If you pulled 250k out of the stock market....where would you put it?

[cabo35]

If you pulled 250k out of the stock market....where would you put it?

I know its tempting, but, please play nice with the question.

Consider:

Preservation of wealth in the short and long haul.

Safety of investiments?

Return on investments?

[under55]

Well I did what they said and about 18 months before I retired I moved most of my money to a stable return fund. I am taking out enough now to pay off the the house in TV before we move there in May 2011.

[kar guy]

I took all of mine out of Merrill Lynch and puit it in equity stock index funds. :eclipsee_gold_cup: I will be garanteed 13% this year ( 10% immediatly ). This is probably the best decision I have made. Take care Kar guy

[spk7951]

Well we moved out of the market a couple of years ago and put that money into CD's at 5%. If I was doing that now I probably would still go with CD's but for a shorter time frame due to the low return rates.

[Boomer]

If you pulled 250k out of the stock market....where would you put it?

I know its tempting, but, please play nice with the question.

Consider:

Preservation of wealth in the short and long haul.

Safety of investments?

Return on investments?

Cabo,

First of all, I really try hard never to tell anybody what I think they should do with money. But this is just a hypothetical you are putting out here so I will hypothetical right back atcha.

It sounds like you are asking about the formula for what I call "the cost of sleep."

There are two key words in your question: preservation and safety. If that is truly all that is important, and ROI, not so much, I would use short term CD's in banks insured by the FDIC.

I would split it up maybe, even though I think the FDIC is insuring up to $250,000 now. But I think that might be slated to revert back to $100,000 at the end of the year. I have not looked at the FDIC website for a while. But it explains all that and has something where amounts can be plugged in to check what would be insured. It is not just a flat amount. It has to do with how the accounts are named.

CD rates are so low right now, it is painful to even ask about them. The reason I said short-term CD's is that I do not see how they can get a whole lot worse and I have wondered if inflation will cause rates to go up over the next year.

Those double-digit CD's I held in the early 80's were freakish I know. I knew it was not right even then. Those double-digit CD's paid Boomette's tuition. I do not expect rates even close to those, nor should they be.

But how inflation cannot set in and affect rates, I do not know. But they will find a way to pay us nothing is my guess. Even so, short term CD's are what I would use. Of course, rates could also get lower. So who knows how CD rates will be down the road.

(I will try very hard now not to start in here on a rant about the Fed over the past several years.)

So back to those CD's. Painful though those rates may be, FDIC insured CD's pass my cost of sleep test. I am so unsophisticated as an investor that I cannot even imagine buying a CD on the internet. I like small, bricks and mortar banks that shelve their mortgages and do things the old-fashioned way. And where when I go there, they say, "BOOMER!" You know, like on "Cheers" when they say, "NORM!"

I never invest in anything that is not liquid. Let me clarify that. By liquid, I mean CD's and stocks that, of course, I could take a hit on for cashing in at the wrong time, but that would be my decision. I have to have those decisions all in my own hands. I refuse to tie up in an annuity. I do not understand annuities. I do not try to understand annuities. I cannot turn it over. But that's just how I am.

And since you said "out of the market" I will not go into dividend payers like utilities. Who knows anyway about those. Somebody might decide they are not green enough or something like that. But we just bought more utilities.

Cabo, I know my answer was 101 and you already know that stuff. I wish I had a really good answer. And I know the thing about how low rates lose against inflation. But the principal remains. And sometimes all I can do is try to hang onto the principal, even though inflation eats away at it. But also, I just cannot let go of those dividend payers. Even though they take a hit in price, the check is still in the mail. For now.

It was not supposed to be like this.

And that was all just hypothetical. I know nothing.

Boomer

[spk7951]

Cabo,

First of all, I really try hard never to tell anybody what I think they should do with money. But this is just a hypothetical you are putting out here so I will hypothetical right back atcha.

It sounds like you are asking about the formula for what I call "the cost of sleep."

There are two key words in your question: preservation and safety. If that is truly all that is important, and ROI, not so much, I would use short term CD's in banks insured by the FDIC.

I would split it up maybe, even though I think the FDIC is insuring up to $250,000 now. But I think that might be slated to revert back to $100,000 at the end of the year. I have not looked at the FDIC website for a while. But it explains all that and has something where amounts can be plugged in to check what would be insured. It is not just a flat amount. It has to do with how the accounts are named.

CD rates are so low right now, it is painful to even ask about them. The reason I said short-term CD's is that I do not see how they can get a whole lot worse and I have wondered if inflation will cause rates to go up over the next year.

Those double-digit CD's I held in the early 80's were freakish I know. I knew it was not right even then. Those double-digit CD's paid Boomette's tuition. I do not expect rates even close to those, nor should they be.

But how inflation cannot set in and affect rates, I do not know. But they will find a way to pay us nothing is my guess. Even so, short term CD's is what I would use. Of course, rates could also get lower. So who knows how CD rates will be down the road. (I will try very hard now not to start in here on a rant about the Fed over the past several years.)

So back to those CD's. Painful though those rates may be, FDIC insured CD's pass my cost of sleep test. I am so unsophisticated as an investor that I cannot even imagine buying a CD on the internet, I like small bricks and mortar banks who shelve their mortgages and do things the old-fashioned way. And where when I go there, they say, "BOOMER!" You know, like on "Cheers" where they say, "NORM!"

I never invest in anything that is not liquid. Let me clarify that. By liquid, I include CD's and stocks that I could take a hit on for cashing in at the wrong time. But that would be my decision. I have to have those decisions all in my own hands.

And since you said "out of the market" I will not go into dividend payers like utilities. Who knows anyway about those. Somebody might decide they are not green enough or something like that.

Cabo, I know my answer was 101 and you already know that stuff. I wish I had a really good answer. And I know the thing about how low rates lose against inflation. But the principal remains, if that is what is improtant.

It was not supposed to be like this.

And that was all just hypothetical. I know nothing.

Boomer

The FDIC insuring up to $250,000 of deposits is set to return back to $100,000 at the end of this year.

[KayakerNC]

I took all of mine out of Merrill Lynch and puit it in equity stock index funds. :eclipsee_gold_cup: I will be garanteed 13% this year ( 10% immediatly ). This is probably the best decision I have made. Take care Kar guy

Index funds with a guarantee?
Or did you utilize some sort of an annuity package?

[champion6]

I took all of mine out of Merrill Lynch and puit it in equity stock index funds. :eclipsee_gold_cup: I will be garanteed 13% this year ( 10% immediatly ). This is probably the best decision I have made. Take care Kar guy
You have my attention!!!

Can you be more specific? Who offers this investment? What is the name of the fund or funds?

I don't understand your statement about a guarantee, but I will investigate that when you explain what you bought.

Thanks.

[TrudyM]

I have diversified greatly, and was not hit too bad in recent events. Or at least I don't think of it that way because I never saw the bubble gains as real. That said we plan on refinancing our sons house so we have a stable income. He has a good job and would never stiff us. That said in order for it to be arms length and make the payments deductable for him (and income for us but at our lower tax rate) the rate has to be the same or not much lower than what he can get elsewhere. This has the side benifit of avoiding state inheritence taxes in some states (Fed not an issue we don't have that much)
This was suggested by the investment bankers and hedge fund managers in my family.

