Set Aside Funds for College Expenses With College Savings Plans
CD Rates Summary April 24, 2018
What You Need to Know Before You Store Items into a Safe Deposit Box
April Series I Savings Bonds - Just Below Top 1-Year CD RatesBest Bank Account Interest Rates - Summary for April 17, 2018
On Monday President Trump announced his intention to nominate officials to fill two vacancies at the Fed. Richard Clarida will be nominated for the position of Vice Chairman of the Board of Governors, and Michelle Bowman will be nominated for the position of Member of the Board of Governors. Will they be hawks or doves? This Bloomberg article describes Clarida as a “Pragmatic Centrist.” This MarketWatch article describes both nominees as “mainstream central bankers.” According to the article:
Clarida and Bowman are both well respected Republicans, but neither is seen as someone who would push hard for higher interest rates at a time when inflation, even after a recent upward shift, remains unusually low by historical standards.
Don’t expect the Fed to change much. If the nominees are more hawks than doves, they could impact the Fed in December. If this year goes as planned, we should see Fed rate hikes in June and September. Assuming inflation continues as it has been, a more dovish Fed would likely choose to pass on another rate hike in December. If the new members are more hawkish, a December rate hike will become more likely.
The 6-month Treasury yield topped 2% today; its yield at the end of today was 2.02%. It was only in February when the 1-year Treasury yield reached this milestone. Today, the 1-year Treasury yield reached 2.16%.
The yield curve continues to compress. Yields for maturities under 5 years are rising faster than the longer maturities. The 10-year yield now exceeds the 2-year yield by only 41 bps, and it exceeds the 6-month yield by only 80 bps.
The odds of more rate hikes in 2018 went up from last week according to the Fed funds futures. They now show a 100% chance of a June Fed rate hike (up from 90.2% last week). The odds that we’ll have at least four rate hikes in 2018 (federal funds rate up by at least 75 bps in December) went up from last week, but they’re still under 50%, which shows that the market still thinks that the Fed’s forecast of three rate hikes in 2018 is still the most likely scenario.
The following numbers are based on Daily Treasury Yield Curve Rates and the CME Group FedWatch.
Treasury Yields:
- 1-month: 1.68% up from 1.63% last week (0.76% a year ago)
- 6-month: 2.02% up from 1.93% last week (0.94% a year ago)
- 1-year: 2.16% up from 2.09% last week (1.04% a year ago)
- 2--year: 2.41% up from 2.32% last week (1.21% a year ago)
- 5--year: 2.68% up from 2.62% last week (1.79% a year ago)
- 10-year: 2.82% up from 2.80% last week (2.26% a year ago)
- 30-year: 3.00% down from 3.02% last week (2.92% a year ago)
Fed funds futures' probabilities of future rate hikes by:
- Jun 2018 - up by at least 25 bps: 100% up from 90.2% last week
- Sep 2018 - up by at least 50 bps: 74.4% up from 58.0% last week
- Dec 2018 - up by at least 75 bps: 44.5% up from 28.9% last week
Savings and Money Market Account Rates
The above graph shows the rate trends of the average savings account rates. These average rates are based on all the rate data that we have collected over the years. This is an interactive graph. You can choose the look-back period (from 3 months to 5 years). As you can see in the graph, average savings account rates are rising slowly. They are still below the average from five years ago, but not by much.
Below are the noteworthy savings and money market account rate hikes that have occurred in the last two weeks:
- PurePoint Financial (+15 bps to 1.75% APY)
- Sallie Mae Bank (+10 bps to 1.65% APY)
- SFGI Direct (+10 bps to 1.61% APY)
- Marcus by Goldman Sachs (+10 bps to 1.60% APY)
- American Express Bank (+10 bps to 1.55% APY)
- Radius Bank (+20 bps to 1.50% APY)
It has been almost a month since the March Fed rate hike, and we are still waiting for several of the big internet banks to raise their savings account rates. Capital One, Discover and Ally Bank haven’t increased their savings or money market rates since February. Barclays’ last rate hike on its savings account was in January.
In general, we’ve seen more rate hikes on CDs since the Fed rate hike than on savings and money market accounts. Raising CD rates probably costs the banks less than raising savings account rates since higher savings account rates immediately impacts both new and existing customers. One way banks can reduce this cost is to offer a higher rate only on a new savings account. Unfortunately for savers, that is a strategy that we’re seeing more internet banks using. The two rate leaders, Popular Direct (2% APY) and Salem Five Direct (1.85% APY) both introduced new accounts with these rates. Existing customers didn’t automatically receive these top rates.
