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Fed Hints at a December Rate Hike - Strategies for Savers

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Fed Hints at a December Rate Hike - Strategies for Savers

The Fed yet again decided to hold off on a rate hike at its second-to-last FOMC meeting of the year. Due to the upcoming presidential election, no one was expecting a rate hike.

The question for this meeting is if there are signs that the Fed is preparing everyone for a December rate hike. I'm afraid there were no strong signs. However, there were a few subtle signs. One is the Fed acknowledging higher inflation. Below are excerpts of today’s FOMC statement and the September FOMC statement. As you can see, the Fed is indicating more signs of higher inflation.

Excerpts from the September FOMC Statement:

Inflation has continued to run below the Committee's 2 percent longer-run objective…

....

Market-based measures of inflation compensation remain low....

....

Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further…

Excerpts from Today’s FOMC Statement:

Inflation has increased somewhat since earlier this year but is still below the Committee's 2 percent longer-run objective…

...

Market-based measures of inflation compensation have moved up but remain low…

...

Inflation is expected to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further. …

The paragraph that describes the Fed’s decision on interest rates didn’t change much from September. There were two small changes that may suggest an increased chance of a Fed rate hike at the next meeting. Below are the excerpts that show this change. I’ve highlighted the words that were added:

Excerpts from the September FOMC Statement:

Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives.

Excerpts from Today’s FOMC Statement:

Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The Committee judges that the case for an increase in the federal funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of continued progress toward its objectives.

Lastly, there were fewer dissenters at today’s meeting. Only two members voted against holding steady on rates. Three dissented in September. However, that was expected after one of the September dissenters, Eric Rosengren, had suggested in an interview that a December rate hike would be more appropriate than a November rate hike.

The markets appear to be viewing the FOMC statement as suggesting a slightly reduced chance of a December rate hike. Markets are pricing in a 72% chance of a rate hike in December, based on fed fund futures contracts. This had been 74% yesterday. After last year’s October Fed meeting (the last one before the December meeting), the fed funds futures were showing only a 43% chance of a December rate hike.

Deposit Account Strategies

We probably won’t see much movement in deposit rates until next year, assuming the Fed hikes rates at its mid-December meeting. The December 2015 Fed rate hike didn’t help deposit rates. In fact, long-term CD rates are lower now than in December. It will probably take at least two Fed rate hikes next year before we see some significant upward movement in deposit rates. That frequency of Fed rate hikes will indicate confidence in a strengthening economy. Based on the Fed’s September dot plot and the Fed’s history, future rate hikes will probably be very gradual.

With the high likelihood of only a very gradual increase in rates, long-term CDs and CD ladders still make sense. Currently, 5-year CDs are generally the best deals. The only exception is the 3% APY 7-year IRA CD at Andrews FCU.

If you are worried about being stuck in low-rate long-term CDs as rates rise, you may want to put more focus on 5-year CDs with mild early withdrawal penalties. Another option is a barbell CD ladder with internet savings accounts and/or reward checking accounts. I have more details on these strategies in my article, Deposit Account Predictions and Strategies for 2016.

Future FOMC Meetings

The next three FOMC meetings are scheduled for December 13-14, January 31/February 1, and March 14-15. The December and March meetings will include the summary of economic projections and a press conference by Fed Chair Yellen.

Comments
Anonymous
Anonymous   |     |   Comment #1
"...but decided, for the time being, to wait for some further evidence of continued progress toward its objectives."

