|
|
01-19-2009, 09:05 PM
|
#41
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
|
The title of this thread is "Can you get rich with CDs?" The answer, obviously, is no.
If the question is recast as "Can you survive with CDs, given plenty of money, or one or two or more COLA pensions, and/or an age that would not be commonly thought of as early retired, the answer is just as clearly "yes".
Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
|
|
|
|
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!
|
01-20-2009, 05:35 AM
|
#42
|
Dryer sheet aficionado
Join Date: Oct 2008
Posts: 46
|
|
|
|
01-20-2009, 11:12 PM
|
#43
|
Full time employment: Posting here.
Join Date: Dec 2006
Posts: 880
|
"OAG". I agree with you. My retirement plan was very similar. Currently, I also search for the best CD rates. Penfed, USAA, Capital 1 (poor CS), etc.
In the past, Penfed had some 7% CD's. Currently I have their 6 1/4 CD's. 5yr and 7 yr terms.
I also have funds in my local Credit union (former employer), I always ask if they give customer's with large balances better CD rates.
One day I was surprised when they said they would match other Credit Unions rates up to 1% over their current rates. (they have recently change it to 1/2%). Always ask!!!!!
Since retiring, at 55, I've kept about 18% in stock. The balance in CD's. 7 years later, We are still in pretty good shape.
Much more to say, Don't want to bore anyone.
But one last thought, ALL of the highly paid experts, who promote equity, warn us about inflation, were all wrong! The worst stock market drop in 50 years, and they all missed the call.
If the experts cannot predict or make the right call, why do so many people base their investments on their advice?
Sometime's it best to use common sense, don't be greedy, and sometimes dont't follow the crowd.
|
|
|
01-21-2009, 05:24 AM
|
#44
|
Thinks s/he gets paid by the post
Join Date: Dec 2004
Location: Minneapolis
Posts: 4,455
|
Quote:
My question is: I like the security of CDs despite the modest returns and I'm wondering if anyone has accumulated a sizeable portfolio ($1 million+) by just investing with CDs over the course of their lives?
|
No - the return of CDs will not provide enough income to support our expenses. However, if one can live off the income from CDs forever, the answer is yes.
__________________
May we live in peace and harmony and be free from all human sufferings.
|
|
|
01-21-2009, 05:59 AM
|
#45
|
Recycles dryer sheets
Join Date: Apr 2008
Posts: 125
|
Quote:
Originally Posted by Spanky
However, if one can live off the income from CDs forever, the answer is yes.
|
Perhaps, but the principal is usable too. In simple terms, one could draw down $360k in CDs over thirty years at $1k a month. Obviously inflation and interest earned both play a role in the amount you can realistically withdraw, but to not use the principal means leaving cash on the table at the end.
Granted, the time frame is an unknown, but one can reasonably use a plan that includes other investment strategies (pensions, Social Security) to ensure that running out of CD cash at 90 years old will not be the cause of a pet food diet. I don't think my need/desire for cash will be as great 40 years hence, and while the CDs may not last the term, not only will other sources of income pick up the slack but many expenses will cease.
CDs are for risk averse investors who can stomach NOT making a ton of money when it's good, and who can't stomach losing a ton (even on paper) when it's ugly.
|
|
|
01-21-2009, 07:51 AM
|
#46
|
Thinks s/he gets paid by the post
Join Date: Jul 2007
Location: St. Louis
Posts: 1,563
|
Can You Get Rich With CDs? You could over time if you were a great saver. The thing is you don't go 40 percent in the negitive in one year.
|
|
|
01-21-2009, 05:24 PM
|
#47
|
Thinks s/he gets paid by the post
Join Date: Jan 2006
Posts: 1,645
|
My dads retirement savings thru his work were all in CDs. Had about 400K when he passed back in 2004. Wasn't even drawing any of the money. Both he and my mom were tightwads and always were super conservative with money.