Reward Checking Accounts
There continues to be little change to my list of nationally available reward checking accounts. The only change this week was the addition of three new nationally-available reward checking accounts. All three are from credit unions that offer easy ways for people in any state to join.
La Capitol Federal Credit Union started offering Choice Checking which earns up to 4.25% APY. It has a very low balance cap of $3k. Only the first $3k can qualify for the 4.25% APY. The portion of the balance above $3k and below $10k earns 2% APY, and the portion above $10k earns only 0.10%. Another downside with the account is a monthly fee. It can be waived if a $1k balance is maintained.
The other two new reward checking accounts are Kasasa Cash accounts. All Kasasa Cash accounts are free with no monthly maintenance fees.
The first new Kasasa Cash account is from Hanscom Federal Credit Union. The account earns 2.50% APY on balances up to $15k.
The second is from Northwest Federal Credit Union. The account earns 2.00% APY on balances up to $15k.
To find the highest reward checking rates and balance caps in your state or nationwide, please refer to our reward checking rate table. If you're new to reward checking, please refer to my blog post, Overview of Reward Checking and Our Reward Checking Table.
Certificate of Deposit Rates
I’m now publishing my CD survey as a separate post. Please refer to my survey of the best CD rates. This recap will focus on banking news of the week and liquid accounts.
CD Deals: I just wanted to include this reminder of a few noteworthy CD deals that are available.
For terms close to one year, INOVA FCU continues to offer 2.30% APY on a 14-month certificate ($50k minimum). For a standard 12-month CD that can be opened online, My eBanc and Banco do Brasil Americas are on top with a 2.25% APY.
MidFirst Direct is offering a special 15-month CD that earns 2.35% APY. MidFirst Direct’s online application used to be limited to a group of 12 states. Now it’s available to the 48 continental U.S. states.
For 5-year CDs, more banks and credit unions are at or approaching 3%. As you can see in our 5-year CD rate table, we have two small banks offering nationally-available 5-year CDs with a 3% APY. Popular Direct came close this week when it raised its 5-year CD rate to 2.90% APY. Several easy-to-join credit unions continue to offer 3% APY on 5-year CDs. A few of these include Mountain America, Quorum and Utah First.
Rates as of April 17, 2018Checking/Savings/Money Market Accounts:
- Best Savings Account Rates (Nationwide and by State)
- Best Money Market Rates (Nationwide and by State)
- Best Checking Account Rates (Nationwide and by State)
- Noteworthy Accounts Available Nationwide:
| Institution | Rates | Notes |
|---|---|---|
| Popular Direct | 2.00% ($5k min) | Popular Direct Exclusive Savings - Account review |
| Salem Five Direct | 1.85% | eOne Savings, for new customers only Account review |
| DollarSavingsDirect | 1.80% (no min) | Dollar Savings Account - Account review |
| Bank 7 | 1.80% ($5k min) | High Rate Online Money Market |
| Bank 7 | 1.80% ($100 min) | High Rate Online Savings Account |
| Incredible Bank | 1.76% ($25k+), 1.21% ($2.5k), | IncredibleBank Savings - Account review |
| CIT Bank | 1.75% | Money Market ($100 min) - Account review |
| PurePoint Financial | 1.75% ($10k min) | Online Savings - Account review |
| All America Bank | 1.75% (up to $50k), 0.50% ($50k+) | Mega Money Market Account - Account review |
| Redneck Bank | 1.75% (up to $50k), 0.50% ($50k+) | Mega Money Market Account |
| MutualOne Bank | 1.71% ($250k max) | Online Statement Savings - Account review |
| ableBanking | 1.70% ($250 min) | Money Market Savings - Account review |
| Live Oak Bank | 1.70% ($5 million max) | Savings Account - Account review |
| BankPurely | 1.70% ($25k min) | PurelyMoneyMarket - Account review |