That "further evidence" will be a long time coming I'm afraid.
Anonymous
Anonymous   |     |   Comment #2
Translation: Keynesian/Obamanomics has failed miserably in everything but creating a stock bubble which we will continue to inflate by not raising rates. Unless Trump gets in then we will raise rates just to make him look bad.
Anonymous
Anonymous   |     |   Comment #3
Another good reason to vote for Trump!
Anonymous
Anonymous   |     |   Comment #4
David Duke and the KKK have now endorsed Trump.  How sad for that reason alone anyone that is not a bigot would vote for that.
Anonymous
Anonymous   |     |   Comment #6
Yep.......Call me whatever you want......Bigot.....Deplorable.......Nonredeemable......Go for it........I already voted for Trump and I'm proud to do it. Everyone I know is voting for Trump. So call us whatever you want.......We're taking back our country.......TRUMP 2016!!!!!!!!!!!!
Anonymous
Anonymous   |     |   Comment #11
Everyone I know is not voting for Trump.  You should study WWII how Hitler came to power by dividing people too like Trump does.
Anonymous
Anonymous   |     |   Comment #13
You liberals are the ones that divide people and you are the true racists........You are getting desperate and in an absolute liberal meltdown because Trump is making massive gains in polls.
Anonymous
Anonymous   |     |   Comment #21
What are you going to do when HRC is sworn in January 20th?
Anonymous #2
Anonymous #2 (anonymous)   |     |   Comment #17
If you don't know even a single person who's voting for Trump, then it sounds like your circle of acquaintances is not very inclusive or diverse.
Anonymous
Anonymous   |     |   Comment #19
cute, I know tons of people, that are intelligent and not stupid, that support diveristy fairness and are not ingnorant. Apparantly you are ' SUCH A NASTY PERSON'
Anonymous
Anonymous   |     |   Comment #27
Amen...  it's incredible that anyone with any decency would even consider voting for Trump.  His personality is disgusting, and he knows NOTHING about politics or how to run a country.  Good luck, America, if that Trump fool is elected.  I don't think it will happen, but you can never underestimate the ignorance of people who don't analyze things and act without thinking things through.  The saddest part is, many of the people who would vote for Trump think he will somehow help improve their financial situation.  Good luck with that!
Bozo
Bozo   |     |   Comment #35
You hit the nail on the head. These days, politics has become even more "tribal". I used to subscribe to the motto "we can agree to disagree without being disagreeable", but that seems a bit quaint these days.
Another Trump Voter
Another Trump Voter (anonymous)   |     |   Comment #83
Adolf Hitler was a socialist.  NAZI is the German abbreviation for "National Socialist German Workers Party".  Nationalized control of the private sector for the good of the government's social programs.  Hitler's policy sounds a lot like HRC and Obama's policy.  I think you are the one that should study WWII history.
Anonymous
Anonymous   |     |   Comment #84
Really?? still?
Anonymous
Anonymous   |     |   Comment #12
Trump 2016?  We can only hope.  I will vote for the lessor of two evils, Trump of course.

Trump's personal life will not hurt  the U.S. nearly as much as Hillary's political agenda and self enrichment.
Anonymous No. 2
Anonymous No. 2 (anonymous)   |     |   Comment #16
Well, the Communist Party USA has endorsed Hillary. Do you hold her to the same standard; or do you only hold it against Trump when some fringe group offers an unwanted endorsement?
Anonymous
Anonymous   |     |   Comment #5
Trump would wreck the finances of this country...

“I would borrow, knowing that if the economy crashed, you could make a deal” to pay bondholders less than full value on the debt owed to them. This is, after all, the sort of thing Trump has done with creditors when, say, one of his casinos went bankrupt. It is also more or less what Greece has repeatedly negotiated with its bondholders over the last few years.

Read more at: http://www.nationalreview.com/article/435226/trump-national-debt
#7 - This comment has been removed for violating our comment policy.
Anonymous
Anonymous   |     |   Comment #8
"Hints at a rate hike"??? That's funny.
Smokeboat
Smokeboat (anonymous)   |     |   Comment #9
Art of the deal  vs  How much more can we steal.... Don't forget your clothespin when you go to the polls.
Anonymous
Anonymous   |     |   Comment #10
As has been stated before by the site, ALL political jabs and arguments is to be confined
to the Weekly Summary reports
Anonymous
Anonymous   |     |   Comment #14
TRUMP 2016!!!!!
highrate
highrate   |     |   Comment #15
if you have the seven year cd at valor, you can now put in more money which is like a 5 year cd at 3 percent
Jesperson
Jesperson (anonymous)   |     |   Comment #18
What's that got to do with Trump vs. Hillary?    :)
Anonymous
Anonymous   |     |   Comment #29
I just fully funded it to the NCUA limit minus expected interest.  Best deal I could find.  Just make sure your valor cd has the 3% floor limit.
Anonymous
Anonymous   |     |   Comment #43
This is the first I've heard that; I haven't gotten any letter yet.  Do you have a copy of the letter you can post?  Thanks!
Anonymous
Anonymous   |     |   Comment #20
Obfuscation, obfuscation., obfuscation.
Anonymous
Anonymous   |     |   Comment #22
For comments not on the "Strategies for Savers" OP
"Here's Your Sign"
jeff foxworthy
Anonymous
Anonymous   |     |   Comment #23
It is being written elsewhere that the employment report for October, released today, mitigates favorably for a rate hike next month.  Of course there remains the November employment report hurdle.  That report will be released December second, prior to the December FOMC meeting.  If that employment report turns out to be a clinker, the hoped-for rate hike will likely be postponed once again.