|
|
|
01-21-2009, 09:30 PM
|
#48
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 17,809
|
This discussion has surprised the heck out of me. I thought I was the only one on the board who was so risk averse as to to stay mainly in cash equivalents for most of my saving career (mostly GICs, AKA Stable Value funds in 401(k))
Having said that, my best move and the reason I could retire is that I left money in Megacorp's stock in my 401(k) and watched it explode (no, that's a good thing!). Sold most of it before bottom fell out in 2000s. Sooooooo Did all the "wrong" things for (probably) all the wrong reasons and still came out pretty well. Still, if I'd stayed in all equities back in 74/75 instead of going to cash (with MY 401(k) money, that is), I would, indeed, be rich now instead of just "very comfortable" - whatever that means.
I do worry constantly about inflation, so I'm still convincing myself I need to get more into equities if I really do plan to live another 30 years.
I need to get off the pot (no, the other kind) and get going on my "plan". This discussion has NOT helped!!! But thanks for letting me know I'm not alone in staying mostly in cash.
__________________
Ko'olau's Law -
Anything which can be used can be misused. Anything which can be misused will be.
|
|
|
01-21-2009, 10:51 PM
|
#49
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
|
Quote:
Originally Posted by Koolau
This discussion has surprised the heck out of me. I thought I was the only one on the board who was so risk averse as to to stay mainly in cash equivalents for most of my saving career (mostly GICs, AKA Stable Value funds in 401(k))
|
Check again when the market has doubled. Won't be many risk averse people around then, instead we'll all be deriding those whose equity allocation seems too small.
Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
|
|
|
01-22-2009, 12:50 AM
|
#50
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 17,809
|
Quote:
Originally Posted by haha
Check again when the market has doubled. Won't be many risk averse people around then, instead we'll all be deriding those whose equity allocation seems too small.
Ha
|
I hope you're right, Ha. I hope I'm one of those who has "seen the light" by then. I've missed a lot of possible gains over the years by being so risk averse. Of course, I've never suffered much in the way of losses either. You pays yer money and takes yer choice, I suppose. I know there is a balance and I hope I can find the best balance for me. I'm workin' on it!
__________________
Ko'olau's Law -
Anything which can be used can be misused. Anything which can be misused will be.
|
|
|
01-22-2009, 02:42 AM
|
#51
|
Recycles dryer sheets
Join Date: Jun 2007
Posts: 118
|
It is comforting, in a strange sort of way, to find that there are so many others who are nearly as risk adverse as I. I've never been able to stomach losses and have kept over 95% of my assets in cd's, government savings bonds and the Thrift Savings "G-Fund." Consequently, I've slept well and at present still have a nestegg in the neighborhood of $1.6M. The "secret" has been good 'ol fashion frugality -- LBYM. Looking forward, I hope I'll build up enough courage to someday have a light exposure in equities, perhaps 25 percent. But, I don't expect I will ever have the stomach for the asset allocations many count on. My plan is to continue to live modestly. I expect that my nestegg will spin off enough income (at a conservative 2 percent WD rate) to keep me going until the grim reaper arrives. I do have a small cola'd pension of about $20k and social security to fill things out a bit. The bottom line is that I believe it is still possible to achieve finanical security in retirement without exposing oneself to very much risk. Bottom Line: you can become financially secure without much exposure to risk, and more importantly you can stay that way.
|
|
|
01-22-2009, 06:40 AM
|
#52
|
Recycles dryer sheets
Join Date: Apr 2008
Posts: 125
|
Quote:
Originally Posted by haha
Check again when the market has doubled. Won't be many risk averse people around then, instead we'll all be deriding those whose equity allocation seems too small.
Ha
|
And I'll refer back to this thread if I need motivation to hold to what has worked: http://www.early-retirement.org/foru...all-41947.html
Granted this guy's asset allocation was skewed, but how many folks here have had their retirement pushed back years or cancelled due to this downturn?
Can't buy that back.
|
|
|
01-22-2009, 06:46 AM
|
#53
|
Full time employment: Posting here.