Hope this helps

[Irish Rover]

I don't think I would pull out of the market right now. Personally, my portfolio has been bouncing back so I'm straying put. If I did make a move it would probably be into bonds. :shrug:Good luck.

[Boomer]

I have diversified greatly, and was not hit too bad in recent events. Or at least I don't think of it that way because I never saw the bubble gains as real. That said we plan on refinancing our sons house so we have a stable income. He has a good job and would never stiff us. That said in order for it to be arms length and make the payments deductable for him (and income for us but at our lower tax rate) the rate has to be the same or not much lower than what he can get elsewhere. This has the side benifit of avoiding state inheritence taxes in some states (Fed not an issue we don't have that much)
This was suggested by the investment bankers and hedge fund managers in my family.

Hope this helps

I have an opinion on this one. Please forgive me for not keeping it to myself. I know you did not ask. This is not directed at your specific situation, just family mortgages in general.

This could be a good idea because it is recycling the family money. You know about the imputed interest rate and the IRS stuff. And I assume you are going through an attorney and filing the mortgage at the courthouse and making sure the title is clear and figuring out how the property taxes and insurance will be handled. You are the bank when you do this so from an investment perspective, you have to think like a bank, not like mom and dad.

But I just have to say that anyone doing this really needs to consider what would happen if for some reason the house payment did not come through, one time, two times, maybe more not than often.

By bringing this up, I am not saying that a child would intend such a thing to happen. What I am saying is that life happens. Illness. Job loss. A spouse. An ex-spouse. All sorts of things could possibly get between you and the house payment.

But if the answer is that you could really do without the money if you had to, and if all the bases are covered, just like you are the bank, these things can work out fine. Just not always.

I have known of family mortgages. I know people who have done it. I have seen the good, the bad, and the ugly. But a family mortgage can't truly be arm's length. Even if on paper it is that way.

When looking at this as an investment, the bottom line has to be whether you as the lender can afford not to get paid. Life happens.

I wish you the best. (And I really do know of some of these that have worked out beautifully. But possibilities must be considered, just like with any investment.)

Boomer

[spk7951]

According to The Wall Street Journal Congress voted this week to extend the $250,000 deposit insurance limit for the FDIC until the end of 2013.

[Boomer]

According to The Wall Street Journal Congress voted this week to extend the $250,000 deposit insurance limit for the FDIC until the end of 2013.

Thanks, spk.

Now if only we could get even 5% on CD's. But I wonder if we will ever see that again. The window for 5% did not seem to be open for long. At the time, I was running around chasing 5 for 5. (And feeling like I was probably being an idiot. And I wish that were true. I would much rather have seen the market thrive.)

And if only Congress has sense enough not to mess with the capital gains tax and dividends taxed at 15%. Unless they want to make those rates even better. Ya think????!!!

I have to wonder if the market will be getting back on its feet and staying there about the time those tax rates expire by 2011. If Congress messes with those rates for the worse, I have to wonder if that would pretty much hamstring the market. At least for the individual, small investor. (But I am a mere bumpkin. I don't know anything.)

There are those who believe that stocks are fairly valued now. I am a buy and hold girl. And I have bought a little lately. But only dividend payers that I understand. With CD's paying nothing, I figured if I feel comfortable that the dividend rate is pretty much locked in, I might as well shop a little. Get paid to wait. Kraft has been my favorite buy recently. Seems like mac and cheese is in vogue and will be for a while.

I don't think anybody really knows what to do. This is like nothing we have ever seen before. I do not care what they say.

Boomer the Buy and Hold Bumpkin

[rshoffer]

Call Bernie Madoff:faint:

[spk7951]

Boomer,

My feeling is that we will not see 5% interest on CD's for quite some time. I could not even hazard a guess as to a time frame because I have no faith in the economy right now. (I think I am a victim of bail-out fatigue). We completely bailed out of the stock market, which as our personal portfolio, in May 2006 when we lost 20% in two weeks time. That was cash set aside to carry us until we could tap one of our 401k's and we are now happy we did that.

[inda50]

I have diversified greatly, and was not hit too bad in recent events. Or at least I don't think of it that way because I never saw the bubble gains as real. That said we plan on refinancing our sons house so we have a stable income. He has a good job and would never stiff us. That said in order for it to be arms length and make the payments deductable for him (and income for us but at our lower tax rate) the rate has to be the same or not much lower than what he can get elsewhere. This has the side benifit of avoiding state inheritence taxes in some states (Fed not an issue we don't have that much)
This was suggested by the investment bankers and hedge fund managers in my family.

Hope this helps

Great advice I think for safe, investing. Everyone wins, you, the children. You get to help family and yourself. Sort of like the good old days.

We are in for alot of inflation in the next few years. Perhaps another alternative is gold.

[sbm]

Not true that deposit insurance is reverting to $100,000 at year-end. Per the FDIC website "As of May 20, 2009 deposits at FDIC insured instituitions are now insured up to at least $250,000 per depositor thorugh December 31, 2013. On January 1, 2014, the standard insurance amount will return to $100,000 per depositor for all account categories except for IRAs and other certain retirement accounts which will remain at $250,000 per depositor." (I'm not that smart, I just work at a bank and know where to look).

[conn8757]

Golly Cabo - I think if it is money you might need in the next 5 years, Boomer gave some good advice. I might look at some tax free bonds - My personal money I know needs to last 20-30 years so I have 30% in equities and 70% in cash and bonds (bonds are 45% - cash 25%). Our financial advisor thinks I should be 70% bonds 30% equities, but I need the comfort of the cash reserve so I know I can get by for 3-5 years if the market tanks again. I am in a "trust no one" mode with my money after the whipping we took the past couple of years. I did keep working 2 years longer than I had originally intended so that helped. I may look for part time work next year for an additional cushion if the picture doesn't get better. Good luck - being able to sleep is the key - upset stomach just makes you spend your money on PeptoBismol.

[scotsman]

Index funds with a guarantee?
Or did you utilize some sort of an annuity package?
Sounds like Bernie Madoff is out on bail. When anyone promises 13% returns on equity stock index funds it is time to run for the door. No index fund can promise these returns.

[k2at]

Like the rest of us, I took a beating in the stock market over the past several years. When the market was going up 14000, I thought I was a genius. Then when it tanked at 7000 I came to the realization that at my age 68, it is better to be safe (sleep factor) than sorry. I have therefore been systematically taking my money out of the market and putting it in CD's. I am quite sure that the market will eventually return to the pre crash highs, but time is working against me. I don't want to be a millionaire at 90.

I know what to expect from my CD's and I don't have to worry about another financial setback when the stock market takes another dive.

There is so much corruption in our country that I just don't trust the stock market any more. My goal is to get out systematically and take the least losses possible.

I say I am not a gambler by nature, but afterall how is playing poker and different from playing the market.