The election outcome?  Well, that outcome will most likely be known (barring some sort of electoral college tie or a year 2000 election like event) when the next FOMC meeting takes place in December.  How America's choice for POTUS might impact that meeting's decision, if at all, I do not know.
Anonymous
Anonymous   |     |   Comment #24
I like to make interest on my savings and save money on taxes so I'm voting for Trump! Yeah I know this comment will be removed due to telling the truth etc.
Anonymous
Anonymous   |     |   Comment #28
Good luck with that.  Unless you are of a VERY high income, the tax cuts he is proposing won't do anything to alleviate your tax burden.  And, it's clear that savers would suffer under his policies as well.  
Anonymous
Anonymous   |     |   Comment #33
Trump would cut all tax brackets and more than double the standard deduction. That means that low to middle income people would have their first $30,000 a year in income federal tax free. Please educate yourself before posting. Stop believing the Democratic "only tax breaks for the rich" lies. You do have a computer all you need to do is google it.
Anonymous
Anonymous   |     |   Comment #36
both political parties lie. Promise the moon, and it gets hit in the eye.
Only JFK kept that promise.
Anonymous
Anonymous   |     |   Comment #41
Yeah Republicans never cut taxes right? Bush cut my taxes from 15% to 10% a 33.3% tax cut. I'm still in the 15% tax bracket now because of Bush! I would have been in the 28% bracket without those cuts. The fact is that Democrats NEVER lower taxes ever. Give me one example of a Democrat lowering taxes in the last 100 years....................yeah you can't.
Anonymous
Anonymous   |     |   Comment #44
that was a very irresponsible thing for Bush to do. He increased our debt tremendoulsy by lowering those taxes pushing our debt  upand putting us into that GREAT RECESSION we had. So what sounds good in the beginng will only bite us in the end.  Orange Hitler would hurt us the same way if he wins.
Anonymous
Anonymous   |     |   Comment #48
Actually the "Great Recession" was caused by Bill Clinton's policy, not Bush's.  He is the one who lowered the requirements for lending, and when everyone figured out they could buy a house with nothing down and no risk, they jumped on it.  Human greed caused the housing bubble and its consequential crash.
Anonymous
Anonymous   |     |   Comment #49
Let's "talk" about loans...in a significant no. of states there are non-recourse statutes (go look it up, you'll be amazed, i.e. You don't know what you don't know!) for home purchase loans, i.e. One does not have personal liability for non-payment!  So, who cares about the quality of the borrower, the lender doesn't since it is ONLY looking to the collateral.  Otherwise don't make the loan!  Did the lenders who packaged these loans disclose the non-recourse nature?  Did the lenders who refinanced disclose your new loan is recourse?  The Feds went after the wrong issue AND borrowers did not get (good)legal advice 