Join Date: Aug 2006
Location: Columbus
Posts: 769
|
Maybe some stock gurus can do a little figuring and we can make a comparison of different investing paths over the last 24 years.
Here's the numbers. In November 1985 DW quit working and took her pension benefit in a lump sum of $4700. It was rolled into an IRA (cd) and has been compounding ever since. The current value (1-1-09) is $23818.
So with a starting value of $4700 on November 1, 1985 what would you have today if it had been invested in the market (maybe something that follows the DOW or S&P) for same time period? I have no idea how to figure in dividends and espenses.
UH
__________________
100% retired and working hard at it.
|
|
|
01-22-2009, 09:04 AM
|
#54
|
Thinks s/he gets paid by the post
Join Date: Oct 2006
Posts: 4,629
|
Quote:
Originally Posted by UncleHoney
Maybe some stock gurus can do a little figuring and we can make a comparison of different investing paths over the last 24 years.
Here's the numbers. In November 1985 DW quit working and took her pension benefit in a lump sum of $4700. It was rolled into an IRA (cd) and has been compounding ever since. The current value (1-1-09) is $23818.
So with a starting value of $4700 on November 1, 1985 what would you have today if it had been invested in the market (maybe something that follows the DOW or S&P) for same time period? I have no idea how to figure in dividends and espenses.
UH
|
Somebody posted a neat link a few months ago that provided this calculation for any two dates. But I've lost the link.
I use Robert Shiller's data at: http://www.econ.yale.edu/~shiller/data/ie_data.xls
He just provides prices and dividends, so I have to do my own compound returns. I get the total (nominal) increase in the S&P 500 from 11-85 through 12-08 as converting $1.00 into $7.55. That means your $4,700 would have grown to $35,485. Note that Shiller's Dec 2008 price is $877, today's price is lower. Note also that this calculation doesn't deduct anything for investment expenses.
[If you want to check my math, I calculate a monthly return as (next month's price + dividend/12)/(this month's price). Then I multiply the 277 monthly returns.]
|
|
|
01-22-2009, 10:16 AM
|
#55
|
Recycles dryer sheets
Join Date: May 2008
Posts: 162
|
Threads like this seem to miss the question of who wants to be rich anyway? Seems a whole lot easier to be poor. And I don't have to mention that the government will take care of you anyway. Am i wrong again or what?
|
|
|
01-22-2009, 11:19 AM
|
#56
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
|
Quote:
Originally Posted by deepc
And I'll refer back to this thread if I need motivation to hold to what has worked: http://www.early-retirement.org/foru...all-41947.html
Granted this guy's asset allocation was skewed, but how many folks here have had their retirement pushed back years or cancelled due to this downturn?
Can't buy that back.
|
This is true, but very slanted. This guy in effect jumped into the tiger cage.
The board is full of people who have little or no pension and high stock allocations, and have not been particularly bothered by the downturn, although for the most part we would have preferred that it not happen. As for well diversified retirees who have had to go back to work, there have been a few who chose that and mentioned it. Many more are continuing as before.
However, my intention was not to argue for high stock allocations. My meaning was that the cautious attitudes being expressed mostly are due to recent market events, and with time will change as the market regains ground, and finally breaks new ground. Then the board once more will be home to many vocal equity fans.
People in general are not rational enough to invest important money in risk assets. I actually agree with the CD fans, if they are consistent. If CD fans don't like equity prices now, when will they like them? CDs will give absolute safety from what seems to be most feared- nominal volatility expressed in USD.
Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
|
|
|
01-22-2009, 02:18 PM
|
#57
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2005
Location: Northern IL
Posts: 26,821
|
Quote:
Originally Posted by deepc
|
Quote:
Originally Posted by haha
This is true, but very slanted. This guy in effect jumped into the tiger cage.
Ha
|
skewed?
