Options for cash going forward

[jazz4cash]

Another option for me would be an intermediate muni fund with taxable equivalent yield ~2.6% but taking the dividends monthly. This fund burned me when I reinvested the divvies.

 

[bolt]

Has anyone looked into multi-year guaranteed annuities? Looks like you can get a Mass Mutual 3 yr for around 2.1% - which is quite a bit better than CD's. Obviously, since they have surrender charges you don't want to use money you'll need. Any concerns?

Annuities of any sort other than SPIAs should be reviewed by wiser individuals than the buyers.

I’ve dealt w/MMutual in the last 5 yrs and was disappointed and reassured by the engagement to never consider their services after wrapping up another’s fleecing after their death and mass mutuals history of their in force illustrations outcome.
It’s seems like a conflict of interest cutting short benchmarked market returns for insurance contracts till absolutely necessary.
Good luck &Best wishes.......

 

[pb4uski]

Really the only difference I can see between a MYGA and a CD is instead of early withdrawal penalties you pay surrender charges. Also, they are issued by insurance companies instead of banks, so no FDIC insurance. Mass Mutual has a jumbo ($100,000) paying 2.1% What's the downside?

I think you got it. The penalties for early withdrawal are typically more onerous for a MYGA than for a CD. IMO, if you chose a well rated carrier then the credit risks are negligible, especially considering guaranty fund coverage.

 

[jazz4cash]

Annuities of any sort other than SPIAs should be reviewed by wiser individuals than the buyers.

I’ve dealt w/MMutual in the last 5 yrs and was disappointed and reassured by the engagement to never consider their services after wrapping up another’s fleecing after their death and mass mutuals history of their in force illustrations outcome.
It’s seems like a conflict of interest cutting short benchmarked market returns for insurance contracts till absolutely necessary.
Good luck &Best wishes.......

Do you have any specific concerns / objections to MYGA's?

 

[PatrickA5]

I think you got it. The penalties for early withdrawal are typically more onerous for a MYGA than for a CD. IMO, if you chose a well rated carrier then the credit risks are negligible, especially considering guaranty fund coverage.

+1 I'm trying to figure out how to make more than the Fidelity MM (FZDXX) that is currently down to .4%. All of the brokered CD's are less than 1%. I'm wanting to keep my retirement funds at Fidelity. I've already moved my taxable funds to Ally.

I can get a 3yr MYGA from Mass Mutual or New York Life (both A++) for 2.1%. You can withdraw 10% per year penalty free and they have provisions for death, nursing home and hospitalization.

The other option would be buying some kind of short(er) term bond fund that yields over 2%. I would be willing to maybe take on a little interest rate risk, but not much. I'm just not finding much in the way of Fidelity bond funds that meet the criteria. I could always pony-up the $75 and buy a VG fund at Fidelity, if they are better.

 

[pb4uski]

Yeah, I have money at both VG and Fido, and the Fido cash-like options are so consistently mediocre in the times that I have looked at them that I don't even bother looking at them anymore.

 

[Freedom56]

Amex is still paying 1.5% for their money market account versus Fidelity's treasury fund which is now paying .01%. I moved a lot of cash out of Fidelity to Amex, Capital One, and two other MM savings accounts. They are limited to $500K FDIC coverage (joint accounts). My allocations is now 42% Cash and 58% corporate bonds. Right now all quality corporate bonds are overpriced whether they are high yield or investment grade. I'll wait for the next sell-off to buy more. Bond ratings mean absolutely nothing right now. The rating agencies are far lagging like they were in 2007/2008 Many investment grade bonds are headed for default and conversely many high yield bonds are trading like investment grade. The bond market is sorting our who survives and who files for bankruptcy. Many companies have issued more debt recently just to survive. I would avoid those companies as their business fundamentals probably won't improve and all they are doing is prolonging the inevitable.

 

[calmloki]

Marcus just sent an interest drop from 1.5% to 1.3%. They do still offer a no-penalty 7 month CD for 1.55%.

 

[Spock]

Amex is still paying 1.5% for their money market account versus Fidelity's treasury fund which is now paying .01%. I moved a lot of cash out of Fidelity to Amex, Capital One, and two other MM savings accounts. They are limited to $500K FDIC coverage (joint accounts). My allocations is now 42% Cash and 58% corporate bonds. Right now all quality corporate bonds are overpriced whether they are high yield or investment grade. I'll wait for the next sell-off to buy more. Bond ratings mean absolutely nothing right now. The rating agencies are far lagging like they were in 2007/2008 Many investment grade bonds are headed for default and conversely many high yield bonds are trading like investment grade. The bond market is sorting our who survives and who files for bankruptcy. Many companies have issued more debt recently just to survive. I would avoid those companies as their business fundamentals probably won't improve and all they are doing is prolonging the inevitable.