Thank god my retirement is in a fixed income for life and not in a 401k.

[senior citizen]

...

[TrudyM]

This may not be the wise path to follow.........but we know a lot of people with similiar and higher amounts who tucked it away as cash in safety deposit boxes or safes. Other monies were kept in various money market accounts and checking accounts. This practice may be more widespread than people are aware of.

Cash is King ultimately.

At the time, the fear was of the banks failing. The dilemma in this choice is "What does one do with all the cash" when it is time to relocate to TV? Airlines xray your carry on bags. If you drive through the wrong state and get pulled over, large amounts of cash may be confiscated as drug money. Does anyone have an experience with this?

I do not think that people who had their money in federal insured banks lost a dime, so long as each account was under the insurance limit. Many accounts, many banks if it makes you feel better, but under your mattress, earning no income, your kidding right. :jester:
Withdraw huge amounts in cash from any bank, and you will end up on a federal watch list for sure. As I understand it cash deposited or withdrawn over ten thousand is reported to the watchdogs. We won't need our security clearance in retirement but I wouldn't want to end up on a watch list.:eek:

[BobKat1]

I'd really be hesistant about travelling, either by plane or car, with LARGE sums of cash. Too many bad or unexpected things can happen. I agree that having $$'s in FDIC insured accounts is the way to go if one wants to put all of their cash someplace.

Remember that recent news story of the woman in Israel (I think) who supposedly had over a million dollars in her mattress and it got hauled away?

[Campbell soup]

I would say keep it in the stock market.....

I have been buying stock at these great prices!

I sold a bunch when the DOW was at 14000 and will again. Just hang in there. :pepper2:


If you are really that nervous take out a little to take a loss...and you will do better on your taxes.

Real Estate is still a good investment if you are looking a few yrs down the road.

[Boomer]

Oh dear! Please tell me that there are not retirees out there, headed south, down the interstates, schlepping suitcases full of cash, across all those state lines for immortal porpoises or whatever. Oh dear! Oh my! Please tell them not to do that.

All kidding aside. Carrying around large amounts of cash is not smart and could be really dangerous. Trudy and BobKat are right. FDIC insured accounts are where some people like to stash cash. Look at the FDIC website for more info.

Boomer

[Sgtsixpack]

Buy a Boat- Sounds silly but when K2at mentioned the market liken to playing poker and real estate (motgages) about the same why not invest a good sized boat that you could probably get cheap now. Sound corny but not fishy like the others are. :wave:

[ChattanoogaTn]

I agree with this statement and after losing CONSIDERABLY while waiting on the market to "come back" month after month for almost a year we finally switched 50% of my money to a "Variable" GUARANTEED Annuity that pays 6% for life and 6% is always adjusted once a year so that "if" portfolio balance goes up the 6% "Yield" is adjusted to higher balance Guaranteed NEVER to drop below HIGHEST Market Value on any given anniversay date on your YIELD even though portfolio balance may drop 6% rates are locked each anniversary year and..... you are still invested in Market either aggressively or consersatively. However your money is locked for 7 years to which if you pull it out 1st year it will cost 7% ....if you pull it out 2nd year 6% .... 3rd year 5% ...4 year 4% ....3 year 3% etc. After 7 years you will not pay any penality for taking out and your 6% can grow as your portfolio grows (adjusted for balance every year) and will never go down in yield even if balance drops. We have ours thru MetLife...#1 Rated Company




I don't think I would pull out of the market right now. Personally, my portfolio has been bouncing back so I'm straying put. If I did make a move it would probably be into bonds. :shrug:Good luck.

[ChattanoogaTn]

My Thoughts EXACTLY!! :agree:



Like the rest of us, I took a beating in the stock market over the past several years. When the market was going up 14000, I thought I was a genius. Then when it tanked at 7000 I came to the realization that at my age 68, it is better to be safe (sleep factor) than sorry. I have therefore been systematically taking my money out of the market and putting it in CD's. I am quite sure that the market will eventually return to the pre crash highs, but time is working against me. I don't want to be a millionaire at 90.

I know what to expect from my CD's and I don't have to worry about another financial setback when the stock market takes another dive.

There is so much corruption in our country that I just don't trust the stock market any more. My goal is to get out systematically and take the least losses possible.

I say I am not a gambler by nature, but afterall how is playing poker and different from playing the market.

Thank god my retirement is in a fixed income for life and not in a 401k.

[ricthemic]

Looking at existing houses now in TV. Does it make sense to buy the house cash by taking out of stock market? Planning on six months in TV. Have existing house up north paid off. Leaves us with a decent pension, SS and some cash.

[jrjr729]

The original question had to do with investing $250k taken from the stock market. One really needs more information about you to give an answer that meets your needs. For example, is your total household net worth greater than one million dollars? If it is you may want to purchase some life insurance with part of the money to cover estate costs. It is possible Congress may not modify the estate tax allowing it to revert to the one million exemption after 2010.

Another thing how large is your portfolio? Does the $250k represent more than 50% of it? If so, and you are absolutely against owning individual stocks, I would suggest mutual funds. In that case split the money into five equal parts of $50k each and buy five different funds from the same fund family. Vanguard has pretty low expense ratios, so I would start there. Use Morningstar to help identify particular funds. Invest the money as follows: An S&P 500 index fund, A bond index fund, a technology index fund, a high yield fund and an international fund. After 12 months and one day re-evaluate and shift your fund allocation back to 20% in each fund. (If the money is in tax deferred accounts you can shift every six months since you won't have to worry about tax consequences.)

Still, I generally agree with some of the other posts that you probably shouldn't pull the money out, now. Yes, the market cold dip again but it might not. I think the worst is over and that the economy is safe. Over the next five years the markets should rebound nicely.

If you do not like your current mix of stock investments, consider becoming a bit more defensive y buying consumer staples and shifting into high dividend paying stocks.

Finally, although annuities have there place in some portfolios they might not fit in yours. After all, if you have a well funded pension that plus social security means you already have two annuities. Do you need more?

[jdsl1998]

I'd buy another home in TV so the kids wouldn't have to fight over this one....

[Boomer]

..............................

If you do not like your current mix of stock investments, consider becoming a bit more defensive y buying consumer staples and shifting into high dividend paying stocks.

Finally, although annuities have there place in some portfolios they might not fit in yours. After all, if you have a well funded pension that plus social security means you already have two annuities. Do you need more?

Hi jrjr,

While I hope we all know that nobody should be taking investment advice from somebody posting on a forum, I enjoy the discussions and have to throw in my opinion from time to time. It can be fun to bounce some ideas around.

I will say that the last two points you make here in your post, I can mostly agree with.

But about that word "high" in front of dividend. I have to fine-tune that one just a little. So jrjr, please bear with me here. I bet you already know all this.

All dividends are not created equal and if a dividend looks too good to be true, it just might be. An investor needs to look at dividend history. How long has the dividend been paid and how consistent is the history of increases? Also, I have to know the company. Know what they do. I have to understand the company. A dividend that is way high may be ripe for being cut. In my unschooled, not-a-professional, sleep-at-night book of investing, if something looks out of whack, it probably is.