| iGObanking.com | 1.70% ($25k min) | MMA, New accounts and new money only, Account review |
| Sallie Mae Bank | 1.65% | MMA - Account review |
| United Bank (MA) | 1.65% ($500k max, guaranteed for 6mo) | Advantage Money Market, Not available in all states, Account review |
| Colorado Federal Savings Bank | 1.65% ($50k+) | Premier Savings (New customers) - Account review |
| SFGI Direct | 1.61% | Savings account - Account review |
| Amalgamated Bank | 1.60% | Online Savings - Account review |
| FNBO Direct | 1.60% | Online Savings |
| Marcus by Goldman Sachs | 1.60% | High-Yield Online Savings Account - Account review |
| UFB Direct | 1.60% ($5k min) | High Yield Money Market - Account review |
| EBSB Direct | 1.57% ($10k+), 0.80% ($2m+), 0.50% ($10+) | Direct Money Market Special - Account review |
| Synchrony Bank (formerly GE Capital Retail Bk) | 1.55% | High Yield Savings - Account review |
| CIT Bank | 1.55% | Premier High Yield Savings - Account review |
| Sallie Mae Bank | 1.55% | High Yield Savings - Account review |
| American Express Bank | 1.55% | American Express Personal Savings - Account review |
| Nationwide Bank | 1.55% ($10k+), 1.15% APY (up to $10k) | Money Market - Account review |
| Northern Bank Direct | 1.51% ($250k max) | Money Market - Account review |
| First Internet Bank | 1.51% ($250k+) 1.26% (up to $250k) | Money Market Savings |
| My eBanc | 1.50% | Super Saver - Account review |
| Barclays | 1.50% | Online Savings - Account review |
| Community Bank of Pleasant Hill | 1.50% | Premier Money Management Account |
| Community Bank of Raymore | 1.50% | Premier Money Management Account |
| Discover Bank | 1.50% (no min) | Online Savings - Account review |
| EverBank | 1.50% (1yr intro rate) 1.35% ($100k+) ongoing rate | Yield Pledge Money Market - Account review |
| Alliant Credit Union | 1.50% ($100 min) | High-Rate Savings - Account review |
| Bethpage Federal Credit Union | 1.50% ($500 min) | Money Market |
| Radius Bank | 1.50% ($2.5k min) | Radius High-Yield Savings - Account review |
| Capital One | 1.50% ($10k+), 0.85% (up to $10k) | 360 Money Market - Account review |
| MyBankingDirect | 1.50% ($25k+), 1.35% ($5k+), 0.25% (less than $5k) | Money Market |
| Northpointe Bank | 1.50% ($25k-$1m, guaranteed for 1 year) | Ultimate Money Market - Account review |
| INOVA Federal Credit Union | 1.50% ($100k min) | Platinum Money Market Savings |
| Ally Bank | 1.45% | Online Savings - Account review |
| Pacific National Bank | 1.45% | Money Market Deposit Account - Account review |
| Self-Help Federal Credit Union | 1.42% ($500) | Money Market - Account review |
| SmartyPig | 1.40% | SmartyPig Savings - Account review |
| Discover Bank | 1.40% ($100k min), 1.35% ($2.5k) | MMA - Account review |
| Franklin Synergy Bank | 1.38% ($500k+), 1.25% ($250k+) | Synergy Money Market |
| Dime Savings Bank | 1.35% | Dime Direct Money Market, new money - Account review |
| Signal Financial Credit Union | 1.35% ($25k+, enrollment in Premium Bundle) | Premium Money Market - Account review |
| TIAA Direct | 1.35% ($100k), 1.25% ($50k) Money Market | Internet bank |
| Nationwide Bank | 1.30% | Online Savings - Account review |
| Bank of Internet USA (BofI) | 1.30% | Smart Savings |
| BankPurely | 1.30% ($1 min) | SavingPurely - Account review |
| CIBC USA (formerly The Palladin PrivateBank) | 1.30% (6mo intro rate), 1.10% blended APY ($1k min) | Savings Account - Account review |
| UFB Direct | 1.30% ($25k+), 0.20% ($100) | Premium Savings - Account review |
| McGraw-Hill Federal Credit Union | 1.30% ($75k), 1.10% ($20k), 1.00% ($5k) (guaranteed through 12/31/18) | Ascend Account - Account review |
| M.Y. Safra Bank | 1.26% | Direct Online Money Market |
| Quorum Federal Credit Union | 1.25% | HighQ Savings |
| Chevron Federal Credit Union | 1.25% ($2.5k+), 0.25% ($1+) | MarketEdge Savings |