I didn't find an exact number, but it sounded like over half ( I got the impression it was much more than that) his portfolio was in a single stock. And this is after he sold his business, making alternative income difficult. I've often heard the 5% number thrown out for a single stock, and I think that is reasonable. I've stretched that from time to time, but I've always asked myself - "are you prepared for the possibility that this thing goes to zero?". And sometimes I bought puts when doing that.
In some ways, I think I was lucky ( sure didn't feel "lucky" at the time). I made a major misjudgment *before* I retired. That helped me to look at things that way - what if this goes to zero (or thereabouts for a diversified fund)?
CDs might be the right ticket for some, but I don't think you should use the example of someone who took extreme specific stock risk and lost as a justification for that decision. Any more that I would point out a winner, and say that justifies equity investing. Or a 100 year old, pack-a-day guy as an OK to pick up the smoking habit.
-ERD50
|
|
|
01-22-2009, 02:31 PM
|
#58
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
|
Quote:
Originally Posted by ziggy29
I'm talking about the kind of fees that come with annuities pushed by salescritters that come with high commissions. The good news is that there are a growing number of these fixed annuities available now -- but there aren't any sales fees so you won't hear insurance salespeople pushing them.
|
Insurance salespeople get PAID on fixed annuities, they just get paid LESS than on VAs, and WAY LESS than on EIAs.......
__________________
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.........:)
|
|
|
01-22-2009, 02:42 PM
|
#59
|
Recycles dryer sheets
Join Date: Jan 2009
Posts: 155
|
Quote:
Originally Posted by ERD50
skewed?
I didn't find an exact number, but it sounded like over half ( I got the impression it was much more than that) his portfolio was in a single stock. And this is after he sold his business, making alternative income difficult. I've often heard the 5% number thrown out for a single stock, and I think that is reasonable. I've stretched that from time to time, but I've always asked myself - "are you prepared for the possibility that this thing goes to zero?". And sometimes I bought puts when doing that.
In some ways, I think I was lucky ( sure didn't feel "lucky" at the time). I made a major misjudgment *before* I retired. That helped me to look at things that way - what if this goes to zero (or thereabouts for a diversified fund)?
CDs might be the right ticket for some, but I don't think you should use the example of someone who took extreme specific stock risk and lost as a justification for that decision. Any more that I would point out a winner, and say that justifies equity investing. Or a 100 year old, pack-a-day guy as an OK to pick up the smoking habit.
-ERD50
|
Could you expand on this a little? At what age is it ok to "stick a toe, foot, or leg" into the tiger's cage. (metephore for 20-30% of your portfollio).
Seems that if you are making a good income in your early-mid 30s (and LBYM) that putting 30% of your portfollio into a large cap equity and watching it closely may be an acceptable risk.
Hell, if it hits big it could put your kids through college. If it tanks, you have time to recover.
|
|
|
01-22-2009, 03:04 PM
|
#60
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2004
Location: SW Ohio
Posts: 14,404
|
Quote:
Originally Posted by landonew
Seems that if you are making a good income in your early-mid 30s (and LBYM) that putting 30% of your portfollio into a large cap equity and watching it closely may be an acceptable risk.
|
Yes, it is probably better to do this kind of gambling early in your investing experience rather than when you are near/in retirement, but it is still poor practice in my opinion. Concentrating your assets exposes you to uncompensated risk (that is, risk that is not rewarded by better returns, so it doesn't make good investment sense at any age). Also, the losses that are taken early don't get the benefit of decades of compounding growth: that $10k lost while speculating on the fantastic stock of your employer would have grown to $100k over the course of 30 years (8% annual growth). And, if a young investor gets burned by investing in a single stock and "watching it closely" (?), it could be very costly if he learns that he shouldn't invest any more, or if he chooses assets that are so "safe" that the anemic growth doesn't allow him to achieve his goals.
|
|
|
|
|
Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
|
|
Thread Tools |
|
Display Modes |
Linear Mode
|
Posting Rules
|
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
HTML code is Off
|
|
|
|
» Recent Threads
|
|
|
|
|
|
|
|
|
|
|
|
|
» Quick Links
|
|
|