And I know that this is the old buy and hold philosophy showing. Catching a good solid company when it is down can give you a decent dividend while you wait for the price to go back up. I can't look just at that percentage return of the dividend. For me, it is relative to all the other stuff I have to think about. But like you, jrjr, I like good dividend paying stocks. In fact, I will not buy a stock that does not have a dividend.

I do not think anybody who is now retired or close should be putting anything at risk that they will need for retirement expenses. That's my "bird in the hand" philosophy. I have seen too many people retire based on the projections of some investment "expert" who was plugging numbers into a computer and spitting out such a pretty picture.

And as far as the market now is concerned, I think all bets are still off. We have never seen anything like this mess. It has grown arms and legs all over the place. We have no means of comparison in our economic history. Meanwhile, my little buy of a few shares of Kraft is doing well. I just felt like mac and cheese was a good bet. But who really knows? I sure don't. I think it is going to be a while. But my cup of Maxwell House is half full.

Boomer

[jrjr729]

Good points, Boomer. When I look for high dividend yielding stock I generally focus on utilities in areas with relatively stable populations or in lieu of that utilities that have diversified revenue flows.

[Boomer]

Good points, Boomer. When I look for high dividend yielding stock I generally focus on utilities in areas with relatively stable populations or in lieu of that utilities that have diversified revenue flows.

Hey, jrjr,

I hear you. Utilities 'R' Us.:beer3:

But please always remember that I have no idea what I am talking about. And I really do think all bets are off. Who knows? And like I have said before, I have a deep-seated fear that someday I will throw all caution to the wind and start investing in Beanie Babies and Pez dispensers. But for now, I remain cautious. And I am still as mad as a wet hen over this whole big mess. And whether we individually took big hits or not, we all are affected, or will be, in one way or another.

Boomer

[jrjr729]

Hey Boomer,

Forget the Beanie babies and Pez dispensers. Try calculators, instead. after teaching college for over thirty-six years I can tell you that calculators will be in great demand if there is a major collapse. Nobody can do simple arithmetic anymore.

By the way a good tool for analyzing a dividend stock is to divide the dividend per share by the earnings per share. If the result is greater that 100% do not purchase the stock it means the company is cannibalizing itself to continue to look good to its shareholders. Some companies like utilities will have high percentages, say 75% or more but that's just because they normally pay high dividends.

[Boomer]

Hey Boomer,

Forget the Beanie babies and Pez dispensers. Try calculators, instead. after teaching college for over thirty-six years I can tell you that calculators will be in great demand if there is a major collapse. Nobody can do simple arithmetic anymore. .................

Uh oh, jrjr,

I was just about to move forward today with my real life, where I talk to people I can actually see, when I looked back and saw your post, fellow utilities fan.

I am known to digress a little from time to time. Never could color inside the lines. And when I saw this part of your post, I thought, "Ohhhhhhhh, I just have to make sure this person knows about this story. I cannot leave this morning until I make sure."

So here goes......

If you do not already know about a short story "The Feeling of Power" written by Isaac Asimov, a long time ago, then you absolutely must get your hands and eyes on it. You will love/hate it. It is about exactly what you just said.

I am not a huge science fiction fan, but I know a little bit about some of the biggie sci-fi authors from the last century. And I always say that good science fiction makes the reader stop and think, "Could this really come true?" And then the reader looks around the present for signs that it could. But then the reader could start to lose a lot of sleep. Kind of like reading Orwell.

So anyway, if you have not read this story, please, oh please, get thee to a library and find it. This one's for you, jrjr.

And now I must get back to acting like I am talking about investments in this post so as not to digress way too far and be accused of being an English major. Soooo, about those dividends.......

Boomer :read:

[cabo35]

Thank you all so much for contributing to this thread. I sincerely appreciate the thoughtful insights and perspectives you shared so unselfishly. Your collective suggestions are better than most professional planners I have spoken with. They are very helpful....and.....your consulting fees are the best.

[NJblue]

Sorry for being late to this discussion - I hope it's not so old that people have stopped reading or adding to it.

As recent retirees, we are currently exploring our investment options and have attended various lunch/dinner seminars and had a few follow-up meetings. This is what I have found out:

Indexed Fixed Annuities - the concept is that you buy an annuity that is tied to some index (e.g., S&P 500). The annuity guarantees that your principal is never lost but yet allows you to profit from the upside in the stock market - hence is sold as a good hedge against inflation. The problem is that the rate that the index is allowed to go up is severely capped (perhaps 5-7%). That is, if the S&P goes up by 15% in a year (which is not uncommon in an up year, especially in a high-inflation period), the annuity only goes up by the capped amount - 6.75% in the case of the product that one agent is trying to sell us on.) Sure, the account value won't decrease, but the cap means that your annuity is a very poor hedge against inflation. So, if we get back to double-digit inflation rate as many are suggesting we are headed for because of our increased deficit spending, while stocks may keep up with inflation, the annuity will lose buying power each year. That's my take on it, but will welcome contradictory views.

Variable Annuities - Several companies (Prudential and Axxa are two that I know of) have products out that offer both an account value (that can go up AND down relative to the market) and another value (I call it an "annuity account" that is used to determine annual payments if you decide you want to annuitize your fund rather than take out the principal. This latter value is tied only to market gains. That is, if your portfolio value starts at $100K and goes up at some point during the year to $125K, the $125K becomes the new basis for which annuity payments are made. This value is locked in and will never go down, but can ratchet up even more if your underlying account value at some point goes even higher before you start taking money out of the account. The nice thing is that at whatever point your annuity account reaches a new high, from that point until the next high, your annuity account will grow at 7% per year. There are some attractive features added concerning death benefits and others. One downside to this is the higher fees that are charged to cover the profit and added risk that the insurance company is taking. The other negative as I understand it is that though this appears to offer reasonably good inflation protection while it is in its accumulation phase, once you start to take money out, I believe it is a fixed percent of the value of the annuity account. Hence any inflation from that point on will not be addressed. I am still evaluating this option to see if it makes sense.

Indexed CD As I understand them, they are like a CD in that the initial principal is guaranteed by the FDIC, but the interest rate is not fixed but rather can go up based on the increase of an index such as the S&P 500. I believe that annual increases in this CD are taxable, so it probably makes more sense to own it in an IRA or other tax sheltered vehicle. This also sounds intriguing to me but I need to learn more.

[spk7951]

Do not forget to look into the tax consequences involved with annuities. When we were looking into annuities last month we were told that we could expect to pay higher income taxes when drawing a monthly check from an annuity vs using our existing CD's.

[Autoshow]

Index funds with a guarantee?
Or did you utilize some sort of an annuity package?

I would be a little scared when someone tells me 10 percent now and 13 percent later

[NJblue]

Do not forget to look into the tax consequences involved with annuities. When we were looking into annuities last month we were told that we could expect to pay higher income taxes when drawing a monthly check from an annuity vs using our existing CD's.