| BBVA Compass | 1.25% ($10k min) | ClearChoice MMA Promo - Account review |
| Hanscom Federal Credit Union | 1.25% ($25k min) | Higher Yield Savings |
| INOVA Federal Credit Union | 1.25% ($50k min) | Gold Money Market Savings |
Reward Checking Accounts:
- Noteworthy Accounts Available Nationwide:
| Institution | Rates | Notes |
|---|---|---|
| Consumers Credit Union | 4.59% (up to $20k) | Rewards Checking - debit card and $1k credit card requirements |
| La Capitol Federal Credit Union | 4.25% (up to $3k), 2.00% ($3k-10k), 0.10% ($10k+) | Choice Checking |
| Consumers Credit Union | 3.59% (up to $15k) | Rewards Checking - debit card and credit card requirements |
| One American Bank | 3.50% (up to $10k), 0.25% ($10k+) | Kasasa Cash - Account review |
| Consumers Credit Union | 3.09% (up to $10k) | Rewards Checking - debit card with NO credit card requirements |
| Market USA Federal Credit Union | 3.01% (up to $15k), 0.05% ($15k+) | VIP Checking Platinum Tier - Account review |
| Evansville Teachers Federal Credit Union | 3.00% (up to $20k), 0.00% ($20k+) | Vertical Dividend Checking - Account review |
| MainStreet Bank | 3.00% (up to $15k), 0.25% ($15k+) | Kasasa Cash - Account review |
| Lake Michigan Credit Union | 3.00% (up to $15k), 0.00% ($15k+) | Max Checking |
| INOVA Federal Credit Union | 3.00% (up to $15k), 0.07% ($15k+) | Shield Checking - Account review |
| Signature Federal Credit Union | 3.00% (up to $15k), 0.10% ($15k+) | Choice Checking |
| USE Federal Credit Union | 3.00% (up to $10k), 0.25% ($10k+) | Kasasa Cash |
| Great Lakes Credit Union | 3.00% (up to $10k), 0.10% ($10k+) | Ultimate Checking |
| Partner Colorado Credit Union | 3.00% (up to $10k), 0.50% ($10k+) | High Interest Checking |
| American Bank & Trust | 2.51% (up to $10k), 0.25% ($10k+) | Kasasa Cash |
| Hanscom Federal Credit Union | 2.50% ($15k min), 0.30% ($15k+) | Kasasa Cash Checking - Account review |
| Industrial Bank | 2.50% (up to $15k), 0.25% ($25k+) | Kasasa Cash |
| Capital Educators Federal Credit Union | 2.50% (up to $10k), 0.20% ($10k+) | High Yield Checking |
| New Buffalo Savings Bank | 2.27% (up to $15k), 0.2497% ($15k+) | Kasasa Cash - Account review |
| Bellco Credit Union | 2.25% (up to $25k), 0.25% ($25k+) | Boost Interest Checking - Account review |
| Main Street Bank | 2.25% (up to $25k), 0.25% ($25k+) | Kasasa Cash - Account review |
| Altra Federal Credit Union | 2.25% (up to $15k), 0.50% ($15k+) | A+ Checking |
| All America Bank | 2.25% (up to $10k), 0.50% ($10k+) | Ultimate Rewards Checking |
| Redneck Bank | 2.25% (up to $10k), 0.50% ($10k+) | Redneck Rewards Checking |
| Coastal Credit Union | 2.25% (up to $10k), 0.10% ($10k+) | Go Green Checking - Account review that includes companion Go Green MMA |
| Georgia Bank Company | 2.15% (up to $25k), 0.40% ($25k+) | Kasasa Cash - Account review |
| TruStone Financial Credit Union | 2.02% (up to $20k), 0.10% ($20k+) | TruRate Checking - Account review |
| BankFirst | 2.02% (up to $10k), 0.15% ($10k+) | Kasasa Cash |
| Finex | 2.018% (up to $25k), 0.20% ($25k+) | Axcess Rewards Checking, Premier Account (formerly First New England Federal Credit Union) |
| XCEL Federal Credit Union | 2.01% (up to $25k), 0.03% ($25k+) | Kasasa Cash Checking |
| Bay State Savings Bank | 2.01% (up to $20k), 0.25% ($20k+) | Kasasa Cash - Account review |
| Legence Bank | 2.01% (up to $10k), 0.25% ($10k+) | Kasasa Cash |
| Campus Federal | 2.01% (up to $10k), 0.05% ($10k+) | Lagniappe Checking |
| Hawaii Pacific Federal Credit Union | 2.00% (up to $25k), 0.25% ($25k+) | Kasasa Cash Checking |
| 5Star Bank | 2.00% (up to $25k), 0.15% ($25k+) | Kasasa Cash Checking Account review |
| Country Bank | 2.00% (up to $20k), 0.25% ($20k+) | Kasasa Cash Checking Account review |
| Elements Financial | 2.00% (up to $20k), 0.10% ($20k+) | High Interest Checking - Account review |
