down like our Discover and Ally bank accounts. Just for fun you can try turning any of those computer bank digital dollars into real paper cash money. Not easy. You can also imagine some other country's hackers making your digital dollars go poof. Safe. hunh.

We're headed to Guatemala this week so we bought some Guatemalan paper money. Brightly colored, security strips, special paper, holograms - their paper money is impressive. And 100 Quetzals are worth about $7 US. Our $200 of walking around money converted to a stack about 3/8" thick. So what if US money becomes valueless? Stocks? If they can crash or shoot upwards what does that say about their intrinsic value? Why is Apple worth twice what it was a year ago?

I'm gonna put our money in canned soup. and maybe chickens.

<do not take investment advice from this man. Your performance may vary. Void before going to bed.>

 

[OldShooter]

You still recommend TIPS now even with real yields so low or even negative at the short end?

Sorry, I have not been keeping up. What was the guaranteed real yield on the last 20 year treasury auction?

 

[OldShooter]

You still recommend TIPS now even with real yields so low or even negative at the short end?

(Another thought/next day)

Short dated TIPS are IMO something to stay away from. I was looking at them a year or so ago and saw some very crazy numbers. TIPS a few months apart at wildly different YTMs. After some consultation with the Schwab bond desk we figured out that the short TIPS pricing was driven by the timing of the semiannual inflation adjustments vs the maturity of the bond. So there is action behind the curtain and the YTM does not tell all. My conclusion was to leave these to the professional TIPS traders, but as always YMMV.

 

[target2019]

Guaranteed Interest in a TSA is 3%
Discover Bank is 1.7%
Inherited Annuities still at 3%
Stable Value in a 401(k)
That's how we roll with 'safe'

 

[pb4uski]

I think that your best bet is to be patient and keep your eyes peeled for some credit union CD specials... look locally and the link in post #3 above.... I scooped up some 3.5% and 3.0% 5-year credit union CD specials in 2019 but 3.0% is pretty good now if you can find them.

In the meantime, you can park money in an online savings account (Discover Bank is 1.7%) or a money market fund (VMMXX is 1.71%).

Is this taxable account, tax-deferred or tax-free?

 

[brewer12345]

I buy 5 year CDs from time to time when I think rates are attractive. At the moment they are poor, so I will wait for a special at a credit union. In the meantime, extra cash goes in an online bank account, T bills, or Money Market.

 

[BeachOrCity]

Sorry, I have not been keeping up. What was the guaranteed real yield on the last 20 year treasury auction?

.15 for 10 year and .5 for 30 year

 

[pb4uski]

.15 for 10 year and .5 for 30 year

So if Fed hits its 2% inflation target then 2.15% for the 10 year and 2.50% for the 30 year?

 

[OldShooter]

.15 for 10 year and .5 for 30 year

I was asking about the Treasuries, not TIPS.

 

[OldShooter]

So if Fed hits its 2% inflation target then 2.15% for the 10 year and 2.50% for the 30 year?

Yes. You could also do the calculation using:

3.22%, which is the 100 year average US inflation. (https://inflationdata.com/Inflation/Inflation_Rate/Long_Term_Inflation.asp)

4.1%, which is the average for the about the last 60 years. (https://onceusave.com/wp-content/uploads/2018/01/core-CPI-inflation-1020x574.png)

Or just take what seems to be the most popular approach, believing what Sir John Templeton called "The four most dangerous words in investting."

This time it's different.
​

 

[BeachOrCity]

So if Fed hits its 2% inflation target then 2.15% for the 10 year and 2.50% for the 30 year?

Yes