I am aware of the consequences of annuity payments versus dividends and/or capital gains from a portfolio of equities (the annuity is taxed as income and the the others are at a reduced rate - for now). However, I'm not aware of any differences between interest from CDs versus annuity payments. It seems that both are charged as income. Can you elaborate?

[spk7951]

I am aware of the consequences of annuity payments versus dividends and/or capital gains from a portfolio of equities (the annuity is taxed as income and the the others are at a reduced rate - for now). However, I'm not aware of any differences between interest from CDs versus annuity payments. It seems that both are charged as income. Can you elaborate?

You are correct that they are both equally charged as income.
For us if we held out of a CD what we needed for the year vs getting an equal monthly amount from an annuity that is where we had a tax concern. The interest rate paid on CD's right now is so low that we would have paid more in taxes by changing to an annuity vs the CD dividends.

[mgm4444]

I'm a little confused. If someone took 250K out of the market and put it into CDs, - what is constituted as "income" ... as in ...."Obama has proposed higher taxes for families earning more than $250,000 a year". Is the 250K AND interest "income", just the interest or is the entire 250K seen as "income"? -- many thanks !

[NJblue]

If you had 250K in the market, meaning the stock market, you would have been paying taxes on the "interest" all along in the form of the taxes imposed on dividends that the stocks were generating. The only taxable event that occurs when taking money out of the stock market is any capital gains that may result. Hence if you bought your stock portfolio a number of years ago and paid 200K (i.e., its cost basis), then your capital gains would be 50K (250-200=50). You would then pay capital gains tax on the 50K. The current maximum rate for this is 15% which is likely better than if the gains were taxed as ordinary income.

[Boomer]

I'm a little confused. If someone took 250K out of the market and put it into CDs, - what is constituted as "income" ... as in ...."Obama has proposed higher taxes for families earning more than $250,000 a year". Is the 250K AND interest "income", just the interest or is the entire 250K seen as "income"? -- many thanks !

The $250,000, the principal, is not taxed. The interest generated by the principal is taxed.

401's and certain other employer retirement accounts can be rolled over into IRA CD's and remain tax-deferred. But you have to be sure that you do the rollover right so that you do not trigger tax consequences earlier than you need to. (It's not that hard to do it right though. Ask lots of questions along the way if you need to.)

There is some fairly recent news on the FDIC insurance coverage of bank deposits. The FDIC's temporary increase in coverage from $100,000 to $250,000 was set to expire at the end of 2009. But the timeline for the increased coverage has been extended through December 31, 2013. After that date IRA accounts are to remain at the $250,000 amount of FDIC coverage, as they have been for the past few years. But other accounts are slated to revert to $100,000 coverage. See www.myfdicinsurance.gov for details.

If you go to this particular FDIC site, the opening picture is of Suze Orman. It is a .gov site, but Suze Orman must have worked with the FDIC to get things set up to be easily navigated. Orman's investment advice is really conservative, and she is committed to making financial education accessible and clear.

Yes. I know that Suze Orman can get quite dramatic on her show when she starts hollering, "YOU CANNOT AFFORD IT," at those silly people who call her up and ask about buying ridiculous things. But those people deserve to be hollered at. And so sometimes I help Suze holler.

I used to holler a lot at Alan Greenspan when he was on television giving money away. But he never listened to me. I would get so aggravated with Al. How lowwww could heeeee go.......I know the Fed fears inflation, but..........

And, yeah, I know Alan Greenspan used to party with Ayn Rand. But maybe he should have been partying with Boomer.

Boomer

PS: Please do not forget that I have no piece of paper that says I can give financial advice. And I have no financial alphabet designations after my name. My financial musings and theories and advice are worth exactly what you pay me.

[drdodge]

try Parady ....11 per cent bonus up front and 7.5 per cent per year
Parady Financial group
Lady Lake
352. 751.3016

[collie1228]

What's interesting is that if you had not moved the $250K out of the market and kept it in a broad stock index like the S&P 500, you would have had a gain of over 33% between the date of your original post and yesterday's market close (ignorning taxes and mutual fund fees). If you put that $250K in a money market over that period, you might have made a total of 1% on your money, or $2,500. Leaving it in an S&P 500 index fund, (ignoring taxes and fees) your balance would now be around $330K. Good lesson here - one that I've learned the hard way - invest it and forget it. Even in the bad years, it has always come back . . . so far, at least.

[784caroline]

drdodge
You have to be kidding me to think that someone can provide you 11% interest or even 7.5% interest return worry free in todays market.

If its too good to be true ..well you knowthe answer.

[Boomer]

This thread began almost a year ago, and since then we have seen quite a run-up in the market, as it shakes off all kinds of bad news -- to the point where I sometimes have to wonder if this market is completely immune to reality.

Out of curiosity, I just now looked up one of the most well known index funds. I wanted to see how the numbers told the tale over time. Here's what I found.

Vanguard 500 Index:
1 yr. 49.73%
5 yr. 1.84%
10 yr. -0.73%
since inception in 1976 10.58%

When looking at risk and at returns, I try to keep in mind the words of that great philosopher Mick Jagger -- well I guess really it is a paraphrasing of those words, "Time Is Not On My Side." Well.....not like it used to be anyway. Not that I don't like the market...still do....but....

(Oh, and btw, I was all set to digress a little by putting a You Tube clip in here of Mick Jagger singing "Time Is On My Side." But.....well....when I found it....well, it was just downright embarrassing. He was wearing some hideous white pants. He looked like one of those creepy guys that used to hang around the Greyhound Bus station picking up cigarette butts...and so I spared you...great song though.)

Boomer

[drdodge]

Caroline 784
I think you should talk to some financial people.
, there are a lot of companies that will pay you bonus going in and between 6 and 8 percent a year and if the market goes down you do not loose any money

[2BNTV]

I am not a Financial advisor nor do I pretend to be an expert on finances.
I consider myself one of the lucky ones to have have come out of the "great recession" in good shape.
My financial advisor at Schwab advised me to get out of a portofio of mostly bonds when the market was at 9,400 and temporarily put it in a Money Markert fund until I felt safe to start reinvesting. at that point, my portfolio was down 18%.
I also had cashed out of an annuity at Merrill Lynch that has lost 25% of its principle. My accountant advised that I divide the total amount received and put into 6 month CD"s at the start of each month. So at the beginning of every month, I would have my money available to pay for any unforseen expense.
WHen the market climbed back to 8,200 from the low of 6,600 points. I was advised to put it into a Schwab Managed Portfolio. That portfolio has returned 30%.
The CD"s will give you peace of mind that you will not lose any money although your gains will not be great and you will have liquidity.
The portfolio will be subject to stock market conditions. I still see the market as growing for the next year but it will be choppy.
Liz Ann Sonders of Schwab has been one of the few financial people who has been accurately predicting how the market will do.
Since you asked, I would consider taking 100K to put in a conservative managed portfolio and the rest to be dived equally in 6 month CD's.

Again, I am not a financial advisor but so far I have been lucky to listen to the right people.