| Blue Federal Credit Union | 2.00% (up to $15k), 0.25% ($15k+) | Extreme Checking (up to 4% w/account relationships) - Account review |
| Northwest Federal Credit Union | 2.00% ($15k min) | Kasasa Cash - Account review |
| United Educators Credit Union | 2.00% (up to $10k), 0.25% ($10k+) | Kasasa Cash |
| KS StateBank | 1.95% (up to $25k), 0.50% ($25k+) | Check PLUS - Account review |
| Connexus Credit Union | 1.75% (up to $25k), 0.25% ($25k+) | Xtraordinary Checking |
| MemoryBank | 1.60% (up to $250k) | EarnMore Interest Checking - Account review |
| First Tech Federal Credit Union | 1.58% (up to $10k), 0.16% ($10k+) | Dividend Rewards Checking |
| Superior Choice Credit Union | 1.50% (up to $30k) | AMP Checking |
| Heritage Bank | 1.41% (up to $25k), 0.15% ($25k+) | eCentive Account |
| Marine Federal Credit Union | 1.26% (up to $10k), 0.05% ($10k+) | Kasasa Cash Checking |
| Bank of Internet USA | 1.25% (up to $150k), 0.00% ($150k+) | Rewards Checking |
Certificates of Deposit:
- Best CD Rates (Nationwide and by State)
- Best IRA CD Rates (Nationwide and by State)
- Survey of the Best CD Rates (Nationwide and Local)
Bank Account Alternatives - NOT FDIC Insured
| Institution | Rates | Notes |
|---|---|---|
| GM Financial Right Notes | 2.00% ($50k+), 1.85% ($15k+), 1.75% ($500+) | |
| Vanguard Prime Money Market Fund | 1.77% 7-day yield | |
| Ford Interest Advantage | 1.65% ($50k+), 1.60% ($15k+), $1.55 (less than $15k) | Ford Interest Advantage review |
| Duke Energy PremierNotes | 1.65% ($50k+), 1.50% ($10k+), 1.45% (less than $10k) | Duke Energy PremierNotes review |
| Fidelity Money Market Fund | 1.53% 7-day yield | |
| Vanguard Municipal Money Market Fund | 1.48% 7-day yield | |
| Ally Financial Demand Notes | 1.45% ($50k+), 1.30% ($15k+), 1.10% (less than $15k) ( | |
| Fidelity Municipal Money Market Fund | 1.05% 7-day yield |
Post Publication Edits
4/18/2018: Amalgamated Bank new Online Savings account added.
1. Banks use the usually upward-sloping yield curve to their advantage, accepting deposits at short-term rates and originating loans at long-term rates. A flat yield curve hurts bank's profit margins. But this does not fully explain why savings account rates were low, because they were high when the yield curve flattened last time, in 2006.
2. Quantitative easing caused a large increase in excess reserves at banks. During QE, the Fed bought long-term Treasuries on the open market. The sellers of these Treasuries (pension funds, for example) would then typically redeposit the money they received in the banking system, thereby increasing bank deposits. Here is a graph of Excess Reserves:
https://fred.stlouisfed.org/series/EXCSRESNW
Excess reserves were very low before 2008 and they are now $2 trillion. So unfortunately, banks don't really have a current need for our deposit money. This might slowly change with the unwinding of QE. But I think it could be a factor in interest rates not keeping up, especially at large institutions that would be holding a lot of these reserves.
In my area CountryWide (remember their heavily-tanned CEO, who assured us that "everything is just fine"?) did not do mortgages - we were not located in a sand state, just the boring Midwest. But they did have a national available bank, and I recall their savings account (or possibly their money market account) paying me well over 5% for spare cash, circa-2006 to 2007.
In my area we did have National City Bank, a regional which wanted desperately to play with the big boys. They got their subprime mojo late in the game, and largely in Florida. Instead of being taken over by the FDIC they were forced into a "shotgun wedding" (essentially a takeover) by PNC in 2008, greased with TARP funds. As I recall they were also paying well over 5% until then.
And yet, these troubled banks carried the same FDIC insurance at the same cost to the depositor (zero) as did the healthy ones. Moral hazard, anyone?