Pretend u are in Colorado...suck/smoke it up!
Anonymous
Anonymous   |     |   Comment #52
believe what you want, Bill Clinton was out of office almost 8 years, so there was plenty of time for Bush to fix it, so please put the blame where it truly goes.
Anonymous
Anonymous   |     |   Comment #53
The Congress refused to do so.
Anonymous
Anonymous   |     |   Comment #54
no excuse if Bush was a good president then someway or somehow he would have fixed it, so he gets the blame being on his watch.
Anonymous
Anonymous   |     |   Comment #55
That's what we are reading, i.e. "somehow" if it happens on your watch, that president is at fault merely b/c Congress failed to act in a responsible manner, too!  Got it!  Why does Congress keep passing for the last 16 years an unbalanced budget?  Why won't they negotiate...they did once and got burned, i.e. the Sequestration arrangement really/really burned them!  Whether demo or rep!
Anonymous
Anonymous   |     |   Comment #57
8 years of Obama and still blaming Bush for a recession he didn't cause! Obama fixed nothing! All the new jobs are low paying and part time. The unemployment rate is a complete lie as well. All we got is 20 trillion in debt with 8 years of QE and 0% interest rates creating a stock bubble. Obamacare costing us more in healthcare costs than ever before and more Muslim terrorist streaming across the borders to collect a welfare check and set up sleeper cells here in the U.S. Only a total fool would think that Obama fixed anything!
Anonymous
Anonymous   |     |   Comment #58
try to see the world as the glass half full instead of the glass half empty. However as things are now in 2016 they are tremondously better than they were 8 years ago right now.  Whatever lie the umemployement rate is right now the figuring has not changed when it was doubled eight years ago.
Anonymous
Anonymous   |     |   Comment #56
Are you (also) talking about the 8 years Obama took to fix the problem from Bush's 8 year watch?
Anonymous
Anonymous   |     |   Comment #65
The glass was half full before Obama came in and dumped the other half out. Then because I didn't like it I have been called a racist for the last 8 years. Where is the half full part? The Muslim terrorists and illegal aliens streaming across the border? The higher healthcare costs? The 8 years of 0% interest rates? Siding with thugs and criminals over the police? Apologizing around the world for the U.S.? I seriously can't think of even one good thing that Obama has done in 8 years. Sure he takes credit for getting Bin Laden but it was really the policies put in place by Bush that did that. Look at that awful Iran deal. Nothing like handing over our tax dollars to a terrorist country so they can build nukes to use against us. Glass half full indeed.
Anonymous
Anonymous   |     |   Comment #67
I am not even going to try to explain, you are too much against the progess that has been going on, and if you can see something good from the last 8 years you will only credit it to Bush. So you are too far gone.
Anonymous
Anonymous   |     |   Comment #25
Fed hints at a rate hike but only if Trump wins election
Anonymous
Anonymous   |     |   Comment #26
It is difficult to predict Janet Yellen's reaction should Mr. Trump win.  She knows Trump will not retain her as Fed chair following expiration of her term.  But on November ninth she still will have roughly fourteen months remaining in office.  If Mrs. Clinton prevails next Tuesday, OTOH, the Fed chair job will belong to Yellen for as long as she wishes.  How this all might impact the course of interest rates, over which Yellen at present has considerable control, is anyone's guess.
Hoody
Hoody   |     |   Comment #30
well than the whole picture is wrong, why would she raise rates if Trump becomes president?

 I mean all these past 10 years all I've heard id the reason the rates are kept low and the FED & BLS is BSing about inflation , that its all about the  "debt" and the "market", so if she all sudden raises rates due to a Trump winning the presidency, than it'is all  "political BS".

Cause if it IS the "debt" than it shouldn't matter who sits in the white house to the FED, right??? and rates should continue to be held down so the market can stay up, and the BLS can keep BSing so the GOV can explain those NO COLA years or this .3% year.

Than again I'm not sure who is involved with all this debt, cause those $700 dollar cell phones cranked out of China seem to sell pretty well to all those poor underpaid individuals with all that student loan,home,car,medical, legal, debt to deal with ...........!
Anonymous
Anonymous   |     |   Comment #31
Young people are not investing in homes or saving anywhere what they should. Live for the moment is the rule of the day and those phone prices pale in comparison to the monthly fees involved. I assist old folks and I have a woman whose monthly phone bill exceeds her electric & gas costs combined. Actually, her food expenses are only 10-15 dollars above her monthly phone plan cost of 85 bucks (insurance included). She abandoned her landline which would have added another 50 bucks to her monthly budget.

Rates cannot go up more than a few basis points for a few reasons. (1) the economy is not robust and (2) pensions would fail by the bucketful. Numerous pension planners really ****ed up when they projected 7%-8% annual growth in portfolios.     
Anonymous
Anonymous   |     |   Comment #32
That **** was a helically inclined plane. Pretty soon the language will be dead.
Anonymous
Anonymous   |     |   Comment #59
Hoody, #26 is "you know whose campaign mgr."
Anonymous
Anonymous   |     |   Comment #34
Not difficult to predict at all if Hillary wins interest rates go negative like Europe and the debt climbs to 40 trillion. Just like interest rates stayed at 0% for Obama's 8 years in office while the debt doubled. I predicted that 8 years ago as well. 
Anonymous
Anonymous   |     |   Comment #37
Show me the Money
Anonymous
Anonymous   |     |   Comment #38
Sad that Congress passes bills to allow all of this debt
Anonymous
Anonymous   |     |   Comment #39
PS:  Recent years it was a Rep Congress...how did that debt get authorized by Congress?
Anonymous
Anonymous   |     |   Comment #40
That's why we need Trump as our next president.  To "Drain the swamp" !
Anonymous
Anonymous   |     |   Comment #42
Trump and Congress don't mix!  And #41...the new Rep party will not pass taxes too...that's the problem...spend, spend and more spending and more debt!
Anonymous
Anonymous   |     |   Comment #45
I have been watching the Trump rallies just from TODAY!  The guy is amazing.  He is holding five rallies in one day all across America.  And the crowds are just astonishing!