I've been poor and rich and being poor stinks. - Mae West

[RayinPenn]

About a year or more ago a friend (57) was 'helped' by our mutual employer to retire. she was with our firm for 30 plus years had seen it coming for some time but it was still painful. Of course she was heavily invested in our firms stock; Yes, too many eggs in one basket. You can guess that shortly after her departure the crash hit. She called me and asked for advise..I urged her to wait it out ..ups and downs are all a part of the market -no matter how drastic. well I haven't heard from her in while I'll bet she panicked and missed the comeback.

Now to your question find a inflation proof investment like real estate..The current administration is spending money we don't have..hyper inflation is coming as sure as god made little green apples. Do not put it in a long term fixed income instrument...RayinPenn

[Russ_Boston]

Not sure this was clear so I just looked it up. The 250K FDIC protection was extended to 2014:

http://www.fivecentnickel.com/2009/05/27/fdic-extends-250k-insurance-limit-through-2013/

[REDCART]

In the NYC metro area, David Lerner and Associates has a following. Since 1993, they have created a number of illiquid REITs which invest in prime hotel properties, Hilton, Marriott (and Marriott subsidiaries). Their current offering, Apple Nine ($2 billion cap) has been paying 8 percent. I've heard some financial planner poo poo this investment but it appears to have below average risk. Anyone have experience with David Lerner or their Apple REITs investment? Seems like a nice place to park money at this time.

George

[jmitchell]

If you pulled 250k out of the stock market....where would you put it?

I know its tempting, but, please play nice with the question.

Consider:

Preservation of wealth in the short and long haul.

Safety of investiments?

Return on investments?

Cabo35,

I can't resist -- TV issued tax-exempt bonds :a20:

[jmitchell]

Index funds with a guarantee?
Or did you utilize some sort of an annuity package?

Yes, please let us in on this. Are they Merrill Index funds?

[batman911]

Good one jmitchell.

My take on the $250K is:

1. High/Medium Risk: Invest half in a 500 Index fund and the other half in good quality companies that stand to gain on a market up turn. There are still a lot of under priced stocks. This is a good time to pick some winners if you can afford to put the money at risk.

2. Meduim Risk: Buy utility stocks for the dividend income. Some down side principal risk but more stable than most. Do not go only for the highest dividend. Take a good look at earnings per share and other assets the company owns that could affect stock price.

3. Safe: Government Bonds/Notes. 10 Year currently about 2.74 %.

Remember the high interest rates usually go along with high inflation. Low interest rates are not a bad thing unless you are stuck there and inflation takes off. I would be happy at 1% if inflation was the same.

[tonyafd]

Withdrawal from the stock market is something to consider right now because oil prices may choke off a recovery. However the Treasury yield curve is steeply up-sloping. Which is bullish.

While a healthy middle class is decreasingly important to corporate profits, one must take into account the relationship of oil prices to corporate profits.

Kiplinger's Magazine is recommends short term high grade bonds, because interest rates have nowhere to go but up.

This is a tough call.

[tonyafd]

"Now to your question find a inflation proof investment like real estate..The current administration is spending money we don't have..hyper inflation is coming as sure as god made little green apples. Do not put it in a long term fixed income instrument...RayinPenn[/QUOTE]

Raw land maybe but not houses.

[Celebrator]

Everyone has different circumstances, needs and risk tolerances. I suggest having a fee based financial advisor provide you with expert advise. Make sure to interview the advisor to see if you are comfortable with his/her philosophy.
Good luck!

[784caroline]

JMitchell

The TV Municipal Bonds recently being advertised in the paper for 6+% tax free were Comunity Development District Bonds...NOt the recreational bonds that are now under scruitiny by the IRS. Totally different.

[rjm1cc]

If you pulled 250k out of the stock market....where would you put it?

I know its tempting, but, please play nice with the question.

Consider:

Preservation of wealth in the short and long haul.

Safety of investiments?

Return on investments?

More toward the short term I would go with CD's, maybe Discover's on line bank or to get a little better return corporate bonds that are maturing in 2 to 5 years. The bonds would be stressing the return more than safety.

[GTTPF]

You have my attention!!!

Can you be more specific? Who offers this investment? What is the name of the fund or funds?

I don't understand your statement about a guarantee, but I will investigate that when you explain what you bought.

Thanks.

There are no index funds that make that claim. There are index annuities such as alliance that do give you 10% up front with guarantee of 0 loss and work off the indexes monthly or annualy and reset each month or year howerer you set it up. I preferr monthly. Example if the market goes up 2% in june you make 2 % if it drops 3% in july you lose nothing. That is if you are on a month to month annuity. I have 2 m2m and 1 annual. They work well but your money is tied up for 17 years. You can withdraw up to 10% yearly without penality. I just reinvest the dividends for now. I have made over 35K in the past 2 years on just those with no risk. Speak to a professional about them before you invest so that you get the entire picture. Now to answer the question if I was investing 250k I would open 3 50k annuities and 100k in High Dividend stocks such as ATT etc. Do not take this as finincial advise but this is only my opinion on what I would do withe the 250k question. Do your reasearch! You have to live with your decisions. GOOD LUCK!

[Figmo Bohica]

Our broker told us, if he sends us all our money go buy bullets and can goods for the poopie is about to hit the fan. That is the best advise I ever got and thisy guy has made us money every year, no matter what the market does. Sometimes not a lot, but enough that we have had to pay capital gains every year.

[rubicon]

I worked a five year program to qualify as a finacial advisor and before completing the last course backed away. I backed away because I felt very uncomfortable telling people how to invest their hard earned money. Giving advice in a good economy is easy but head spinning in a down turn.

Add to that the conflicting advice from the financial community and a dynamic market that spooks easy and you can see why someone like me would rethink offering advice

[rjm1cc]

Looking at existing houses now in TV. Does it make sense to buy the house cash by taking out of stock market? Planning on six months in TV. Have existing house up north paid off. Leaves us with a decent pension, SS and some cash.
Remember capital gains taxes when you run the numbers. I would also assume that inflation will increase so having a fixed monthly mortgage payment for 30 years might be a good thing. I would consider a mortgage and putting trailing stop loss orders on the stock I would have sold to buy the property. You will have to put the stop 5% to 10% under the market to avoid getting sold out too soon. Maybe 10% now and if the market calms down move it to 5%. This is not risk free as you could end up selling the stock for less than you could get now.

[Trader58]

I trade options, usually condors or iron condors on indexes, like the Russell 2K. With that you can make money if the market goes up or down or sideways. It doesn't have to always go up to be profitable. If you know the recipe it's very safe.

[mrfixit]

I trade options, usually condors or iron condors on indexes, like the Russell 2K. With that you can make money if the market goes up or down or sideways. It doesn't have to always go up to be profitable. If you know the recipe it's very safe.

..........can it be said on this forum ????? ....." S-T-R-A-D-D-L-E-S "......AND....." S-T-R-A-N-G-L-E-S "...............(YUMMY...it's time to eat)...