You'll be waiting awhile... the Fed is buying corp bonds
https://fortune.com/2020/04/09/fed-buying-junk-bonds-corporate-america-federal-reserve-coronavirus/

 

[pb4uski]

True, but the Fed propping up the corporate bond market isn't going to do much to improve the various issuers ability to pay.... it is just delaying the inevitable.

 

[jazz4cash]

Really the only difference I can see between a MYGA and a CD is instead of early withdrawal penalties you pay surrender charges. Also, they are issued by insurance companies instead of banks, so no FDIC insurance. Mass Mutual has a jumbo ($100,000) paying 2.1% What's the downside?

I am being stalked by an outfit called Gainbridge offing a MYGA product. They are affiliated with Guggenheim which has a B+ rating, I think. Their offer is 2.75 for 3 yrs with 10k minimum. I think they allow 10% "free" withdrawal per year.

Does anyone know what happens if you skizp the "free" withdrawal (i.e. do you get to take more the 10% the following year)?

How much protection does your state guaranty fund provide?

 

[Spock]

True, but the Fed propping up the corporate bond market isn't going to do much to improve the various issuers ability to pay.... it is just delaying the inevitable.

Agreed... but it hides the bond dropping in price because of declining ability to pay/reduces the yields on higher risk issues.

 

[VungTau]

I play the bonus game but it takes some work with opening accounts and moving money which it seems you find troublesome but Cap One is offering as follows:

Earn a $450 bonus when you deposit $50,000 or more, or $150 when you deposit $20,000–$49,999.99, of new money by May 31, 2020.

You need to keep it in for 90 days but it works out to nearly 4% apy. I probably collected 2 grand in bonuses in the last 12 months significantly pumping up my safe cash returns.

 

[mrfeh]

I play the bonus game but it takes some work with opening accounts and moving money which it seems you find troublesome but Cap One is offering as follows:

Earn a $450 bonus when you deposit $50,000 or more, or $150 when you deposit $20,000–$49,999.99, of new money by May 31, 2020.

You need to keep it in for 90 days but it works out to nearly 4% apy. I probably collected 2 grand in bonuses in the last 12 months significantly pumping up my safe cash returns.

I rarely play the bonus game, but I opened a Cap One savings account yesterday, although for a slightly different/better deal: $100 per $10K deposited and kept in the account for 90 days.

https://www.capitalone.com/score500/

 

[capjak]

I am being stalked by an outfit called Gainbridge offing a MYGA product. They are affiliated with Guggenheim which has a B+ rating, I think. Their offer is 2.75 for 3 yrs with 10k minimum. I think they allow 10% "free" withdrawal per year.

Does anyone know what happens if you skizp the "free" withdrawal (i.e. do you get to take more the 10% the following year)?

How much protection does your state guaranty fund provide?

For me I would want A rated or higher by AMBEST or Comdex around 80 or more. In regards to 10% free it depends on the insurance company but the ones I have seen do not allow 20% the next year if you skip 1 year. Also allow interest only withdrawal.

 

[pb4uski]

I rarely play the bonus game, but I opened a Cap One savings account yesterday, although for a slightly different/better deal: $100 per $10K deposited and kept in the account for 90 days.

https://www.capitalone.com/score500/

+1 I also rarely play the bonus game but 2.5% for a year is attractive... I'll do $50k for me and $50k for DW... better than a one-year CD but a small risk that the 1.5% crediting rate might decline but if it does I'll just move the money out.

Thanks for the tips VungTau and mrfeh.

 

[pb4uski]

...Does anyone know what happens if you skizp the "free" withdrawal (i.e. do you get to take more the 10% the following year)?...

No, if you don't do the 10% in a given year it doesn't rollover.

Also check if you can do that at any time. I have a faint recollection that the 10% annual surrender charge-free withdrawal is a brief window around the policy anniversary to withdraw up to 10% without a surrender charge and then the window closes until around the next policy anniversary... so if your policy anniversary is in June and you want money out in January then it would be subject to surrender charge.

 

[mrfeh]

+1 I also rarely play the bonus game but 2.5% for a year is attractive... I'll do $50k for me and $50k for DW... better than a one-year CD but a small risk that the 1.5% crediting rate might decline but if it does I'll just move the money out.

Thanks for the tips VungTau and mrfeh.

Our primary online savings account is Ally, and they're soon lowering their rate from 1.5 to 1.25 (I think? something close to that).

I assume Cap One will at least be competitive.

 

[pb4uski]

+1 Discover Bank is currently 1.4% and I presume that Cap One will be competitive... if they aren't then after the bonus is credited the world is my oyster.

 

[calmloki]

Note eligibility: if you have been primary or secondary on a CapOne account after 1/2016 you aren't eligible. We are joint on many accounts and that has bitten us more than once. OTOH, having the other be a beneficiary is no good for the "couple struck by meteor" eventuality where we want someone else as beneficiary.