Since 2008, the Fed also pays banks interest on excess reserves. It's part of the reason that excess reserves are now $2 trillion. (Required reserves are less than 200 billion.) How much interest does the Fed pay? Currently 1.75%. So all the banks that have our money on deposit for less than 1.75% could turn around and park it at the Fed for a risk-free profit.
The Fed now uses this rate (Interest On Excess Reserves or IOER) as the primary policy tool to enforce its Federal Funds rate target.
1.75% on $2 trillion is $35 billion. Who pays this expense? Technically the Fed, but actually the American Taxpayers. The Fed makes ~$100 billion in income per year from its portfolio of Treasuries, Mortgage-backed Assets, etc. and the Fed is required to remit its net income to the U.S. Treasury. The IOER is paid from the Fed's income, reducing the net income that it delivers to the government.
The Federal Reserve Banks pay interest (1.75%) on required reserve balances and on excess reserve balances. The Board of Governors has prescribed rules governing the payment of interest by Federal Reserve Banks in Regulation D (Reserve Requirements of Depository Institutions, 12 CFR Part 204).
The FED does not pay the treasury, it is an even exchange for treasury notes that the congress spends without any coverage (it is called deficit spending adjustment).
https://fred.stlouisfed.org/graph/?g=jveD
There's not a good graph of the highest 5 year CD rates over time (Ken?) so let's use the 5-year Treasury bond as a substitute. The graph linked above shows a 30-year time frame with the three most recent economic cycles where the Fed increased interest rates. Notice that the 5-year rate generally does not move up (or down) as much as the Fed funds rate. The 10-year rate is what you might consider the "long-term rate" over which the Fed does not have much control, so it moves very little and sometimes out of step with the Fed funds rate. The 5 year rate is somewhere in-between.
As you can also see in the graph, the 5 year rate does not move up nice and linearly. It sometimes moves up, moves sideways, drops a little bit, takes a breather and then increases more. So nobody can really predict with any kind of accuracy how much 5 year rates will go up towards the end of this year.
One way to make this kind of prediction is to calculate the "5 year forward rate" from something like the current 5-year and 10-year spot rates, but it would be just what the bond market currently "thinks" the rate will be in the future.
See last item here [under "Deposit Accounts"]: https://www.bankatunited.com/Resources/Rates/Deposit-Rates
Do you know any different, DCGuy?
I see there was a slight flare up to 1.7% for new account holders earlier this year (unobtainable by existing account holders).
DA is not some other site, which is confirmation of your first sentence.
Some bonds are state-tax-free. Some bond funds are state-tax-free. When comparing bonds and bond funds, it is always important to consider the tax consequences.
For example, VMSXX is now 1.5% while the Fidelity brokerage sweep MMF account is at 1.3%. So tax free is the better deal (ignoring other taxable MMF yields).
Example: I invest a million dollars in CA in tax free MB and lets suppose I live in CA, the cost of living in CA is twice as much as the national average and the return on the purchasing power of interest received on the tax free money is already half of the money I receive in TN compared in purchasing power and the cost of living. It may sounds OK to do tax free in CA, but it will not help much, unless you double that income from better investments (even if taxed).
There is a point of no profitable return if you live in CA and most of you know that, however, if you want to shield the income from taxation, there are certain annuities where you can withdraw 10% penalty free money each year and the rest of the interest received accumulate tax deferred until your retirement and then you can chose to pay the tax over 10,20 or on life time table, which will amount to very little tax or you can exchange (do 1035) it for charitable entity annuity, where you will receive all of the accumulated income and principal staring from day one and then deduct all of the money you ever paid into the annuity. It is a win win proposition, talk to a tax advisor first.
The California's state average cost of living isn't 100% above the national average. The statewide average is distorted because of high real estate prices in LA and SF.
It's hard to do a valid comparison because the largest metro area is Nashville at 1.5 million people. Heck your whole state is less than 6 million (LA & SF are bigger).
If you compare the Sacramento metro area at 2.6 million to Nashville's 1.5 million the cost of living there is only 8% higher.
Personally, I live in a nice little suburban city of around 100,000 people in south Orange County, CA.
Sure, the cost of living here is high. That's because people are willing to pay for schools, libraries, parks, senior and police services. The crime rate here is low.
The county has excellent regional beaches and parks that are just a few minutes away. Plus, a national forest that's practically in my back yard.