[Trader58]

From a technical perspective, the market only goes up or down 33% of the time. Your much safer if you limit your speculative holdings and set more income earning products that make money when the market goes sideways, which is 66% of the time.

[TF Hutch]

Treasury Inflation-Protected Securities (TIPS)

Treasury Inflation-Protected Securities, or TIPS, provide protection against inflation. The principal of a TIPS increases with inflation and decreases with deflation, as measured by the Consumer Price Index. When a TIPS matures, you are paid the adjusted principal or original principal, whichever is greater.

TIPS pay interest twice a year, at a fixed rate. The rate is applied to the adjusted principal; so, like the principal, interest payments rise with inflation and fall with deflation.

[Villages PL]

If you pulled 250k out of the stock market....where would you put it?

At this time, I would never consider taking money out of the market. (This assumes that one is holding good quality stocks.) What about CDs and bonds? Low rates of return are giving a strong signal to stay away, in my opinion.


Preservation of wealth in the short and long haul.

If you get into CDs or bonds now, for preservation of wealth, when would you plan on getting back in the market? Ever? Would you be waiting for the next market crash or bear market? If so, you might be waiting for 3 or 4 years. No one knows for sure but I believe it would be at least a few years away. Meanwhile, the value of your money would be eroding due to inflation.
And if inflation steps up it's pace, it could be a serious problem.


Safety of investiments?

No investment is ever 100% safe. Example: If interest rates go up, which they will at some point, bond prices will fall.


Return on investments?

You might consider some quality stocks that pay good dividends and which also stand to appreciate in price as the market goes up.

Good luck!

[Happinow]

Ask Suze Orman!

[coralway]

If I took 250k out of the market - I would turn right around and put it back in ASAP !!!!!

[eweissenbach]

Real Estate - bargains abound!

[KYWildcat]

I am currently a residential real estate appraiser. I think I know something about my local market. I am a "hard money" lender. I currently have five (5)
1st mortgages that are 1-3 year notes with the entire principle payable as a baloon at the end of the specified term. My requirements are simple, 2-3% closing cost up front, 11.99% interest only payable on the 1st of each month. No greater than 60% loan-to-value ratio. I am the 1st mortgage! Also, I must inspect the property and do my own internal appraisal report. (to myself). No appraisal fee required! Must be properties that I would personally be comforable in.

I have turned down many request. The request are presented to me by a couple of mortgage brokers that I do business with. The typical borrower is someone that has a recent mark on the credit score, has a long term job employment history and can restore their credit score in a year or two. All of my borrowers have been great as far as payment history. Only one paid late a couple of times but my late charges went out and she got the message. She paid the loan of $160,000 off about 18 months ago.

[rubicon]

The problem with investment advice is that by the time it reaches a client it is old news. This is why being one exam short of completing a five year investment designation I pulled back.

The OP presents a case of investing 250k pulled from an investment to be re-invested.

I personally would not pull 350k from my IRA. However if I had found money equal to250k it wouldn't go in CD annuities, life insurance or bonds. The latest news from Burton Malkiel author of the famous "Random Walk suggest investing in dividend stocks. However if you read all of these post you read a number of posts wherein the poster felt that not all didvidend stocks are equal. So there you go. You cannot just get a tip on dividend stock but you must research which stocks.

I am not as risk adverse as some. In fact my investment people could give over the fact that my choices more likely fit in the 20 something category than....well my true age and so i had to modify my portfolio.

Bottom line for me would be dividend stocks. Like a number of people here I built ladders which have been a blessing

[l2ridehd]

I agree with most of you. I have been moving my asset allocation from about 50/50 to 65/35 on market dips. I use mostly very low expense Vanguard index funds to keep it simple. Also moving some bond money into dividend stocks. I did one mortgage with a good loan to value with a 10 year balloon. Would like to find another. Ist mortgage only, 60% loan to value, 10 year balloon at 6%. Actuals on the closing cost.

[kentucky blue]

I am currently a residential real estate appraiser. I think I know something about my local market. I am a "hard money" lender. I currently have five (5)
1st mortgages that are 1-3 year notes with the entire principle payable as a baloon at the end of the specified term. My requirements are simple, 2-3% closing cost up front, 11.99% interest only payable on the 1st of each month. No greater than 60% loan-to-value ratio. I am the 1st mortgage! Also, I must inspect the property and do my own internal appraisal report. (to myself). No appraisal fee required! Must be properties that I would personally be comforable in.

I have turned down many request. The request are presented to me by a couple of mortgage brokers that I do business with. The typical borrower is someone that has a recent mark on the credit score, has a long term job employment history and can restore their credit score in a year or two. All of my borrowers have been great as far as payment history. Only one paid late a couple of times but my late charges went out and she got the message. She paid the loan of $160,000 off about 18 months ago.

I've carried lots of mortgages over the years,but only on property that i own and have sold.Your terms and interest rate would be extremely difficult for me to accept,but there are desperate people out there and you fill a need.Have owned Vanguard funds forever,but my returns have not been great,so i own mostly blue chip companies that pay attractive dividends.I realize that my aggressive portfolio is risky,80% stocks 20% bonds, but it's paid off bigtime . Plus, it doesn't hurt that 2 of my kids,a son and daughter, are investment bankers in NYC,and give me advice constantly.I usually listen to them,but my son was very high on Steve Jobs and Apple 5 years ago,but i didn't invest because it paid no dividend....................not smart:undecided:

[John Maiorino]

If you pulled 250k out of the stock market....where would you put it?

I know its tempting, but, please play nice with the question.

Consider:

Preservation of wealth in the short and long haul.

Safety of investiments?

Return on investments?

Real Estate flips - hot market in Florida paying 12% min return

[kentucky blue]

Real Estate flips - hot market in Florida paying 12% min return

Great idea,the real estate market in my area, Lexington, has bottomed out and is currently very active.I recently sold a rental home after it being on the market for less than a week.But since we only live once, take that $250,000 go for broke and think outside the box.Take it all and bet on Bodemeister in the Preakness Stakes,he should have won the Kentucky Derby, but got nipped at the wire.Since the Preakness is a shorter race,Bodemeister will win going away.If you want to add some excitement to your life,i think this could be the solution:D.It's better advise then i've gotten from most of my financial advisors:$:

[LABSX2]

If you pulled 250k out of the stock market....where would you put it?

I know its tempting, but, please play nice with the question.

Consider:

Preservation of wealth in the short and long haul.

Safety of investiments?

Return on investments?

Back yard.

[CaptJohn]

Since this thread dates back to 2009, my question is where is the 250K now and what is it currently worth? :shrug:

[vinnie]

I would give my money ot Creative Planning. They were rated #1 in the country independent Investors. Low cost, low risk.
Go to Youtube and watch Peter Mallouk, the CEO talk about investment strategy.
Their overall theory is that the market will go down and then up and then down and then up. No way to really time the market.
Their fees are low... I have my money with Ameritrade, Creative just does my investing for me. My time is worth something andI would not operate on myself when I can pay a doctor to do it professionally. Only my opinion

[donb9006]

To the OP...should have left it where it was and you'd have made money...I bet you lost...am I right?