 

[PatrickA5]

No, if you don't do the 10% in a given year it doesn't rollover.

Also check if you can do that at any time. I have a faint recollection that the 10% annual surrender charge-free withdrawal is a brief window around the policy anniversary to withdraw up to 10% without a surrender charge and then the window closes until around the next policy anniversary... so if your policy anniversary is in June and you want money out in January then it would be subject to surrender charge.

I have a phone meeting with my Fidelity guy tomorrow, so I'll ask that question. I think DW and I are each going to get a 100K MYGA at 2%. Beats .37% I'm getting with my MM.

Already moved the taxable money to Ally and did the 1.5% no fee CD for most of it.

Will probably look to maybe get back into some shorter bond funds or ETFs.

Man, this sucks trying to find pennies on the street.

 

[pb4uski]

Note eligibility: if you have been primary or secondary on a CapOne account after 1/2016 you aren't eligible. We are joint on many accounts and that has bitten us more than once. OTOH, having the other be a beneficiary is no good for the "couple struck by meteor" eventuality where we want someone else as beneficiary.

So, I set up his and her accounts this morning. Could I also do a joint account?

 

[2177V]

I'd like to get some of your knowledgeable opinions.

I hold a large amount of cash, about $600,000. I do this because, if the right opportunity arises, I may buy a new home before selling the current one, therefore not having to mess around with a mortgage and the associated fees as well as not having to move twice.

I now have $250k at Ally (max FDIC insured amount - I do not want a joint account) and the rest in MM funds at my broker, which are paying about 40 basis points. I am considering opening another account with a different online bank to get the current 1.5% interest rate. But it's a hassle - more paperwork, emails, etc.

So, the question is - what are the chances the online banks lower their interest rates for a savings accounts to something less than 1%, in which case I may not want to make the change? What other decent options might be available to me?

I also purchased a SF Bay house in 2011 for $250K and it is now worth $500K. I then rented my old house and the price of old house has also doubled. With high unemployment, chances are good that the price of real estate will be dropping. With the government printing money like crazy, inflation is a concern so having hard assets instead of paper assets is a smart move.

As far as where to put your money since CD and MM interest rates are getting low, The other option are short term treasury bonds since as VFIRX. Here are the most recent quarterly returns for the last 3 years and the annual returns from 2007 to 2016:

2020 2.70% (1st qtr)
2019 1.09%, 1.54%, 0.64%, 0.38% (1st, 2nd, 3rd, 4th qtr) 3.70% (total)
2018 -0.21%, 0.18%, 0.09%, 1.39% (1st, 2nd, 3rd, 4th qtr) 1.45% (total)
2017 0.28%, 0.21%, 0.29%, -0.39% (1st, 2nd, 3rd, 4th qtr) 0.39% (total)
2016 1.18% (total)
2015 0.55%
2014 0.82%
2013 0.00%
2012 0.79%
2011 2.36%
2010 2.76%
2009 1.54%
2008 6.76% (bear Market)
2007 8.02% (bear Market)
2006 3.93%

No negative return in 15 years with only 1 year at 0.00% return.

Note that the returns of VFIRX during the last bear market 2007 and 2008 and the 1st quarter 2020 are pretty good. This is because investors believe that treasuries are safer than equities and therefore the value of treasures tend to rise. Also note that the value of treasures include both capital return plus interest return = total return. There is some risk of interest turning negative but this risk may be offset by a higher capital return.

There is no doubt that VFIRX is a higher risk than MM and CD but that is how the system works: high interest = higher risk. low interest = lower risk.

Most smart investors (Warren Buffet) have recently increased their cash position so MM and CD are probably the best option for you since you may be buying real estate. Buying real estate in the middle of a recession or high unemployment is always a good thing.

 

[joeprintz]

Fidelity-FCONX

 

[Dtail]

+1 I'm trying to figure out how to make more than the Fidelity MM (FZDXX) that is currently down to .4%. All of the brokered CD's are less than 1%. I'm wanting to keep my retirement funds at Fidelity. I've already moved my taxable funds to Ally.

I can get a 3yr MYGA from Mass Mutual or New York Life (both A++) for 2.1%. You can withdraw 10% per year penalty free and they have provisions for death, nursing home and hospitalization.

The other option would be buying some kind of short(er) term bond fund that yields over 2%. I would be willing to maybe take on a little interest rate risk, but not much. I'm just not finding much in the way of Fidelity bond funds that meet the criteria. I could always pony-up the $75 and buy a VG fund at Fidelity, if they are better.

My parents are in the same boat, as their 5 year CD matured and I am just holding it in the FZDXX fund currently.
Fidelity spoke to me about the MYGA for 2.1% for 3 years. My parents will definitely not need the money in those 3 years, so might go for it.
Would you go through Fidelity?