Here's my take:

This is not a political forum and I'm not campaigning for him.  But let me tell you if Trump wins, as now appears likely, hold onto your hats where interest rates are concerned.  Interest rates are on topic here;  very much so.  I know Trump has the formula for enhanced American economic activity because I've been alive long enough (I'm older than Trump) to know what works.  And Trump obviously also knows how to get things going, and he WILL.  This dude is no idiot community organizer or politician.  This guy is a builder, shaker, and MOVER, with a track record of having produced REAL STUFF over many years.

If Trump wins, stay relatively short with your CD money.  Take five year CDs off the table.  Because by the end of his first term Trump will have us rocking economically.  And that will cause interest rates to jump way up because demand for money will escalate sharply.  Also Trump will replace Yellen, which also augers for higher interest rates.

Maybe you'll realize this is not a Trump campaign commercial after you read the following:

I'm not at all certain higher interest rates are what is best for us savers.  This is a warning, not a warm hug for Trump.  Because if Trump triggers significant inflation, something I see as a distinct possibility, something for which other Republicans have been responsible, then we will lose, not win.

So bottom line, I equate Trump with higher interest rates BIG TIME.  And if higher interest rates are coming our way, it is not a good time to throw money into five or more year CDs at present-day, very low, rates.

Hillary right now appears to be fading, owing to the Wikileaks disclosures and so much more.  But if she holds on for the win, buy long term CDs to the max, early and often.  Hillary will be four more years of Obama along with Yellen forever.  Interest rates will remain stable or go lower.  It will not be so bad as long as she can keep us away from inflation, as President Obama has done.

I have money to invest right now targeted for CDs.  Worst case for me would be a "no decision" after Tuesday, similar to what happened back with the Bush/Gore election in 2000.  Because today there is no fully-staffed Supreme Court, as there was in 2000, which can render a final judgement.  Regardless who wins, I dearly hope we get a clear decision on Tuesday.  The election outcome is going to make a huge difference for CD investors.     
Anonymous
Anonymous   |     |   Comment #46
Uh, sorry.  Make that FOUR rallies all across America.  I got carried away.  BTW, Hillary's one rally for today, in Florida, was rained out.  The poor woman cannot buy a break . . not even with all that foreign loot she has collected.
Anonymous
Anonymous   |     |   Comment #47
CD's are a lagging indicator. Unless the economy is booming CD's are dead in the water. I'm not sure people understand CD's are the last resort of the frugal who choose safety (i.e. low interest) over everything else. CD's are the equivalent of treading water, nothing more.  
Bozo
Bozo   |     |   Comment #50
I wouldn't be so doom and gloom. An argument can be made that CDs are an indicator of things on the horizon, a "forward" indicator. Financial institutions hire all these PhDs to forecast, then they set CD rates accordingly. Remember back in 2006, financial institutions were tripping all over themselves to offer close to 6%, since the economy was tripping. CDs were a "forward" (but incorrect) indicator. Feel free to correct me if I am wrong.