[villagetinker]

I work with a paid advisor (Amerprise), and am looking at in excess of 20% gain this year. My advisor has done a wonderful job over the later 7-8 years, to the point that when the market crashed (40% losses typical), mine were much less, and I have made all of that back.

Bottom line find an advisor that you can deal with, tell him you goals and what you are comfortable with in terms of risk, and listen to what he says. I would stick with a larger firm.

[Minnesotalyn]

We left our in, and got it all back plus we've been living on it for 5 yrs.

[billethkid]

Looking at existing houses now in TV. Does it make sense to buy the house cash by taking out of stock market? Planning on six months in TV. Have existing house up north paid off. Leaves us with a decent pension, SS and some cash.

If one can have a mortgagewith interest rates 2-5 points below what can be earned in the market why work to pay cash for anything?

While it is a persoanl choice, it seems there are many retirees who "feel" more comfortable paying off the house. And if the "feel" is that important so be it. Or it may be one's goal to not have a mortgage...that is another choice.

But if I can have a mortgage AND CONTINUE growing the nest egg....that is my choice.

There is plenty of time to pay off the house...or my survivors can handle it!!

btk

[billethkid]

Since this thread dates back to 2009, my question is where is the 250K now and what is it currently worth? :shrug:

Yup let's hear the results?

btk

[jimmy D]

Who would guarantee 13 %. It reminds me of who are you kidding, if you could get 13% guaranteed ?????? Well just forget about it is not happening. come up with some other numbers and it may work.

[Campbell soup]

I took a large amount out of the market in August 2007 when the market was peaking. I paid off my house in Michigan it was one of the smartest things I ever did as it just gave me a good night sleep......
As it is peaking again...I may pay off the house in TV this time. Don't like mortgages or car payments.....good luck.

[Shimpy]

If one can have a mortgage with interest rates 2-5 points below what can be earned in the market why work to pay cash for anything?

While it is a persoanl choice, it seems there are many retirees who "feel" more comfortable paying off the house. And if the "feel" is that important so be it. Or it may be one's goal to not have a mortgage...that is another choice.
btk

I agree 100%. I was going to pay cash for my home, then realized I'd rather pay cash one month at a time and keep the balance in investments. I'm way ahead now and have the good feeling of having available funds for emergencys.
Money tied up in your home isn't readily available.

[Steve Gawdun]

REITS..Such as AGNC, NLY, and PSEC. They've bottomed out and will start to recover. Yields are the best and that's what it's all about. Some would say it's to risky, then take all the cash and put it in a safety Deposit Box. No Risk and Principal amount is safe. CD's yielding 2 to 3% if your lucky then taxed then 2% inflation, well...You end up losing principal and tax liability stinks. Good Luck anyway.

[DonH57]

I wished I saw this thread at page one. My money would be on canned goods and shotguns especially before the next tremendous weather event.

[rubicon]

Thank the Fed for the over the top double digit increases in equity funds be it individual index, etc and it may well continue as wall street continues on this sugar high and brokers/advisors sit back on automatic pilot collecting their high fees.

The only exceptions bonds, CD's money markets because of the Fed's QE's

S&P Index appreciably over 25% this year.....be ready for the bubble if Fed tapering continues. Also possible if economy does not continue its upward trend the Fed will ease off the tapering.

[Happy Snowbird]

Why would anyone give up double digit returns by paying cash or paying off their house rather than taking a single digit mortage? I don't like payments but my theory is "always use somebody elses money and watch mine grow". I never owe more than I can pay off.

[rubicon]

Why would anyone give up double digit returns by paying cash or paying off their house rather than taking a single digit mortage? I don't like payments but my theory is "always use somebody elses money and watch mine grow". I never owe more than I can pay off.

the proper application of leverage is what makes rich people even richer. it is Warren Buffets so not secret to wealth creation

[manaboutown]

Ever hear the story of the dumbest guy in the class?

He flies to the twentieth class reunion in a Gulfstream IV and at the party emerges from a limo with a young hot blonde on each arm. No one can understand how this fellow got so rich so one classmate finally asks him. The guy responds "I make 4% on everything I do. Puzzled, the classmate asks "What do you mean by 4%?" The guy responds "You know, buy it for a dollar and sell it for four dollars."

Sounds like the way to go to me.

[jimmyson1]

The Pentagon Federal Credit union is now offering a 5 year Certificate of Deposit with a yld at 3.04%.

[JP]

10 year US Treasuries just went over 3%.

Probably a good sign that inflation will be coming back in the next couple of years.

[manaboutown]

Having just read Jim Roger's new book, "Street Smarts", I am going to look into moving some more money out of US stocks into some Asian companies.

[Ecuadog]

The Pentagon Federal Credit union is now offering a 5 year Certificate of Deposit with a yld at 3.04%.

By the by... as a member of Pen Fed, you can get a credit card that gives 5% cash back for gasoline purchases at the pump and it has no foreign-transaction fees.

[JP]

I'm big on Canadian companies. Canada has lots of natural resources that they freely mine and lots of energy resources.

[David C]

There are lots of good suggestions here. If you are retiring and haven't paid off your primary home, you may want to consider doing so. I personally don't like to invest in the stock market. I have no control and who knows who is doing what...

I prefer to invest in real estate for a buy-and-hold strategy. Finding properties that are good rentals for good families and having them cash flow. Have you ever thought about doing something like that?

-David

[gardeniagirl]

With a matured IRA in Dec. and new even lower CD rate, the research I've done says bonds may be on the way down with the govt. not pumping them up as they have, interest rates may be heading up, and index funds are most recommended. I'm looking at Vanguard Wellesley and Wellington, and there are several others that look stable with a return of around 8 to 15%. The costs are very low, you can make changes at anytime. Some of the "widow" stocks that have been recommended for safety and dividends(were about 5% quarterly) are Duke Energy, Verizon.
I would NOT invest in annuities....first words out of the mouth of every financial planner...non liquid, they get big commissions, if you withdraw sooner than the term, penalties wipe out gains.
CD's are FDIC insured for every beneficiary you have on the account, so
two beneficiaries would be insured for $250,000 each, or $500,000 total, if I remember correctly. Ask the bank, as some are not even well informed about it.
I negotiated a CD with a local bank for 1.45% (not much, but better than me paying them) that is a 5 yr., but they waived the term if I want to withdraw all of it at anytime, I can without penalty and can deposit or withdraw at any time, but not use it as a checking account. Some banks WILL negotiate CD rates. Be sure there's no fees if you move it to another bank at maturity (Wells Fargo does, I think).

[kittygilchrist]

The FDIC insuring up to $250,000 of deposits is set to return back to $100,000 at the end of this year.

I can't find any info to confirm this. anybody?

edited...nevermind. someone already posted the answer. It is not happening...

[billethkid]

I can't find any info to confirm this. anybody?

it covers cash deposits. There is another line of insurability that is much higher for securities.

[TNLAKEPANDA]

We bought a house in TV... good investment and I am guessing it will provide a good return if / when we want to sell it.