There's state and national parks within a two hour drive of where I live. Mountains and deserts that are beautiful places to explore.
Quite frankly, it's not a bad place to retire either. The state doesn't tax Social Security and Proposition 13 limits property tax increases to 2% per year.
Oh, and did I mention the weather? Yup, we pay extra for that too. And, being from Chicago originally, it's definitely worth the extra cost!
If you like tax free, please buy them and do not get influenced by other commentators, you know best your financial condition. Watch out for Brown, he will tax anything to support his illegals.
California residents - Taxed on ALL income, including income from sources outside California,
barters and exchanges are taxable, car trade-ins are taxable, CA has sale and USE tax that may be applied at same time, the gain of real estate is taxable by California even if the real estate is sold when you are a nonresident, sale of stocks and bonds, all pension income is taxed at full rates, California's property tax rates are based on your home's full cash value at the time you buy the home (not the real value), California residents pay the second highest capital gains tax rate in the world – 33.3 percent,.......I have a list over 20 pages long, but you get the picture of the costs for living in CA.
Someone suggested retiring in CA, you must be out of your mind to make such decision.
Not sure I understand the difference between the sale price of a home and the real value. I would say the real value of a home is whatever it would sell for in the marketplace. It is true that if you own the home for many years, the assessed value of the home would be far less than what the home would sell for in today's market, a considerable break for existing homeowners.
Appraised Value (real value) is the amount the banks are willing to finance the property.
A large gap between the appraised value and the asking price can be a problem for the buyer. If the lender thinks the appraised value of the property is not enough to cover the requested mortgage, the lender could require a larger down payment, which can be problematic for a buyer if there is mortgage involved.
The county will appraise the property at the sale price (mortgage + cash + down payment + closing costs), which means you pay property tax on your hard earned cash in perpetuity or until you live in it, even if the property is worth much less.
In other words, you could be living in a shack, in a bad neighborhood, but you payed millions for it and your property tax may be 10 times or more than the house next door of same size and looks.
On the capital gains, it is CA tax + Federal tax = 33.3% maximum (and that is second highest in the world).
A coalition of liberal groups is trying to qualify an initiative for the November ballot that would remove Prop. 13’s restrictions on reassessments and tax increases for corporate-owned property.
There is another way for the democrats to nullify prop 13, the governor can declares state of emergency or if the state defaults on the pensions, bonds and other public obligations. It is in the CA constitution, so do not rely 100% on prop 13 to stay around for life time.
https://www.forbes.com/sites/thomasdelbeccaro/2018/04/19/the-top-four-reasons-california-is-unsustainable/2/#7767798d55ce
http://uscommonsense.org/research/unsustainable-california-the-top-10-issues-facing-the-golden-state-wall-of-debt/
https://www.sfchronicle.com/politics/article/California-s-400-billion-debt-worries-analysts-6812264.php
http://www.latimes.com/politics/la-pol-ca-road-map-jerry-brown-budget-wall-of-debt-20170702-story.html
https://medium.com/@andrewengel2010/california-is-saddled-with-a-unsustainable-debt-and-without-federal-money-they-would-be-unable-to-f065fade4b2d
https://californiapolicycenter.org/californias-total-state-local-debt-totals-1-3-trillion/
https://www.newsmax.com/dwightlschwab/california-ronald-reagan-debt-sanctuary/2018/02/14/id/843420/
I think these facts should chase the bee from my bonnet.
https://www.youtube.com/watch?v=JDVT-8tUfiE
He knew in advance what the liberals will bring to this country a destruction from within.
Please read some actual reality from reputable sources:
http://www.santacruzsentinel.com/article/NE/20180206/LOCAL1/180209803
https://www.city-journal.org/html/pension-fund-ate-california-13528.html
https://www.npr.org/templates/story/story.php?storyId=98392050
The corruption in CA is out of control, the taxpayers should brace for new bail out for CalPERS.
My point is that California has severely underfunded persion fund.
They can't raise property taxes but some counties have total sales taxes of 9.75%.
Something will have to give sooner or later, it is not sustainable on long run. It is not CalPERS fault alone, it is the bureaucrats in Sacramento who will ruin the pension system altogether, unless they find new ways to tax (again) the CA resident with an innovative or hidden tax. Some counties in CA have started adding firefighters fund and local union fees as an addition to the property taxes. If that spreads, it will become parallel taxing system.
https://www.usgovernmentspending.com/california_state_spending_pie_chart