These days, as a forward indicator, five-year CDs are fairly prescient. Two percent for stock dividends, two percent for bond funds, two percent for growth (if we're lucky), two percent for inflation, and two percent for five-year CDs. It's what I call the "terrible twos". 
Bozo
Bozo   |     |   Comment #51
Treading water has its advantages. CDs are not exactly the "last resort" of folks who choose safety. They can also be rational alternatives to an asset allocation which calls for a certain percentage in fixed income, but balks at bond funds. A ladder of five-year CDs offers many advantages unavailable with intermediate-term bond funds. Prudent investors have a prudent asset allocation. Treading water in one's fixed-income might well be prudent.
Anonymous
Anonymous   |     |   Comment #61
CD's are backed by the FDIC. Stocks, bonds, etc. are not. As interest bearing "investments" go, CD's are the safest along with Treasuries. Safe means extremely low risk which translates into very low interest. CD's have only become "investments" because people no longer understand the difference. CD's at very best, maintain the purchasing value of your money. Money in other low-interest bank accounts diminshes in value with each passing day. Sort of like termites chewing away at your house. Silent, but deadly. 
Bozo
Bozo   |     |   Comment #60
Somewhat prescient post for an anonymous poster. The stock market clearly is in tatters over a Trump win (witness the last month). Wall Street firmly believes the devil we know is so much better than the devil we don't. Wall Street hates unpredictability. At least with Hillary, they get predictability. Shrill, boring, opaque, paranoid, corrupt, but predictable. Mind you, I'm no Trump fan, my preferred candidate was washed away by the Trump tsunami. I have hedged my bets on this election with cash. Five-year CDs in five year ladders. The stock market will do what it will do. My CD ladder will click along.

The Republic will survive. The sun will come up on November 9, folks will go to work, or to school, and folks overweight in laddered CDs will be happy.
Anonymous
Anonymous   |     |   Comment #62
Wall street wants the charade to continue as long as possible regardless of the impact on the vast majority (you and me). Hillary is corrupt, the banks are corrupt (i.e. WF) and no one seems to understand or care. Well, maybe someone does. If I was Trump and I was elected I'd get Elizabeth Warren on board for a singular task...Liz, clean up the banks. If you need anything call Rudy over at the AG's office.
Anonymous
Anonymous   |     |   Comment #63
Bozo, you are just as anonymous as any other Anonymous here.  So your point is mute on that issue. 

Choosing the status quo for fear of the unknown is ridiculous unless you really like the present condition our country is in.  Thank God our ancestors didn't have your mind set!
Anonymous
Anonymous   |     |   Comment #64
OK, list all your CD's with time frames and rates. For many, after taxes, CD's don't even keep up with inflation. CD's are not classic investments...they are a simple preservation strategy and nothing more. And, when taxes are calculated the rate of return on a CD often results in a negative impact on purchasing power...which is the only measure that counts. We have almost a million in various CD's so I'm not blowing smoke here. My wife will probably outlive me and she wanted safety and simplicity. Our incomes generate annual savings in excess of 50K so, in retirement, we save money every month and should do so into our 80's. We are the ideal retirees risky investments (i.e. we can afford losses) but risk is exactly what we've avoided in favor of simplicity and peace of mind.

PS
The lesson of history is that the republic may, in fact, not survive.      
Bozo
Bozo   |     |   Comment #68
I think you might be over-reacting. My ladder has easily out-paced inflation. Per your request, my IRA CDs: PenFed, roughly $140K at 3.5%; StateFarmBank, roughly $220K at 2.1%; KeyDirect, roughly $110K at 5.8%; Alliant $225K at 2.1%; Patelco $226K at 1.95%; USAA (after-tax) $350K at 3.8%. PF rolls next year, SFB not until 2020, Key in 2018, Patelco in 2012, Alliant in 2021. USAA next year. I have never, ever, lost a penny to inflation in my ladder. Ever.
Anonymous
Anonymous   |     |   Comment #69
Nice, Bozo has over $1.25 million.
Anonymous
Anonymous   |     |   Comment #70
Not after taxes he/she doesn't. Remember, a $1,000,000 IRA sounds great until you're in the 25% tax bracket when you start mandatory withdrawals. Then your 1 million is worth $750,000. A couple with a few small pensions and social security can easily be in the 25% bracket. The USAA $350,000 mentioned as after tax money is equal to $466,000 in an IRA that will ultimately be taxed at 25%. Bozo did a great job with his/her money which proves all Bozos are not bozos.
Anonymous
Anonymous   |     |   Comment #73
QCD up to 100k each year is tax free!  Do it while you can.  BTW, those with Roth IRAs better think about what happens when they are taxed on distributions too...after all Soc Sec use to be tax free until Reagan started the change there...luv those Rep...and the Demos built on that to 85%.  Double taxation!  
Bozo
Bozo   |     |   Comment #75
I must give Ken Tumin most/all of the credit for my ladder. Without Ken's blog over these past 10+ years, I would be but wandering in the jungle. As for taxes, IRA CDs are a double-edged sword, admittedly. Defer now, pay later. The tax man eventually gets his due. We deferred when our effective tax rate was much higher than it is now, in retirement.
Bozo
Bozo   |     |   Comment #80
The interest on the after-tax CD currently at USAA is most assuredly taxed by both the state (of CA) and the Feds. When (if) I redeem the principal (in whole or in part), redemptions will not be taxed (as tax has already been paid, hence "after-tax"). In that regard, after-tax CDs are, indeed, worth "more" than IRA CDs, where principal is taxed upon redemption.
Anonymous
Anonymous   |     |   Comment #81
Look again...also true if one takes a IRA QCD (which is tax free) and uses it for charitable purposes a charity gains too!  If "after tax CD" is used for charity, no deduction (and if so, tax benefit depends on tax rate).  IRA QCD are the/a way to go in using pre tax $s...now finding the "right" charity is the key, too!
Anonymous
Anonymous   |     |   Comment #66
Wall Street definitely wants the status quo. Hillary cleared again, gives stocks 300 pt jump.
Anonymous
Anonymous   |     |   Comment #71
Wall street simply wants what they paid for!
Anonymous
Anonymous   |     |   Comment #72
Your right.  Wall Street wants Hillary as president.  After all, they paid for that. 
Bozo
Bozo   |     |   Comment #76
Whether Hillary or the Donald is the Black Swan on our investing horizons is somewhat irrelevant to folks who follow Ken's blog. The key has always been to diversify against exogenous events, whether they be Presidential elections or tumbling stock markets. Wags predict "Mr. Market" will tumble if Trump is elected. If one has a conservative asset allocation, such a prediction is greeted with a yawn. While my equity-based asset allocation might take a short-term tumble if Trump is elected, my bond funds and my CD ladders most assuredly will not. Life will go on, the Republic will survive, my wife and I will be able to pay our bills, and the sun will come up in the morning.
Bozo
Bozo   |     |   Comment #77
Taking a cue from my own posts, I just checked. While the futures market is a mess (although rebounding from its lows), our CD ladders are intact, the FDIC and NCUA remain, the sun is indeed coming up, the world keeps spinning, and the Republic will survive. Folks who hedged their bets with cash (as did I) are happy campers this morning. Folks who hedged their bets with laddered CDs with guidance from Ken Tumin's blog over the past decade or so, are even happier campers.

While Mr. Trump was hardly my choice for President, he is now the President-elect. Congratulations to his supporters. Now, let's move on.
Anonymous
Anonymous   |     |   Comment #78
Donald Trump was my choice by default.  He was the lessor of two evils.  It was about time the general public woke up and  VOTED for CHANGE rather than just complaining about  the political elite running amuck. 

What happens next is anyone's guess.   All the "political experts" and "talking heads" on television got it all wrong so far! 
Anonymous
Anonymous   |     |   Comment #82
The market crashed. Then, a few hours later, it rebounded to new highs. Anyone who believes this wasn't deliberate manipulation is silly. A lot of robots made a lot of money for a very few in a short period of time. The election wasn't rigged but the market sure is.
#74 - This comment has been removed for violating our comment policy.
Anonymous
Anonymous   |     |   Comment #79
What matters here is impact of the Trump victory on interest rates.  Commencing on January 20, 1981, President Reagan sought to extract America from the "malaise" years with a massive change in tone and direction.  It took even Reagan over two years to get things back on track and turned around.  Of course President Reagan, unlike with Trump, did not have a Republican Congress.  Still, while I believe Trump eventually will be successful, I do not think he will be able to fix things overnight.  Also, Trump will not be in position to replace Yellen (barring her resignation, which I do not anticipate) for almost a year after he is sworn in.

It is Trump's changes in direction, in addition to his change at the Fed, which eventually will jumpstart our country.  But this is NOT going to happen instantly.  And until Trump does get us moving, interest rates will remain low.  My guess is another two years of lower rates.  Just hope I'm not underestimating Trump.  He obviously is an incredibly driven guy who will be Commander in Chief of much more than just our military.  Trump is the quintessential alpha male.  He will get his way far more often than not, having no difficulty bullying existing pee-pants RINO Congressional leaders.  Also, at banks and credit unions, there could be anticipatory CD interest rate hikes which might trap some of us.  So hang onto your hat;  anything could happen.

Things would have been a lot more predictable for us with a Hillary victory.  Four more years of an Obama-like administration with no worry of higher rates would have been in the bag.  Now, with Trump, not so much.